W.C. No. 3-632-483Industrial Claim Appeals Office.
July 28, 1995
FINAL ORDER
The respondent Colorado Compensation Insurance Authority (CCIA) seeks review of a final order of Administrative Law Judge Barringer (ALJ) which assessed a penalty of $10 per day from June 1, 1989 until the date of the order, January 22, 1993. We affirm.
The ALJ found that, on April 26, 1989, the claimant’s treating physician submitted a medical bill to the CCIA. However, the bill was not paid, and had not been paid at the time of hearing on January 13, 1993. Further, the ALJ found that the CCIA offered no “excuse, reason or cause for their failure to pay the bill that was submitted on April 26, 1989 in the amount of $76.55.” Under these circumstances, the ALJ ordered the CCIA to pay the sum of $10 per day from June 1, 1989 “to the present and continuing” until the bill is paid.
I.
On review, the CCIA’s first argument is that the applicable law does not support the assessment of a penalty. In essence, the CCIA argues that its conduct is not subject to a penalty because it did not act knowingly or recklessly. Further, the CCIA argues that the claimant and physician failed to show “prejudice” resulting from the CCIA’s delay in payment of the bill, and the defense of laches bars the claim for a penalty. We reject these arguments.
The penalty in this case was assessed under former § 8-53-116 and § 8-53-117, C.R.S. (1994 Cum. Supp.) [currently codified with changes at § 8-43-304(1), C.R.S. (1994 Cum. Supp.), and § 8-43-305, C.R.S. (1994 Cum. Supp.)]. Former § 8-53-116 provides as follows:
“Any employer or insurer . . . who violates any provision of articles 40 to 54 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 as provided by said articles shall be punished by a fine of not more than one hundred dollars for each such offense.”
Section 8-53-117 provides that each violation constitutes a “separate and distinct” violation, and is separately punishable.
Under § 8-53-116, an insurer may be penalized for failure to obey an order under an “objective standard measured by the reasonableness of the insurer’s action.” The statute does not require the claimant to prove that an insurer acted recklessly or intentionally with regard to its conduct Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). Similarly, we have also held that the word “fails,” as used in § 8-53-116, connotes a negligence standard. Consequently, if the basis of the penalty is failure to carry out a duty under the Act, an insurer can be penalized for negligent conduct. Brown v. Gosney and Sons, Inc., W.C. No. 3-104-140, August 30, 1994.
However, an action taken in defense of a claim is not unreasonable under the objective standard if predicated on a “rational argument based on law or evidence.” Brown v. Gosney and Sons, Inc., supra. Thus, we have held that where insurers admit liability, they have a duty to pay in accordance with their admission, or advance a good faith argument for their failure to do so. See Figal v. City of Pueblo, W.C. No. 3-690-844, May 10, 1994; former Rule of Procedure XIV (6) (requiring payment of medical bills within 45 days).
Here, the CCIA does not dispute that it admitted liability for the bill and that § 8-53-116 applies to its action in failing to pay. Further, the ALJ correctly found that the CCIA advanced no evidence or legal theory as justification for its failure to pay the bill. In fact, the CCIA’s counsel admitted, at close of the hearing, that failure to pay the bill was “a mistake.” (Tr. p. 23). Thus, the CCIA is liable for a penalty under § 8-53-116 because there was no good faith basis for its action. Moreover, the ALJ has sufficient familiarity with the practice of insurers in workers’ compensation cases to determine whether the CCIA’s failure to pay was consistent with the conduct of a “reasonable insurer.” See Wierman v. Tunnell, 108 Colo. 544, 120 P.2d 638 (1941) (ALJ’s considered to have special expertise in the evaluation of medical evidence and matters relating to causation).
The CCIA’s assertion that no penalty may be imposed because there was no prejudice to the claimant or physician is without merit. Former § 8-53-116 does not require a showing of specific prejudice in order to impose a penalty. While prejudice is one factor which may be considered in determining the extent of a penalty to be imposed, it is certainly not a precondition to imposition of a penalty.
