W.C. No. 4-231-877Industrial Claim Appeals Office.
November 12, 1998
FINAL ORDER
Respondents Burlington Coat Factory and Reliance National Indemnity Company (Reliance) seek review of an order of Administrative Law Judge Wells (ALJ) which imposed penalties on Reliance. Reliance argues that the ALJ erred in imposing penalties based on the failure of its agents to respond to discovery orders. We perceive no error.
The claimant sustained a compensable injury in August 1994. At the time of the injury, Burlington Coat Factory was insured by Reliance. Reliance retained Scibal Associates (Scibal) to adjust the claim. Scibal in turn retained Frontier Adjusters (Frontier) to conduct the actual adjusting duties.
In April 1995, the claimant was placed at maximum medical improvement (MMI) by the treating physician. The treating physician advised the claimant that the insurer might require an independent medical examination (IME) for purposes of assessing the claimant’s permanent impairment. However, by October 1995, the respondents had not requested an IME or filed a final of admission of liability for permanent impairment. The claimant contacted the Frontier insurance adjuster, but the claimant’s efforts to resolve his claim were unsuccessful and he retained counsel to assist him. On February 14, 1996, claimant’s counsel wrote to Reliance, in care of Scibal, requesting the production of various documents including medical records, correspondence, and wage verification.
However, counsel received no response, and filed a “Motion to Compel Carrier File” in early May 1996. The motion listed Reliance “Scibal Associates” as “respondents,” and requested an order “compelling the Respondents to produce to Claimant’s counsel the complete copy of the file maintained by Frontier Adjusting with respect to this matter.” On May 20, 1996, ALJ Wheelock entered an order granting the motion to compel, and ordered that the “Respondents produce to Claimant’s counsel a complete copy of the file maintained by the insurance adjusting entity with respect their involvement in this matter” within ten days of the order. The order was mailed to Reliance in care of Scibal.
However, no documents were produced and counsel for claimant filed a second “Motion to Compel” dated October 24, 1996. The motion recounted that counsel had obtained documents from the Division of Workers’ Compensation indicating that the matter was being handled by Frontier Adjusters located at a different address than Scibal. Counsel also stated that “it would appear from a review of the file that numerous addresses have been used by various sources for the filing and exchanging of information.” Counsel therefore requested an order requiring each of “those adjusting entities and or third party administrators present to Claimant’s counsel a complete copy of their files.”
On November 13, 1996, ALJ Wheelock entered an order granting the second motion to compel. The order directed Reliance, Scibal, and Frontier to produce a complete copy of their files to claimant’s counsel. Counsel for claimant then requested penalties based on the failure to comply with the orders to compel. An initial hearing was held on December 2, 1996, at which some of the requested documents were produced. All documents were subsequently received by the claimant’s counsel on December 23, 1996.
The matter subsequently proceeded to hearing on August 12, 1997, concerning claimant’s request for penalties due to noncompliance with the orders to compel. The ALJ found that the respondents acknowledged violation of the May 20 and November 13 orders, and offered no evidence to justify or mitigate the violations. The ALJ first imposed a penalty on Frontier at the rate of $400 per day from May 31, 1996 (ten days after the May 20 order) through October 27, 1996 (the day before Frontier would have received the second motion to compel). The ALJ then imposed a penalty on Frontier at the rate of $500 per day from October 28, 1996 through December 21, 1996 (the date counsel for claimant should have received the documents mailed by counsel for respondents). The ALJ next imposed a penalty on Scibal at the rate of $250 per day from October 28, 1996 through November 24, 1996 (the date Scibal should have produced its file pursuant to ALJ Wheelock’s November 13 order). The ALJ also imposed a penalty on Scibal of $500 per day from November 24, 1996 through December 21, 1996. Finally, the ALJ determined that, because Reliance was the principal and Frontier and Scibal were agents of Reliance, Reliance is liable for all penalties imposed on Frontier and Scibal.
