W.C. No. 4-200-716.Industrial Claim Appeals Office.
May 16, 2007.
FINAL ORDER
The respondents seek review of an order of Administrative Law Judge Broniak (ALJ) dated December 18, 2006 that denied the respondents’ claim for statutory penalties. We affirm.
A hearing was held on the sole issue of whether the claimant was liable for penalties for violating an order approving a stipulation concerning medical treatment. Following the hearing the ALJ entered findings of fact that for the purposes of this order may be summarized as follows. The claimant sustained a compensable injury on November 15, 1993, and continues to receive medical treatment from Dr. Black. Before June 12, 2006, the claimant received her prescription medication from Walgreens pharmacy. On that date the parties filed a stipulation providing that the claimant agreed to obtain her prescription medication from Corporate Pharmacy Services (CPS), and on June 14, 2006 the stipulation was approved by the Office of Administrative Courts. On June 15, 2006, CPS sent the claimant a letter describing its procedures for submitting and filling prescriptions. The letter stated that the claimant could mail new prescriptions to CPS or her physician could submit the prescriptions; however, it did not inform the claimant when she should begin to use CPS. The claimant did not receive the letter until July, when she was given a copy by her attorney. It was at that time that she first learned she was required to use CPS to obtain her prescription medication rather than Walgreens or some other pharmacy. CPS also sent a letter to Dr. Black on June 15, 2006, explaining the procedures for submitting prescriptions applicable to the medical provider. On June 29, 2006, either the claimant or Dr. Black submitted a prescription to “Share ‘n Care Compounding Pharmacy,” which was then forwarded by the
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claims adjuster to CPS. On July 5, 2006, and then on July 18th the claimant filled several prescriptions at Walgreens pharmacy. On August 3, 2006, Dr. Black submitted prescriptions for several medications to CPS, which shipped them to the claimant using Federal Express. Federal Express failed to deliver the medications to the claimant, which delayed her receipt of the medication. On August 10, 2006 the claimant filled several more prescriptions at Walgreens, which had approval from CPS to provide the claimant with morphine. The claimant believed that she had authorization to resort to Walgreens pharmacy because she had not received the medication from CPS, although she had ordered it on August 3rd. Walgreens filled the prescriptions because it continued to have authorization from the insurer to do so. The insurer had not revoked its standing authorization to Walgreens to refill the claimant’s prescriptions. The ALJ also found that the claimant first attempted to use CPS as the authorized pharmacy on August 3, 2006, and that on August 10, 2006 CPS authorized the claimant to fill at least one prescription at Walgreens. Since that time the claimant did not attempt to fill any prescriptions anywhere but with CPS. The ALJ also found that the claimant was not aware of the exact date on which she was required to begin using CPS, and that she therefore did not know that she was in violation of the stipulation.
Based upon her factual findings, the ALJ concluded that the claimant cured any violations of the order approving the stipulation and that, in any event, the claimant did not reasonably know the effective date of the stipulation. Accordingly, the ALJ concluded that the claimant did not know that her actions in filling prescriptions at Walgreens violated the stipulation. The ALJ therefore denied penalties.
The respondents appealed the ALJ’s order and argue that the ALJ erred in concluding that the claimant cured her violation of the stipulation, that the ALJ applied an incorrect burden of proof, and that the record compels the conclusion that penalties were warranted in this case. We disagree that the ALJ committed reversible error.
Whether statutory penalties may be imposed under § 8-43-304(1), C.R.S. 2006 involves a two-step process. That section provides for the imposition of penalties of up to $500 per day where the party
“violates any provision of articles 40 to 47 of [title 8], or does any act prohibited thereby, or fails or refuses to perform any duty lawfully enjoined within the time prescribed by the director or panel, for which no penalty has been specifically provided, or fails, neglects, or refuses to obey any lawful order made by the director or panel. . . .”
