State of Connecticut Workers' Compensation Commission, John A. Mastropietro, Chairman
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Audi v. Blakeslee Arpaia Chapman

CASE NO. 4311 CRB-3-00-10

CASE NO. 4624 CRB-3-03-12

COMPENSATION REVIEW BOARD

WORKERS’ COMPENSATION COMMISSION

FEBRUARY 10, 2004

VINCENZO AUDI

CLAIMANT-APPELLEE

v.

BLAKESLEE ARPAIA CHAPMAN

EMPLOYER

RESPONDENT-APPELLANT

and

HELMSMAN MANAGEMENT SERVICES

INSURER

RESPONDENT-APPELLEE

APPEARANCES:

The claimant was not represented at oral argument. Notice sent to Charles Tiernan, Esq., Lynch, Traub, Keefe & Errante, 52 Trumbull Street, P.O. Box 1612, New Haven, CT 06506.

The respondent Blakeslee Arpaia Chapman was represented by William Clendenen Jr., Esq., 400 Orange Street, P.O. Box 301, New Haven, CT 06502.

The respondent Helmsman Management Services was represented by Timothy D. Ward, Esq., McGann, Bartlett & Brown, 281 Hartford Turnpike, Suite 401, Vernon, CT 06066.

These Petitions for Review from the October 19, 2000 Supplemental Finding and Award and the January 22, 2003 Corrected Supplemental Finding and Award of the Commissioner acting for the Third District were heard July 18, 2003 before a Compensation Review Board panel consisting of the Commission Chairman John A. Mastropietro and Commissioners James J. Metro and Howard H. Belkin.

OPINION

JOHN A. MASTROPIETRO, CHAIRMAN. The respondent Blakeslee Arpaia Chapman (hereinafter BAC) has petitioned for review from the October 19, 2000 and January 22, 2003 Supplemental Findings and Awards of the Commissioner acting for the Third District. It contends on appeal that the trier erred by making BAC rather than the respondent Helmsman Management Services (hereinafter Helmsman) responsible for sanctions and fees payable to the claimant under § 31-288 C.G.S. and § 31-300 C.G.S. We find no error, and affirm the trial commissioner’s decision.

The relevant history of this case is as follows. The claimant sprained his right knee on April 8, 1993, and was totally disabled from work for a 97-week period beginning on April 12, 1993. On February 20, 1995, he reached maximum medical improvement with a 39% permanent partial disability of the right knee, as per a voluntary agreement approved on April 19, 1995. A Form 36 was also approved on March 31, 1995 that discontinued the claimant’s temporary total disability benefits effective February 20, 1995 in favor of permanent partial disability benefits. Attached to that Form 36 was a medical report by Dr. Glass reflecting that the claimant was unable to return to work due to his physical limitations, despite having reached maximum improvement.

The first litigated issue in this case centered on whether the “respondent insurer Liberty Mutual Insurance Co.”1 had provided timely notice to the Second Injury Fund of its intent to transfer liability pursuant to § 31-349. Audi v. Blakeslee Arpaia Chapman, 3418 CRB-3-96-9 (Aug. 4, 1997). The claim for transfer was originally dismissed by a trial commissioner. On review, this board ruled that the notice provisions of Public Act 95-277 were applicable to the instant case, and ordered that the matter be remanded to the trier for a finding as to whether the “insurer’s” notice otherwise complied with § 31-349. Id. During those proceedings, Liberty Mutual was represented by an attorney from the law firm of Maher & Williams, whereas BAC’s interests were separately represented by an attorney from the firm of Letizia & Ambrose.

The dispute over benefits began when the claimant requested an emergency hearing on December 8, 1997, seeking to open the voluntary agreement and Form 36. At the subsequent formal proceedings, it was learned that the claimant—who is not fluent in English and has only a fifth-grade Italian education—had not understood the legal significance of the Form 36 and the voluntary agreement when they were presented to him. He had signed the agreement at the request of Marrett Dorfee, a managed care nurse who had been a longtime employee of Liberty Mutual. Because the claimant had come to trust Dorfee (who spoke a very limited amount of Italian), he did not question her instructions, and assumed that the government required the documents to be signed in order for him to continue collecting benefits. At the time the voluntary agreement was approved, the respondents did not disclose the medical report of the treating physician stating that the claimant had not yet reached maximum medical improvement, as they were eager for the claimant to be taken off total disability.

