W.C. No. 4-214-079Industrial Claim Appeals Office.
October 28, 2002
FINAL ORDER
The claimant seeks review of an order of Administrative Law Judge Henk (ALJ Henk) which denied a claim for penalties based on the respondents’ appeal from an order to pay temporary disability benefits. The claimant argues the evidence establishes the appeal was in bad faith and that the respondents violated a Rule of Procedure governing the content of briefs. We affirm.
On October 13, 2000, ALJ Snider entered an order which required the respondents to pay $1,019,81 in temporary total disability benefits and assessed penalties for the late payment of temporary disability benefits. The respondents filed a timely petition to review the order in which they alleged that ALJ Snider erred “in awarding penalties for alleged late payment of TTD and in awarding additional TTD in the amount of $1,019,81.” The claimant petitioned to review other aspects of the order.
The respondents filed a brief in which they addressed the claimant’s grounds for review and argued ALJ Snider erred in assessing the penalties for late payment of temporary disability benefits. However, the respondents’ brief did not contain any argument regarding the award of temporary disability benefits. On October 19, 2001, a panel of this office (ICAP) affirmed the ALJ’s order without specifically addressing the award of temporary disability benefits. The respondents did not pay the temporary disability benefits until November 9, 2001.
The claimant filed an application for hearing alleging the respondents violated ALJ Snider’s order by filing a bad faith appeal on the issue of additional temporary disability benefits. The claimant also contended the respondents violated Rule of Procedure VII (D), 7 Code Colo. Reg. 1101-3 at 19, concerning the content of appellate briefs. A hearing was held and the attorney who filed the respondents’ brief testified.
The attorney testified that he was aware of case law holding that the filing of a brief is not a jurisdictional requirement for appellate review by ICAP, and that the filing of a petition to review is sufficient to perfect the appeal. The attorney further testified that he did not brief the temporary disability benefits issue because the respondents were more concerned with the penalty issue and did not want to detract from the force of their argument on that matter by briefing the less persuasive temporary disability issue. Nevertheless, the attorney opined the temporary disability benefits issue had merit because counsel believed ALJ Snider incorrectly interpreted documentary evidence concerning the amount of benefits paid to the claimant. Further, counsel testified that he did not intend to abandon the temporary disability benefits issue and believed there was some chance ICAP would address the issue. In fact, counsel stated he was aware of cases where ICAP had considered issues not briefed by the parties. (Tr. Pp. 14-15, 23-26, 33-34, 36-37).
In an order dated April 23, 2002, ALJ Henk found the claimant failed to prove the respondents violated ALJ Snider’s order by filing a “bad faith appeal.” Further, ALJ Henk found no violation of any statute or rule. She determined that the filing of briefs is “optional” under the statute, and no penalty can be assessed where a party chooses not to file a brief in support of an issue designated in a petition to review.
On review, the claimant contends ALJ Henk’s finding that the respondents’ appeal from ALJ Snider’s order was not taken in bad faith is unsupported by the evidence. The claimant argues the insurer’s failure to brief the temporary disability benefits issue demonstrates that either the issue was withdrawn, or the respondents violated Rule VII (D) by not briefing the issue. The claimant also asserts the attorney’s failure to brief the issue, and the attorney’s testimony, proves the insurer had no reasonable expectation of prevailing on the issue and the appeal was groundless as a matter of law.
Section 8-43-304(1), C.R.S. 2002, authorizes the imposition of penalties of up to $500 per day if a party fails, refuses, or neglects to obey a lawful order. This statute encompasses an order issued by an ALJ. Giddings v. Industrial Claim Appeals Office, 39 P.2d 1211
(Colo.App. 2001).
We assume, arguendo, that a party may fail, refuse, or neglect to obey an ALJ’s order by not making payment in accordance with the order while prosecuting an appeal to ICAP without any good faith basis for doing so See Industrial Commission v. Continental Investment Co., 85 Colo. 475, 277 P. 303 (1929); section 8-43-301(14), C.R.S. 2002 (authorizing attorney fees and costs against party prosecuting appeal not well grounded in fact and law or good faith argument for extension, modification or reversal of existing law); Shepherd v. Costco Wholesale,
(Colo.App. No. 01CA0397, November 1, 2001) (not selected for publication) (treating Industrial Commission v. Continental Investment Co. as binding authority Court of Appeals remands for findings on whether respondents’ appeal was taken in good faith).
For purposes of section 8-43-304(1) a party “neglects” to obey an order if it fails to take the action a reasonable insurer would take to comply with the order. Thus, the insurer’s conduct is measured by an objective standard of reasonableness and does not require actual knowledge the conduct was in bad faith. Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996); Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). The reasonableness of an insurer’s action depends on whether it was predicated on a rational argument based in law or fact. Diversified Veterans Corporate Center v. Hewuse, 942 P.2d 1312 (Colo.App. 1997). Generally, determination of the reasonableness of the insurer’s conduct is a question of fact for the ALJ. Pueblo School District No. 70 v. Toth, supra.
Resort to an appellate forum is not in bad faith so long as there is a reasonable basis for the legal challenge to payment of the claim. BCW Enterprises, Ltd. v. Industrial Claim Appeals Office, 964 P.2d 533
(Colo.App. 1997). As with the standard for assessing penalties, an appeal is unreasonable or “frivolous” only if it has no rational basis in law or fact. See Tozer v. Scott Wetzel Services, Inc., 883 P.2d 496
(Colo.App. 1994) (cited with approval in Diversified Veterans Corporate Center v. Hewuse). An appeal is not unreasonable, even if unsuccessful, if it involves a legitimate attempt to create new law or a good faith effort to extend, modify, or reverse existing law. Western United Realty, Inc. v. Isaacs, 679 P.2d 1063 (Colo. 1984).
