W.C. No. 4-416-066Industrial Claim Appeals Office.
June 30, 2000
FINAL ORDER
The respondents seek review of an order of Administrative Law Judge Mattoon (ALJ) insofar as the ALJ imposed penalties for failure timely to admit or deny liability, and for failure to file supplemental admissions of liability. The respondents contend the ALJ did not consider mitigating circumstances with respect to the insurer’s failure to file an admission or denial of liability. The respondents further contend that it was improper to award separate penalties for the insurer’s failure to admit or deny and its failure to file supplemental admissions. We affirm the order in part, set it aside in part, and remand for entry of an additional order.
The claimant sustained a compensable knee injury on October 11, 1997. On March 6, 1998, the treating physician restricted the claimant from working for a period of 10 to 14 days, and the insurance adjuster was immediately notified of this fact. However, the insurer failed to file an admission or denial of liability with the claimant or the Division of Worker’s Compensation (Division) until March 25, 1999. Nevertheless, the insurer did commence paying temporary total disability benefits, albeit at a rate $50 less per week than the claimant was entitled to receive.
On April 21, 1998, the treating physician released the claimant to return to work, but restricted her hours. The insurance adjuster was made aware of this release on April 22, 1998, and apparently reduced the claimant’s temporary disability benefits from temporary total to temporary partial. However, the adjuster did not file an admission of liability documenting this reduction of benefits. On or about May 18, 1998, the treating physician released the claimant to full duty. The ALJ found the insurance adjuster then terminated the claimant’s temporary disability benefits, but filed no admission of liability documenting the termination. On December 30, 1999, the claimant underwent additional surgery to her knee. The insurer reinstated temporary total disability benefits, but again failed to file an admission of liability.
The claimant sought penalties against the insurer for failure timely to admit or deny liability as required by § 8-43-203(1)(a), C.R.S. 1999. The claimant also sought penalties under §8-43-304(1), C.R.S. 1999, because the insurer allegedly violated Rule of Procedure IV (N) (3), 7 Code Colo. Reg., 1101-3 at 6.02, by failing to file supplemental admissions of liability when it reduced, terminated, then reinstated the claimant’s benefits.
The ALJ found the insurer failed to file the required admission or denial of liability for the period of March 25, 1998 to March 25, 1999. The ALJ also found the respondents “presented no evidence of any mitigating factors or any reasonable excuse for” the insurer’s failure to admit or deny liability. Consequently, the ALJ assessed a penalty of one day’s compensation for 365 days, resulting in a total penalty of $9,434.73. The ALJ also found the insurer violated Rule of Procedure IV (N) (3) by failing to file supplemental admissions of liability when modifying the claimant’s temporary disability benefits in April 1998, May 1998, and December 1998. Because the ALJ determined the insurer knew it was in violation of the rule and offered no reasonable basis in law or fact for its actions, the ALJ assessed penalties under § 8-43-304(1). Specifically, the ALJ determined that a reasonable penalty for the April 1998 violation would be the equivalent of one day’s compensation for each day the insurer failed to file a supplemental admission between April 1998 and March 1999. The ALJ also concluded that it would be unreasonable to “stack” penalties based on the subsequent violations and, therefore, assessed penalties of $1 per day for each of the subsequent violations. The total penalty for the violations of Rule IV (N) (3) was $9,158.15.
I.
On review, the respondents contend the ALJ abused her discretion in assessing a penalty for failure to admit or deny based on one day’s compensation for each day. Specifically, the respondents argue the ALJ failed to consider evidence of mitigating circumstances, including the insurer’s payment of temporary disability and medical benefits, the adjuster’s willingness to communicate with the claimant during the pendency of the claim, and the absence of prejudice to the claimant resulting from the failure timely to admit or deny liability. Because we conclude the ALJ failed to consider relevant evidence in mitigation, we remand for entry of a new order concerning the amount of the penalty.
Section 8-43-203(2)(a), C.R.S. 1999, provides the insurer “may become liable” to the claimant “for up to one day’s compensation for each day’s failure” to file an admission or denial of liability. Therefore, the parties agree that the amount of the penalty under § 8-43-203(2)(a) is a discretionary determination for the ALJ. Because the issue is discretionary, we may not interfere with the ALJ’s order unless it is beyond the bounds of reason, as where it is contrary to law or unsupported by the evidence. Rosenberg v. Board of Education of School District No. 1, 710 P.2d 1095 (Colo. 1985).
When considering the sufficiency of the evidence, we must uphold the ALJ’s findings of fact if supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. 1999. Although this standard of review requires us to defer to the ALJ’s resolution of conflicts in the evidence, we may not convert a finding of “no evidence” into a finding of no credible or persuasive evidence. See Hall v. Industrial Claim Appeals Office, 757 P.2d 1132 (Colo.App. 1988).
The purposes of requiring the insurer to admit or deny liability are to notify the claimant that she is involved in a proceeding with legal ramifications, and to notify the Division of the insurer’s position so that the Division may exercise its administrative oversight of the claims process. Smith v. Myron Stratton Home, 676 P.2d 1196 (Colo. 1984). In Public Service Co. v. Boatwright, 749 P.2d 456 (Colo.App. 1987), the court denied a penalty because the insurer substantially complied with the statute by filing an admission with the Division, and paying the claimant the benefits to which he was entitled under the Workers’ Compensation Act. The court reasoned that, even though the claimant never received formal notice of the admission, he received “constructive notice” of the respondents’ admission by payment of the benefits.
