Opinion
W.C. No. 4-543-591.
June 8, 2006.
FINAL ORDER
The respondents seek review of an order of Administrative Law Judge Cain (ALJ) dated February 6, 2006 that ordered the respondents to pay statutory penalties under § 8-43-304(1), C.R.S. 2005, for the insurer's failure to timely pay a medical bill. We affirm.
A hearing was held on the issues of penalties for the insurer's alleged failure to pay a medical bill pursuant to an order of the Director of the Division of Workers' Compensation (the Director), penalties for the insurer's alleged violation of orders of ALJ Harr and the Industrial Claim Appeals Office (the ICAO) to pay a medical bill, and the respondents' affirmative defense of the statute of limitations. Following the hearing, which was conducted on stipulated exhibits, the ALJ entered factual findings that may be summarized as follows. The claimant sustained a compensable back injury on June 13, 2002, and the parties settled the case on a full and final basis, the Director approving the settlement on April 19, 2004. Following approval of the settlement, the claimant's attorney sent a medical bill for treatment by Dr. Cronin to the respondents and requested payment in accordance with the settlement agreement. When the carrier failed to respond to the request for payment of the bill, the claimant obtained a hearing on the issue of penalties under § 8-43-304(1) for the refusal to pay. The matter was heard before ALJ Harr, who found that the settlement agreement contemplated that the carrier would pay the outstanding bill of Dr. Cronin. ALJ Harr imposed penalties in the total amount of $3,838 for the violation of the Director's order to pay all amounts pursuant to the settlement agreement. The insurer appealed ALJ Harr's order and on May 16, 2005 a panel of the ICAO affirmed his order. The claimant did not appeal our order to the court of appeals. Liberty did not pay Dr. Cronin's bill until August 14, 2005, and the ALJ found that the insurer offered no persuasive evidence explaining its failure to pay until that date.
Based upon his factual findings the ALJ concluded that a daily penalty of $55.50 was appropriate for the insurer's continued violation of the Director's order, for the period from November 13, 2004 to August 15, 2005. Because neither order required the carrier to actually pay the medical bill, the ALJ denied additional penalties for the insurer's alleged violations of ALJ Harr's order and the order of the ICAO.
The respondents appealed and argue, first, that the penalty claim was barred by the statute of limitations and by the doctrine of collateral estoppel and, second, that the amount of the penalty was constitutionally excessive and violated the respondents' right to due process and the prohibition against excessive fines.
I.
The respondents argue that the penalty claim here was barred either by the statute of limitations set forth in § 8-43-304(5), C.R.S. 2005 or that it was limited by the doctrine of collateral estoppel. We agree with the ALJ's resolution of these arguments.
Section 8-43-304(5) establishes a statute of limitations for commencement of penalty claims. The party seeking a penalty must file the request for penalties within "one year after the date the requesting party first knew or reasonably should have known the facts giving rise to the penalty." The duty to file the request commences when the party first becomes aware of circumstances constituting a violation, even in cases where the violation is continuing. Spracklin v. Industrial Claim Appeals Office, 66 P.3d 176 (Colo.App. 2003).
As we understand the respondents' argument, they contend that ALJ Harr finally adjudicated the respondents' liability for penalties for their violation of the Director's order, at least through November 12, 2004, which was the date of the hearing before ALJ Harr. When the claimant sought further penalties for the same violation of the Director's order after the date when penalties terminated under ALJ Harr's order, the respondents argue that the claimant was required by § 8-43-304(5) to have perfected that separate claim within one year of the date the claimant first knew of the violation of the Director's order.
In rejecting the respondents' argument, the ALJ relied upon Spracklin v. Industrial Claim Appeals Office, 66 P.3d 176 (Colo.App. 2002). In Spracklin the claimant sought penalties for the respondents' violation of the rule of procedure then in effect, Rule IV(N)(6), requiring that the insurer either admit liability consistent with applicable medical reports or file an application for hearing. However, the claimant had not perfected his claim for penalties until May 11, 2001, which was after the expiration of one year from the insurer's first failure to comply with Rule IV. The court rejected the claimant's argument that § 8-43-305, C.R.S. 2005, which provides that every day is a separate violation, permits penalties for one year prior to the claim, even if the penalty claim "accrued" longer than a year before it was filed. The court further rejected the argument that § 8-43-305 was merely a one-year "cap" on penalties, permitting them to be recovered in cases of a continuing violation a year prior to the filing of the penalty claim.
