IN RE BAKER, W.C. No. 4-132-474 (7/31/96)


IN THE MATTER OF THE CLAIM OF LINDA L. BAKER, Claimant, v. VADE MECUM, INC., Employer, and COLORADO COMPENSATION INSURANCE AUTHORITY, Insurer, Respondents.

W.C. No. 4-132-474Industrial Claim Appeals Office.
July 31, 1996

FINAL ORDER

The respondents seek review of an order of Chief Administrative Law Judge Felter (ALJ) which assessed penalties against the Colorado Compensation Insurance Authority (CCIA) for the improper submission of records in a utilization review (UR) proceeding. We affirm.

A brief procedural history is necessary to understand our resolution of the issues on appeal. The claimant sustained a compensable injury in 1992. The CCIA subsequently requested a UR of the medical care of Dr. VanHook. Pursuant to § 8-43-501 C.R.S. (1995 Cum. Supp.), the UR request was accompanied by a medical record package which included notes and letters from the CCIA’s adjuster, a report from an independent medical examination (IME) by Dr. Orent, and a letter from the CCIA’s Medical Director, Dr. Stieg. The claimant objected to the inclusion of these documents, and applied for a hearing on the issue of penalties.

In an order dated August 21, 1995, a pre-hearing ALJ ordered the CCIA to remove the disputed documents from the medical record package, and referred the penalty issue to the Director of the Division of Workers’ Compensation (Director). The CCIA subsequently deleted the adjuster’s notes from the medical record package. Thereafter, the claimant applied for a hearing before the ALJ.

Over the respondents’ objection, the ALJ determined that he had jurisdiction to hear the penalty issue. The ALJ also found that the CCIA violated § 8-43-501(2)(d), C.R.S. (1995 Cum. Supp.), and the Rules of Procedure, Part XV(C)(2), Code Colo. Reg. 1101-3 at 64, by including the letters from Dr. Stieg and the CCIA adjuster in the medical record package. Consequently, pursuant to § 8-43-304(1) C.R.S. (1995 Cum. Supp.) the ALJ assessed a penalty of $4, 650.

I.
On review, we first reject the respondents’ argument that the ALJ lacked jurisdiction to adjudicate the penalty issue. The respondents argue that because the matter was referred to the Director, the claimant’s application for a hearing before the ALJ was in contradiction of the §8-43-304(5), C.R.S. (1995 Cum. Supp.), and the Rules of Procedure. In support, the respondents cite Rule VIII(N)(1)(b), Code Colo. Reg. 1101-3 at 29 which provides that a party may request penalties under § 8-43-304 by the filing of an application for hearing or the filing a written motion with the Director. The respondents also rely on the portion of §8-43-304(5) which states that a “request for penalties shall be filed with the director or administrative law judge.” Therefore, the respondents argue that the claimant is entitled to a hearing before the Director or the ALJ, but not both.

Contrary to the respondents’ implicit assertion, the pre-hearing ALJ’s August 21 order did not limit the ALJ’s jurisdiction. Rather, § 8-43-201
C.R.S. (1995 Cum. Supp.) affords both the Director and the ALJ original jurisdiction to hear and decide “all matters” arising under the Workers’ Compensation Act (Act). Furthermore, § 8-43-207.5(2), C.R.S. (1995 Cum. Supp.) does not authorize pre-hearing ALJs to limit the jurisdiction of the Director or the ALJs in the Division of Administrative Hearings.

Moreover, § 8-47-107 C.R.S. (1995 Cum. Supp.) expressly provides that the Director may not adopt any rule which limits the jurisdiction of the ALJs in the Division of Administrative Hearings. Consequently, we do not construe the Rules of Procedure as prohibiting the ALJ’s exercise of jurisdiction over the claimant’s motion for penalties.

In any case, the Rules of Procedure do not address the situation where a party applies for a hearing on the issue of penalties, and the matter is referred to the Director by a pre-hearing ALJ. Therefore, we are not persuaded that Rule VIII(N) is dispositive of the circumstances presented here.

II.
Next, the respondents concede that under § 8-43-304 penalties may be imposed where the insurer “fails or refuses to perform any duty lawfully enjoined,” or “violates any provision” of the Act for which no penalty is specifically provided. However, the respondents contend that this claim does not involve any violation of the Act or failure to perform “any duty lawfully enjoined.” We disagree.

