State of Connecticut Workers' Compensation Commission, John A. Mastropietro, Chairman
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Riccitelli v. Regional Network of Programs

CASE NO. 5450 CRB-4-09-4

COMPENSATION REVIEW BOARD

WORKERS’ COMPENSATION COMMISSION

MAY 3, 2010

ROBERT R. RICCITELLI

CLAIMANT-APPELLEE

v.

REGIONAL NETWORK OF PROGRAMS

EMPLOYER

and

GUARANTY FUND MANAGEMENT SERVICES

INSURER

RESPONDENTS-APPELLANTS

APPEARANCES:

The claimant was represented by Nora Treschitta, Esq., and Robert C. Sousa, Esq., Sousa & Stone, LLC, 375 Bridgeport Avenue, Shelton, CT 06484.

The respondents were represented by Margaret E. Crawford, Esq., Montstream & May, 655 Winding Brook Drive, P.O. Box 1087, Glastonbury, CT 06033-6087.

Mark D. Robins, Esq., Nixon Peabody LLP, 100 Summer Street, Boston, MA 02110, appeared on behalf of Guaranty Fund Management and presented oral argument before the board.

This Petition for Review1 from the March 25, 2009 Finding and Award of the Commissioner acting for the Fourth District was heard October 23, 2009 before a Compensation Review Board panel consisting of the Commission Chairman John A. Mastropietro and Commissioners Peter C. Mlynarczyk and Stephen B. Delaney.

OPINION

JOHN A. MASTROPIETRO, CHAIRMAN. This appeal deals with the extent in which the Connecticut Insurance Guaranty Association (CIGA) can be held liable for sanctions owing to the delay in paying cost-of-living adjustments to a claimant under § 31-307a(c) C.G.S. The claimant in this matter was not paid his COLA for a period of approximately 10 years. During the first five years the original compensation carrier was solvent, and then, due to insolvency of the original carrier, CIGA assumed administration of this claim. The trial commissioner has assessed interest pursuant to § 31-300 C.G.S. against CIGA for the entire amount of unpaid COLA due the claimant. CIGA denies that it bears any legal liability for such a sanction, and has appealed. On appeal, we reject the legal defense advanced by CIGA. On the other hand, CIGA cannot be sanctioned for misconduct which occurred prior to their assumption of this claim. This matter is remanded to the trial commissioner for further proceedings to ascertain the interest due on the unpaid COLA based on the point in which CIGA commenced covering this claim.

The following facts are pertinent to our consideration of this matter. We note that no witnesses testified in this matter and there was agreement on the basic facts in this matter. The claimant was injured on November 18, 1997. On June 8, 2001 a Voluntary Agreement was approved by the Commission wherein Legion Insurance Company accepted the injury with a temporary total disability rate of $330.03. The claimant has been totally incapacitated since November 21, 1997 as a proximate result of the injury and has been paid total incapacity benefits since that date. As of November 21, 2002 the claimant had been totally incapacitated for a period of five years.

On July 25, 2003 a judge in Pennsylvania declared Legion Insurance insolvent. CIGA paid its first total incapacity benefit to the claimant on September 3, 2003 and has continuously paid those benefits to the claimant since that date. The claimant in January or February 2008 advised CIGA for the first time that Legion had not paid a retroactive COLA for the period November 21, 1997 through November 21, 2002 and requested it be paid. CIGA on March 6, 2008 paid the claimant $27,155 for benefits claimed under § 31-307a C.G.S. This included an entitlement to an aggregate, lump sum COLA of $10,731.49 as of November 21, 2002 and weekly COLA payments after November 21, 2002. The parties also provided information regarding social security offset payments which are not a subject of this appeal. The claimant was not paid any COLAs prior to March 6, 2008. The parties offered divergent views on whether interest could be assessed against CIGA for the delayed COLA payments. CIGA contended it was not an insurer and § 31-300 C.G.S. does not authorize an award of civil penalties against it. The claimant sought ten percent (10%) interest consistent with § 37-3a. C.G.S.

The trial commissioner concluded § 31-307a(c) presents an affirmative obligation on the respondents by requiring COLAs to be paid by the employer without any order or award from the commissioner. The respondents were obligated to pay the COLA prior to March 6, 2008 and were unduly delayed through CIGA’s neglect in the handling of the claim, necessitating an award of statutory interest. CIGA was the “insurer” on this claim pursuant to the precedent in Potvin v. Lincoln Service & Equipment, 5258 CRB-3-07-8 (November 12, 2008), appeal pending, S.C. 18357. CIGA was obligated to pay interest on the unpaid COLAs, less the offset due from social security payments received by the claimant.

