W.C. No. 4-692-272.Industrial Claim Appeals Office.
June 25, 2010.

The respondents seek review of an order of Administrative Law Judge Harr (ALJ) dated February 1, 2010, that ordered the respondents to adjust the claimant’s average weekly wage (AWW). We affirm the order in part, set aside in part, and remand for further proceedings.

The claimant sustained an industrial injury on July 21, 2006. The ALJ adopted the stipulation of the parties that the claimant’s AWW at the time of his injury was $844.54. The claimant reached maximum medical improvement (MMI) on June 11, 2009. The employer terminated the claimant on July 28, 2009.

At the time he was injured the claimant received health insurance coverage from the employer and the employer continued to provide such coverage through July 31, 2009. The claimant did not immediately exercise his option of continuing his health insurance coverage under the Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA) where his monthly premium beginning August 1, 2009 was $984.09. However, the federal government enacted a stimulus plan, the American Recovery and Reinvestment Act of 2009 that subsidized the claimant’s coverage under COBRA. The claimant continued his health insurance coverage through COBRA by paying the monthly premium of $344.33. This federal subsidy is scheduled to end and beginning May 1, 2010 the claimant’s monthly premium is expected to be $984.09.

The ALJ determined that the monthly premium of $344.33 reflected the replacement cost of continuing the claimant’s health insurance coverage under COBRA from August 1, 2009 through April 30, 2010 ($79.46 per week). The ALJ further

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determined that the claimant’s monthly premium of $984.09 reflected the replacement cost of continuing his health insurance coverage under COBRA from May 1, 2010 and continuing ($227.10 per week). The ALJ found that the claimant’s AWW should be increased to include the cost of replacing his health insurance coverage after the date of MMI. The ALJ concluded that from August 1, 2009 through April 30, 2010 the insurer should increase the claimant’s AWW by the amount of $70.46 and further that the insurer should increase the claimant’s AWW by the amount of $227.10

The respondents first contend the ALJ erred in requiring them to adjust the claimant’s AWW, after the period of disablement for permanent partial disability (PPD) had begun. The respondents note that § 8-42-102(3) provides that the claimant’s AWW is determined as of the “time of the injury.”

The respondents argue that the claimant reached MMI for his work-related injury effective June 11, 2009; consequently for the purposes of PPD the period of disablement began on that date. The respondents contend that at the time of this disablement the claimant’s AWW was $936.21 and because the claimant did not seek to replace his health insurance benefits until August 1, 2009 the rate of indemnity payment had already been established as of the June 11, 2009 MMI date. Therefore, the respondents argue that the ALJ’s determination that the claimant was entitled to increases of AWW on August 1, 2009 and May 1, 2010 constituted error. The respondents request that the order should be vacated and remanded for entry of a new order setting the AWW for the purposes of payments of permanent partial disability (PPD) benefits at $936.21 with no increases following the date of MMI.

Section 8-42-102(2)(d), C.R.S, sets forth the method for calculating the average weekly wage. The overall purpose of the statutory scheme is to calculate “a fair approximation of the claimant’s wage loss and diminished earning capacity.”Campbell v. IBM Corp., 867 P.2d 77 (Colo. App. 1993). The ALJ is afforded discretionary authority in calculating the wage. We may not interfere with the ALJ’s calculation of the average weekly wage unless an abuse of discretion is shown. Coates, Reid Waldron v. Vigil, 856 P.2d 850 (Colo. 1993). An ALJ only abuses his discretion where the order “exceeds the bounds of reason,” such as where it is unsupported by the record or is contrary to law. Rosenberg v. Board of Education of School District # 1, 710 P.2d 1095 (Colo. 1985).

The ALJ relied upon Avalanche Industries, Inc. v. Clark 198 P.3d 589 (Colo. 2008) in reaching his decision. We note that in a recent decision the Colorado Supreme Court overruled part of its holding in Avalanche Industries, Inc. that the claimant’s “time of injury” as used in § 8-42-102(3) could mean either time of accident or time of

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disablement. Benchmark/Elite Inc. v. Simpson and City of Colorado Springs v. Bennett No. 09SC769 ___ P.3d ___ (Colo. 2010).

However, in Benchmark/Elite Inc, supra, the court reaffirmed that under Workers’ Compensation Act in determining an employee’s AWW, the ALJ may choose from two different methods set forth in section 8-42-102. The court noted the first method, referred to as the “default provision,” provides that an injured employee’s AWW “be calculated upon the monthly, weekly, daily, hourly, or other remuneration which the injured or deceased employee was receiving at the time of injury.” Section 8-42-102(2). The default provision lists six different formulas for conducting this calculation, such as multiplying the monthly wage or salary at the time of the accident by twelve and then dividing by fifty-two. Section 8-42-102(2)(a)-(f). The court then explained the second method for calculating an employee’s AWW, referred to as the “discretionary exception,” applies when the default provision “will not fairly compute the [employee’s AWW].” Section 8-42-102(3). In such a circumstance, the ALJ has discretion to “compute the [AWW] of said employee in such other manner and by such other method as will, in the opinion of the director based upon the facts presented, fairly determine such employee’s [AWW].” Id. The court overruled its previous holding that the term “time of injury” could mean either the time of the accident or the time of disablement. However, the court specifically noted that its decision did not alter the core holding of Avalanche Industries, which is that the discretionary exception allows an ALJ to compute an employee’s AWW based on compensation received at a subsequent employer, provided the ALJ does not abuse his or her discretion.