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Therefore, the ALJ must first determine that the insurer’s conduct constituted a violation of the Workers’ Compensation Act (the Act), a rule, or an order. However, the conduct constituting the violation must also have been objectively unreasonable. Therefore, if the ALJ finds that a violation occurred, penalties may only be imposed if the ALJ concludes that the claimant’s conduct was not reasonable under an objective standard. E.g., Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). The reasonableness of the claimant’s actions depends on whether they were predicated on a rational argument based in law or fact. Jiminez v. Industrial Claim Appeals Office, 107 P.3d 965 (Colo.App. 2003).
In reviewing the ALJ’s order refusing to impose penalties, we are bound by her factual findings if they are supported by substantial evidence in the record. § 8-43-304(8), C.R.S. 2006; City of Durango v. Dunagan, 939 P.2d 496 (Colo.App. 1997). Substantial evidence is probative evidence which would warrant a reasonable belief in the existence of facts supporting a particular finding, without regard to the existence of contradictory testimony or contrary inferences. See F.R. Orr Construction v. Rinta, 717 P.2d 965 (Colo.App. 1985). The substantial evidence standard requires that we view evidence in the light most favorable to the prevailing party, and defer to the ALJ’s assessment of the sufficiency and probative weight of the evidence. Thus, the scope of our review is “exceedingly narrow.” Metro Moving Storage Co. v. Gussert, 914 P.2d 411 (Colo.App. 2003). This narrow standard of review also requires that we defer to the ALJ’s resolution of conflicts in the evidence, credibility determinations, and plausible inferences drawn from the record. Wilson v. Industrial Claim Appeals Office, 81 P.3d 1117 (Colo.App. 2003).
Initially, we note that the claimant apparently conceded that the terms of the stipulation were “violated” when the claimant sought prescription medication from pharmacies other than CPS. However, the claimant certainly did not concede that the “violation” warranted penalties pursuant to § 8-43-304(1). In this respect we further note that the “order” allegedly violated was not entered by an administrative law judge, by the Director, or by the panel. Rather, the order was signed by a “designee clerk,” to whom the authority has evidently been delegated to resolve certain matters in order to obviate the need to refer them to an administrative law judge. See OAC Rule 16(D) (stipulated motions may be granted forthwith by the OAC’s designated clerk).
The stipulation recites that a hearing was pending regarding the issues of medical benefits and “change of pharmacy” and that the stipulation was being entered into in order to “resolve those issues.” Therefore, we assume that the stipulation is a partial settlement within the meaning of § 8-43-204(1), C.R.S. 2006. Accordingly, pursuant to § 8-43-204(3),
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C.R.S. 2006, the statute requires that the settlement be “approved in writing by an administrative law judge or the director of the division prior to the finalization of such settlement.” We express no opinion concerning the lawfulness of a delegation to a “designee clerk” to approve settlements given the express references in § 8-43-204(3) to approval by an ALJ or the Director.
However, in our view § 8-43-304 may not be applied to impose penalties for the “violation” of an order entered by a “designee clerk.” The statute refers to penalties imposed upon any person who “fails, neglects, or refuses to obey any lawful order made by the director or panel. . . .” (emphasis added). The court of appeals has subsequently concluded that § 8-43-304 may also be applied when a person fails to obey an order of an administrative law judge. See Giddings v. Industrial Claim Appeals Office, 39 P.3d 1211 (Colo.App. 2001). Further, §8-40-201(15), C.R.S. 2006 defines an “order” as “any decision, finding and award, direction, rule, regulation, or other determination arrived at by the director or an administrative law judge.” (emphasis added). We are aware of no authority holding that the essentially ministerial act of a clerk’s entering an order on an uncontested motion then vests that order with the status of one entered by an administrative law judge or the Director. Whatever sanctions might be imposed for some later “violation” of such an order, the imposition of statutory penalties up to $500 per day is, by the clear and unmistakable terms of the statute, not among them.
