W.C. Nos. 3-815-100, 4-170-231, 4-176-876Industrial Claim Appeals Office.
April 15, 1997
ORDER OF REMAND
The Colorado Compensation Insurance Authority (CCIA), and its third-party adjustment firm, Hewitt, Coleman and Associates (Hewitt) seek review of a final order of Chief Administrative Law Judge Felter (ALJ), which assessed penalties based on the CCIA’s failure to pay medical benefits in a timely fashion. We set the order aside and remand for entry of a new order.
In this case, the CCIA was the claimant’s employer, as well as the workers’ compensation insurer. Hewitt acted as a third-party claims adjuster from the fall of 1995 until OHMS assumed the adjustment duties on February 15, 1996. The issue centers on the failure of the CCIA, Hewitt, and OHMS to pay for a medically prescribed hot tub, and their failure to reimburse the claimant for medically-related travel expenses.
The ALJ found that, in May 1995, he entered an order requiring the respondents to pay reasonable and necessary medical expenses. On August 30, 1995, one of the claimant’s treating physicians prescribed a hot tub to treat the claimant’s condition. This prescription was received by Hewitt on September 29, 1995. However, no hot tub had been provided by the time of the hearing on June 21, 1996.
Further, on September 12, 1995, the claimant submitted a letter to Hewitt requesting reimbursement for mileage expenses which the claimant incurred while traveling to Denver for medical treatment. However, Hewitt did not pay the mileage, and the ALJ discredited evidence that the delay was attributable to the adjuster’s confusion over the identity of the authorized treating physician. Moreover, the ALJ found that a Hewitt adjuster advised the claimant that reimbursement would be made, and then reneged on this promise. As a result, the claimant bounced several checks which she had written in anticipation of Hewitt’s payment.
Ultimately, the ALJ held that Hewitt and OHMS were “agents” of the CCIA, and therefore, the CCIA was responsible for their conduct in adjusting the claim. The ALJ found that Hewitt engaged in “willfully incompetent adjusting practices” by failing to reimburse the mileage expenses and pay for the hot tub. The ALJ also concluded that, although “OHMS inherited a mess from Hewitt Coleman,” it did not act promptly enough to remedy the difficulties created by Hewitt’s adjustment practices. Thus, utilizing § 8-43-304(1), C.R.S. (1996 Cum. Supp.), the ALJ assessed penalties against the CCIA in an amount exceeding $75,000. The daily penalties spanned the period from September 16, 1995 to June 21, 1996.
I.
On review, the CCIA and Hewitt argue that the ALJ erred in assessing penalties under § 8-43-304(1) rather than § 8-43-401(2)(a), C.R.S. (1996 Cum. Supp.). They argue that the gravamen of the penalties assessed by the ALJ is failure to pay medical benefits, and therefore, § 8-43-401(2)(a) is the pertinent statute. We agree with this argument.
In Sears v. Penrose Hospital, ___ P.2d ___, (Colo.App. No. 96CA0909, February 20, 1997), the Court of Appeals concluded that the specific penalty provisions of § 8-43-401(2)(a) superseded the general penalty provisions of § 8-43-304(1) where the “gravamen” of the disputed conduct was the respondent’s failure to pay medical benefits in a timely fashion. The court held that § 8-43-304(1) applies only when the Act does not create a “specific penalty” for the violation in question, and that § 8-43-401(2)(a) establishes a particular penalty for failure to pay medical benefits within thirty days. Moreover, the court rejected the claimant’s argument that the respondent’s alleged “failure to investigate” the claim for medical benefits constituted a separate theoretical basis for imposing penalties under § 8-43-304(1). To the contrary, the court stated that “an underlying act or omission, such as a failure to investigate, is necessarily encompassed in the broader question whether the employer willfully delayed or stopped payment.”
The Sears court also held that imposition of a penalty under §8-43-401(2)(a) requires proof that the insurer or employer “willfully” and “wrongfully” stopped or withheld payment for a medical benefit. The court defined willfulness as acting with “deliberate intent,” and wrongfulness as the equivalent of “unlawful” or “unjust.” The court further held that resolution of these issues are questions of fact for the ALJ.
Here, the “gravamen” of the claimant’s request for penalties is that the CCIA withheld payment for medical benefits in the form of mileage expenses and a hot tub. Therefore, Sears v. Penrose Hospital, supra,
requires that the case be remanded to the ALJ for the application of §8-43-401(2)(a), not § 8-43-304(1).
The claimant’s argument notwithstanding, it makes no difference that the ALJ entered an order requiring the payment of medical benefits. In fact, Sears also involved a general order requiring the payment of medical benefits. However, it was the failure to pay medical benefits, not the existence of an order, which identified the applicable penalty statute in Sears.
Similarly, the CCIA’s conduct may not be punished separately as a violation of Rule of Procedure XVI(K), 7 Colo. Code Reg. 1101-3 at 80.01. This argument is no different than the assertion that violation of the order constituted a separately punishable violation under §8-43-304(1). The “gravamen” of the CCIA’s conduct remains the failure to pay medical benefits.
