Colorado § 8-43-304 - Violations - penalty - offset for benefits obtained through fraud - rules.

§ 8-43-304. Violations - penalty - offset for benefits obtained through fraud - rules.

(1) Any employer or insurer, or any officer or agent of either, or any employee, or any other person who violates articles 40 to 47 of this title 8, or does any act prohibited thereby, or fails or refuses to perform any duty lawfully enjoined within the time prescribed by the director or panel, for which no penalty has been specifically provided, or fails, neglects, or refuses to obey any lawful order made by the director or panel or any judgment or decree made by any court as provided by the articles shall be subject to such order being reduced to judgment by a court of competent jurisdiction and shall also be punished by a fine of not more than one thousand dollars per day for each offense, to be apportioned, in whole or part, at the discretion of the director or administrative law judge, between the aggrieved party and the Colorado uninsured employer fund created in section 8-67-105; except that the amount apportioned to the aggrieved party shall be a minimum of twenty-five percent of any penalty assessed.

(1.5) (a) (I) An insurer who knowingly or repeatedly violates any provision of articles 40 to 47 of this title shall be subject to a fine as determined by the director. If necessary, the director may conduct a hearing or may refer the matter to the office of administrative courts for the entry of findings of fact. The director shall promulgate rules that specify, with respect to an insurer's willful or repeated violations that are subject to this subsection (1.5):

(A) The circumstances pursuant to which the director may issue an order imposing a fine; and

(B) Criteria for determining the amount of the fine.

(II) If the division determines, as part of a compliance audit of an insurer or self-insured pool, that an injury or occupational disease was not reported to the division within the time specified in sections 8-43-101 and 8-43-103 because the insurer or self-insured pool did not have notice or knowledge of the injury, occupational disease, or fatality within a period of time that would allow the information to be reported to the division within the time specified in sections 8-43-101 and 8-43-103, the director shall not impose a fine for late reporting under this subsection (1.5). The director may impose a fine under this subsection (1.5) for late reporting under sections 8-43-101 and 8-43-103 as part of findings from a compliance audit if the director finds that the late reporting constituted a knowing or repeated pattern of noncompliance with the reporting requirements of sections 8-43-101 and 8-43-103 and was not caused by the insurer or self-insured pool's lack of notice or knowledge of the injury, occupational disease, or fatality within a period of time that would allow the information to be reported to the division within the time specified in sections 8-43-101 and 8-43-103.

(b) Fines imposed pursuant to this subsection (1.5) on or after July 1, 2018, shall be transmitted to the state treasurer, who shall credit the fines to the Colorado uninsured employer fund created in section 8-67-105.

(2) An insurer or self-insured employer may take a credit or offset of previously paid workers' compensation benefits or payments against any further workers' compensation benefits or payments due a worker when the worker admits to having obtained the previously paid benefits or payments through fraud, or a civil judgment or criminal conviction is entered against the worker for having obtained the previously paid benefits through fraud. Benefits or payments obtained through fraud by a worker shall not be included in any data used for rate-making or individual employer rating or dividend calculations by any insurer or by Pinnacol Assurance.

(3) The director and each administrative law judge shall report to the division each time a penalty is imposed pursuant to this section. Each such report shall include the amount of the penalty, the name of the administrative law judge awarding the penalty, if applicable, and the name of the offending party.

(4) In any application for hearing for any penalty pursuant to subsection (1) of this section, the applicant shall state with specificity the grounds on which the penalty is being asserted. After the date of mailing of such an application, an alleged violator shall have twenty days to cure the violation. If the violator cures the violation within such twenty-day period, and the party seeking such penalty fails to prove by clear and convincing evidence that the alleged violator knew or reasonably should have known such person was in violation, no penalty shall be assessed. The curing of the violation within the twenty-day period shall not establish that the violator knew or should have known that such person was in violation.

(5) A request for penalties shall be filed with the director or administrative law judge within one year after the date that the requesting party first knew or reasonably should have known the facts giving rise to a possible penalty.