I.
On review, the respondents first contend that the ALJ erred in imposing a penalty on Scibal from October 28, 1996 through November 24, 1996. The respondents reason that during this period, no order existed requiring Scibal to produce its file. We disagree.
Initially, we note that we must uphold the ALJ’s findings of fact that are supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. 1998. This standard requires us to review the evidence in a light most favorable to the prevailing party. Further, we must defer to the ALJ’s resolution of conflicts in the evidence, his credibility determinations, and the plausible inferences he drew from the evidence. Metro Moving Storage Co. v. Gussert, 914 P.2d 411 (Colo.App. 1995).
Section 8-43-304(1) permits imposition of a penalty if a party neglects to obey a lawful order. Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996). Imposition of a penalty is governed by the objective standard of negligence, and depends upon the reasonableness of the insurer’s action or inaction under the circumstances. Pueblo School District No. 70 v. Toth, supra.
The respondents’ argument notwithstanding, the record supports the ALJ’s imposition of a penalty on Scibal commencing October 28, 1996. ALJ Wheelock’s May 20 order listed Scibal as a respondent, and the order was mailed to Scibal. Further, it is not denied that Scibal employed Frontier as its agent for adjusting the claim. Consequently, the ALJ could infer that Scibal was in a position to obey the order by requiring Frontier to produce its file, and for some unexplained reason failed to do so. The ALJ concluded that October 28 was an appropriate date to commence imposition of a penalty because Scibal would have received the second motion to compel on that date, and was therefore reminded of its responsibility to ensure Frontier’s compliance with the ALJ’s order.
II.
The respondents next contend that no penalties should have been imposed on Frontier because ALJ Wheelock’s order was never sent to Frontier. However, we agree with the claimant that Frontier never advanced this theory at the hearing, nor did it deny receiving notice of ALJ’s Wheelock’s order. In fact, as the ALJ found, Frontier offered no defense whatsoever for its failure to produce its file. Consequently, it may not raise the notice argument for the first time on appeal. See Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995) (argument may not be raised for the first time on appeal).
Similarly, the respondents never raised the issue of whether failure to serve the employer with the motion to compel requires a different result. In any event, we do not perceive how the failure to serve the employer could have prejudiced Reliance, Scibal, or Frontier with respect to penalties for failure to produce documents.
Reliance next argues that the ALJ’s order represents an unlawful compounding of penalties in excess of the statutory $500 per day limit. Reliance points out that both Frontier and Scibal were penalized for the period of October 28 to November 24, 1996, and therefore Reliance is liable for penalties at the rate of $750 a day. Further, the combined penalties against Frontier and Scibal were increased to $1000 per day for the period of November 24 to December 21, 1996. We perceive no error.
Section 8-43-304(1) provides as follows:
“Any employer or insurer, or any officer or agent of either . . . who violates any provision of articles 40 to 47 of this title, or does any act prohibited thereby, or fails or refuses to perform any duty lawfully enjoined within the time prescribed by the director or panel, for which no penalty has been specifically provided, or fails, neglects, or refuses to obey any lawful order made by the director or panel or any judgment or decree made by any court . . . shall also be punished by a fine of not more than five hundred dollars per day for each offense, seventy-five percent payable to aggrieved party and twenty-five percent to the subsequent injury fund created in section 8-46-101.”
The central rule of statutory construction is to effect the legislative intent. Snyder Oil Co. v. Embree, 862 P.2d 259 (Colo. 1993). First, we must give the words and phrases in the statute their plain and ordinary meanings. If some ambiguity results, we may then resort to rules of statutory construction. Snyder Oil Co. v. Embree, supra. Ambiguity may be resolved by considering the problem which the statutes sought to resolve. Further, the statute should be construed in a manner which gives consistent, harmonious, and sensible effect to all its parts. Henderson v. RSI, Inc., 824 P.2d 91 (Colo.App. 1991).