We are also unpersuaded by the claimant’s assertion that the gravamen of the ALJ’s order is “bad faith adjusting,” and that improper adjusting constitutes a separate statutory basis for the imposition of penalties under § 8-43-304(1). To the contrary, Sears holds that underlying acts or omissions involving the adjustment of a claim for medical benefits are “necessarily encompassed in the broader question whether the employer willfully delayed or stopped payment.” Therefore, even if some general duty of good faith adjusting can be found in the Act, it is superseded by the specific provisions of § 8-43-401(2)(a) when the issue is penalties for failure to pay medical benefits.
Finally, the claimant argues that § 8-43-401(2)(a) does not apply to the hot tub issue because the statute is limited to cases involving the failure to pay “medical bills.” The claimant reasons that no “bill” was submitted for the hot tub. However, the plain language of § 8-43-401(2)(a) states that the statute applies to delays in the payment of “medica benefits.” (Emphasis added). It is undisputed that the hot tub would constitute a medical “benefit.” Thus, the CCIA’s failure to pay for the hot tub falls within the plain language of the statute regardless of whether a “bill” was submitted.
Under these circumstances, the matter must be remanded to the ALJ for application of § 8-43-401(2)(a). The ALJ shall make specific determinations of fact concerning whether or not the CCIA “willfully” and “wrongfully” delayed payment of medical benefits. In so doing, the ALJ shall utilize the standards established in Sears v. Penrose Hospital, supra. In this regard, we note that the ALJ indicated that some of the conduct by the insurance adjusters was “willfully incompetent.” However, it is unclear whether the ALJ applied the standard of “willfulness” set forth in Sears.
We also note that the ALJ’s order, on its face, applies only to the CCIA. However, Hewitt appears to construe the order as applying to it. On remand, the ALJ should make specific findings and conclusions concerning whether or not any penalties are limited to the CCIA, or are also directed against the adjustment firms.
II.
The claimant has separately argued that the CCIA and Hewitt waived the right to argue that § 8-43-401(2)(a) is the applicable statute. In support of this position, the claimant points out that these parties never specifically argued to the ALJ that § 8-43-304(1) is not applicable, or that the case is governed by § 8-43-401(2)(a). Under the circumstances of this case, we are not persuaded.
Generally, a “waiver” of the right to raise an issue on appeal has been found where a party, which bears the burden of proof on an issue, fails to present evidence and argument concerning the issue at the time of the hearing. E.g., Lewis v. Scientific Supply Co., 897 P.2d 905
(Colo.App. 1995) (party affirmatively asserting waiver on appeal must have raised the issue before the ALJ). Further, the courts have held that parties seeking to challenge an ALJ’s statutory authority should first raise the issue to the ALJ. Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995); Winters v. Industrial Commission, 736 P.2d 1256 (Colo.App. 1986). Courts have also precluded parties from taking positions on appeal which contravene judicial admissions made at a hearing. Schlage Lock v. Lahr, 870 P.2d 615 (Colo.App. 1993).
However, when a party is defending a claim and does not bear the burden of proof on a particular issue, it may usually preserve an argument for appeal by raising it in a petition to review the ALJ’s order. See Schrieber v. Brown Root, Inc., 888 P.2d 274 (Colo.App. 1993). This is true because, as a general matter, the final legal and factual basis of an ALJ’s order cannot become known until the order itself is issued.
Here, we decline to conclude that the CCIA or Hewitt waived the issue of which penalty statute applies. Since these parties did not bear the burden of proof to establish the right to a penalty, nor were they seeking any affirmative relief from the ALJ, their silence concerning the applicability of § 8-43-401(2)(a) cannot be deemed a voluntary, knowing and intelligent waiver. While it is always economical to raise foreseeable legal issues prior to the issuance of an order, the failure to do so cannot always be deemed a waiver.
In view of this disposition, we need not consider the other arguments raised by the CCIA.
IT IS THEREFORE ORDERED that the ALJ’s order dated July 9, 1996, is set aside, and the matter is remanded for entry of a new order consistent with the views expressed herein.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Bill Whitacre
Copies of this decision were mailed April 15, 1997 to the following parties:
Vicky Brawner Ahlstrom, 0301 Shannon Rd., Texas Creek, CO 81223
Colorado Compensation Insurance Authority, Attn: Curt Kriksciun, Esq. (Interagency Mail)
Hewitt, Coleman Associates, Attn: Richard A. Hurley, P.O. Box 3808, Greenville, SC 29608
Alexsis, Inc., 1099 18th St., Ste. 3050, Denver, CO 80202-1930
OHMS, P.O. Box 173682, Denver, CO 80217-3682
Subsequent Injury Fund (Interagency Mail)
Steven U. Mullens, Esq., P.O. Box 2940, Colorado Springs, CO 80901-2940 (For the Claimant)
Ralph Odgen, Esq., 1750 Gilpin St., Denver, CO 80218 (For the Claimant)
Thomas Kanan, Esq., 1700 Broadway, #1910, Denver, CO 80290 (For the Respondents)
Attorney General’s Office, Attn: Michael Serruto, Esq., 1525 Sherman St., 5th Flr., Denver, CO 80203 (For SIF)
Bernard Woessner, Esq. and Anne Smith Myers, Esq., 3900 E. Mexico, Ste. 1000, Denver, CO 80210 (For Hewitt, Coleman Associates)
By: _______________________________