Source: L. 90: Entire article R&RE, p. 510, § 1, effective July 1. L. 91: Entire section amended, p. 1323, § 35, effective July 1. L. 92: (1) amended, p. 1828, § 1, effective May 19. L. 94: (3), (4), and (5) added, p. 1878, § 11, effective June 1. L. 97: (3) amended, p. 1474, § 9, effective June 3. L. 2002: (2) amended, p. 1883, § 30, effective July 1. L. 2005: (1.5) added, p. 199, § 2, effective July 1. L. 2006: IP(1.5)(a) amended, p. 1489, § 6, effective June 1. L. 2010: (1) amended, (SB 10-012), ch. 287, p. 1340, § 1, effective August 11. L. 2012: (1.5)(a) amended, (HB 12-1033), ch. 43, p. 147, § 1, effective August 8. L. 2017: (1) and (1.5)(b) amended, (HB 17-1119), ch. 317, p. 1706, § 4, effective July 1.

Editor's note: This section is similar to former § 8-53-116 as it existed prior to 1990.

ANNOTATION

Law reviews. For article, "Update on Colorado Appellate Decisions in Colorado Workers' Compensation Law", see 30 Colo. Law. 129 (July 2001). For article, "Update on Colorado Appellate Decisions In Workers' Compensation Law", see 32 Colo. Law. 87 (Mar. 2003). For article, "Update on Colorado Appellate Decisions in Workers' Compensation Law", see 33 Colo. Law. 83 (Apr. 2004).

Annotator's note. The following annotations include cases decided under former provisions similar to this section.

Subsection (1) does not violate a claimant's constitutional rights. A claimant's share of the penalty imposed on an employer may be reduced without effecting an unconstitutional taking of claimant's property. Moland v. Indus. Claim Appeals Office, 111 P.3d 507 (Colo. App. 2004).

The plain language of subsection (1) defines and limits a penalty and a resultant benefit in favor of a claimant, and the general assembly has the power and authority to set and limit benefits. Moland v. Indus. Claim Appeals Office, 111 P.3d 507 (Colo. App. 2004).

Subsection (1) applies only in the absence of another, more specific penalty provision. Sears v. Penrose Hosp., 942 P.2d 1345 (Colo. App. 1997), overruled in Holliday v. Bestop, Inc., 23 P.3d 700 (Colo. 2001).

For purposes of the penalty provision in subsection (1), failure to comply with a procedural rule is a failure to obey a lawful order. Pioneers Hosp. of Rio Blanco County v. Indus. Claim Appeals Office, 114 P.3d 97 (Colo. App. 2005); Fera v. Indus. Claim Appeals Office, 169 P.3d 231 (Colo. App. 2007).

Where an employer does not obey a procedural rule requiring written notice and permission from the administrative law judge (ALJ) prior to taking a witness's deposition, the ALJ may impose a fine of up to $500 per day upon finding the employer's action to be unreasonable. Pioneers Hosp. of Rio Blanco County v. Indus. Claim Appeals Office, 114 P.3d 97 (Colo. App. 2005).

Penalties under subsection (1) for failing, neglecting, or refusing to obey "any lawful order made by the director or panel or any judgment or decree made by any court as provided by [the Workers' Compensation Act]" are available even though penalties for such conduct are elsewhere specifically provided in the Workers' Compensation Act. Holliday v. Bestop, Inc., 23 P.3d 700 (Colo. 2001) (overruling Sears v. Penrose Hosp., 942 P.2d 1345 (Colo. App. 1997)).

Penalties under subsection (1) do not apply to the Colorado insurance guaranty association (CIGA) by virtue of the immunity provided to CIGA in § 10-4-517, which is both more recent and more specific than this section. Mosley v. Indus. Claim Appeals Office, 119 P.3d 576 (Colo. App. 2005).

Under the rules of statutory construction, the phrase "for which no penalty has been specifically provided" defines "fails or refuses to perform any duty lawfully enjoined within the time prescribed by the director or panel". The use of the disjunctive conjunction "or" demarcates four different acts within this section that give rise to penalties. Holliday v. Bestop, Inc., 23 P.3d 700 (Colo. 2001) (overruling Sears v. Penrose Hosp., 942 P.2d 1345 (Colo. App. 1997)).

The limiting clause "for which no penalty has been specifically provided" also applies to acts and omissions contrary to articles 40 to 47 of this title. Pena v. Indus. Claim Appeals Office, 117 P.3d 84 (Colo. App. 2004).