The ALJ here reasoned that Spracklin only requires a single claim for penalties based on particular conduct, and that the filing of that claim within one year of the time the party "first" knew of the facts giving rise to the penalty satisfies the requirements of the statute of limitations in § 8-43-304(5), even where future claims arise based on the same conduct. We agree with the ALJ's conclusions in this regard. Indeed, the court in Spracklin noted that the effect of § 8-43-305 in making each day a separate offense is to provide "for the joinder of penalty claims for ongoing conduct after the date of the claim." Id., 66 P.3d at 178. Contrary to the respondents' argument, and for purposes of the statute of limitations, we do not perceive any meaningful distinction between ongoing conduct penalized prior to the date of the hearing and subsequent to it in those rare cases where the violation continues. See also Federal Express v. Industrial Claim Appeals Office, 51 P.3d 1107 (Colo.App. 2002) (filing a petition to reopen tolls the statute of limitations and the application for hearing does not need to be filed within six years of the injury).
Moreover, we fail to see how the purpose of the statute of limitations would be furthered were the respondents' argument adopted. Statutes of limitations are enacted to promote justice, discourage unnecessary delay, and forestall prosecution of stale claims. See Dean Witter Reynolds, Inc. v. Hartman, 911 P.2d 1094 (Colo.App. 1996). Since, as the claimant notes, he was unaware that the respondents would continue to violate the Director's order after entry of ALJ Harr's order until they actually did so, there is no unnecessary delay or stale claim here. It is also difficult to see any way in which permitting a penalty claim for the respondents' continuing violation works any injustice against them. Indeed, if the vagaries of the adjudicative system resulted in scheduling of the hearing before ALJ Harr more than a year after the discovery of the violation, the respondents' argument would absolutely preclude any further penalties for the continued violation after the date of his order. Under such circumstances, having been subject to statutory penalties for violating the Director's order up to November 12th, it is difficult to see how justice is promoted by then legally precluding such penalties for the respondents' violation of the same order after November 12th.
Finally, we note that although this is not strictly a case in which the second application for penalties merely "amended" the first application for penalties, it is at least analogous to such circumstances. And, under the applicable rules of civil procedure where a claim asserted in an amended pleading "arose out of the conduct, transaction, or occurrence set forth in the original pleading, the amendment relates back to the date of the original pleading." Brossia v. Rick Construction, 81 P.3d 1126, 1130 (Colo.App. 2003). The reason for the relation back doctrine is "of importance primarily when the statute of limitations is implicated." Id. Hence, the courts will not permit a claim to be barred by the statute of limitations where it is so closely related to a previous claim that "justice . . . requires" that the relation back doctrine apply. See C.R.C.P. 15(a). Here, we decline to construe § 8-43-304(5) to reach the result urged by the respondents.
II.
The respondents also argue that the amount of the penalty imposed for their failure to pay the medical bill was constitutionally excessive, violating their right to due process and to be free from excessive fines. We disagree with the respondents' argument.
Under § 8-43-304(1), C.R.S. 2001, the ALJ may impose penalties of up to five hundred dollars per day when an employer fails, neglects or refuses to obey any lawful order made by the panel or director. Holliday v. Bestop Inc. 23 P.3d 700 (Colo. 2001). Because the ALJ's authority is discretionary, we may not disturb the ALJ's determination of the amount of the penalty to be imposed in the absence of fraud or an abuse of discretion. See Associated Business Products v. Industrial Claim Appeals Office, 126 P.3d 323 (Colo.App. 2005); Hall v. Home Furniture Co., 724 P.2d 94 (Colo.App. 1986); Brunetti v. Industrial Commission, 670 P.2d 1246 (Colo.App. 1983). There is no assertion of fraud in this case. The legal standard for review of an alleged abuse of discretion is whether, under the totality of the factual circumstances at the time of the ALJ's determination, the ALJ's order "exceeds the bounds of reason." Associated Business Products, 126 P.2d 323 (Colo.App. 2005); Rosenberg v. Board of Education of School District #1, 710 P.2d 1095 (Colo. 1985). The application of this substantial evidence standard includes consideration of whether the ALJ's determination is supported by substantial evidence and the applicable law. Coates, Reid Waldron v. Vigil, 856 P.2d 850 (Colo. 1993).
There is no issue presented here regarding either whether the respondents violated the Director's order to pay Dr. Cronin's bill, or whether their conduct in doing so was objectively reasonable. As the ALJ here noted, ALJ Harr resolved both of those questions against the respondents, and the order doing so became final when a panel of the ICAO affirmed ALJ Harr's order. In any event, the respondents have not renewed any argument that they did not violate the Director's order or that their conduct was reasonable.
