Lead Opinion
Opinion
Labor Code
Facts
Employee Adrienne Stuart sustained an industrial injury in 1991 while employed as a legal secretary for Attorney Gerald Rosenberg. She thereafter received temporary disability payments of $336 per week, payable every two weeks. On July 1, 1994, the statutory rate for her injury was increased to $406 per week. On December 20, 1994, Stuart received a letter from Rosenberg’s workers’ compensation insurance carrier, petitioner State Compensation Insurance Fund (SCIF), explaining the increase and giving her a lump sum check (dated December 13, 1994) for the aggregate amount of the increase that had accumulated as of July 1. (Stuart received checks for the correct amount after that date.) Pursuant to section 5814, Stuart sought and obtained a penalty of 10 percent on the entire award for an unreasonably delayed payment, and the Board denied SCIF’s petition for reconsideration.
Other than the December 13, 1994, lump sum check representing the statutory increase, SCIF’s checks to Stuart for her temporary disability had been timely. Stuart’s case had been open since October 17, 1991, and her checks had always been sent to the same address. On March 15, 1995, Jo Jo Arago became the claims adjuster handling Stuart’s case for SCIF, but he went on vacation in April of that year. His caseload was covered by another adjuster, Grace Chu. On or about April 28, 1995, Chu received a letter from Rosenberg informing SCIF he was relocating his law office to Beverly Hills. Rosenberg’s new business address was erroneously entered into SCIF’s computer as a change of address for Stuart. As a result, Stuart’s May 15, 1995, benefits check was sent to Rosenberg’s Beverly Hills law office by mistake.
When Stuart did not receive her check for temporary disability benefits, she contacted her attorney, Jack Goldfarb. Goldfarb’s secretary called Arago on May 18, 1995, and Goldfarb himself called SCIF the next day. Arago told him he would reissue the check, with penalties
Stuart then filed a declaration of readiness to proceed (complaint) on May 30, 1995, alleging she was entitled to a 10 percent increase in her overall
The WCJ found SCIF “unreasonably delayed the payment of temporary disability benefits” and Stuart was thus “entitled to a ten percent penalty to be assessed against the entire specie of benefits, past and future.” SCIF sought reconsideration, citing Kampner v. Workers’ Comp. Appeals Bd. (1978)
The Court of Appeal issued a writ of review, but denied relief. It agreed with the WCJ that Kampner, supra,
Discussion
A. Background
Three types of penalties may apply when payment of compensation is delayed. As noted, ante, section 4650, subdivision (d) provides in pertinent part that “[i]f any indemnity payment is not made timely as required by this section, the amount of the late payment shall be increased 10 percent and shall be paid, without application, to the employee . . . .” In other words, if a payment is late, that individual payment is automatically increased by 10 percent, and this penalty applies irrespective of the reason for the delay. (State of California v. Workers’ Comp. Appeals Bd. (1996)
Section 5814, at issue in this case, provides: “When payment of compensation has been unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, the full amount of the order, decision or
Section 5814 thus sets forth a much harsher penalty than section 4650, for its imposition requires a 10 percent increase of “the full amount of the order, decision or award” as opposed to 10 percent of the single delayed payment. Thus, a section 5814 penalty “is to be computed by assessing 10 percent of the entire amount ultimately awarded for the particular class of benefit which has been unreasonably delayed or withheld.” (Gallamore v. Workers’ Comp. Appeals Bd. (1979)
The purpose of the section 5814 penalty is twofold. First, the statute provides an incentive to employers and insurance carriers to pay benefits promptly by making delays costly. {DuBois v. Workers’ Comp. Appeals Bd. (1993)
By adopting the WCI’s report, the Board found SCIF’s one-week delay in paying Stuart her temporary disability was unreasonable. The scope of our review of this decision is set forth in section 5952, which provides: “The
As a general matter, division 4 of the Labor Code, concerning workers’ compensation, “shall be liberally construed by the courts with the purpose of extending their benefits for the protection of persons injured in the course of their employment.” (§ 3202.) Accordingly, we generally will uphold decisions of the Board if they are supported by substantial evidence. (LeVesque v. Workmen’s Comp. App. Bd. (1970)
Reading together sections 5814 (“The question of delay and the reasonableness of the cause therefor shall be determined by the appeals board in accordance with the facts.”) and 5952 (review by an appellate court is limited to whether the Board’s decision “was unreasonable” and is supported by “substantial evidence”), we thus turn to an examination of the factual basis of the Board’s decision that SCIF’s delay was unreasonable, keeping an eye on whether the Board’s decision represents a fair balance between the interests of the employee and employer.
