W.C. No. 4-187-261.Industrial Claim Appeals Office.
August 2, 2006.
FINAL ORDER
The claimant seeks review of an order of Administrative Law Judge Stuber (ALJ) dated March 1, 2006 that denied the claimant’s claim for statutory penalties. We affirm.
A hearing was held on the sole issue of the respondents’ liability for statutory penalties based upon the insurer’s final admission stating that there was “zero” impairment. Following the hearing the ALJ entered factual findings that may be summarized as follows. The claimant sustained a compensable injury on April 12, 1993, and on November 2, 1994 the insurer filed a final admission for permanent partial disability benefits based upon an impairment rating of six percent of the left arm. On January 9, 1996, the insurer filed another final admission for benefits based upon impairment ratings of ten percent of the right arm and 20 percent of the left arm. The claimant was then awarded permanent total disability benefits and the insurer filed another final admission on September 12, 1997, which admitted for cost of living increases to the permanent total disability rate and which left blank the portion of the form devoted to permanent partial disability benefits. Between 1998 and 2002 the insurer then filed a series of five additional final admissions admitting for the annual cost of living increase, each also leaving blank the portion of the form recording permanent partial disability benefits. On October 18, 2004 and September 21, 2005, the insurer filed two additional final admissions, on each of which the insurer entered a numerical zero on the portions of the form recording the percentage of whole person impairment and of scheduled impairment. The claimant filed an application for hearing seeking statutory penalties. The ALJ found, however, that the insurer had not violated the Workers’ Compensation Act (the Act) by its final admissions, and accordingly denied penalties.
The claimant appealed and argues that the insurer’s representation on the final admission that she sustained “zero” permanent physical impairment as a result of the injury is a misrepresentation, is inaccurate, and in the future may result in a finding that she in fact sustained no permanent impairment from the injury. However, we are unpersuaded that the ALJ erred in denying penalties.
Whether statutory penalties may be imposed under § 8-43-304(1), C.R.S. 2005 involves a two-step process. That section provides for the imposition of penalties of up to $500 per day where the insurer “violates any provision of articles 40 to 47 of [title 8], 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. . . .” Therefore, the ALJ must first determine that the insurer’s conduct constituted a violation of the Act, a rule, or an order. However, the conduct constituting the violation must also have been objectively unreasonable. Therefore, if the ALJ finds that a violation occurred, penalties may only be imposed if the ALJ concludes that the insurer’s conduct was not reasonable under an objective standard. E.g., Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). The reasonableness of the insurer’s actions depends on whether it was predicated on a rational argument based in law or fact Jiminez v. Industrial Claim Appeals Office, 107 P.3d 965
(Colo.App. 2003).
Here, because the ALJ determined that the insurer’s conduct had not violated the Act, a rule, or an order, it was unnecessary for him to determine whether that conduct was objectively reasonable. The claimant alleged that the insurer’s conduct violated § 8-432-03(2)(b)(II), C.R.S. 2005, which sets forth the notice required to be included in a final admission generally informing the claimant that issues admitted will be closed if no objection to the admission is made. See tr. at 6; Claimant’s Application for Hearing and Notice to Set. In concluding that the insurer had not violated § 8-43-203(2)(b)(II) the ALJ reasoned that that statute does not require the admission of any specific
indemnity benefits. Rather, it merely requires the insurer to state what benefits were admitted and to advise the claimant that an objection is necessary to prevent closure of the admitted issues. The ALJ also noted that the insurer is only required to admit for benefits based upon a specific impairment rating where it is required to respond to the report of a Division-sponsored independent medical examination (DIME).
We agree with the ALJ that the insurer did not violate §8-43-203(2)(b)(II). The statute provides a procedure for objecting to and for closing issues admitted to or denied in a final admission. It requires a final admission to contain a notice to the claimant that he or she may contest the admission and that failure to do so will close the issues admitted. One of the purposes of the statute is to put the claimant on notice of the exact basis of admitted or denied liability, in order to permit the claimant to make an intelligent decision regarding whether to challenge the final admission. The section “is part of a statutory scheme designed to promote, encourage, and ensure prompt payment of compensation to an injured worker without the necessity of a formal administrative determination in cases not presenting a legitimate controversy.” Dyrkopp v. Industrial Claim Appeals Office, 30 P.3d 821, 822 (Colo.App. 2001). The court of appeals has noted the purposes of the statute:
Section 8-43-203(2)(b)(II) grants a claimant the right `to file an application for hearing, or a response to the [employer’s] application for hearing, as applicable, on any disputed issues that are ripe for hearing.’ It also makes it clear that a claimant `may contest’ the FAL `if the claimant feels entitled to more compensation.’ Still further, it requires notice to the claimant `that the case will be automatically closed as to the issues admitted in the final admission if the claimant does not . . . contest the final admission in writing and request a hearing on any disputed issues that are ripe for hearing.’
Peregoy v. Industrial Claim Appeals Office, 87 P.3d 261, 263
(Colo.App. 2004).
Given these statutory purposes, the provision clearly creates certain duties on the part of both the insurer and the claimant with respect to closure of issues. However, in our view, it does not create an obligation on the part of the insurer to admit that specific impairment was sustained where permanent total disability benefits have been admitted and paid. The admission for permanent partial disability benefits based upon “zero” impairment was, in effect, the denial of additional permanent partial disability benefits. Given that the claimant was adjudicated permanently and totally disabled and those benefits were being paid pursuant to the order, the insurer was not under any duty to admit for benefits based on the claimant’s medical impairment ratings. As the ALJ observed in his order, the purpose of a final admission is to admit or deny benefits, and given the admission that the claimant was permanently and totally disabled, it was appropriate for the insurer to deny further permanent partial disability benefits. See Waymire v. Industrial Claim Appeals Office, 924 P.2d 1168 (Colo.App. 1996) (contemporaneous awards of permanent partial and permanent total disability benefits not permitted). Although the admission based upon “zero” impairment was concededly not the most precise manner in which those further benefits could have been denied, in our view it was not a violation of § 8-43-203(2)(b)(II).
We are mindful of the claimant’s argument that she might in the future be bound by the insurer’s statement that “zero” medical impairment resulted from the injury. However, we note that the insurer had previously admitted for permanent partial disability benefits in an earlier final admission, and nothing in the record suggests that those final admissions were withdrawn or otherwise vacated, or that the insurer’s admission that permanent impairment resulted from the injury was somehow “retracted” by the later final admissions. Hence, we view the claimant’s concern as legally unfounded. Moreover, we also note that our holding here is a narrow one. This is not a case in which the insurer is under an obligation to admit for permanent partial disability benefits, either pursuant to a rule or to statute and we express no opinion regarding such a case. Rather, it is one in which permanent total disability benefits were ordered and were being paid on an ongoing basis, and the final admission was filed to advise the claimant of the fact and the amount of a cost of living increase. Under those circumstances, the insurer did not violate § 8-43-203(2)(b)(II) by inserting “zero” in the portion of the form stating the impairment rating.
IT IS THEREFORE ORDERED that the ALJ’s order dated March 1, 2006, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ John D. Baird
____________________________________ Curt Kriksciun
Ellena Gustafson, Colorado Springs, CO, Ampex Corporation, Colorado Springs, CO, Crawford Company, Englewood, CO, Steven U. Mullens, Esq., Colorado Springs, CO 80901-2940 (For Claimant).
Joanne C. Crebassa, Esq., Denver, CO, (For Respondents).