W.C. No. 4-172-195Industrial Claim Appeals Office.
September 8, 1997
ORDER OF REMAND
The respondents seek review of an order of Administrative Law Judge Henk (ALJ), which required them to pay a penalty for improperly terminating temporary disability benefits. We set aside the order and remand the matter to the ALJ for entry of a new order.
The ALJ’s order was entered on the following stipulated facts. The respondents admitted liability for a 1993 injury, and paid temporary total and permanent partial disability benefits. After the benefits were interrupted, the respondents filed a General Admission of Liability dated February 27, 1996, reinstating temporary total disability benefits at the rate of $414.05 per week. The claimant was subsequently awarded Social Security Disability Insurance (SSDI) benefits for the period July 1993 thru July 1996, which were paid in a lump sum. As a result of the SSDI award, the respondents filed a General Admission of Liability dated August 19, 1996, claiming an overpayment of workers’ compensation benefits, and stating that the overpayment would be recovered against future benefits at the rate of $414.05 per week. The Admission also stated that no further temporary disability benefits would be paid until the overpayment was fully recovered.
The ALJ found that the respondents’ August 19 Admission constituted a “termination” of temporary disability benefits in violation of the Rules of Procedure, Part IX(1)(C), 7 Code Colo. Reg. 1101-3 at 32, and § 8-42-105(3), C.R.S. (1995 Cum. Supp.) [amended 1996]. Therefore, the ALJ ordered the respondents to pay a penalty at the rate of $10 per day from August 19, 1996 to April 23, 1997.
The ALJ’s order does not explicitly identify the statutory basis for the penalty assessment. However, it is implicit from the imposition of penalties at the rate of $10 per day that the ALJ relied upon § 8-43-304(1), C.R.S. (1993) [amended in 1994]. Insofar as pertinent § 8-43-304(1) allows an ALJ to impose a penalty on an insurer who “does any act prohibited [by the Act], or fails or refuses to perform any duty lawfully enjoined.” The court of appeals has held that a penalty may be imposed under §8-43-304(1) for the failure to comply with a statute or a procedural rule. See Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996); Allison v. Industrial Claim Appeals Office, 916 P.2d 623 (Colo.App. 1995).
On review, the respondents argue that pursuant to §8-42-103(1)(c)(I), C.R.S. (1996 Cum. Supp.), they are entitled to assert an offset against their liability for temporary disability benefits in an amount equal to fifty percent of the claimant’s SSDI benefits. Citing Cody v. Industrial Claim Appeals Office,
___ P.2d ___ (Colo.App. No. 96CA0485, October 24, 1996), the respondents also contend that they are allowed to take the offset against temporary disability benefits paid prior to the date the offset is asserted, as long as the claimant is not required to repay any workers’ compensation benefits. Moreover, they point out that there is no method, prescribed by statute or procedural rule, for determining the rate at which an insurer may recover overpaid benefits. Therefore, they argue that their decision to recover overpaid benefits at a rate equal to the claimant’s temporary disability rate does not violate any statute or rule.
Furthermore, the respondents contend that the ALJ mischaracterized their admission as a “termination” of temporary disability benefits. To the contrary, the respondents argue that they admitted liability for temporary disability benefits, but “modified” their admission to assert an offset on account of the claimant’s receipt of SSDI benefits. The respondents assert that this “modification” was done in accordance with Rule IX(E). Consequently, they argue that they are not subject to a penalty. We conclude that the ALJ’s findings are insufficient to permit appellate review, and therefore, remand the matter to the ALJ for additional findings and the entry of a new order. Section 8-43-301(8), C.R.S. (1996 Cum. Supp.).
Section 8-43-203(2)(d), C.R.S. (1996 Cum. Supp.), provides that where an insurer files an admission, “payments shall continue according to admitted liability.” Consequently, temporary disability benefits may only be terminated in accordance with § 8-42-105(3), C.R.S. (1995 Cum. Supp.) [amended in 1996] or Rule IX. See PDM Molding, Inc. v. Stanberg, 898 P.2d 542 (Colo. 1995); Monfort Transportation v. Industrial Claim Appeals Office, ___ P.2d ___ (Colo.App. No. 96CA2275, May 29, 1997). It follows that where an insurer admits liability for temporary total disability benefits at a rate of $414.05, the insurer may not cease making payments in that amount except as provided by § 8-42-105(3) or Rule IX.
As argued by the respondents, Rule IX(E) states that:
“An insurance carrier may modify temporary disability benefits to offset social security, disability pension or similar benefits pursuant to statute by filing an admission of liability form with the Division, with documentation which substantiates the offset and figures showing how the amount of the offset was calculated pursuant to statute.”
The respondents argue that insofar as Rule IX(E) requires an admission modifying temporary disability benefits to show how the modification was calculated “pursuant to statute,” that requirement refers to the statute which entitles the insurer to the modification. Where the modification is based upon an offset for SSDI benefits, the respondents argue that Rule IX(E) merely requires that the admission show that the amount of the offset was calculated pursuant to § 8-42-103(1)(c)(I).