B. The WCJ’s Opinion
' The WCJ found Mr. Arago was “a hardworking and conscientious claims adjuster” and found his assertion that he would not have made the same data entry mistake was “credible].” In addition, “Undoubtedly, Ms. Chu did not intend to delay applicant’s temporary disability check. However,
At the threshold, we observe that Ms. Chu did not testify, so there was no evidence on which the WCJ could rely to ascertain whether or not Chu was “overwhelmed” filling in for Mr. Arago. There was also no evidence presented concerning whether SCIF ensured its adjusters enjoyed manageable caseloads. Indeed, Arago testified he had not spoken to Chu and that he was “speculating” about the cause of the error. The WCJ’s conclusions regarding Chu’s being overworked or SCIF’s failing to ensure sufficient adjusters to process benefits are thus revealed as pure speculation. Such speculation does not comprise substantial evidence supporting the WCJ’s finding that the delay in paying benefits was unreasonable. (See Hegglin v. Workmen’s Comp. App. Bd. (1971)
There being no evidentiary support for the WCJ’s findings that Chu was overwhelmed by her caseload or that SCIF failed to ensure its adjusters had sufficient time to process the necessary paperwork, we are left with a single factual finding in support of the WCJ’s initial decision that the delay was unreasonable: Mr. Arago would not have made the same mistake. Mr. Arago testified to that effect, and the WCJ expressly found him credible on this point, so there is substantial evidence to support this factual finding. Nevertheless, that Arago would not have made the same mistake does not comprise substantial evidence supporting a section 5814 penalty.
The mistake in entering the change of address admittedly was careless. Nevertheless, in any endeavor in which humans are involved, mistakes are made. A reasonably short delay attributable to human error cannot, standing alone, be considered unreasonable. In requiring a finding of unreasonableness as the trigger for a section 5814 penalty, our Legislature intended something beyond the mere existence of any delay in the payment of benefits. A contrary interpretation of the statutory scheme would improperly conflate the penalty in section 4650, subdivision (d), which is an automatic,
Were there substantial evidence in the record showing that SCIF had a history of improperly processing benefits payments, or that SCIF failed to provide a sufficient number of adjusters to handle the caseload or otherwise configured its office or business practices in such a way that errors were likely or probable, we would have a different case. Here, however, all the record demonstrates is a solitary instance of human error, which was quickly corrected upon discovery.
We conclude the WCJ’s initial decision concluding SCIF unreasonably delayed payment of Stuart’s benefits is not supported by substantial evidence.
• C. The WCJ’s Report and Recommendation on Petition for Reconsideration
Consideration of the WCJ’s report on SCIF’s petition for reconsideration is a more complex undertaking, but leads to the same result. Following the WCJ’s decision in this matter, SCIF sought reconsideration, citing Kampner, supra,
The Kampners then requested a 10 percent penalty for an unreasonable delay in payment, citing section 5814. The workers’ compensation judge granted the request, but a divided panel of the Board annulled the penalty, explaining that “ ‘[i]t is inevitable that delays of a few days will occur at the points at which responsibility for different functions must be passed along. This becomes unreasonable only when the delays are excessive.’ ” {Kampner, supra,
The Court of Appeal in Kampner, supra,
In the present case, SCIF contends Kampner, supra,
Although the facts of Kampner are not identical to the instant case, we disagree with the Court of Appeal, the Board and the WCJ that Kampner is so different that it fails to provide guidance here. While it is true the delay in this case was seven days past the statutory deadline for payment, whereas in Kampner there was no statutory deadline, the touchstone in both cases for section 5814 purposes is the reasonableness of the delay. On this point,
In addition, although no evidence in Kampner established what portion of the delay was caused by sending the check to the wrong address, we may surmise that error engendered at least a few days’ delay. Kampner is thus more similar to this case than it is different. Moreover, the absence in the instant case of an intervening holiday weekend is of no moment, for in Kampner that fact contributed to a 26-day delay in payment, far in excess of the 7-day delay in this case. In short, we disagree with the attempt to cabin the reasoning, and thus the application, of Kampner.
In addition to finding Kampner, supra,
Of course, the length of the delay, as well as the size of the late payment, should be considered by the Board when assessing the reasonableness of the delay. (Gallamore, supra, 23 Cal.3d at pp. 822-823.) In addition, although a
We conclude the WCJ’s report on reconsideration that SCIF unreasonably delayed payment of Stuart’s benefits is not supported by substantial evidence. Accordingly, the Board’s reliance on the report to deny reconsideration is unsupportable.