Subsection (1) was applicable to an insurer that refused to provide medically necessary transportation and, thus, refused medical treatment, although no bill for medical benefits was submitted and the insurer did not delay or stop payment of such a bill, which would have invoked the specific penalty set forth in § 8-43-401 (2)(a). Pena v. Indus. Claim Appeals Office, 117 P.3d 84 (Colo. App. 2004).

Subsection (1) was applicable to an employer that refused to obtain medical review of the claimant's request for treatment of an injury as required by rules of the department of labor and employment. Crowell v. Indus. Claim Appeals Office, 2012 COA 30, 298 P.3d 1014.

Subsection (1) penalizes only those persons with the authority to bind an insurer with respect to actions required by a lawful order and whose actions violate the order. An attorney who lacked the authority to bind an insurer did not violate subsection (1) by advising an insurer to violate a lawful order. Dworkin, Chambers & Williams, P.C. v. Provo, 81 P.3d 1053 (Colo. 2003).

An ALJ may impose additional penalties pursuant to this section even though a specific penalty is provided by § 8-43-404. Kennedy v. Indus. Claim Appeals Office, 100 P.3d 949 (Colo. App. 2004).

This section does not extend to a claim against an attorney who allegedly acts with fraud or malice in advising an insurer to violate a lawful order. Dworkin, Chambers & Williams, P.C. v. Provo, 81 P.3d 1053 (Colo. 2003).

An order of an ALJ is an order "made by the director or panel"; violation of such order provides an independent basis for the imposition of a penalty for the refusal to perform a duty for which no penalty has been specifically provided, and may be in addition to a penalty imposed under § 8-43-401. Giddings v. Indus. Claim Appeals Office, 39 P.3d 1211 (Colo. App. 2001).

If the general assembly intended to create two penalties for the late payment of medical benefits, § 8-43-401 (2) would have provided that it is in addition to the penalty authorized by subsection (1) of this section. Holliday v. Indus. Claim Appeals Office, 997 P.2d 1212 (Colo. App. 1999), vacated and claimant's appeal dismissed, 23 P.3d 700 (Colo. 2001).

ALJ has authority to issue penalty. Penalty for failure to obey a lawful order need not be entered by "court of competent jurisdiction", but may be entered by ALJ. CCIA v. Indus. Claim Appeals Office, 907 P.2d 676 (Colo. App. 1995).

Penalty may be imposed based on an objective standard of negligence, which is determined by the reasonableness of the insurer's actions and does not require the insurer's knowledge that its conduct was unreasonable. Diversified Veterans Corp. Ctr. v. Hewuse, 942 P.2d 1312 (Colo. App. 1997).

Where an employer disputes that it must respond to an IME pursuant to § 8-42-107.2 (4) and that such dispute is a rational argument based on law or fact, the employer must establish a higher burden greater than proving that the employer neglected to act as a reasonable employer would have acted in response to an IME pursuant to § 8-42-107.2. The court may impose penalties pursuant to subsection (1) of this section when the employer is unable to prove this higher burden. City Market, Inc. v. Indus. Claim Appeals Office, 68 P.3d 601 (Colo. App. 2003).

No penalty for offset preceding ALJ's order. Although § 8-42-105 (1) sets the rate for temporary total disability benefits, that section does not mandate a legal duty upon the employer to pay that rate without regard to any claimed offset prior to the ALJ's determination of benefits. Allison v. Indus. Claim Appeals Office, 916 P.2d 623 (Colo. App. 1995).

No penalty during time review of award is sought. This section and § 8-53-127 (now § 8-53-117) should not be construed to impose a penalty during the time that an employer, acting under statutory permission, is seeking in good faith to have a judicial review of an award. Indus. Comm'n v. Cont'l Inv. Co., 85 Colo. 475, 277 P. 303 (1929).

Subsection (5) requires a request for penalties to be filed within one year after the requesting party first becomes aware of the circumstances that constitute a violation and support the imposition of a penalty, even if that violation was ongoing. Spracklin v. Indus. Claim Appeals Office, 66 P.3d 176 (Colo. App. 2002).

A party seeking to recover a penalty must assert the penalty claim within one year of discovering another's improper actions in an open or reopened case. This means that the party seeking reopening to pursue a penalty claim must do so before the expiration of the statute of limitations in the reopening statute, § 8-43-303. Macaulay v. Villegas, 2022 COA 40M, 513 P.3d 1117.

