W.C. No. 4-403-661.Industrial Claim Appeals Office.
September 27, 2004.
ORDER OF REMAND
The respondents and the claimant seek review of an order of Administrative Law Judge Mattoon (ALJ) which imposed penalties for an improper termination of temporary disability benefits and two late payments of temporary disability benefits. The respondents argue they are not liable for any penalties because the actual insurer, the Western Guaranty Fund, is immune from penalties. The respondents further contend the termination of temporary disability benefits was reasonable and may not be punished. Alternatively, the respondents challenge the length of time for which the penalty was imposed. Finally, the respondents argue the ALJ had no jurisdiction to award penalties for the late payments, and in any event the penalties imposed for the late payments was excessive. The claimant argues the ALJ abused her discretion in determining the amount of the penalty for the termination of benefits. The claimant also argues the ALJ improperly calculated the period of time for which the late payment penalties should be imposed. We set the order aside and remand for entry of a new order.
As the parties recognize, this case has a long and complicated procedural history, and we have issued two prior orders dated September 21, 2001, and December 1, 2003. The statements of the facts contained in our prior orders are incorporated herein for purposes of documenting the history of the case.
On April 29, 2004, the ALJ entered an order pursuant to our December 2003 order.
The ALJ concluded, consistent with our prior orders, that the June 8, 2000, Final Admission of Liability (FAL), which purported to terminate temporary total disability (TTD) benefits on June 11, 1999 (although the parties agree the benefits were paid through June 15, 1999), constituted a violation of Rule IX (C), 7 Code Colo. Reg. 1101-3 at 34. The ALJ further concluded that penalties should be assessed at the rate of $30 per day from June 16, 1999, through June 25, 2002, when the respondents paid TTD for the period June 16, 1999 to June 15, 2000. This payment closely coincided with the opinion of the Court of Appeals, dated June 20, 2002, which upheld the determination that the claimant was not at maximum medical improvement (MMI) in June 1999 and awarded ongoing TTD benefits. The total penalty was $33,090.
The ALJ further determined that on December 20, 2000, the respondents issued a check for the payment of TTD benefits for the period from August 1, 2000, to December 31, 2000. Thereafter, the respondents paid TTD every two weeks through April 4, 2001. The respondents then missed the April 18, 2001 payment date, and did not issue a check until May 2, 2001, resulting in a “two-week period in which no benefits were paid when due.” The ALJ determined that this 14 day “delay” in payment should be penalized at the rate of $500 per day for a total penalty of $7,000.
The ALJ also found that a second period of delay occurred in October 2001. After the May 2, 2001 check, the respondents paid every two weeks through October 3, 2001. However after October 3 the next check was not issued until October 26, 2001. The ALJ determined that there was an 9 day delay in payment which must be should be penalized at the rate of $500 for a total penalty of $4,500.
I.
The respondents first contend that because the Western Guaranty Fund has stepped into the shoes of the insolvent compensation insurer, no penalties are appropriate. The respondents predicate this argument on our decision in Mosley v. Ashpalt Paving Co.,
W.C. No. 4-439-762 (December 19, 2003), which held that the Colorado Insurance Guaranty Association is immune from penalties under § 8-43-304(1), C.R.S. 2003, by operation of § 10-4-517, C.R.S. 2003.
However, we agree with the claimant that this argument was waived because it was not raised at the time of the March 31, 2003, hearing. See Kuziel v. Pet Fair, Inc., 948 P.2d 103
(Colo.App. 1997). At the hearing on March 31, 2004, the respondents did not contend the Western Guarantee Fund was uninvolved in the case at the time of the hearing on March 31, 2003. Rather, they argued that the Mosley decision represented a “clarification of the law” and created a “new right” of which they could not have known until after the decision. The respondents contend that under these circumstances they did not waive the issue by failing to raise it in 2003.
However, as noted in the Mosley decision itself, the relevant statutes have been in existence for decades. Thus, any argument that these statutes confer immunity could have been raised as a defense at the 2003 hearing. Further, the Mosley decision did not create a “new right.” It merely interpreted existing statutory law as conferring immunity on a select group of respondents. See Loffland Brothers Co. v. Industrial Claim Appeals Office, 754 P.2d 768 (Colo.App. 1988) (traditional view is that courts do not make law, they discover and declare law already in existence), aff’d., Loffland Brothers Co. v. Industrial Claim Appeals Panel 770 P.2d 1221 (Colo. 1989)
II.