The respondents concede that § 8-43-501(2)(d) prescribes the contents of a medical records package in a UR proceeding. Section 8-43-501(2)(d) defines “medical records” as “documents and transcripts of information obtained from a patient or his or her medical professional that are related to the patient’s medical diagnosis, treatment and care.”

Here, the ALJ determined that June 3, 1994 letters from the CCIA’s adjuster to Dr. VanHook and the claimant’s attorney, which referenced a video tape of the claimant, were not medical records within the meaning of § 8-43-501(2)(d). The ALJ also found that Dr. Stieg’s April 11, 1995 letter to Dr. VanHook did not constitute information from the claimant’s medical professional. Further, the ALJ determined that insofar as Dr. Stieg’s letter objected to Dr. VanHook’s correspondence with the claimant’s attorney, and asked Dr. VanHook to provide additional information which Dr. Stieg stated would be helpful in “reaching some settlement on this case,” the letter did not relate to the claimant’s diagnosis, treatment or care. Similarly, the ALJ found that the April 29, 1994 letter from the CCIA’s adjuster to Dr. VanHook, which included criticism of Dr. Rose, was argumentative and not reasonably related to the claimant’s medical diagnosis, treatment and care.

The ALJ’s findings represent a plausible interpretation of the record, and therefore, must be upheld. Section 8-43-301(8), C.R.S. (1995 Cum. Supp.); Suetrack USA v. Industrial Claim Appeals Office, 902 P.2d 854
(Colo.App. 1995). Moreover, the ALJ’s findings support his determination that the CCIA violated § 8-43-501(2)(d) by including the disputed documents in the medical records package.

The ALJ also determined that the CCIA violated the Rules of Procedure governing UR proceedings. In so doing, the ALJ relied on our prior conclusion that the violation of a procedural rule constitutes the failure to “perform any duty lawfully enjoined” by the Director. See Halbritter v. Colorado Professional Counseling Services, P.C., W.C. No. 4-160-869, August 3, 1995, aff’d Colorado Professional Counseling Services, P.C. v. Halbritter (Colo.App. No. 95CA1356, June 6, 1996) (not selected for publication); Adkinson v. National Rooter, W.C. No. 4-197-635, August 11, 1995; O’Grady v. Denver Public School District, W.C. No. 4-151-533, November 18, 1994.

Rule XV(C)(2) sets forth the contents and organization of medical record packages in UR proceedings. Insofar as pertinent, Rule XV(C)(2)(c) provides that the following documents are to be included:

“Section 4 — all reports resulting from referrals, consultations, independent medical examinations and second opinions as submitted to the requesting party.”
“Section 6 — all vocational rehabilitation/medical management reports as submitted to the requesting party.”

Rule XV(C)(3) states that:

“The medical records package shall not contain billing statements, adjustor notes, surveillance tapes or reports, admissions, denials or comments directed to the utilization review committee.”

The ALJ determined that the disputed documents are not expressly included in Rule XV(C)(2)(c), and to the contrary, are expressly prohibited from being included by Rule XV(C)(3). Thus, the ALJ could, and did, find that the CCIA failed to perform a duty lawfully enjoined when it included the disputed documents in the medical record package.

III.
Nevertheless, the respondents argue that the CCIA was not subject to the imposition of penalties because its actions were objectively reasonable. In support, the respondents cite the testimony of the CCIA’s Medical Audit Supervisor, Marybeth Chenoweth, that she thought Dr. Stieg’s letter and the adjuster’s notes were properly included in accordance with Rule XV(C)(2)(c), Section 6. (Tr. p. 32). She also stated that she routinely, and without complaint, previously included letters from adjusters in UR medical record packages. (Tr. p. 30).

As argued by the respondents the first party “bad faith” standard does not govern the imposition of penalties under § 8-43-304. Pueblo School District No. 70 v. Toth, ___ P.2d ___ (Colo.App. No. 95CA0189, January 25, 1996). Rather, § 8-43-304 is subject to a “negligence” standard measured by the reasonableness of the insurer’s actions. Pueblo School District No. 70 v. Toth, ___ P.2d ___ (Colo.App. No. 95CA0189, January 25, 1996); Colorado Compensation Insurance. Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). We have previously stated that the “reasonableness” of the insurer’s actions depends on whether the action was predicated on a “rational argument based on law or evidence.” See Tozer v. Scott Wetzel Services, Inc., 883 P.2d 496 (Colo.App. 1994); Halbritter v. Colorado Professional Counseling Services, P.C., supra. Consequently, we have held that an insurer is not subject to the imposition of penalties under § 8-43-304(1) if the insurer’s actions which are the basis for the penalty request were predicated on a rational argument based in law or evidence.