By a decision dated April 27, 2000, the trial commissioner overturned the approval of the voluntary agreement and the granting of the Form 36, and ordered that the claimant continue receiving total disability benefits retroactive to March 31, 1995. He also ordered that the “respondents” pay interest on the unpaid amounts at the rate of 6% per year, and that further hearings be scheduled on the issue of sanctions and attorney’s fees. On appeal, this board affirmed the portion of that decision that opened the voluntary agreement and the Form 36, while remanding for further findings on the issue of the claimant’s entitlement to total disability benefits. Audi v. Blakeslee Arpaia Chapman, 4234 CRB-3-00-5 (June 26, 2001).

This board’s decision did not address the issue of sanctions or attorney’s fees, however. In a Supplemental Finding and Award dated October 19, 2000, the trial commissioner had found the respondents guilty of misleading the claimant with regard to the filing of the Form 36 and the procurement of his signature on the voluntary agreement. The trier found that their actions constituted undue delay pursuant to § 31-300, entitling the claimant to a $13,249.25 attorney’s fee and the payment of 12% interest on any delayed compensation payments. The trier also assessed a $500 penalty against the respondents for undue delay in the payment of compensation. BAC filed a petition for review from this ruling, along with a Motion for Articulation that sought clarification as to which of the respondents were liable to pay sanctions under the award. Subsequently, BAC moved to stay any ruling on its Motion for Articulation, pending this board’s decision on the merits of the trier’s decision to reopen the voluntary agreement and the Form 36. BAC’s motion for stay was granted.

The Motion for Articulation was eventually addressed in the commissioner’s January 22, 2003 Corrected Supplemental Finding and Award. The trier took administrative notice of Commission records showing that BAC was granted a certificate of self-insurance on April 13, 19932, with workers’ compensation claims to be administered by Helmsman and Attorney John Letizia, and a surety bond to be provided by Liberty Mutual. The commissioner also noted that, prior to being self-insured, BAC’s workers’ compensation liability was insured by Liberty Mutual. Both parties’ appellate briefs indicate that Helmsman is a subsidiary of Liberty Mutual, and the appellee appears content to refer to itself as “Liberty Mutual and Helmsman Management Services” in the documents it has filed pursuant to this appeal.

The trier noted that, upon receiving the claimant’s request for payment of the sanctions that had been awarded, BAC and Liberty-Helmsman each refused to comply. BAC argued that the October 19, 2000 order directed the “respondents” Liberty and Helmsman to pay the award, as it was conduct by their employees that prompted the assessment of penalties. Liberty and Helmsman argued that they received improper notice of the June 28, 2000 hearing and the October 19, 2000 award, thereby depriving them of due process. Also, because their involvement was based on Helmsman’s having acted as a third-party administrator, they contended that their relationship with BAC was purely contractual and outside the scope of the Workers’ Compensation Act. From their perspective, this Commission had jurisdiction only to impose liability against the self-insured employer. Whether or not Helmsman should ultimately be held responsible for payment of the sanctions was a matter for the Superior Court.

In a lengthy written decision, the trial commissioner agreed with the position of Liberty-Helmsman. He found that the hearing notice sent for the June 26, 2000 formal hearing was defective insofar as it listed the law firm of Letizia, Ambrose & Cohen as representing both BAC and Liberty Mutual, while Maher & Williams was listed as representing Helmsman. At that time, the law firm of Maher & Williams no longer represented Liberty-Helmsman, while Attorney Letizia’s firm only represented BAC. Thus, notice was technically ineffective to apprise Liberty-Helmsman of any claims that might be lodged against it.

The trier then stated that these procedural defects did not determine the outcome of the proceedings, as fundamental jurisdictional considerations prevented him from making a separate award of sanctions against Liberty-Helmsman. He explained that, even if BAC’s claimed damages were caused by the actions of Liberty-Helmsman, the Workers’ Compensation Act makes the employer primarily responsible for any compensation payable to an injured worker. BAC’s remedy against Liberty-Helmsman was to bring a breach of contract or negligence suit in Superior Court, where the contract between the parties could be interpreted and damages could be awarded. Meanwhile, a Workers’ Compensation Commissioner’s power is limited to imposing liability for benefits and associated sanctions directly against a self-insured employer as per § 31-284 C.G.S. “While such an employer is free to hire a third party to administer claims, the statute does not absolve that employer of liability should the administrator refuse to make a required payment.” Findings, ¶ J. Thus, the trial commissioner ordered BAC to assume responsibility for the fees, interest and penalties set forth in the October 19, 2000 Supplemental Finding and Award. BAC has appealed that decision to this board.