Here the ALJ in relying on Avalanche Industries specifically noted that the discretionary exception allowed him to compute the AWW in such a manner that would fairly determine the claimant’s AWW. The ALJ then found that the claimant’s increased wages, based upon merit raises, more fairly measured his loss of earning capacity because of his injury. The ALJ also based the claimant’s AWW on other periods depending on the claimant’s COBRA benefits. We perceive no reversible error in this exercise of the ALJ’s exercise discretion. We are not persuaded that the ALJ was restricted to use of the wage earned as of the time of the injury in calculating AWW.

The respondents next contend that the ALJ’s order requiring an adjustment of the claimant’s AWW after a period of PPD benefits has begun is contrary to the stated purpose of the Workers’ Compensation Act, is unworkable and exceeds the bounds of reason. The respondents argue that the ALJ’s order will force at least two additional amendments to the Final Admission of Liability, causing uncertainty.

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The ALJ did not order the respondents to pay a specific dollar amount. Rather, the ALJ ordered the respondents to pay temporary disability benefits and permanent partial disability benefits based on the AWW in effect for different periods of disability. We perceive no problem with the insurer complying with the order concerning temporary disability benefits even though the ALJ determined different AWW for different periods of time. However, in our view variable determinations of AWW creates a problem when the insurer has been ordered to use those various AWW determinations in calculating PPD.

As noted by the court in Benchmark/Elite Inc, the Workers’ Compensation Act establishes a formula for calculating workers’ compensation benefits that proceeds in two steps. The ALJ determines the employee’s average weekly wage, which serves as the basis for computing disability benefits. Section 8-42-102, C.R.S. After the ALJ determines the employee’s AWW, either through the default provision or the discretionary exception, the ALJ applies the statutory limit on workers’ compensation benefits and calculates the rate of the claimant’s benefits. For both TTD and PTD benefits, this rate is the lesser of either sixty-six and two-thirds percent of the employee’s AWW or ninety-one percent of the state’s average weekly wage (“state AWW”). Section 8-42-105 (awards for TTD benefits); § 8-42-111 (awards for permanent total disability benefits); [§ 8-47-106 (statute governing state AWW).

The calculation of a whole person award of PPD benefits is dependent upon the claimant temporary total disability rate, age factor and the medical impairment rating awarded. Sections 8-42-107(8)(d)(e); 8-42-107(8)(e). This determines the total amount payable for PPD benefits. Permanent medical impairment benefits are calculated as follows: Medical impairment rating x age factor x 400 weeks x TTD rate = PPD award.

The variables of medical impairment, age factor and TTD rate are placed in the formula and multiplied against the constant 400 weeks, which yields a specific dollar amount for medical impairment benefits. It is then provided in § 8-42-107(8) (d) that the payments of medical impairment benefits shall be paid at the temporary total disability rate beginning on the date of MMI. In our view, the problem present in the ALJ’s order is that the PPD formula contemplates one figure for the TTD rate, which in turn is dependent upon there being only one AWW figure. We cannot discern what the exact amount of PPD benefits the respondents are obliged to provide under the order.

The claimant argues that Schelly v. Industrial Claim Appeals Office 961 P.2d 547 (Colo. App. 1997) is dispositive on the current matter. In Schelly, the sole issue before the court was whether the cost of Medicare insurance benefits is included in an injured claimant’s average weekly wage once the continuation of the employer’s group health insurance plan is terminated. The court concluded that cost should be included. The

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claimant argues that in Schelly the adjustment of AWW was allowed to be made after MMI had been achieved. However Schelly dealt with the issue of permanent total disability (PTD) benefits not PPD benefits as in the case before us. An award of PTD benefits is paid out at the TTD weekly benefits rate and the benefit continues until the death of the claimant. Section 8-42-111. Moreover, whereas it may be possible for adjustments of AWW to be made in the awards of TTD benefits that is not the situation here. In any event, the court in Schelly therefore was not faced with the issue presented here of calculating the dollar amount owed for PPD benefits when there are multiple determinations of AWW. On the present issue, we view Schelly as inapplicable.

The claimant also cites Pizza Hut v. Industrial Claim Appeals Office 18 P.3d 867 (Colo. App. 2001) for the proposition that the ALJ’s discretion to make adjustments in AWW, as occurs in the case of temporary disability benefits and PTD disability awards, should be extended to include awards of PPD benefits. In Pizza Hut the court held that an ALJ did not abuse his discretion by awarding medical impairment benefits to the claimant based upon higher weekly wage claimant was earning at time of MMI rather than using the claimant’s average weekly wage based on his earning at the time of the injury. We note that Pizza Hut did not deal with the issue of changing determinations of AWW, which the insurer has been ordered to use in calculating PPD. That is the problem presented here. Rather, Pizza Hut holds that the ALJ has discretion in awarding PPD benefits to use the wage earned at the time of MMI or the AWW based on the claimant’s earning at the time of the injury depending on which would fairly compensate the claimant for his future loss of earning.

We are not persuaded by the claimant’s contention that the insurer should have no difficulty complying with the order because the amount owed is easily calculated. We note that the claimant fails to demonstrate concretely how such calculation can be made. In any event, we cannot ascertain what amount is owed under the order for payment of PPD benefits. Therefore, we remand the matter to the ALJ for entry of a new order on the liability of the respondents for PPD benefits. The ALJ shall exercise his discretion in determining what AWW should be used in the formula for determining PPD benefits.

IT IS THEREFORE ORDERED that the ALJ’s order dated February 1, 2010 is set aside on the issue of AWW for purposes of determining PPD benefits, and the matter is remanded for further proceedings and entry of a new order consistent with the views expressed herein. Otherwise the order is affirmed.

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______________________________ John D. Baird

______________________________ Thomas Schrant

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