As the proponent of a penalty, the claimant had the burden of proof to establish the respondents’ appeal was taken in bad faith. Section 8-43-201, C.R.S. 2002, Cowin Co. v. Medina, 860 P.2d 535 (Colo.App. 1992) (burden of proof rests with party asserting the affirmative of a proposition). The question of whether the claimant met the burden is one of fact for resolution by the ALJ. See Metro Moving Storage Co. v. Gussert, 914 P.2d 411 (Colo.App. 1995).
Because the issue is factual, we must uphold the ALJ’s resolution if supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. 2002. This standard of review requires that we view the evidence in a light most favorable to the prevailing party, and defer to the ALJ’s resolution of conflicts in the evidence, credibility determinations, and plausible inferences drawn from the record. Metro Moving and Storage Co. v. Gussert, supra. In this regard we note the ALJ is under no obligation to discuss all possible inferences and explicitly reject those which she does not find persuasive. Further, we may consider findings necessarily implied by the order. Magnetic Engineering, Inc. v. Industrial Claim Appeals Office, 5 P.3d 385 (Colo.App. 2000).
The claimant’s argument notwithstanding, the record does not compel the conclusion the appeal of the temporary disability issue was taken in bad faith because the respondents failed to brief the issue. As the ALJ recognized, and the attorney testified, our courts have held the failure to file a brief does not bar ICAP from ruling on a timely petition to review. The rationale for these decisions is the absence of any statutory language requiring that a brief be filed, and the presence of language in section 8-43-304(1), C.R.S. 2002, indicating that consideration of the appeal must continue “after the briefs are filed or the time for filing has run.” Ortiz v. Industrial Commission, 734 P.2d 642 (Colo.App. 1986); Saxton v. Industrial Commission, 41 Colo. App. 309, 584 P.2d 638
(1978).
Admittedly, these decisions address the jurisdictional consequence of failing to file a brief, and not the specific consequences of filing a brief which addresses only some of the issues raised in the petition to review. However, we agree with the ALJ that one plausible extension of these decisions is the conclusion that filing a brief is optional; therefore, filing a brief on some issues raised in a petition to review does not constitute a waiver or abandonment of other issues which were raised in the petition to review, but not briefed. The claimant points to no dispositive cases on this issue, and we are not aware of any. Thus, even if the respondents’ view of the law is incorrect, it represents a plausible argument for the extension of existing authority. Thus, the record supports the ALJ’s finding that failure to brief the issue is not necessarily indicative of a bad faith appeal.
The claimant also places reliance on Rule of Procedure VII (D)(2) concerning the “submission of briefs.” The rule provides that a brief “shall” contain a statement of the issues for review and arguments concerning the issues. Admittedly, use of the word “shall” ordinarily indicates a mandatory act. However, in Saxton v. Industrial Commission, supra, the court rejected the argument that the rules of procedure could impose a jurisdictional requirement for a brief when none existed in the statute. Thus, the respondents have a plausible basis for arguing that Rule VII (D) does not create a requirement to file a brief on all issues submitted in the petition because the statute itself does not impose such a requirement. While we should not be understood to agree with the respondents’ position, it represents a plausible legal argument based on the current state of the law.
Further, the evidence did not compel ALJ Henk to infer that the appeal of the temporary disability issue was so lacking in substantive merit that the respondents’ failure to brief the issue must be taken as proof the appeal was unreasonable and in bad faith. The attorney testified there was a substantive basis for the appeal because of ALJ Snider’s alleged misinterpretation of the documentary evidence pertaining to payment of benefits. The attorney also testified he believed, based on prior experience, that ICAP might consider the issue and reverse the award despite the failure to brief the issue. The claimant produced no evidence which directly refutes this testimony.
ALJ Henk expressly found the claimant failed to meet the burden of proof to establish a bad faith appeal. Inherent in that determination was the decision to credit the attorney’s testimony in the absence of persuasive evidence to the contrary. Although the ALJ might have drawn a different inference from the respondents’ conduct, we cannot say she was required to do so as a matter of law. Consequently, the order must be upheld.
The claimant has also argues the respondents should be penalized for violating Rule VII. However, for the reasons stated above, we conclude the respondents presented a rational legal argument that the provisions of the rule are not mandatory. Therefore, ALJ Henk did not err in refusing to impose a penalty for the alleged violation.
IT IS THEREFORE ORDERED that ALJ Henk’s order dated April 23, 2002, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
________________________________ David Cain
________________________________ Robert M. Socolofsky
NOTICE
This Order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, CO 80203, by filing a petition for review with the Court, within twenty (20) days after the date this Order is mailed, pursuant to § 8-43-301(10) and § 8-43-307, C.R.S. 2002. The appealing party must serve a copy of the petition upon all other parties, including the Industrial Claim Appeals Office, which may be served by mail at 1515 Arapahoe Street, Tower 3, Suite 350, Denver, CO 80202.
Copies of this decision were mailed October 28, 2002 to the following parties:
Maxie Jiminez, 1263 Lipan Dr., Denver, CO 80221
Amax Henderson Project, P. O. Box 68, Empire, CO 80438
Robert Klingler, Esq., Special Funds, Tower 2, #630, Division of Workers’ Compensation — Interagency Mail
Legal Department, Pinnacol Assurance — Interagency Mail
Roger Fraley, Jr., Esq., 517 E. 16th Ave., Denver, CO 80203 (For Claimant)
Merrily S. Archer, Esq., and Douglas A. Thomas, Esq., 600 17th St., #1600N, Denver, CO 80202 (For Respondents)
By: _____A. Hurtado_____