The respondents reiterate their prior arguments that they had a “rational basis” for believing that the June 8 FAL did not violate Rule IX (C)(1)(a). However, we disagree with these assertions for the reasons stated in our prior orders. In particular, we held in our September 2001 order that the June 8 FAL violated Rule (C)(1)(a) because it terminated TTD benefits based on MMI without taking a position on permanent impairment. In our December 2003 order we held that the June 8 FAL violated Rule (C)(1)(b) because there was no rational basis for believing that the May 2000 release to regular employment was delivered to the claimant in June 1999.
III.
The respondents next contend the ALJ erred in commencing the penalties for violation of Rule IX in June 1999. The respondents argue that no violation occurred until June 8 when the FAL was filed. We agree with this argument.
Violation of a Rule of Procedure amounts to violation of an “order” of the Director of the Division of Workers’ Compensation (Director) for purposes of imposing penalties under §8-43-304(1). Spracklin v. Industrial Claim Appeals Office, 66 P.3d 176 (Colo.App. 2002). Imposition of a penalty under §8-43-304(1) for violation of an order requires evidence o actions by a person or insurer which demonstrate a failure, neglect or refusal to obey the “order.” See Dworkin, Chambers Williams, P.C. v. Provo, 81 P.3d 1053, 1058, n. 11 (Colo. 2003).
As noted in our September 2001 order the claim for penalties has, from the start, been predicated on an alleged violation of Rule IX (C)(1)(a). Rule IX governs the termination of TTD benefits “without a hearing by filing an admission of liability.” Here, Rule (C)(1)(a) was violated when the respondents filed the June 8 FAL without taking a position on permanent disability benefits.
It follows there was no “violation” of any order of the Director until June 8, 2000, because it was not until then that the insurer acted improperly by filing the FAL without taking a position on permanent disability. Prior to that time the respondents had not taken any action prohibited by any order of the Director. It follows that because the penalty is to be imposed based ont the respondents’ conduct, the penalty must commence on June 8 when the improper conduct first occurred. We also note that the ALJ’s order, if allowed to stand, would mandate the imposition of daily penalties commencing in June 1999, nearly ten months before ALJ Stuber’s order of April 2000 first ordered the payment of TTD.
In reaching this result we recognize that the respondents’ conduct may affect the payment of benefits at a time before the admission was filed. Of course the consequences of an improper termination and the length of delay in paying benefits may be considered in determining the amount of penalties to be imposed after the improper admission is filed.
IV.
The respondents next contend the ALJ erred in continuing the penalties for violation of Rule IX through June 24, 2002. At hearing, the respondents argued the penalties should cease on June 21, 2000, when the second FAL was filed, and no later than September 20, 2000, when the issue of penalties first went to hearing before ALJ Wheelock.
The ALJ’s order notes the filing of the June 21, 2000 FAL. (Finding of Fact 7). The FAL includes a report from Dr. Weinstein placing the claimant at MMI on June 15, 1999, and declaring the claimant has no permanent impairment. Thus, the June 21 FAL purports to terminate TTD on June 14, 1999, and states the claimant has no permanent impairment.
The ALJ did not determine whether this FAL complied with Rule IX and is based on a rational argument that the claimant’s benefits should be terminated on June 14. We recognize that the reasonableness of this admission may be subject to dispute. However, the question of whether the respondents had a rational basis for the June 21 FAL is a question of fact for the ALJ. See Diversified Veterans Corporate Center v. Hewuse, 942 P.2d 1312
(Colo.App. 1997).
If the ALJ determines that the respondents had a rational basis for terminating the claimant’s TTD benefits through the June 21 FAL, penalties for violation of Rule IX would cease on that date. The respondents would have rectified the defects in the June 8 FALand there would be no continuing violation of Rule IX because the termination would be based on compliance with the rule. Section 8-43-305, C.R.S. 2003 (each day insurer fails to comply with order constitutes a separate violation); Spracklin v. Industrial Claim Appeals Office, supra (purpose of § 8-43-505 is to provide for joinder of penalty claims based on “ongoing conduct” after date of claim).
Because we must remand to determine the effect of the June 21 FAL we need not reach the respondents’ argument concerning the effect of the September 20 hearing, if any.
