W.C. No. 4-344-781Industrial Claim Appeals Office.
April 24, 2002
FINAL ORDER
The claimant seeks review of an order of summary judgment by Administrative Law Judge Harr (ALJ) which denied the claimant’s request for penalties. We set aside the order and remand for further proceedings.
In 1995 the claimant suffered a compensable injury. On February 15, 2001, the ALJ ordered the respondent to pay permanent total disability benefits commencing September 4, 1997, subject to allowable offsets and credits for permanent partial disability benefits previously paid. No appeal was taken from that order.
On March 9, 2001, the respondent made a lump sum payment of accrued permanent total disability benefits less a credit of $10,296 for permanent partial disability benefits paid pursuant to a previously filed final admission of liability. On April 24, 2001, the respondent filed an amended final admission of liability for the payment of permanent total disability benefits. The “Remarks” section of the admission stated, “[P]ayment of PPD paid from 9/4/97 to 12/28/98 of $10,296.00 to be taken as a credit against future payments of PTD.” (Emphasis added).
The claimant objected to the amended admission and requested a hearing on “overpayment alleged by Respondents.” A hearing was scheduled for August 22, 2001. The claimant’s attorney also wrote to the respondent and asserted that the $10,296 credit had already been taken and was no longer available in April 2001. On August 20, 2001, the respondent filed another amended final admission of liability for the payment of permanent total disability benefits which stated, “[P]ayment of PPD from 9/4/97 to 12/28/98 of $10,296.00 has been taken as a credit against PTD payments.” (Emphasis added). On August 30, 2001, the claimant requested penalties against the respondent for “alleging an overpayment on the Final Admission of Liability dated 4/24/01 when the overpayment had already been taken.”
The respondent moved for summary judgment on the penalty claim. The respondent argued it violated no statute or rule, and there was no genuine issue of material fact concerning the respondent’s liability for penalties. In support, the respondent submitted an affidavit from its adjuster which indicated the adjuster had no “intent” to deprive the claimant of permanent total disability benefits awarded by the ALJ, and she took no action to reduce the claimant’s permanent total disability benefits pursuant to the “credit” listed in the April 24 admission.
The claimant objected to summary judgment but conceded she did not know the adjuster’s “intent,” when filing the April 2001 admission. Under these circumstances, the ALJ “credited” the content of the adjuster’s affidavit and found there was no “intent” to deprive the claimant of awarded benefits and no action was taken to diminish the claimant’s award after March 9, 2001. Further, the ALJ stated he was “unable to discern the nature of” the alleged violation under § 8-43-203(2)(b)(I), [mistakenly cited as § 8-43-205(2)(b)(I)] and, the Rules of Procedure, Part IV(N)(3), 7 Code Colo. Reg. 1101-3. Therefore, the ALJ determined there was no issue of material fact, granted summary judgment in favor of the respondent and dismissed the claim for penalties.
On review the claimant contends the ALJ erroneously determined there was no genuine issue of material fact. We agree.
Summary judgment is a drastic remedy which is only proper where there is no issue of material fact. Service Supply Co. v. Vallejos, 169 Colo. 14, 452 P.2d 387 (1969); Morphew v. Ridge Crane Service, Inc., 902 P.2d 848 (Colo.App. 1995). A “material fact” is simply a fact that will affect the outcome of the case Dominquez Reservoir Company v. Feil, 854 P.2d 791 (Colo. 1993). Where there are disputed issues of material fact, due process requires the parties be afforded a reasonable opportunity to present evidence and confront adverse evidence. Hendricks v. Industrial Claim Appeals Office, 809 P.2d 1076 (Colo.App. 1990).
Under former § 8-43-304(1) C.R.S. (1990 Cum. Supp.) [amended 1991 Colo. Sess. Laws, Ch. 218 for injuries occurring after July 1, 1991], an ALJ may impose penalties up to $100 per day against an insurer who violates any provision of the Workers’ Compensation Act (Act) or a duty imposed by the Director of the Division of Workers’ Compensation. See Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996). Where the ALJ finds the insurer violated the Act, penalties may be imposed if the insurer’s actions which resulted in the violation were objectively unreasonable. Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). In this regard, the issue is not whether the respondents can, in hindsight, offer some justification for their action. Instead, the issue is whether the respondents’ failure to comply with the statute or rule was “objectively reasonable” because it was predicated on a rational argument based in law or fact. See Pueblo School District No. 70 v. Toth, supra. Consequently, i Diversified Veterans Corporate Center v. Hewuse, 942 P.2d 1312
(Colo.App. 1997), the court upheld an ALJ’s finding that the insurer’s violation due to a “mistake” was not predicated on a rational argument in law.
Unlike the ALJ we are able to discern the nature of the respondent’s alleged violation of the Act. Former §8-43-203(2)(b)(I), C.R.S. 1996 [amended 1998 Colo. Sess. Laws Ch. 313 at 1432 for injuries occurring on or after June 4, 1998] which governs this claim provides that:
“If the employer or, if insured the employer’s insurance carrier admits liability, such notice shall specify the amount of compensation to be paid, to whom compensation will be paid, the period for which compensation will be paid, and the disability for which compensation will be paid. ” (Emphasis added).