D. Kerley v. Workmen’s Comp. App. Bd. (1971)
Kerley v. Workmen’s Comp. App. Bd. (1971)
Although Kerley stated that “the only satisfactory excuse for delay in payment of disability benefits ... is genuine doubt from a medical or legal standpoint as to liability for benefits” (Kerley, supra, 4 Cal.3d at p. 230, italics added), our opinion in Kerley was not intended to address the universe of potential factual circumstances that could give rise to delay in payment. Instead, we addressed in that case the discrete situation of an employer intentionally refusing to pay, not as here, a situation where the delay was inadvertent. Kerley is thus distinguishable on this ground, for there is no factual finding in this case that the delay in payment was intentional. Jensen v. Workers’ Comp. Appeals Bd. (1985)
Conclusion
The judgment of the Court of Appeal is reversed and the penalty imposed on SCIF pursuant to section 5814 is annulled.
George, C. J., Baxter, J., Chin, J., and Brown, J., concurred.
Notes
All further statutory references are to this code.
With exceptions inapplicable to this case, section 4650, subdivision (d) provides in pertinent part: “If any indemnity payment is not made timely as required by this section, the amount of the late payment shall be increased 10 percent and shall be paid, without application, to the employee . . . .” As explained, post, this 10 percent penalty on the amount of the late payment is not at issue in this case.
Section 5813 completes this triad of penalties. That section authorizes a financial sanction of up to $2,500 for “bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay.” {Id., subd. (a).) Under section 5813, subdivision (a), the workers’ compensation referee or the Board is also authorized to order the offending party “to pay any reasonable expenses, including attorney’s fees and costs,” incurred by the other party.
In denying reconsideration in this matter, the Board explained in its brief order that it had reviewed the record and “for the reasons stated in [the WCJ’s] report which we adopt and incorporate, we will deny reconsideration.” The Board’s decision thus refers back to the WCJ’s report, and the correctness of the Board’s decision will depend on whether the WCJ’s report is supportable.
Section 4650, subdivision (c) provides “[p]ayment of temporary or permanent disability indemnity subsequent to the first payment shall be made as due every two weeks on the day designated with the first payment.” As noted, ante, SCIF understood this deadline and had made timely semimonthly payments for over three years.
Dissenting Opinion
I dissent.
The workers’ compensation judge (WCJ) found, as a fact, that the delay in payment of workers’ compensation benefits in this matter was unreasonable.
The Workers’ Compensation Appeals Board found, as a fact, that the delay was unreasonable.
The Court of Appeal found, as a fact, that the delay was unreasonable.
I would affirm.
Although I agree, in principle, that inadvertent error in processing workers’ compensation payments is not per se “unreasonable” under Labor Code section 5814, I disagree that we should second-guess the determination that the delay at issue here was unreasonable. In my view, it-is supported by substantial evidence.
The facts herein are simple and clear. Jo Jo Arago, the claims examiner for the State Compensation Insurance Fund (SCIF), who was assigned to injured employee Adrienne Stuart’s case, went on vacation during the last week of April 1995. During that period, another SCIF employee, Grace Chu, covered his desk. Chu reviewed a two-sentence letter, dated April 15, from Stuart’s employer notifying SCIF of his change of address. The letter, headed with the employer’s name, said: “Kindly change your records to reflect a change of my mailing address from 15300 Ventura Boulevard, Suite 415, Sherman Oaks, CA to: fi[] Post Office Box 2608 fll] Beverly Hills, CA 90213-2608. flQ Thank you.” Chu incorrectly entered the change of address into the computer as a change of Stuart’s address, with the result that Stuart’s May 15 benefits were sent to the wrong address.
At the hearing before the WCJ, Arago testified that he would not have made the mistake Chu made. The WCJ found Arago credible, observing that he “gave the impression of being a hardworking and conscientious claims adjuster.” Taking into consideration Arago’s testimony and the fact that the text of the letter from Stuart’s employer was straightforward and unambiguous, the WCJ concluded that Chu’s error resulted from a lack of ordinary diligence: “Mr. [Arago] would not have made that error and neither would anyone else who took the time to read the document in question before acting on it.” Arago, in effect, testified concerning the applicable standard of
I also agree with the Court of Appeal that Kampner v. Workers’ Comp. Appeals Bd. (1978)
Because, after reviewing the record, I see no grounds for reversal, I would affirm the finding that the delay was unreasonable, and, accordingly, the imposition of a mandatory penalty under Labor Code section 5814.
Kennard, J., concurred.
The majority point to a comment by the WCJ to the effect that “[i]t may well be that Ms. Chu was so overwhelmed from having to do both her and Mr. [Arago’s] work that she didn’t have enough time to exercise proper care,” and observe that there was no evidence to support the suggestion that Chu was “overwhelmed” or about whether SCIF ensured its adjusters manageable loads. I agree that the comment did not amount to substantial evidence. Nor did the WCJ purport to rely on it for that purpose. Rather, it found that the error itself was inexcusable: No one who actually read the document would have made it. No history of improperly processing benefits payments was required in order to account the “solitary” error here unreasonable. (See maj. opn., ante, at pp. 1216-1217.) ■