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An Administrative Law Judge May Deny a Penalty on the Merits for Failure to Plead Specific Grounds for Penalty

In Lovett v. Stroup Insurance Services, Inc., W. C. No. 4-808-092 (August 30, 2013), the Industrial Claim Appeals Office recently held that an Administrative Law Judge’s denial of a penalty for failure to plead the specific grounds for the penalty allegation in the merits was a denial of the penalty on the merits, rather than a dismissal of the penalty allegation, even when the Administrative Law Judge dismissed the penalty claim “without prejudice.”  § 8-43-304(4) states that “in any application for hearing … the applicant shall state with specificity the grounds on which the penalty is being asserted.” The instructions appearing on the application for hearing form required by the Office of Administrative Courts also advise the parties to “Describe with specificity the grounds on which a penalty is asserted, including the order, rule or section of the statute allegedly violated, and the dates on which you claim the violation began and ended.”  Claimant’s Application for Hearing asserted a claim for penalties which stated simply “violation of Rule 16 regarding medical denials for preauthorization with completed request”.

Finding that the pleading of the penalty claim prior to the date of the hearing was inadequate, the Administrative Law Judge ruled the claim for penalties “must be denied without prejudice.” The claimant appealed the denial of penalties, and the respondents moved to strike the appeal for lack of a final order because the denial was “without prejudice.”  The Industrial Claim Appeals Office stated that generally a trial court’s dismissal of a claim without prejudice does not constitute a final judgment for purposes of appeal because the factual and legal issues underlying the dispute have not been resolved. It went on to state, however, that a trial court’s characterization of an order to dismiss a claim without prejudice is not dispositive, and that if a judgment in fact completely resolves the rights of the parties before the court with respect to a claim and no factual or legal issues remain for judicial resolution, the judgment is final as to that claim. Since the order resolved the issue of penalties, the Industrial Claim Appeals Office reasoned that it was a final order subject to review.

The Industrial Claim Appeals Office then went on to address the propriety of the dismissal of the penalties claim for failure to plead the grounds for the alleged penalty with specificity.  The Industrial Claim Appeals Office held that the claimant’s statement: “violation of rule 16 regarding medical denials for preauthorization with completed request” did not state a basis for a penalty. To the extent the claimant alleged a violation of the procedures established in Rule 16 governing a denial of medical care, the claimant is “required to cite to the specific procedure involved… [including] a statement of the dates on which it is claimed the violation began and ended [ and] an indication of the ‘grounds’ for the penalty.”  The Industrial Claim Appeals Office held that the claimant’s failure to cite to the statute or rule being implicated, the dates of the violation or a statement as to how the violation is said to have occurred was insufficient to satisfy the requirements of § 8-43-304(4). Reasoning that the requirement for specificity serves two purposes (notify the putative violator of the basis of the claim so that the violator may exercise its right to cure the alleged violation and ensure the putative violator will receive notice of the legal and factual basis for the penalty claim so that their rights to present  evidence, confront adverse evidence, and present argument in support of their position are protected), the Industrial Claim Appeals Office upheld the Administrative Law Judge’s denial of the penalty allegation.

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