Summary
In Davis unlike the facts presented here, the claimant expressly alleged a violation of Rule XVI(K) at the commencement of the hearing and the respondent did not object, allege surprise, or request a continuance in response to the claimant's allegation of the Rule XVI(K) violation.
Summary of this case from In re Work, W.C. NoOpinion
W.C. No. 4-493-641
April 28, 2004
FINAL ORDER
The respondent seeks review of an order of Administrative Law Judge Klein (ALJ) insofar as the ALJ imposed penalties under § 8-43-304(1), C.R.S. 2003, for the respondent's violation of its Final Admission of Liability (FAL) and the Rules of Procedure, Part XVI(K)(2), 7 Code Colo. Reg. 1101-3. We affirm.
In August 2001, an authorized treating physician (ATP) for the claimant's admitted industrial injury, prescribed a six-month "wellness program" at either the Parker Recreation Center or the Castle Rock Recreation Center (Castle Rock). The claimant subsequently began a six-month wellness program at Castle Rock. The program was scheduled to expire in April 2002. The respondent paid for the six-month wellness program and reimbursed the claimant for mileage to and from the program.
On December 14, 2001, the ATP placed the claimant at maximum medical improvement and recommended future medical care including "a wellness program for one year." The respondent's FAL dated January 16, 2002, stated: "GROVER MEDICAL BENEFITS DENIED EXCEPT PER DR. SMITH'S 12/14/01 AND 12/16/01 reports." (Emphasis in original).
The ALJ found that on May 28, 2002, the claimant sent the respondent a request for payment of the additional one-year wellness program and reimbursement for mileage. The ALJ determined the respondent's new third-party administrator, Cambridge Integrated Services Group Inc. (Cambridge), received the request on June 2, 2002. No action was taken on the request until August 23, 2002, when the claimant received a letter from Cambridge which stated: "No authorization so we are denying your mileage in full." The claimant subsequently applied for a hearing and requested penalties under § 8-43-304(1).
At hearing, the respondent did not present any testimony to explain its failure to pay the requested Grover medical benefits. However, the respondent's counsel stated the bills were denied because the respondent had no way of verifying the claimant's mileage or attendance in the wellness program; there was no physical therapist on duty at Castle Rock; the ATP did not specify Castle Rock for the wellness program; and Castle Rock only had a self-directed wellness program.
The ALJ found the respondent's August 23 denial letter violated Rule XVI(K)(2)(b) and the failure to pay admitted medical benefits violated the FAL. Further, the ALJ determined the respondent's explanation was incredible. Therefore, the ALJ determined the respondent willfully refused to pay the Grover medical benefits. The ALJ then imposed a penalty at the rate of $500 per day for the period July 2, 2002 to October 14, 2003, for the respondent's failure to comply with its FAL. The ALJ also imposed a penalty for the same period at the rate of $200 per day for the respondent's violation of Rule XVI(K)(2).
On review, the respondent first contends it was denied due process because it was not sufficiently notified of the grounds for claiming penalties for a violation of Rule XVI(K)(2). We reject this argument.
Section 8-43-304(4) provides that an application for penalties under § 8-43-304(1) "shall state with specificity the grounds on which the penalty is being asserted." We have previously determined that the requirement for specificity serves two functions. First, it notifies the putative violator of the basis of the claim so that the violator may exercise its right to cure the violation. The specificity requirement also ensures the violator will receive notice of the legal and factual bases for the penalty claim so that the violator's rights to present evidence, confront adverse evidence, and present argument in support of its position are protected. See Major Medical Insurance Fund v. Industrial Claim Appeals Office, 77 P.3d 867 (Colo.App. 2003); Jakel v. Northern Colorado Paper Inc., W.C. No. 4-524-991 (October 6, 2003); Gonzales v. Denver Public School District No. 1, W.C. No. 4-437-328 (December 27, 2001). However, procedural due process can be waived and we need not consider arguments which were not preserved for appellate review. Colorado AFL-CIO v. Donlon, 914 P.2d 396 (Colo.App. 1995); ( Colorado Compensation Ins. Authority v. Industrial Claim Appeals Office, 884 P.2d 1131 (Colo.App. 1994).
Here, the claimant did not expressly allege a violation of Rule XVI(K) until the commencement of the hearing. (Tr. pp. 4, 7). However, the respondent's counsel did not object, allege surprise, or request a continuance. (Tr. pp. 5, 8). Furthermore, the respondent's post-hearing Position Statement denied any violation of Rule XVI(K), but did not allege any due process violation. Therefore, we conclude the respondent failed to preserve the issue for appellate review.
In any case, we reject the respondent's contention that the Rule XVI(K) penalty claim was not sufficiently pled. The respondent is presumed to know the applicable law, including any relevant procedural rules. See Boeheim v. Industrial Claim Appeals Office, 23 P.3d 1247 (Colo.App. 2001). The claimant's Application for Hearing expressly stated that the claimant sought penalties under § 8-43-304(1) for the respondent's failure to pay the wellness program membership and the mileage reimbursement based on grounds of "no authorization" or "proof of visits." Thus, a cursory reading of the Application is sufficient to alert the respondent of the action required to cure the potential violation of Rule XVI(K). See Varela v. Cedaredge Mercantile, W.C. No. 4-471-768 (July 18, 2003) [application for hearing requesting penalties for violation of Rule IX "without filing petition to suspend" gave sufficient notice of claim for penalties based on specific provisions of Rule IX(C)(1)(a)]. Moreover, to the extent the respondent remained unsure of the precise nature of the claimant's allegations, discovery was available.