Once the statute of limitations for reopening under § 8-43-303 has expired, a party can no longer pursue penalties in that claim. Reopening must be requested within the later of six years of a claimant's date of injury or two years after the last disability or medical benefit becomes due or payable. Macaulay v. Villegas, 2022 COA 40M, 513 P.3d 1117.

An injured worker's penalty claim that was governed by subsection (5) was time-barred because he failed to comply with the statute of limitations under § 8-43-303. The injured worker's penalty claim was not governed solely by the statute of limitations in subsection (5), but could be brought only if the injured worker's case was still open or the injured worker first reopened the case under § 8-43-303. Because the injured worker's case was closed and he failed to reopen the case before the statute of limitations dictated by § 8-43-303 expired, the injured worker's claim for penalties was dismissed as time-barred. Macaulay v. Villegas, 2022 COA 40M, 513 P.3d 1117.

The requirement for an injured worker to reopen his case within the statute of limitations under § 8-43-303 before asserting penalties governed by subsection (5) applied to the injured worker's penalty claim against the doctor who oversaw his workers' compensation examination. Macaulay v. Villegas, 2022 COA 40M, 513 P.3d 1117.

Penalties may be assessed under former § 8-53-116 against an insurer neglecting to take action that a reasonable insurer would take to comply with either a lawful order or a provision of the Workers' Compensation Act. Pueblo Sch. Dist. No. 70 v. Toth, 924 P.2d 1094 (Colo. App. 1996) (decided under law in effect prior to 1992 repeal and reenactment).

Where insurance authority failed to abide by rule requiring insurer to send certain information to the provider or injured employee within 45 days after receipt of a bill if payment was not possible within that period, penalties were properly assessed against insurance authority. Pueblo Sch. Dist. No. 70 v. Toth, 924 P.2d 1094 (Colo. App. 1996) (decided under law in effect prior to 1992 repeal and reenactment).

Insurance authority lacked standing to assert that former § 8-53-116 violated its procedural due process rights where the authority was an "arm of the state" and its engagement in private corporate functions did not affect its governmental and political character. Pueblo Sch. Dist. No. 70 v. Toth, 924 P.2d 1094 (Colo. App. 1996) (decided under law in effect prior to 1992 repeal and reenactment).

Even if insurance authority was entitled to procedural due process protection, adequate procedural protections were afforded to the authority where the rule provided notice of the standard of conduct that was expected of the authority and the authority had opportunity to present evidence concerning the reasonableness of its actions. Pueblo Sch. Dist. No. 70 v. Toth, 924 P.2d 1094 (Colo. App. 1996) (decided under law in effect prior to 1992 repeal and reenactment).

Insurance authority lacked standing to assert that fines imposed under former § 8-53-116 violated the excessive fines clause of § 20 of article II of the state constitution where the authority was an "arm of the state" and where, even if the authority had standing, the $6540 fine imposed for delay in reimbursing workers' compensation claimant for medical bill was not excessive. Pueblo Sch. Dist. No. 70 v. Toth, 924 P.2d 1094 (Colo. App. 1996) (decided under law in effect prior to 1992 repeal and reenactment); Diversified Veterans Corp. Ctr. v. Hewuse, 942 P.2d 1312 (Colo. App. 1997).

Treating physician's letter was a "medical report" the withholding of which was not predicated on a rational argument in law or fact, hence the imposition of a penalty under subsection (1) was proper. Diversified Veterans Corp. Ctr. v. Hewuse, 942 P.2d 1312 (Colo. App. 1997).

Cure provision in subsection (4) is substantive, hence, not applicable in a case in which the injury occurred prior to its effective date. Diversified Veterans Corp. Ctr. v. Hewuse, 942 P.2d 1312 (Colo. App. 1997).

The 1991 amendment to subsection (1) that raised the penalty from $100 to $500 and awarding the penalty to the injured claimant, did not directly state or imply that this award precludes a claimant's common law bad faith claim against his workers' compensation insurance carrier. Vaughan v. McMinn, 945 P.2d 404 (Colo. 1997).

Although subsection (1) was amended in 1991, 1992, 1994, and 1997, the legislature never explicitly abrogated the common law tort of bad faith despite many opportunities to do so. Vaughan v. McMinn, 945 P.2d 404 (Colo. 1997).

Applied in Coursey v. Indus. Comm'n, 82 Colo. 311, 259 P. 514 (1927).