W.C. No. 4-214-079Industrial Claim Appeals Office.
October 24, 2000
ORDER OF REMAND
The claimant seeks review of an order of Administrative Law Judge Harr (ALJ Harr) which imposed penalties of one dollar per day based upon the respondent-insurer’s failure to obey an order to pay disfigurement benefits. The claimant contends ALJ Harr improperly considered statements of the insurer’s counsel as evidence, and committed an abuse of discretion by failing to award greater penalties. We set aside the contested portion of the order and remand for entry of a new order.
On July 14, 1999, ALJ Schulman entered an order directing the respondents, within 30 days, to pay $1,000 in disfigurement benefits or request a hearing on the issue of disfigurement. It is undisputed the insurer failed to request a hearing within 30 days, nor did it pay the award of disfigurement benefits until September 21, 1999.
At the hearing, the claimant sought penalties against the respondent-insurer under § 8-43-304(1), C.R.S. 2000, based on the insurer’s failure to comply with ALJ Schulman’s order. The claimant presented evidence that on August 18, 1999, his attorney wrote a letter to the insurer noting its failure to comply with the July 14 order and advising of the claimant’s intention to seek penalties unless the insurer promptly obeyed the order. The insurer presented no testimony or documentary evidence concerning the reason(s) underlying its failure to comply with the order. However, during closing arguments, counsel for the insurer contended the penalty provision applicable to these facts is contained in § 8-43-401(2)(a), C.R.S. 2000 (concerning willful failure to pay permanent partial disability or medical benefits), and the claimant failed to prove willful misconduct. Alternatively, counsel for the respondents asserted that, assuming § 8-43-304(1) governs, the insurer operated under a “mistaken” belief that the disfigurement award did not have to be paid because it had paid benefits which reached the “benefits cap” found at § 8-42-107.5, C.R.S. 2000. (Tr. pp. 109, 117).
In his order dated February 29, 2000, ALJ Harr concluded the claim for penalties is governed by § 8-43-304(1), not §8-43-401(2)(a). ALJ Harr found that the insurer “neglected to timely pay disfigurement benefits” in accordance with ALJ Schulman’s order until 39 days after the benefits were due. ALJ Harr also found the insurer “contends” that it “mistakenly believed the disfigurement award was not due claimant because the total amount of disability benefits paid to claimant exceeded the statutory cap.” Under the circumstances, ALJ Harr concluded the insurer should be “punished by a fine of one dollar per day for each day’s failure to pay the disfigurement order or a total of $39.”
On review, the claimant contends the record lacks substantial evidence to support ALJ Harr’s “finding of fact” concerning the insurer’s “excuse for not paying the disfigurement award.” Specifically, the claimant argues that there is no evidence the insurer delayed payment of the disfigurement award based on its interpretation of the benefits cap. The claimant reasons that the oral representations of the insurer’s attorney at the conclusion of the hearing do not constitute evidence. We agree with the claimant, and remand for entry of a new order concerning the amount of penalties to be awarded.
Section 8-43-304(1) permits the ALJ to assess a fine of not more than $500 per day for each day the insurer “fails, neglects, or refuses to obey any lawful order.” Under this statute, an insurer violates an order and may be assessed penalties if it neglects to take an action a reasonable insurer would have taken to comply with a lawful order. Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676
(Colo.App. 1995). Reasonableness of the insurer’s action is assessed by an objective standard, and does not depend on actual knowledge that the conduct is unreasonable. Rather, reasonableness depends upon whether the insurer’s actions were predicated on a rational argument based in law or fact. Diversified Veterans Corporate Center v. Hewuse, 942 P.2d 1312 (Colo.App. 1997). In this case, the insurer has not appealed ALJ Harr’s implicit finding that it’s conduct was unreasonable under an objective standard.
Once the ALJ determines the insurer presented no rational argument justifying violation of the order, the ALJ has discretion to assess a penalty of up to $500 per day for each day’s violation. Because determination of the amount of penalties is discretionary, we may not interfere with the ALJ’s order unless there is fraud or an abuse of discretion. Brunetti v. Industrial Commission, 670 P.2d 1246 (Colo.App. 1983); Trumble v. Choice Casing Service, Inc., W.C. No. 4-125-136 (March 29, 1996), aff’d. Choice Casing Service, Inc. v. Industrial Claim Appeals Office,
(Colo.App. No. 96CA0664, January 16, 1997). An abuse of discretion is not shown unless the ALJ’s order is beyond the bounds of reason, as where it is unsupported by the law or the evidence. Rosenberg v. Board of Education of School District No. 1, 710 P.2d 1095 (Colo. 1985).