Next, the respondent contends it was the claimant's burden to prove she provided verification of her mileage expenses and wellness membership and, therefore, the ALJ misassigned the burden of proof by requiring the respondent to prove why penalties should not be imposed. We perceive no error.
Section 8-43-304(1) provides for imposition of a penalty where a party "fails, neglects, or refuses to obey any lawful order." Section 8-40-201(15), C.R.S. 2003, defines the term "order" to mean and include "any decision, finding and award, direction, rule, regulation or other determination arrived at by the director or and administrative law judge." Accordingly, the term "order" has been interpreted to include a rule of procedure adopted by the Director of the Division of Workers' Compensation for enforcement of the Workers' Compensation Act. Human Resource Co. v. Industrial Claim Appeals Office, 984 P.2d 1194 (Colo.App. 1999); Jiminez v. Industrial Claim Appeals Office, ___ P.3d ___ (Colo.App. No. 02CA2283, September 11, 2003); Spracklin v. Industrial Claim Appeals Office, 66 P.3d 176 (Colo.App. 2002); Green v. DSM Enterprises, Inc., W.C. No. 4-481-843 (April 7, 2004). Because an uncontested FAL which admits liability for specific Grover medical benefits constitutes an award of medical benefits, it follows that § 8-43-304(1) also authorizes an ALJ to impose penalties for the respondent's failure to comply with its FAL. Cf. Brown Root, Inc. v. Industrial Claim Appeals Office, 833 P.2d 780 (Colo.App. 1991).
The imposition of penalties under § 8-43-304(1) requires a two-step analysis. The ALJ must first determine whether the disputed conduct constituted a violation of a lawful order. See Allison v. Industrial Claim Appeals Office, 916 P.2d 623 (Colo.App. 1995). The ALJ's finding of a violation may be based on inferences from circumstantial evidence. See Ackerman v. Hilton's Mechanical Men, Inc., 914 P.2d 524 (Colo.App. 1996). Where a violation is found, the violator is subject to a penalty if the violator's actions were objectively unreasonable. Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). The reasonableness of the violator's actions depends on whether the actions were predicated on rational argument based in law or fact, and this determination is to be made by the ALJ. Jiminez v. Industrial Claim Appeals Office, supra. Further, in Human Resource Co. v. Industrial Claim Appeals Office, 984 P.2d 1194, 1197 (Colo.App. 1999), the court held that where the violator fails to offer a reasonable factual or legal explanation for its actions, the ALJ may infer the opposing party sustained its burden to prove the violation was objectively unreasonable.
Contrary to the respondent's contention, the ALJ's finding that the respondent received a payment request on June 2, 2002, is supported by the record. The claimant testified that she mailed a Grover medical benefit payment request to Cambridge in April or May but did not know the exact date because she did not keep a copy of the request. (Tr. pp. 26-27). The claimant and her daughter also stated that when the claimant received no response from Cambridge, the request was resent to Cambridge in July. (Tr. p. 45). The last entry of the mileage reimbursement request was dated May 28. (Claimant's Exhibit 5). Because the request did not list any mileage incurred in June, the ALJ reasonably inferred that the claimant's first mileage reimbursement request was sent to Cambridge in May and received by mail no later than June 2.
Further, it is undisputed that the respondent did not pay the wellness membership or the mileage reimbursement. Therefore, the ALJ's findings support a conclusion the respondent violated the FAL by failing to pay admitted liability for medical benefits. See § 8-43-203(2)(d), C.R.S. 2003 ("if any liability is admitted, payments shall continue according to admitted liability").
The Rules of Procedure Part XVI(K)(1), 7 Code Colo. Reg. 1101-3 at 81 (2001), require the insurer to pay that medical bills within 30 days after receipt from the provider unless the insurer contests liability in accordance with the rules. Where the insurer contests payment, Rule XVI(K)(2)(b) requires the insurer to provide a written notification of the denial which includes the name of the injured worker, the dates of service being contested, the workers' compensation number, reference to the bill and each item of the bill being contested, reasons for contesting the payment of any item, and notice that the billing party may resubmit a corrected bill within 60 days.
The August 23 denial letter does not list the workers' compensation number of the claim or reference the wellness program membership fee. Neither does the denial letter state a reason for denying payment of the membership fee or notify the claimant of her right to resubmit a corrected bill. Rather, the denial merely denies the "mileage in full" on grounds it was not authorized. Therefore, the record supports the ALJ's Finding of Fact 12 that the respondent's notification failed to comply with the requirements of Rule XVI(K)(2)(b).