In any event, we perceive no error in the ALJ’s resolution of this case. Section 8-43-304(4), C.R.S. 2006 provides that if the alleged violator cures the violation within a twenty-day period, and the party seeking such a penalty fails to prove by clear and convincing evidence that the alleged violator knew or reasonably should have known such person was in violation, no penalty shall be assessed. Accordingly, no penalty may be imposed if, first, the violation is cured within twenty days and, second, the respondent failed to prove by clear and convincing evidence that the claimant knew or should have known of the violation.
The cure statute adds an element of proof to a claim for penalties in cases where a cure is proven. In the ordinary case, it is not necessary for the party seeking penalties to prove that the violator knew or reasonably should have known they were in violation. All that is necessary is that the party seeking penalties prove the putative violator acted unreasonably under an objective standard. See Jiminez v. Indus. Claim Appeals Office, 107 P.3d 965 (Colo.App. 2003); Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996). Section 8-43-304(4) modifies this rule and adds an extra element of proof when a cure has been effected. Specifically, the party seeking penalties must prove the violator had actual or constructive knowledge that its conduct was unreasonable. Diversified Veterans Corporate
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Center v. Hewuse, 942 P.2d 1312 (Colo.App. 1997); Ray v. New World Van Lines of Colorado W. C. No. 4-520-251 (October 12, 2004)
We agree with the ALJ that the claimant’s use of pharmacies other than CPS constituted the “violation” of the stipulation, and that it was cured as of August 10, 2006, when the ALJ found with record support that the claimant exclusively used CPS. The ALJ further found, again with record support, that the claimant did not execute the stipulation and was never informed regarding the exact date on which her obligation to use CPS commenced. This is a reasonable inference from the factual record, and it supports the ALJ’s conclusion that the respondents failed to prove that the claimant knew or should have known of the violation. Accordingly, we decline to disturb the ALJ’s conclusion that the claimant cured any violation of the stipulation and that therefore penalties were not appropriate under the statute.
Finally, as we read the ALJ’s order, she concluded that apart from the question whether the claimant cured her violation of the stipulation the claimant’s conduct was nonetheless objectively reasonable. Hence, the ALJ correctly cited the applicable law setting forth the legal standard governing the imposition of penalties. She noted that the question of the claimant’s negligence is governed by the “reasonable person” standard, and that that in turn depends upon whether the claimant’s actions were predicated upon a rational argument based in law or fact. She then applied this legal standard to the claimant’s conduct and apparently concluded that the claimant acted reasonably under the circumstances of this case. This analysis represents the second step in the “two-step process” applicable to the imposition of penalties under § 8-43-304. Since the ALJ concluded that the claimant’s conduct was objectively reasonable, she correctly inferred that penalties were precluded under the statute.
We perceive no basis on which to disturb this conclusion. The ALJ relied upon her factual findings that the claimant was not aware of the effective date of the stipulation and that she reasonably believed that she was entitled to fill her prescriptions at Walgreens since CPS had failed to deliver her medication. These findings are supported by the claimant’s testimony and they support, in turn, the conclusion that the claimant’s conduct was objectively reasonable. Accordingly, even if the ALJ erred in applying the cure provisions to this case, her denial of penalties was independently supported by the conclusion that the claimant’s actions were objectively reasonable. See Pioneers Hospital of Rio Blanco County v. Industrial Claim Appeals Office, 114 P.3d 97
(Colo.App. 2005) (applicable standard is whether party’s conduct was merely unreasonable).
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IT IS THEREFORE ORDERED that the ALJ’s order dated December 18, 2006, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
_____________________ Curt Kriksciun
_____________________ Robert M. Socolofsky
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Mitzie Tadlock, Lakewood, CO, Gold Mine Casino, CO, Reliance Insurance Co., Claire Bennett, Englewood, CO, Western Guaranty Fund, Michael Kramish, Denver, CO, Sullivan, Sullivan and McGuire, PC Peter H. McGuire, Esq, Denver, CO, (For Claimant).
McElroy, Deutsch, Mulvaney Carpenter, LLP Kristin A. Caruso, Denver, CO, (For Respondents).