Here, the ALJ determined that “there is no rational reason based on the statute or other medical information in the case to warrant submissions of the argumentative comments presented by the medical director and the adjuster at the CCIA.” This finding reflects the ALJ’s factual determination that the respondents’ violation was not predicated on a rational argument, and we perceive no grounds to interfere with the ALJ’s determination. See Colorado Compensation Insurance. Authority v. Industrial Claim Appeals Office, supra. (question of whether insurer’s conduct was reasonable is factual in nature).

Insofar as the ALJ found that the letters from Dr. Stieg and the CCIA’s adjuster were argumentative, and implicitly directed to the UR committee, we agree with the ALJ that they are neither “vocational rehabilitation/medical management reports”. See (Tr. p. 61). In fact, the attorney for the respondents’ conceded that Dr. VanHook and not the CCIA’s adjuster was the claimant’s “medical manager.” (Tr. pp. 53, 54).

Furthermore, Section 6 refers to records “as submitted to the requesting party.” In contrast, the correspondence by Dr. Stieg and the CCIA’s adjuster constitute documents generated by the CCIA as the requesting party. Therefore, we agree with the ALJ that Rule XV(C)(2)(c), Section 6 cannot rationally be construed as permitting the submission of letters originated by the CCIA’s adjuster and medical director.

In reaching our conclusion, we acknowledge the respondents’ argument that the ALJ made no determination concerning whether the respondents presented a rational argument for the submission of Dr. Orent’s IME. (Tr. p. 68). However, the ALJ did not impose penalties for the respondents’ submission of Dr. Orent’s report. Therefore, even if Section 4 required the inclusion of Dr. Orent’s report, the ALJ’s error, if any, if failing to address this issue enured to the benefit of the respondents, and thus, was harmless.

Similarly, the respondents argue that “adjusters’ notes” are “medical management reports” within the meaning of Section 6. However, the ALJ did not impose penalties for the submission of the adjusters’ notes. Consequently, we do not consider the respondents’ contention that Rule XV is internally inconsistent because Section 6 requires the inclusion adjuster’s notes and Rule XV(C)(3) expressly excludes such notes.

Moreover, the evidence that the CCIA has a history of submitting adjuster’s notes and letters to the UR committee does not compel a conclusion that the actions were objectively reasonable. In fact, the ALJ determined that regardless of whether Ms. Chenoweth was acting in her “best lights,” her actions were not based upon a rational argument concerning the requirement of § 8-43-501 or Rule XV. The frequency of a violation does not establish the reasonableness of the violation. Therefore, the ALJ’s oral finding that Ms. Chenoweth acted in “good faith,” that is without malice, did not preclude the ALJ from imposing penalties. (Tr. pp. 29, 59).

IV.
Lastly, the respondents argue that the imposition of penalties under §8-43-304 violates the CCIA’s constitutional protection to due process of the laws. However, the CCIA’s argument was rejected by the court in Pueblo School District No. 70 v. Toth, supra, and we are bound by that decision See C.A.R. 35(f).

IT IS THEREFORE ORDERED that the ALJ’s order dated December 1, 1995, is affirmed.

INDUSTRIAL CLAIM APPEALS PANEL

____________________________________ David Cain
____________________________________ Kathy E. Dean

NOTICE
This Order is final unless an action to modify or vacate this Order iscommenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, CO80203, by filing a petition for review with the court, with service of acopy of the petition upon the Industrial Claim Appeals Office and allother parties, within twenty (20) days after the date this Order ismailed, pursuant to section 8-43-301(10) and 307, C.R.S. (1995 Cum.Supp.).

Copies of this decision were mailed July 31, 1996 to the following parties:

Linda L. Baker, 7156 Maple St., Longmont, CO 80504

Vade Mecum, Inc., 451 Oak St., Frederick, CO 80530

Colorado Compensation Insurance Authority, Carolyn Boyd, Esq. (Interagency Mail)

Division of Workers’ Compensation, Carrier Practices Unit, Attn Jo Anne Ibarra (Interagency Mail)

Douglas R. Phillips, Esq., 155 S. Madison, Ste. 330, Denver, CO 80209-3014 (For the Claimant)

BY: _______________________