We begin our discussion by examining the role of third-party administrators in the workers’ compensation forum. Employers approved to self-insure pursuant to § 31-284 C.G.S. and its associated regulations take on the same responsibilities for paying workers’ compensation benefits as would otherwise fall on a licensed workers’ compensation insurer. This Commission grants self-insurance certificates as a privilege, and requires that self-insurers meet certain qualifications, including the presence of “[q]ualified personnel who shall handle the administration of claims and reserves, and deliver benefits to injured workers or their beneficiaries or dependents in a fair, efficient, and competent manner in accordance with the Act.” Admin. Reg. § 31-284-6(4). From the language of this regulation and that of § 31-284-16, it is evident that the drafters envisioned the possible involvement of third-party claims administrators such as Helmsman, though the use of an outside adjuster is not specifically required in normal circumstances.3 Such administrators voluntarily contract with self-insured employers (and, in practice, with some insurance companies as well) to handle the management of workers’ compensation claims on behalf of the companies that hire them. These contracts are not regulated or required by the Workers’ Compensation Act.

By contracting with an agent to administer claims, a self-insured employer does not absolve itself of the responsibility to ensure that its injured workers timely receive the compensation and medical treatment they are entitled to under Chapter 568. The Workers’ Compensation Act assigns self-insured employers a specific duty to fulfill the obligations of the Act. Whether or not a third party has been independently hired to help meet those obligations, the unambiguous terms of § 31-300 C.G.S. explicitly make an employer accountable for any undue delay in the payment of benefits or an unreasonable contest of claim. There is no statutory language suggesting that this accountability may be waived. Our attention has also been directed to the more general pronouncement in § 31-288(b) C.G.S., which allows a civil penalty to be assessed against the “delaying party or parties” in the event of an undue delay in the payment of compensation, or unreasonable delays in the completion of hearings. Given the overall structure of the Act, we are skeptical that a self-insured employer who fails to pay compensation may escape the “delaying party” label by shifting responsibility for the delay onto its agent, and then distancing itself from accountability for its agent’s actions.

In its appellate briefs, BAC urges this Commission to recognize that the delaying party in this case was Helmsman, whose employees went outside the bounds of Helmsman’s authorized role as a claims administrator by intentionally misleading the claimant into signing a voluntary agreement, and by attaching a misleading document to a Form 36. BAC cites the venerable case of Maisenbacker v. Society Concordia, 71 Conn. 369 (1899), for the proposition that a principal cannot be held liable for punitive damages based on the misconduct of its agent unless the principal is guilty of misconduct as well. It also relies on the Superior Court decision in Boyce v. Canby, Docket No. 96015623 (Feb. 27, 1998). Neither of those cases concerns a situation in which the defendant was assigned a special legal responsibility to protect the plaintiff’s interests, however. Maisenbacker involved a woman who was attending a dance at an armory when she was forcibly seized and then ejected by management, while Boyce concerned a real estate agent who had misrepresented a property she was trying to sell on the defendant’s behalf. Both transactions were matters of independent, arm’s-length contract, devoid of any special underlying relationship between the parties.

In cases where a defendant is obliged by law to assume heightened responsibility for the welfare of a potential plaintiff, a different standard of vicarious liability may be applied. The case of Gionfriddo v. Rent a Car Systems, Inc., 192 Conn. 280 (1984), illustrates this broadened degree of responsibility. There, the driver of a rented vehicle had struck another car head-on while driving in an intoxicated state and in a reckless and heinous manner, instantly killing the other driver. Her estate successfully brought a wrongful death action for compensatory, exemplary, and treble damages against the negligent driver and the rental car company. By statute4, the owner-lessor of the vehicle was treated as the alter ego of the rental car’s operator, making it liable for damages.

The Gionfriddo Court described § 14-154a C.G.S. as reflective of a legislative public policy judgment that the owner of a motor vehicle who entrusts it to another should be liable for that person’s acts, beyond the general principles of respondeat superior and the family-car doctrine. Id., 284. In distinguishing Maisenbacker, the Court wrote, “This legislative expression of public policy grounded in continued concern for safety of traffic upon the public highways necessarily displaces and overrides common law presumptions about the relationship between insurer and insured, master and servant, employer and employee. As sureties under § 14-154a, the defendants Avis and Chrysler must pay for all damages, including treble damages, properly assessed against the defendant Gilliam. . . . It is not relevant, in the light of an operative statute, that the common law was reluctant to impose liability upon employers for punitive damages assessed against employees.” Id., 288.

We find the precedent of Gionfriddo to be instructive here. As the agency charged with administering the Workers’ Compensation Act, we see a similarity between the legislature’s desire to protect the public from unsafe drivers and its desire to protect the interests of employees whose right to sue their employers for work-related personal injuries has been statutorily curtailed in favor of workers’ compensation. The primary purpose of our compensation system is humanitarian and remedial. Dubois v. General Dynamics Corp., 222 Conn. 62, 67 (1992). A fundamental aspect of the system is that, in exchange for surrendering his right to bring a common-law action against his employer, an employee will be given prompt access to prescribed workers’ compensation benefits. Casey v. Northeast Utilities, 249 Conn. 365, 378-79 (1999).