CIGA filed a Motion to Correct seeking both clarifications in the Finding and Award and to reach the conclusion it was legally exempt from being sanctioned. The trial commissioner adopted two corrections that did not change the outcome of the decision, and denied the remainder of CIGA’s proposed corrections. CIGA has pursued this appeal.

We may address the issues in this appeal expeditiously. CIGA argues that pursuant to state statute it is exempt from all forms of sanction, citing § 38a-836 C.G.S. et seq. These issues were also raised in Potvin, supra. For the reasons we discussed at length in Potvin we do not find these arguments meritorious. We extend stare decisis to the Potvin precedent which was relied on by the trial commissioner and affirm his decision finding CIGA subject to sanction by this tribunal.

CIGA further argues that this dispute does not involve a “covered claim” as defined by § 38a-383(5) C.G.S. We find this issue was also dealt with in Potvin in a manner adverse to the appellant. In Potvin we cited Connecticut Insurance Guaranty Association v. Fontaine, 278 Conn. 779 (2006) for the proposition “[i]n general, the legislative objective was to make the [association] liable to the same extent that the insolvent insurer would have been liable under its policy.” Id., at 791. Since the original insurer would be liable to face sanctions for failing to pay a cost-of-living adjustment, we cannot ascertain why CIGA does not face similar liability.

We do find one argument advanced by the appellant persuasive, however. CIGA argues it should not be assessed penalties based on the fault or neglect of the predecessor insurer, Legion Insurance. CIGA’s position on this issue is consistent with our precedent and the statutes governing sanctions.

CIGA commenced administrating this claimant’s file in the summer of 2003. At that point, it became responsible to adhere to the statutory responsibilities under § 31-307a(c) C.G.S. which require an insurer to provide COLAs as necessary to the claimant “without any order or award from the commissioner.” It is acknowledged CIGA did not provide such COLA payments until after the claimant made demand for said payment. Section 31-300 provides that a trial commissioner may award interest at the rate stated in § 37-3 C.G.S. “where, through the fault or neglect of the employer or insurer, adjustments of compensation have been unduly delayed . . . .” We believe the record supports the trial commissioner’s conclusion of undue delay and the sanction award was a reasonable exercise of discretion. Kuhar v. Frank Mercede & Sons, Inc., 5250 CRB-7-07-7 (July 11, 2008).

The statutory basis to award sanctions requires fault or neglect on the part of the employer or insurer, however. It is undisputed that CIGA was not administrating this file until the summer of 2003. Therefore, as a factual predicate CIGA was incapable of being negligent in the administration of this file prior to this date. CIGA cites our precedent in Christensen v. H & L Plastics Co., Inc., 5171 CRB-3-06-12 (November 19, 2007) as authority for their position they cannot be assessed sanctions over the COLA adjustment that were not made when Legion Insurance was administering this file. We agree.

In Christensen the co-insurer sought to have CIGA honor an obligation that the insolvent carrier had entered into prior to its insolvency. We concluded this was not a “covered claim” within the statutory responsibility of CIGA. We also pointed out that CIGA was not “a de facto receiver responsible for addressing the commercial undertakings of insolvent insurance carriers.” Id. There exists no statutory authority to penalize CIGA vicariously for the negligence of its predecessor on this claim.

Therefore, we affirm the Finding and Award as it applies to the fault and neglect of CIGA in failing to pay the claimant a timely COLA adjustment during the period it was administrating the claim. The matter shall be remanded for further proceedings so that the award can be recalculated so as to not assess interest penalties against CIGA for the negligence attributable to Legion Insurance. Pursuant to statute the claimant shall receive interest limited to a “fair and reasonable” percentage consistent with whatever benefit Legion Insurance benefited from during the period it failed to provide COLAs.

Commissioners Peter C. Mlynarczyk and Stephen B. Delaney concur in this opinion.

1 We note that extensions of time were granted during the pendency of this appeal. BACK TO TEXT

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State of Connecticut Workers' Compensation Commission, John A. Mastropietro, Chairman
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