Moreover, the ALJ was persuaded to impose a penalty because of the importance of timely payment of medical bills to the compensation system as a whole. The very purpose of the imposition of a penalty is to insure respondents’ voluntary payment of compensation where no legitimate dispute exists. HLJ Management Group, Inc. v. Kim, 804 P.2d 250 (Colo.App. 1990). The record supports the ALJ’s conclusion that imposition of a penalty is appropriate to sanction the CCIA’s behavior, regardless of actual prejudice to the claimant or the physician.
The CCIA’s further contention that the doctrine of laches applies is without merit. Laches is in the nature of an equitable defense to an otherwise valid claim for relief. See Bacon v. Industrial Claim Appeals Office, 746 P.2d 74 (Colo.App. 1987). Consequently, the defense of laches is waived unless explicitly asserted before the ALJ. See Lewis v. Scientific Supply Co., Inc., 897 P.2d 905 (Colo.App. 1995) (defense of waiver may itself be waived if not raised). Here, the record does not reflect that the respondents ever raised the issue of laches, and therefore, they may not do so on appeal. Lewis v. Scientific Supply Company, Inc., supra.
II.
The CCIA also contends that the penalty statutes are unconstitutional on their face, and as applied. Specifically, the CCIA argues that the statutes deny due process of law, and result in the imposition of “excessive” fines. However, we may not address these issues because we lack jurisdiction to consider the constitutionality of the Workers’ Compensation Act. Kinterknecht v. Industrial Commission, 175 Colo. 60, 485 P.2d 721 (1971); Celebrity Custom Builders v. Industrial Claim Appeals Office, ___ P.2d ___ (Colo.App. No. 94CA1937, June 15, 1995).
We are aware that the CCIA asserts that it is posing both “facial” and “as applied” challenges to the penalty statutes. Further, the Supreme Court has indicated that administrative agencies have the authority to determine whether “an otherwise constitutional statute has been unconstitutionally applied.” Horrell v. Department of Administration, 861 P.2d 1194, 1196 (Colo. 1993). However, the arguments supporting the “facial” and “as applied” challenges are so intertwined that we do not perceive how we can consider the “as applied” challenges without addressing the “facial” constitutionality of the statutes. To do so would violate the principle of separation of powers, and cause us to engage in constitutional decision-making beyond our area of expertise. See Denver Center for Performing Arts v. Briggs, 696 P.2d 299, 305 (Colo. 1985) (administrative rulings concerning “facial” challenges to statutes will not be considered “authoritative” on judicial review). To the extent this ruling is inconsistent with prior decisions, we have reconsidered those decisions.
IT IS THEREFORE ORDERED that the ALJ’s order, dated January 22, 1993, is affirmed.
INDUSTRIAL CLAIM APPEAL PANEL
___________________________________ David Cain
___________________________________ Kathy E. Dean
NOTICE
This Order is final unless an action to modify or vacate the Order iscommenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver,Colorado 80203, by filing a petition to review with the court, withservice of a copy of the petition upon the Industrial Claim Appeals Officeand all other parties, within twenty (20) days after the date the Orderwas mailed, pursuant to §§ 8-43-301(10) and 307, C.R.S. (1995 Cum.Supp.).
Copies of this decision were mailed July 28, 1995 to the following parties:
Leroy E. Selvage, 4325 Hummingbird Dr., Ft. Collins, CO 80526
Colorado Dept. of Highways, 4201 E. Arkansas Ave., Denver, CO 80222
Colorado Compensation Insurance Authority, Attn: C. Boyd, Esq. (Interagency Mail)
Steven U. Mullens, Esq., 90 S. Cascade St., Ste. 300, Colo. Spgs., CO 80903 (For the Claimant)
Ralph Ogden, Esq., 1306 Chancery Building, 1120 Lincoln St., Denver, CO 80203 (For the Claimant)
Attorney General’s Office, Attn: John Baird, Esq., 1525 Sherman St., 5th Flr., Denver, CO 80203
By: _____________________________