We must uphold the ALJ’s pertinent findings of fact if supported by substantial evidence in the record. However, we may set aside an order if the findings are insufficient to support appellate review. Section 8-43-301(8), C.R.S. 2000. Although the ALJ is not held to a crystalline standard in expressing findings of fact, he must make sufficient findings to indicate the basis of the order. Purely conclusory findings are insufficient to support review. Womack v. Industrial Commission, 168 Colo. 364, 451 P.2d 761 (1969).
Here, the ALJ’s findings are insufficient to indicate the basis of his decision to assess a penalty of $1 per day. It is unclear to us whether the ALJ considered the factual representations of the insurer’s attorney, concerning reliance on the benefits cap as mitigation for delayed payment of the disfigurement benefits, as evidence in the case. Although the ALJ refers to counsel’s statements as a “contention,” the reference to the statements is contained in a finding of fact.
To the extent the ALJ considered counsel’s statements as evidence, and mitigated the amount of penalties in reliance on these statements, he abused his discretion. Statements of counsel may not substitute for that which must appear of record Subsequent Injury Fund v. Gallegos, 746 P.2d 71 (Colo.App. 1987). The reason for this rule is that due process considerations require that parties be notified of the evidence to be considered, and they must be afforded an opportunity to confront and rebut adverse evidence. See Hendricks v. Industrial Claim Appeals Office, 809 P.2d 1076 (Colo.App. 1990). The criminal case cited by the respondents, Jones v. District Court, 617 P.2d 803 (Colo. 1980), is not authority to the contrary Jones concerned a suggestion of incompetency by defense counsel prior to a motions hearing in a death penalty case. The court noted that, under the circumstances, “the defense attorney’s representation to the court raised a substantial issue of the petitioner’s competency to stand trial, and the respondent court’s refusal to make any inquiry into the issue or to receive any evidence in that regard constituted an abuse of discretion.” The court emphasized that the defense counsel’s statements were made “sufficiently in advance of trial to permit the timely resolution of the issue,” and were “backed by an offer from defense counsel to testify about the petitioner’s condition.” Id. at 807, 808.
Moreover, the remainder of the ALJ’s findings are insufficient to indicate the basis of the award of penalties. Although the ALJ is afforded discretion in assessing the amount of penalties, we must be able to ascertain the rationale for the award in order to insure that the ALJ has properly applied the law and not considered improper factors. With the exception of the ALJ’s finding concerning the length of the delay, and the ALJ’s possible reliance on the non-evidentiary representations of the insurer’s counsel, the ALJ’s award of $1 per day is stated in a conclusory manner. Therefore, we cannot determine from the order what factors influenced the ALJ’s award.
Under these circumstances, the matter is remanded with instructions to reconsider the amount of penalties to be awarded on account of the respondent-insurer’s failure to obey ALJ Schulman’s order. ALJ Harr shall reconsider the matter without regard to factual representations made by the insurer’s attorney concerning the reason for the insurer’s delay in paying the disfigurement benefits. Further, the ALJ shall enter specific findings of fact and conclusions of law which are sufficient to support appellate review of the reasons for the award. In reaching this result, we should not be understood as expressing any opinions concerning the amount of penalties to be awarded in this case. Finally, we need not consider the claimant’s remaining arguments in light of this order.
IT IS THEREFORE ORDERED that ALJ Harr’s order dated February 29, 2000, is set aside insofar as it determined the amount of penalties to be awarded for the respondent- insurer’s failure to comply with ALJ Schulman’s order. ALJ Harr shall enter a new order concerning this issue in accordance with the views expressed herein.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Robert M. Socolofsky
Copies of this decision were mailed October 24, 2000 to the following parties:
Maxie Jiminez, 1263 Lipan Dr., Denver, CO 80221
Art Davis, Safety Director, Amax Henderson Project, P. O. Box 68, Empire, CO 80438
Barbara Carter, Subsequent Injury Fund, Division of Workers’ Compensation — Interagency Mail
Laurie A. Schoder, Esq., Pinnacol Assurance (CCIA) — Interagency Mail (For Respondents)
Roger Fraley, Jr., Esq., 517 E. 16th Ave., Denver, CO 80203 (For Claimant)
Lisa Varriale, Esq., 600 17th St., #1600N, Denver, CO 80202
BY: A. Pendroy