In order for this system to function efficiently and protect the workers of this state, an employer’s obligations must be taken seriously—as is mandated by the language of Chapter 568. For example, failure to comply with the insurance requirements of § 31-284 is a class D felony under § 31-288(f) C.G.S., and a noncompliant employer may be enjoined from conducting business in Connecticut under § 31-289b C.G.S. Financial penalties both restorative (statutory interest and attorney’s fees) and punitive (civil fines and penalties under § 31-288 and § 31-303) are authorized and sometimes required for inappropriate delays or cessations in the payment of benefits, as “promptness in providing compensation is a key factor in alleviating the severity of an injured employee’s financial predicament.” Casey, supra, 379. A self-insured employer who is dilatory in investigating or adjusting claims may be barred by the Insurance Commissioner from self-insuring in the future. Section 31-326 C.G.S.

In essence, once a workers’ compensation claim has been made by an injured worker, his self-insured employer becomes responsible for ensuring that the claimant’s case is administered properly. The Act contains no indication that such an employer may avoid the negative consequences of failing to comply with its duties by attributing blame to an agent. The implicit public policy behind the Act would disfavor any outcome in which a self-insured employer could point a finger at its own freely-chosen third-party administrator in order to escape punitive consequences for the mismanagement of cases. With the privilege of self-insurance comes the responsibility to properly compensate one’s employees. As this commission has no jurisdiction over the employer-administrator contract, primary accountability in this forum must therefore fall on the party charged with the statutory duty to pay compensation. Any question of damages for breach of contract must be raised in another forum; it is not our role to differentiate between the employer and its administrator in apportioning fines and other sanctions. See, e.g., Cirrito v. Resource Group Ltd. of Conn., 4248 CRB-1-00-6 (June 19, 2001)(inappropriate claims handling resulted in imposition of sanctions against all respondents, with no distinction made between employer, insurer and administrator).

The cases cited by BAC in support of their argument that we have jurisdiction to award penalties against a third-party claims administrator are not persuasive. Both Casey, supra, and Schiano v. Bliss Exterminating Co., 260 Conn. 21 (2002), concerned Second Injury Fund liability for attorney’s fees and interest. The Fund is specifically made liable for the payment of certain claims under § 31-349 C.G.S. and § 31-355 C.G.S., effectively stepping into the role of the employer/insurer. It is that statutorily-mandated liability that gives this Commission jurisdiction to levy sanctions against the Fund. “[W]here the employers and the fund are functionally similar, they are treated similarly under our workers’ compensation system. . . . From an injured employee’s point of view, delay in making payments by the fund is as harmful as is delay by an employer.” Casey, supra, 383. Liberty-Helmsman had no similar statutory responsibility to the claimant in this case; that responsibility remained with BAC, the self-insured employer. Any assessment of sanctions on account of improper claims administration by Helmsman would have to be levied against BAC, the party accountable for its actions under Chapter 568.

Our ruling on this issue in favor of Liberty-Helmsman makes it unnecessary for us to determine whether they were properly notified of the proceedings below.

The trial commissioner’s decision is accordingly affirmed.

Commissioners James J. Metro and Howard M. Belkin concur.

1 We note that the respondent-appellant was there listed as the insurer Liberty Mutual Insurance Co., with no mention made of Helmsman Management Services, or the self-insurance contract that was in effect on the date of the claimant’s injury. span class="back">BACK TO TEXT

2 The claimant’s date of injury was April 8, 1993. Any unexplained discrepancy in these dates is of no moment, as Commission records show that BAC had been self-insured since 1991, and that a valid certificate was in place effective June 1, 1992 through June 1, 1993. span class="back">BACK TO TEXT

3 There is one instance in which this Commission may designate that an administrator become involved in an ongoing case. An employer whose self-insurance status has been terminated remains responsible for the competent administration of previously incurred claims that may be ongoing. Should the employer fail in this duty, Admin. Reg. § 31-284-16(e) empowers this agency to designate an outside administrator to act in the employer’s stead, with the cost of such administration to be borne by the employer. That is not the circumstance here. span class="back">BACK TO TEXT

4 Section 14-154a provided, “[a]ny person renting or leasing to another any motor vehicle owned by him shall be liable for any damage to any person or property caused by the operation of such motor vehicle while so rented or leased, to the same extent as the operator would have been liable if he had also been the owner.” BACK TO TEXT

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