Having found two separate violations, the respondent was subject to penalties unless its actions were based on a rational argument predicated in law or fact. Relying on evidence that the respondent explicitly admitted liability for the Grover medical benefits recommended by the ATP, and paid similar expenses, the ALJ implicitly determined the claimant sustained her initial burden to prove that a reasonable insurer would not have denied payment. Therefore, the burden shifted to the respondent to prove its actions were objectively reasonable.
The statements of respondent's counsel may not substitute for evidence not in the record. See Subsequent Injury Fund v. Gallegos, 746 P.2d 71 (Colo.App. 1987). In any case, the respondent's assertion that payment was denied because the claimant failed to produce written verification of the expenses is inconsistent with the August 23, 2002 denial letter in which Cambridge stated that payment was denied because there was "no authorization" for the treatment. Under these circumstances, we perceive no basis to interfere with the ALJ's finding that the respondent's explanations were incredible. Moreover, the ALJ could, and did, implicitly determine that absent another explanation, the respondent's violation was objectively unreasonable. Consequently, we are not persuaded the ALJ's findings reflect a misapplication of the burden of proof.
Finally, the respondent contests the amount of the penalties assessed under § 8-43-304(1). The respondent contends the ALJ erroneously imposed two penalties for the same conduct and erroneously stacked the penalties. Further, the respondent contends the penalty imposed by the ALJ is unconstitutionally excessive.
Under § 8-43-304(1) an ALJ may impose a fine of "not more than five hundred dollars per day for each such offense," and the statute does not preclude an ALJ from imposing multiple fines which result in an aggregate fine greater than $500 per day. Had the General Assembly intended to preclude the stacking of penalties it could have enacted language to that effect. However, the General Assembly did not do so and we may not read nonexistent provisions into the statute. Arenas v. Industrial Claim Appeals Office, 8 P.3d 558 (Colo.App. 2000).
Here, the record fully supports the ALJ's conclusion that there were two independent violations by the respondent. See Human Resource Co. v. Industrial Claim Appeals Office, supra (respondents' compliance with rule for filing admission concerning scheduled impairment did not excuse failure to comply with rule governing whole person impairment when respondents subsequently received impairment rating triggering the whole person rule). The first violation was the respondent's failure to pay benefits in accordance with admitted liability as required by § 8-43-203(2)(d). The second violation occurred when the respondent purported to deny liability by way of a written notification which failed to comply with the requirements of Rule XVI(K)(2).
The daily rate assessed by the ALJ for each offense does not exceed the maximum daily rate provided by the statute. Furthermore, the ALJ found the violations were aggravated by the respondent's failure to pay even after the claimant made numerous efforts to resolve the respondent's questions and regression of the claimant's condition when she was unable to continue the wellness program due to the unpaid bill. Under these circumstances, we cannot say the ALJ's order exceeds the bounds of reason. Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996); Northern Telecom, Inc. v. Industrial Claim Appeals Office, Colo. App. 02CA2052, December 24, 2003 (not selected for publication).
We are mindful that in Northern Telecom, Inc. v. Industrial Claim Appeals Office, supra, a division of the court set aside a $91,000 penalty for the respondents' failure to pay a $412.40 medical bill on grounds it was grossly disproportionate to the misconduct. However, the court did not establish a specific legal standard for determining as a matter of law when a fine is grossly disproportionate to the seriousness of the misconduct. Contrary to the respondent's further contention, we are not persuaded that a simple comparison between the amount of the unpaid medical benefits and the aggregate fine is dispositive of whether the fine is excessive. In Northern Telecom the penalty set aside by the court was 220 times the amount of unpaid medical benefits. However, in Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996), the court upheld a penalty that was 327 times the amount of the unpaid benefits. Therefore, we decline to conclude as a matter of law that the ALJ's penalty was abuse of discretion merely because it is 197 times the amount of the unpaid medical benefits. Finally, we lack authority to determine whether a fine is unconstitutionally excessive as considered by the court in Northern Telecom. See Celebrity Custom Builders v. Industrial Claim Appeals Office, 916 P.2d 539 (Colo.App. 1995).
IT IS THEREFORE ORDERED that the ALJ's order dated October 14, 2003, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ Kathy E. Dean
______________________________ Bill WhitacreNOTICE
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. 2003. 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 order were mailed to the parties at the addresses shown below on April 28, 2004 by A. Hurtado.
Cathie E. Davis, 34514 County Road 21, Elizabeth, CO 80107
K Mart, c/o Michael W. Sutherland, Esq. and Jonathan O. Wilson, Esq., 1720 S. Bellaire St., #310, Denver, CO 80222-4316
K Mart Corporation, c/o Judy Wood, Cambridge Integrated Services Group, Inc., P. O. Box 52106, Phoenix, AZ 85016
Subsequent Injury Fund, Tower 2, #630, Division of Workers' Compensation — Interagency Mail
James A. Halpin, Esq., 4790 Table Mesa Dr., #100, Boulder, CO 80305 (For Claimant)
Michael W. Sutherland, Esq. and Jonathan O. Wilson, Esq., 1720 S. Bellaire St., #310, Denver, CO 80222-4316 (For Respondents)