The respondents contend that the $25,227.71 overpayment identified in their August 19 Admission was based on the fifty percent offset allowed by § 8-42-103(1)(c)(I). Therefore, they argue that the August 19 Admission complies with Rule IX(E).
However, the ALJ rejected this interpretation of Rule IX(E). The ALJ found that Rule IX(E) allows an insurer unilaterally to modify temporary disability benefits to assert a SSDI offset, “as long as the amount of the offset is pursuant to statute.” Consequently, the ALJ concluded that Rule IX(E) allows unilateral modification of temporary disability benefits to assert an offset on account of “ongoing” SSDI benefits. However, the ALJ determined that Rule IX(E) does not allow an insurer unilaterally to “terminate” the payment of future temporary disability benefits to recover an overpayment resulting from the claimant’s receipt of a retroactive award of SSDI benefits.
Initially, we agree with the ALJ’s interpretation of Rule IX(E). As noted by the respondents, there is no statutorily prescribed method for determining the rate at which an insurer may recover overpaid benefits. See Louisiana Pacific Corp. v. Smith, 881 P.2d 456 (Colo App. 1994). Rather, the court has held that, on the record before it, the rate of recovery was a discretionary issue for determination by the ALJ. Louisiana Pacific Corp. v. Smith, supra. It follows that the amount of an offset against future benefits to recover an overpayment cannot be calculated “pursuant to statute.” Thus, the ALJ correctly ruled that Rule IX(E) is not designed to permit unilateral modification of temporary disability benefits in order to recover an overpayment. Nevertheless, this conclusion is not dispositive of whether the respondents are subject to a penalty.
Section 8-43-304(1) does not impose a “strict liability” standard on respondents for violations of the Rules of Procedure. Rather, § 8-43-304(1) is governed by an objective standard of negligence, measured by the reasonableness of the insurer’s actions. Pueblo School District No. 70 v. Toth, supra Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). The reasonableness of an insurer’s actions is dependent on whether the actions were predicated on a “rational argument based in law or fact.” Diversified Veterans Corporate Center v. Hewuse,
___ P.2d ___ (Colo.App. No. 96CA0583, January 9, 1997).
Furthermore, a legal argument does not lack a rational basis in law or fact merely because it is ultimately proven wrong See Weissman v. Crawford Rehabilitation Services, Inc., 914 P.2d 380 (Colo.App. 1995), cert. granted, March 18, 1996. Rather, the pertinent issue is whether the respondents’ actions which resulted in the penalty were based on a plausible interpretation of existing law, or a reasonable argument for the modification of the law. Moreover, these questions generally present issues of fact for resolution by the ALJ. Pueblo School District No. 70 v. Toth, supra (penalty must be upheld if supported by substantial evidence, based on reasonable reading of the entire record).
Here, the ALJ rejected the respondents’ theory concerning the requirements of Rule IX(E). However, the ALJ did not make any specific findings of fact concerning whether the respondents’ conduct was unreasonable because the filing of the August 19 Admission was not based on a rational argument concerning the proper construction of Rule IX(E). In this regard, we note tha Louisiana Pacific Corp. v. Smith is not necessarily inconsistent with the respondents’ position since the Louisiana Pacific court observed that no party cited a regulation or statute purporting to govern overpayment recovery. Therefore, the ALJ’s findings of fact are insufficient to permit review of whether the ALJ erred in concluding that the respondents’ unilateral change in the payment of temporary total disability benefits subjects them to penalties under § 8-43-304(1).
Moreover, we decline to conclude as a matter of law that the respondents’ interpretation of Rule IX(E) is not a rational legal argument. Under these circumstances, the matter must be remanded to the ALJ for entry of additional findings and a new order. On remand the ALJ must determine whether the respondents’ actions in filing the August 19 Admission were based on Rule IX(E), and if so, whether the respondents’ actions were predicated upon a rational legal argument concerning the proper application of Rule IX(E). The ALJ may, in the exercise of her discretion, conduct a hearing on these matters.
In view of our disposition, we do not consider the respondents’ remaining arguments.
IT IS THEREFORE ORDERED that the ALJ’s order dated April 23, 1997, is set aside, and the matter is remanded to the ALJ for further proceedings and entry of a new order consistent with the views expressed herein.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Kathy E. Dean
Copies of this decision were mailed September 8, 1997 to the following parties:
Gary D. Barnhart, 2119 E. 5th St., Pueblo, CO 81001
Ralph’s Plumbing Heating, 3050 Delta Dr., Colorado Springs, CO 80910-1015
Colorado Compensation Insurance Authority, Attn: Laurie Schoder, Esq. (Interagency Mail)
Stacey J. Tarler, Esq., 3464 S. Willow St., Denver, CO 80231-4599 (For the Respondents)
Michael W. Seckar, Esq., 402 W. 12th St., Pueblo, CO 81003 (For the Claimant)
BY: _______________________________