Opinion
W.C. No. 4-348-960
July 8, 1999.
FINAL ORDER
The Director of the Division of Workers' Compensation (Director) seeks review of an order of Administrative Law Judge Gandy (ALJ), which refused to impose penalties against the Colorado Compensation Insurance Authority (CCIA) for the wrongful termination of temporary disability benefits. We affirm the denial of penalties.
Section 8-43-304(1), C.R.S. 1998, provides that penalties up to $500 per day may be imposed against an insurer who violates any provision of the Workers' Compensation Act (Act) or fails or refuses to perform any duty lawfully enjoined, for which no other penalty is specifically provided. Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996). An insurer's failure to comply with a statutory provision of the Act or the Rules of Procedure constitutes the failure to perform a duty lawfully enjoined. See Diversified Veterans Corporate Center v. Hewuse, 942 P.2d 1312 (Colo.App. 1997).
However, the determination of whether an insurer is subject to penalties under § 8-43-304(1) requires a two-step analysis. Allison v. Industrial Claim Appeals Office, 916 P.2d 623 (Colo.App. 1995). First, the ALJ must determine if the challenged conduct violated a statute or rule. If so, the ALJ must determine whether the challenged conduct was unreasonable as measured by an objective standard. Pueblo School District No. 70 v. Toth, supra. The reasonableness of the insurer's actions depends upon whether the actions were predicated on a rational argument based on law or fact. Diversified Veterans Corporate Center v. Hewuse, supra. The determination of whether the insurer's actions were reasonable is generally a question of fact for resolution by the ALJ. Pueblo School District No. 70 v. Toth, supra. We must uphold the ALJ's factual determinations if supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. 1998.
Here, the underlying factual circumstances are undisputed. The claimant was employed as a camp counselor for the Mountain Trail Youth Camp Inc. (Camp) when he suffered a compensable knee injury. CCIA filed a general admission of liability for temporary total disability benefits commencing August 16, 1997, and ending August 20, 1997. The limited admission was based on the fact that the claimant's last scheduled work day at the Camp was August 21, 1997.
On February 12, 1998, the Director issued an order requiring the respondents to show cause why penalties should not be assessed against the CCIA for the termination of temporary disability benefits without following the requirements of § 8-42-105(3), C.R.S. 1998, and the Rules of Procedure, Part IX, 7 Code Colo. Reg. 1101-3. In response, the CCIA filed an application for hearing.
Based on the evidence presented at a hearing on March 16, 1999, the ALJ denied the claimant's request for penalties. The ALJ determined there is no statute or rule which required the CCIA to admit unlimited or open-ended liability for temporary disability benefits, especially where the claimant is a seasonal employee. To the contrary, the ALJ found that under § 8-43-203, C.R.S. 1998, the CCIA was only obligated to make payments in accordance with admitted liability. Consequently, the ALJ determined that the CCIA's decision to file a "closed-ended admission of liability" for temporary disability benefits is supported by § 8-43-203, and that the CCIA did not violate any statute or rule. The ALJ further determined that in the absence of a specific statute or rule governing this situation, the CCIA had a rational basis in both law and fact for filing the limited admission.
The Director timely appealed the ALJ's order. We note that twenty-five percent of a penalty imposed under § 8-43-304(1) is payable to the Subsequent Injury Fund (SIF), and the Director is the administrator of the SIF. Section 8-46-101(5), C.R.S. 1998; Sears, Roebuck Co. v. Baca, 682 P.2d 11 (Colo. 1984). Therefore, the Director has standing to request review of the ALJ's order denying penalties under § 8-43-304(1); Bradley v. Industrial Claim Appeals Office, 841 P.2d 1071 (Colo.App. 1992) (standing requires "injury in fact and a cognizable legal right.").
The Director contends the ALJ erred in finding that the CCIA's actions did not violate any statute or procedural rule. In support, the Director relies upon our holding in Childers v. Noah's Ark Whitewater Rafting, W.C. No. 4-392-209 (April 7, 1999). We agree the ALJ erred in finding that the CCIA's actions did not violate the Act.
Temporary disability benefits are payable if the industrial injury causes a disability that results in a temporary wage loss. See § 8-42-103(1), C.R.S. 1998; PDM Molding, Inc. v. Stanberg, 898 P.2d 542 (Colo. 1995). The claimant bears the burden to prove his entitlement to temporary disability benefits.