The respondents specifically argue, however, that under the standard set forth in Associated Business Products the ALJ's penalty award is excessive. In Associated Business Products the court reviewed a penalty for constitutional excessiveness, to determine whether its amount violated the due process protections of the federal and state constitutions and the excessive fines clause of the Eighth Amendment. The court set forth three factors to be used to determine whether those constitutional limits had been exceeded by the amount of the penalty. Specifically, the court considered (1) the reprehensibility of the conduct, (2) the disparity between the harm to the claimant and the penalty, and (3) the difference between the penalty and civil damages that could be imposed in comparable cases. As we read Associated Business Products the court held that these factors are appropriate in reviewing whether a penalty is unconstitutionally excessive, or "grossly disproportionate." Associated Business Products, 126 P.3d at 326; See also Pueblo School District No. 70 v. Toth, 924 P.2d 1094, 1100 (Colo.App. 1996). However, subject to constitutional limitations, the ALJ's decision regarding the amount of the penalty remains highly discretionary, which implies that the ALJ may consider a wide variety of factors. Here, we are able to discern the basis for the order, and in our view the ALJ did not abuse his discretion in setting the amount of the award.
In light of the factors set forth in Associated Business Products we conclude that the penalty does not exceed the bounds of reason, and is not "grossly disproportionate," and therefore does not constitute an abuse of discretion. The burden is on the party who is penalized to show mitigation tending to reduce the amount of the penalty, and here we are unable to locate evidence regarding what civil penalties might have been imposed under similar circumstances. See Associated Business Products, 126 P.3d at 327. The respondents note that the ALJ had the benefit of the record in the previous penalty claim in this case, imposed by ALJ Harr at the rate of $18.50 per day. They argue that their conduct was similar, as was the effects upon the claimant of their conduct, and that a penalty here of three times that imposed by ALJ Harr was an abuse of discretion. However, contrary to the respondents' argument, their conduct with respect to the two penalties claims was not identical, and the ALJ did, in fact, consider the previous penalty in determining the appropriate amount of the present penalty. The ALJ noted in his order that the penalty imposed by ALJ Harr apparently failed to persuade the insurer of the necessity of complying with the Director's order, and he concluded that an increase in the penalty amount might be necessary to achieve that effect. We cannot conclude that the ALJ abused his discretion by drawing these inferences from the record.
Of the other two factors set forth in Associated Business Products, the respondents argue, first, that the claimant was not harmed by their failure to promptly pay the medical bill. However, the ALJ recognized and weighed this factor, concluding that whatever mitigating effect it may have had, it was outweighed by the need to impress upon the insurer the need for prompt compliance with lawful orders. Again, the ALJ did not abuse his discretion by weighing this factor thusly.
As to the remaining factor set forth in Associated Business Products, the ALJ could reasonably have inferred from the record that the degree of "reprehensibility" of the insurer's conduct was high. We presume that the court of appeals used that term in its usual sense of "[w]orthy of censure or rebuke." Webster's II New College Dictionary at 941 (1995). It is evident from the ALJ's order that he considered significant the insurer's persistence in failing to pay the medical bill despite a previous penalty regarding the same bill and for similar conduct. The ALJ not only expressly noted that the carrier's conduct was reprehensible, but also that it was "indicative of a pattern of delay." Findings of Fact, Conclusions of Law, and Order at 6.
We disagree with the respondents' argument that the record compels the conclusion that their conduct could not be viewed as reprehensible. Although they do not argue that the ALJ was legally precluded from penalizing them pending their appeal of ALJ Harr's order, they do assert that during that time there was no final adjudication of their liability for the medical bill. They argue that they could not be obstinately "refusing" to pay a bill that they had not finally been ordered to pay. However, the ALJ considered this argument and inferred from their continued failure to pay the bill even after the order became final that the argument was "undermin[ed]." We decline to conclude that the ALJ's inferences drawn from this record were impermissible and that the penalty was constitutionally excessive.
Given the record, the ALJ could certainly reason that a significant penalty was necessary in order to persuade the carrier of the importance of "the requirement for compliance with orders issued by the Director." We also note that the penalty imposed in this case was significantly less than the maximum permitted by the statute, amounting to only slightly more than one-tenth the amount that might have been imposed. Under these circumstances we do not view the penalty of $55.50 per day for this violation to be either constitutionally excessive or otherwise an abuse of the ALJ's discretion.
IT IS THEREFORE ORDERED that the ALJ's order dated February 6, 2006, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ Curt Kriksciun
____________________________________ Thomas Schrant
Cory France, Loveland, CO, Alan Espinoza, Loveland, CO, Michael Ketter, Liberty Mutual Insurance Company, Irving, TX, Brenda Carrillo, Division of Workers' Compensation, W.M. Busch, Jr., Esq., Loveland, CO, (For Claimant).
David G. Kroll, Esq., Denver, CO, (For Respondents).