V.
The respondents next contend the ALJ lacked jurisdiction to award penalties for the late payment of TTD benefits. They take issue with our December 2003 order which addressed this issue. The respondents contend that our order failed to recognize that the FAL of June 26, 2002, contains a notation that the respondents paid $1500 in penalties ordered by ALJ Wheelock.
The respondents’ argument does not alter the conclusion which we reached in the December 2003 order. As noted in that order, the FAL instructs the claimant to object if he disagrees with the “amount and type of benefits” which the carrier has agreed to pay. (Emphasis added). As we stated, there is a substantial distinction between benefits and penalties. The June 2002 FAL does not instruct the claimant he must object if he disagrees with the amount and type of penalties the insurer has agreed to pay, nor does the FAL state that all penalties are denied except for those admitted or denied in the order. Thus, the insurer’s June 2002 FAL did not take any position with regard to the penalties sought here, and the FAL did not foreclose those penalties. See Dyrkopp v. Industrial Claim Appeals Office, 30 P.3d 821 (Colo.App. 2001).
VI.
The claimant contends the ALJ erred in calculating the penalties for the “unilateral modification of the schedule for payment” of TTD benefits. The claimant reasons that the respondents violated Rule of Procedure IV(E)(2), 7 Code Colo. Reg. 1101-3 at 5, because they deviated from the established two week payment schedule by failing to make a TTD payment on April 18, 2001. According to the claimant the first check issued after April 18 was issued on May 2, 2002, and it was indeed 14 days late as the ALJ found. However, the claimant argues that every payment after that date was also 14 days late. Therefore, the claimant argues that either the April 18 check was 279 days late, or 20 subsequent checks were 14 days late and each should be penalized. We are not persuaded.
Rule IV(E)(2) provides that TTD benefits awarded by admission “are due on the date of the admission and payable once every two weeks thereafter.” This rule is consistent with § 8-42-105(2)(a), C.R.S. 2003, which provides that “compensation shall be paid at least once every two weeks” unless the Director orders otherwise.
Here, the respondents deviated from the two week schedule when they failed to make a payment on April 18, 2001. However, on May 2 that arrearage was paid, and the compensation for the period of 22 April through May 5 was again paid in advance.
Under these circumstances, we disagree with the claimant’s interpretation of the law. As the ALJ found, payment for one two week period was late, and thereafter the respondents again paid in advance of the next due date. The Act and Rules should not be interpreted as penalizing insurers who pay in advance of the date the benefits are due regardless of the date the previous check was issued. See Jones v. Industrial Claim Appeals Office, 87 P.3d 259 (Colo.App. 2004). The ALJ correctly assessed one 14 day penalty for the April violation and one 9 day penalty for the October violation.
VII.
The respondents contend the $500 per day penalties for the late payments were excessive. The claimant contends the $30 per day penalties for the Rule IX violation were inadequate.
We have concluded that the ALJ incorrectly determined the commencement date for the Rule IX violation, and directed her to reconsider the termination date based on the June 21 FAL. Because our order substantially decreases the length of of the penalties for violation of Rule IX, and may decrease it further, it is appropriate for the ALJ to reconsider the amount of penalties to be imposed for the violation of Rule IX. Similarly, the amounts of the penalties for the late payment violations appear to have been influenced by the ALJ’s assessment of the respondents’ prior conduct, including violation of Rule IX. We cannot say how reduction of the Rule IX penalties might affect the ALJ’s judgment concerning the seriousness of the late payment violations. It follows that the ALJ shall reconsider the amount of penalties to be assessed for all violations.
IT IS THEREFORE ORDERED that the ALJ’s order dated April 29, 2004, is set aside, and the matter is remanded for entry of a new order consistent with the determinations and views expressed herein. The ALJ’s new order shall be based on the existing record and another hearing is not authorized by this order.
INDUSTRIAL CLAIM APPEALS PANEL
_____________________________ David Cain
_____________________________ Kathy E. Dean
Carl Strombitski, Colorado Springs, CO, Man Made Pizza, Inc., Colorado Springs, CO, Reliance National Indemnity, c/o Francine Bushore, Western Guaranty Fund Services, Denver, CO, William A. Alexander, Jr., Esq., Colorado Springs, CO, (For Claimant).
Gregory Daniels, Esq., Denver, CO, (For Respondents).