Expressly relying on Allison v. Industrial Claim Appeals Office, 916 P.2d 623 (Colo.App. 1995), we have issued a series of decisions which held that the insurer has no legal obligation to admit liability for temporary disability benefits. See Wood v. CZ Courier Ltd., W.C. No. 4-274-394 et al.(May 22, 1998); Gonsalves v. The Aspen Branch Floral Arts, W.C. No. 4-234-403 (May 1, 1998); Butler v. Bridgemaster Inc., W.C. No. 4-267-417 (March 31, 1998); Griffith v. Miller Brothers Inc., W.C. No. 4-153-811 (December 31, 1996). However, the Court of Appeals has held that once "an admission of liability for temporary disability benefits is filed, neither the employer nor its insurer is entitled to suspend payments unilaterally," except as provided by Rule IX. A R Concrete Construction v. Lightner, 759 P.2d 831, 833 (Colo.App. 1988).
In Childers v. Noah's Ark Whitewater Rafting, supra, we concluded that once a claimant proves an entitlement to temporary disability benefits, the duration of those benefits is governed by § 8-42-105(3)(a)-(d), C.R.S. 1998, and Rule IX. Similarly, we held that where the insurer admits liability for temporary disability benefits, the insurer must pay continuing benefits until terminated in accordance with § 8-42-105(3) or Rule IX. Moreover, we concluded that the Act does not permit the filing of a closed-ended admission for temporary disability benefits, where the termination of benefits is not consistent with § 8-42-105(3) or Rule IX.
The facts in Childers are virtually identical to the facts presented here. The claimant in Childers was injured while working as a seasonal employee. The insurer filed a general admission for a closed-ended period of temporary disability benefits based on the claimant's status as a "seasonal employee" However, seasonal employment status is not a ground for the termination of temporary disability benefits under § 8-42-105(3)(a)-(d) or Rule IX. Consequently, we held that the insurer was required to pay temporary disability benefits until properly terminated in accordance with § 8-42-105(3).
The CCIA contends that Childers was wrongly decided. We have considered the CCIA's arguments and are not persuaded to depart from our conclusions in Childers. Accordingly, we conclude the ALJ erred in finding that the CCIA's closed-ended admission of liability for temporary disability benefits did not violate the Act.
Nevertheless, we also conclude that the record supports the ALJ's further determination that the CCIA's actions were predicated on a rational argument based in law or fact. Therefore, the ALJ did not err in refusing to award penalties.
An insurer's actions may be based upon a rational argument in law or fact even if the argument is ultimately proven wrong. Cf. Mission Denver, Co. v. Pierson, 674 P.2d 363 (Colo. 1984) (likelihood of prevailing on theory is not dispositive of whether argument is frivolous); Torres v. Portillos, 638 P.2d 274 (Colo. 1981). This is especially true where the insurer seeks the resolution of an open question of law. See Tozer v. Scott Wetzel Services, Inc., 883 P.2d 496 (Colo.App. 1994).
It is undisputed that the CCIA's actions were predicated on its contention that § 8-43-203 is silent on the right to file a closed-ended admission and that the statute only requires the insurer make payments in accordance with "admitted liability." Although we disagree with the respondents' interpretation of § 8-43-203, we agree that § 8-43-203 does not expressly prohibit closed-ended admissions nor preclude the respondents' interpretation.
A R Concrete Construction v. Lightner, supra, concluded that an insurer may not unilaterally terminate temporary disability benefits except in accordance with Rule IX, but Lightner did not consider the question of whether an insurer may file a limited admission for temporary disability benefits. We know of no published court opinion which resolves the specific issue presented here, and our resolution in Childers was not binding in this matter. Under these circumstances, we perceive no reversible error in the ALJ's determination that the CCIA's actions were predicated on a rational argument in law or fact. That determination supports the denial of penalties.
IT IS THEREFORE ORDERED that the ALJ's order dated April 12, 1999, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ Kathy E. Dean
____________________________________ Bill Whitacre
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, with service of a copy of the petition upon the Industrial Claim Appeals Office and all other parties, within twenty (20) days after the date this Order is mailed, pursuant to section 8-43-301(10) and 307, C.R.S. 1998.
Copies of this decision were mailed July 8, 1999 the following parties:
Donald Beuke, 2038 S. Dwey, Bartlesville, OK 74003
Mountain Trails Youth Camp, Inc., c/o Ritsema Lyons P.C., 999 18th St., Ste. 3100, Denver, CO 80202
Paul David Feld, Esq., Ritsema Lyons P.C., 999 18th St., Ste. 3100, Denver, CO 80202
John Baird, Esq., Asst. Attorney General, 1525 Sherman St., 5th Flr., Denver, CO 80203 (For the Director)
Curt Kriksciun, Esq., Colorado Compensation Insurance Authority, (Interagency Mail)
BY: A. Pendroy