Section 8-43-203(2) provides a mechanism for administrative closure of claims, without the necessity of litigation, in cases presenting no legitimate controversy. Cibola Construction v. Industrial Claim Appeals Office, 971 P.2d 666 (Colo.App. 1998). Specifically, a claimant’s failure timely to object to a final admission of liability forecloses the claimant’s right to further benefits absent an order reopening the claim. One obvious purpose of the requirements of § 8-43-203(2)(b)(I) is to put the claimant on notice of the exact type, amount and duration of benefits the respondent intends to pay, so the claimant can make an informed decision whether to accept or reject the admission. Cf. Bowlen v. Munford, 921 P.2d 59 (Colo.App. 1996); McCotter v. U.S. West Communications, W.C. No. 4-430-792 (March 25, 2002). Where the admission does not specify the amount of benefits to be paid, the claimant is forced to object to the admission and initiate further litigation to adjudicate the amount of benefits to be paid.
Here, it is undisputed the respondent’s April 24 amended final admission provided for the payment of permanent total disability benefits at a rate of $191.57 per week, commencing September 4, 1997. However, the admission also stated that previously paid permanent partial disability benefits of $10,296 were “to be taken as a credit against future payments” of permanent total disability benefits.
The respondent’s Motion for Summary Judgment argues that the April 24 admission provided for a “singular $10,296 PPD credit” which was taken on March 9, 2001. The amended admission does not expressly contain this language. The claimant contends that the phrase “to be taken against future payments” implies the respondent will reduce permanent total disability benefits beyond the credit taken on March 9, 2001.
Regardless of the respondent’s retrospective assertion concerning the intent of the April 24 admission, we conclude the admission is reasonably suspectable to more than one interpretation. Thus, the admission is ambiguous. See Fibreglas Fabricators, Inc. v Kylberg, 799 P.2d 371, 374 (Colo. 1990) (whether document ambiguous is question of law); Cary v. Chevron U.S.A., Inc., 867 P.2d 117 (Colo.App. 1993). Because the admission is ambiguous, it is not specific concerning the “amount of compensation to be paid” as required by § 8-43-203(2)(b)(I) See Dorman v. Petrol Aspen Inc., 914 P.2d 909 (Colo. 1996). Consequently, the ALJ erred insofar as he found the claimant’s allegations fail to establish a violation of § 8-43-203(2)(b)(I).
However, the pleadings fail to establish a violation of Rule IV(N)(3) which states:
“Admissions shall be filed with supporting attachments immediately upon termination or reduction in the amount of compensation benefits. An admission shall be filed within 30 days of resumption or increase of benefits. (Emphasis added).
As we understand the claimant’s argument (see Brief in Support of Petition to Review, p. 5) the respondent erroneously failed to comply with the requirement to file an admission within thirty days of the “resumption or increase of benefits.” However, it is undisputed the respondent never terminated or reduced the claimant’s permanent total disability benefits based on the April 24 admission. Consequently, there was no duty to file another admission to reflect a “resumption or increase of benefits,” and thus, the respondent’s failure to do so did not violate Rule Rule IV(N)(3).
Contrary to the respondent’s further argument, the insurer’s “intent” or state of mind is not dispositive of whether the insurer’s actions were predicated on a rational argument based in law or fact. See Diversified Veterans Corporate Center v. Hewuse supra. This is true because the party seeking penalties is not required to prove bad faith or the insurer’s knowledge that the challenged conduct is unreasonable. Diversified Veterans Corporate Center v. Hewuse, supra; Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, supra; cf. §8-43-304(4), C.R.S. 2001 (which applies to injuries after June 1, 1994). However, the insurer’s “intent” may be relevant in determining the amount of penalties to be imposed.
Similarly, we reject the respondent’s contention that evidence the respondent did not actually reduce its permanent total disability payment following the filing of the April 24 admission compels judgment for the respondent. The claimant is not required to prove she was harmed to establish there was an objectively unreasonable violation of the Act, even though the extent of harm or lack of harm is pertinent in determining the amount of the penalty. Rather, the establishment of penalties presumes the violation caused harm, and some penalty must be imposed if a violation occurred. See Marple v. Saint Joseph Hospital, W.C. No. 3-966-344 (September 15, 1995). Consequently, the ALJ’s finding that the insurer did not intend to harm the claimant does not support the ALJ’s determination there was no issue of material fact which warranted an evidentiary hearing or the order of summary judgment.
Accordingly, we set aside the ALJ’s order and remand the matter for further proceedings which afford the parties the opportunity for an evidentiary hearing on the question of whether the respondent’s action which resulted in a violation of the Act was objectively reasonable. Based upon the resolution of this issue, the ALJ shall enter a new order on the claim for penalties.
IT IS THEREFORE ORDERED that the ALJ’s order dated November 23, 2001, is set aside and the matter is remanded to the ALJ for further proceedings consistent with this order.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Kathy E. Dean
Copies of this decision were mailed April 24, 2002 to the following parties:
Inez Anderton, RR #1, Box 1704, Roosevelt, UT 84066
Sylvia Harding, Hewlett Packard/Agilent Technologies, P. O. Box 2197, Colorado Springs, CO 80901
Lori Hasty, Sedgwick Claims Management, 1225 17th St., #2100, Denver, CO 80202-5534
Steven U. Mullens, Esq., P. O. Box 2940, Colorado Springs, CO 80901-2940 (For Claimant)
David J. Dworkin, Esq., 3900 E. Mexico Ave., #1300, Denver, CO 80210 (For Respondent)
BY: A. Hurtado