Recent Colorado Appellate Decisions in Workers' Compensation Cases
| Publication year | 1996 |
| Pages | 57 |
| Citation | Vol. 25 No. 4 Pg. 57 |
1996, April, Pg. 57. Recent Colorado Appellate Decisions in Workers' Compensation Cases
Pueblo School District No. 70 v. Toth(fn1) dealt with the assessment of penalties for nonpayment of medical bills. Because the claimant was injured before July 1, 1991, the general penalty statute applied, rather than the specific penalty statute contained in Senate Bill 218 for nonpayment of medical expenses.(fn2) The new statute, which appears at CRS § 8-43-401(2)(a), requires the assessment of penalties in the amount of 8 percent of the unpaid bill.
The evidence in this case showed that Rule XIV(6) of the Colorado Workers' Compensation Rules of Procedure required insurers to pay injured workers' medical bills within forty-five days of receipt or notify the claimant of the reason for nonpayment. The Colorado Compensation Insurance Authority ("CCIA") neither paid nor explained why it had not paid for nearly two years, nor did it ever respond to demands for payment sent after the bill was submitted. Furthermore, the bill remained unpaid as of the date of the hearing on penalties. In light of this evidence, the administrative law judge ("ALJ") imposed penalties of $10 per day for the 605-day delay.
On appeal, the CCIA argued that this penalty was excessive under the due process clause of the Fourteenth Amendment and under the Eighth Amendment proscription against excessive fines. The claimant responded that because the CCIA was a governmental agency and an arm of the state of Colorado, it was not a "person" entitled to the protection of either the Eighth or Fourteenth Amendments.
The CCIA conceded that "as a designated political subdivision" it did not have the right to assert a substantive due process claim, but claimed an entitlement to procedural due process protections. The Colorado Court of Appeals disagreed. It distinguished earlier cases and held that the CCIA, as an agency of the state of Colorado, was not entitled to either procedural or substantive due process protection because it was not a person within the meaning of the Fourteenth Amendment.
The court also held that the purpose of the Eighth Amendment was to protect individuals against the government, rather than to protect one governmental agency against another. Thus, the CCIA had no standing to assert an Eighth Amendment claim.
The court then held that even if it assumed the CCIA had standing under the excessive fines clause, the penalty was not excessive. It noted that in Austin v. United States,(fn3) the U.S. Supreme Court refused to establish a specific test to determine whether a civil forfeiture was constitutionally excessive, and left the development of the test for excessiveness to the lower courts. In general, lower federal courts, in civil forfeiture cases, have established a totality of the evidence test. Procedurally, once the right to have a fine, penalty or forfeiture imposed has been proven, the burden of showing that the fine is "grossly disproportionate" shifts to the party on whom it is levied. In Toth, the Court of Appeals adopted this test.
The court noted that although the financial harm suffered by the claimant was relatively small, the ALJ was entitled to consider the CCIA's
repeated and stubborn refusal to respond to her attorney's three letters and the fact that the bill remained unpaid even at the 1993 hearing. Further, the fine was far below the amount that would have been permissible under the statute.... [T]he amount imposed by the director was purposefully designed to get the CCIA to take notice and reflect upon its course of conduct, without being unduly heavy-handed.(fn4)
The court also addressed the CCIA's procedural due process challenge to the general penalty statute and to the fact that appellate review of the imposition of penalties was limited to a determination of whether the penalty award was supported by substantial evidence. The court distinguished this situation from the situation in Honda Motor Company v. Oberg,(fn5) where the U.S. Supreme Court held that a substantial evidence review did not comport with due process. Under the Oregon punitive damage statute discussed in Oberg, a new trial could be awarded after appellate review only if there was no evidence to support the punitive damage award. There was no appellate review at
all if the only basis for relief was the excessiveness of the amount of punitive damages.
In Toth, however, the general penalty statute allowed penalties up to $100 per day for each violation, made it clear what constituted a violation and treated each day's violation as a separate and distinct offense. In addition, the CCIA's conduct was governed by a very specific rule of the Division of Workers' Compensation [Rule XIV(6)], and there was a review by the director, the Industrial Claim Appeals Office ("ICAO") and then the Court of Appeals. The court concluded that these procedures insulated the penalty award from any due process challenge.
Axelson v. Pace Membership Warehouse(fn6) dealt with the relationship between temporary disability benefits and unemployment benefits. The claimant was injured in June 1990 and continued to work through July 12, 1990, when she terminated her employment because of her injury. When the employer refused to pay temporary total disability ("TTD") benefits, she filed an administrative appeal and also applied for and received unemployment benefits totalling $8,109.71.
Her appeal from the refusal to pay TTD benefits was ultimately successful and the employer paid TTD benefits. Pursuant to CRS § 8-42-103(1)(f), however, the employer reduced these benefits by the amount the claimant received in unemployment benefits. This statute provides that:
[W]here it is determined that unemployment insurance benefits are payable to an employee, compensation for temporary disability shall be reduced, but not below zero, by the amount of unemployment insurance benefits received, unless the unemployment insurance amount has already been reduced by the temporary disability benefit amount and except the temporary total disability shall not be reduced by unemployment benefits received pursuant to section 8-73-112.
Under § 8-73-112, a person who is forced to leave his or her employment because of an injury that results in TTD...
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