In light of these principles, we hold the ALJ erred as a matter of law in concluding there is “no evidence” of any mitigating factors in this case. Although the ALJ recognized the insurer paid benefits despite its failure to file an admission (Finding of Fact 12), the ALJ’s conclusion of law indicates the ALJ did not appreciate the potential mitigating effect of these payments. Arguably, the insurer’s voluntary payment of temporary disability and medical benefits, and the claimant’s receipt of these payments, alerted the claimant that she was involved in a proceeding with legal ramifications. Further, these payments may have diminished the financial injury which the claimant would have incurred had the insurer simply ignored all responsibility to the claimant.
Under the circumstances, the ALJ’s order must be set aside insofar the ALJ determined there was “no evidence” of any mitigating factors which could serve to reduce the amount of the daily penalty. The record contains evidence of mitigating factors, and the ALJ must consider such evidence on remand. In reaching this result, we do not express any opinion concerning the weight to be assigned the evidence of mitigating factors when determining the amount of the penalty. Determination of the amount of the penalty remains a matter within the discretion of the ALJ, and the ALJ is free to balance the evidence of mitigating circumstances against any aggravating factors which she finds to exist.
II.
The respondents next contend the ALJ erred in assessing any penalties under § 8-43-304(1) based on the insurer’s three violations of Rule IV (N) (3). Citing Sears v. Penrose Hospital, 942 P.2d 1345 (Colo.App. 1997), the respondents point out that §8-43-304(1) permits the imposition of $500 per day penalties only when the Act does not create a specific penalty for the conduct in question. The respondents argue the “gravamen” of the insurer’s misconduct in this case was the failure to file an initial
admission or denial of liability, and the failure to file subsequent admissions is subsumed in the original misconduct. Thus, the respondents reason the only penalty which may be imposed is a penalty for the failure to admit or deny liability as provided in § 8-43-203(2)(a), based on one violation of 365 days duration. We disagree.
As noted, the purposes of the statutory requirement for admitting or denying liability are to alert the claimant to her involvement in a legal proceeding, and to allow the Division to commence supervision of the claims process. Smith v. Myron Stratton Home, supra. In contrast, Rule IV (N) (3) provides:
Admissions subsequent to the initial admission shall be filed with appropriate attachments pursuant to Rule IX upon resumption, termination, or change in the amount of temporary benefits within twenty (20) days of receipt of supporting documentation.
Thus, on its face, Rule IV (N) (3) concerns itself with the insurer’s responsibilities when reinstating, terminating, or reducing temporary disability benefits, not with the insurer’s initial responsibility to notify the claimant and the Division of the insurer’s position concerning liability. Indeed, the reference to Rule IX demonstrates this fact. Rule IX governs the modification, termination, or suspension of temporary disability benefits by admission of liability and by petition. Rule of Procedure IX, 7 Code Colo. Reg. 1101-3, 32-36.01. The rule establishes procedures for the termination of benefits in compliance with statutory requirements while protecting against unjustified or unilateral interference with the flow of temporary disability benefits. See Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, ___ P.2d ___ (Colo.App. No. 99CA1624, June 22, 2000); Monfort Transportation v. Industrial Claim Appeals Office, 942 P.2d 1358 (Colo.App. 1997); A R Concrete Construction v. Lightner, 759 P.2d 831 (Colo.App. 1988). Thus, the insurer’s duty to document changes in the level of benefits is separate and apart from the insurer’s duty to state a position concerning liability at the outset of the claim.
It follows we perceive no error in the ALJ’s assessment of separate penalties for the violation of § 8-43-203(1)(a), and the violations of Rule IV (N) (3). The statute and the rule govern different aspects of the insurer’s conduct, and protect distinct interests. Therefore, the respondents’ contention that the insurer’s failure to file supplemental admissions of liability is subsumed in the duty to admit or deny liability is incorrect. Consequently, we reject the respondents’ contention that the ALJ’s imposition of multiple penalties was in error.
III.
In reaching these conclusions, we note the ALJ’s Summary Order contains a certificate of mailing dated August 4, 1999, and the respondents’ Request for Specific Findings was not filed until September 15, 1999. However, the Summary Order was entered by the ALJ on August 13, 1999. Under these circumstances, there is an apparent error contained in the certificate of mailing. Therefore, the record does not support an inference that the Request for Specific Findings was untimely.
IT IS THEREFORE ORDERED that the ALJ’s order dated October 5, 1999, is set aside insofar as it assessed penalties based on the insurer’s failure timely to admit or deny liability. On this issue, the matter is remanded for entry of a new order consistent with the views expressed herein.
IT IS FURTHER ORDERED that the ALJ’s order is otherwise affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Kathy E. Dean
NOTICE
This Order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, CO 80203, by filing a petition for review with the Court, within twenty (20) days after the date this Order is mailed, pursuant to § 8-43-301(10) and § 8-43-307, C.R.S. 1999. The appealing party must serve a copy of the petition upon all other parties, including the Industrial Claim Appeals Office, which may be served by mail at 1515 Arapahoe, Tower 3, Suite 350, Denver, CO 80202.
Copies of this decision were mailed June 30, 2000
to the following parties:
Carole E. Lightle, 630 Kansas Ave., Stratton, CO 80836
Sonic Drive In, SDI Burlington Colorado LLC, 750 N. 17th St., Las Cruces, NM 88005-4153
George Fairbanks, Wausau Insurance Companies, 9457 S. University Blvd., #313, Highlands Ranch, CO 80126
Wausau Insurance Companies, P. O. Box 419157, Kansas City, MO 64141-6157
Ronald C. Jaynes, Esq., 777 E. Speer Blvd., #210, Denver, CO 80203 (For Claimant)
William M. Sterck, Esq., 2881 N. Monroe Ave., #2, Loveland, CO 80538 (For Respondents)
BY: L. Epperson