Here, we agree with the claimant that the language of the statute suggests that a separate penalty may be imposed on each entity which violates the act or a lawful order. Thus, if more than one entity violates an order, that entity is subject to a $500 per day penalty.
Moreover, we believe this interpretation is consistent with the statutory purpose underlying § 8-43-304(1). As noted i Vaughan v. McMinn, 945 P.2d 404, 407 (Colo. 1997), the 1991 amendments to § 8-43-304(1) represent an increase in the penalty “for mishandling claims from one-hundred dollars to five-hundred dollars per day.” A subsequent amendment required that seventy-five percent of the penalty be paid to the aggrieved claimant with the remaining twenty-five percent payable to the subsequent injury fund.
Thus, the overall purpose of § 8-43-304(1) is to sanction parties who mishandle claims and violate the requirements of the Act or lawful orders. With this objective in mind, it is logical to impose separate sanctions against all entities responsible for obeying a particular order, rather than limiting the total liability to five hundred dollars per day where multiple entities have disobeyed an order.
It follows that there was no error in the ALJ’s assessment of multiple penalties for the period October 28, 1996 to November 24, 1996. Both Frontier and Scibal were responsible for producing Frontier’s file. Therefore, both violated the May 20 order and are subject to penalties. The fact that Reliance admits that it is responsible for the penalties incurred by Frontier and Scibal does not change the fact that both Frontier and Scibal violated the ALJ’s order.
Similarly, there was no unlawful compounding of penalties from November 24, 1996 through December 21, 1996. As of November 24, 1996, Scibal had an independent duty to produce its own file, and failed to do so until December 21. Therefore, as of September 24, Scibal was not only violating the May 20 order, but also the November 13 order.
III.
Finally, the respondents assert that the penalties assessed in the ALJ’s order constituted a violation of their Eighth Amendment rights because they are “grossly disproportionate to the alleged conduct.” However, the record reflects lengthy delays and improper adjusting of the claim for benefits on the part of respondents. Counsel for claimant was required to file two separate motions to compel, and obtain two separate orders in an attempt to gain the respondents’ compliance. Under such circumstances, we cannot say that the record compels a conclusion that the fines are “grossly disproportionate” to the respondents’ conduct. Pueblo School District No. 70 v. Toth, supra.
The respondents have also argued that they did not receive proper notice, and therefore were denied due process of law under the Fourteenth Amendment. However, as we have pointed out, the respondents failed to raise this issue at the time of the hearing and are precluded from doing so now.
IT IS THEREFORE ORDERED that the ALJ’s order dated August 28, 1997, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
________________________________ Dona Halsey
________________________________ Bill Whitacre
NOTICE This Order is final unless an action to modify or vacate theOrder is commenced in the Colorado Court of Appeals, 2 East 14thAvenue, Denver, Colorado 80203, by filing a petition to reviewwith the court, with service of a copy of the petition upon theIndustrial Claim Appeals Office and all other parties, withintwenty (20) days after the date the Order was mailed, pursuant to§§ 8-43-301(10) and 307, C.R.S. 1998.
Copies of this decision were mailed November 12, 1998
to the following parties:
Larry Gillette, 3760 Inspiration Dr., Colorado Springs, CO 80917
Burlington Coat Factory, Route 130 North, Burlington, NJ 08016
Reliance National Indemnity Co., Scibal Associates, P.O. Box 500, Somers Point, NJ 08244-0500
Frontier Adjusters of Omaha, P.O. Box 34644, Omaha, NE 68134
Jon C. Thomas, Esq., 1032 N. Wahsatch, Colorado Springs, CO 80903 (For Claimant)
Joel S. Babcock, Esq. and Suzanne M. Gall, Esq., 400 S. Colorado Blvd., #700, Denver, CO 80222 (For Respondents)
Joanne Ibarra, D.O.W.C., Carrier Practices Unit (Intraagency Mail)
BY: ______________________