PACIFIC MOTOR TRUCKING v. WORKERS COMPENSATION APPEALS BOARD

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Court of Appeal, Third District, California.

PACIFIC MOTOR TRUCKING, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD of the State of California, and Peter J. Galli, Respondents.

Civ. 21948.

Decided: March 23, 1983

James V. Burchell, Hanna, Brophy, MacLean, McAleer & Jensen, Fresno, for petitioner. W. Michael LaRoche, Roseville, for respondent, Peter J. Galli. No appearance for respondent, W.C.A.B. of the State of Cal.

Pacific Motor Trucking (defendant) brought a petition for a writ of review after a workers' compensation judge assessed penalties against it for delay in making certain payments to its employee, respondent Peter J. Galli (applicant).   Although the judge characterized some of the procedural mishaps in this case as a “comedy of errors,” we imagine defendant finds less than comedic the end result:  a penalty of $11,694.55 for delay in paying approximately $580 in interest, and a second penalty of $12,191.71 for delay in paying the first penalty.   We annul the penalties and remand for further proceedings consistent with the views here expressed.

In January 1962, applicant was injured while working for defendant.   A workers' compensation judge found him totally and permanently disabled, and issued an award that included $600 per month, starting in December 1976, payable to applicant's wife for attendant care.   In October 1977, the wife sought an increase in this monthly payment;  after negotiations the parties agreed to certain increases, including an increase in attendant care payments to $2,000 per month for the period from October 1977, through December 1979.

On January 10, 1979, a workers' compensation judge issued supplemental findings and an award that recognized this increase, and also awarded applicant's attorney a $14,000 fee, payable from the increase.   As a consequence, in January 1979, defendant owed applicant $21,000 in accrued attendant care payments ($2,000 each month from October 1977, through December 1978, less the $600 payment made during each of those months under the original award).   In January, defendant paid $5,000, leaving a balance of $16,000.

In October 1979, the Workers' Compensation Appeals Board (Board) reduced the fee of applicant's attorney to $10,000.

On December 3, 1979, defendant paid the $10,000 fee to applicant's attorney, and the remaining $6,000 to applicant and his wife as ordered.   Defendant also paid $180 as the amount of interest owing on the attendant care award.

Applicant contended the correct amount of interest was $1,000.35, and on December 10, 1979, moved to impose a penalty (under Lab.Code, § 5814) for defendant's failure to pay the correct amount of interest.

On December 20, 1979, defendant paid an additional $240 in interest, asserting that sum was the interest balance due.   This left defendant about $580 short of the amount of interest claimed by applicant.

On October 21, 1980, a workers' compensation judge granted applicant's motion and imposed a 10 percent penalty on defendant for the interest withheld since January 10, 1979.   The amount of the penalty was determined as 10 percent of the interest that accrued on $16,000 after January 10, 1979.

Applicant petitioned the Board for reconsideration.   On January 12, 1981, the Board granted the petition, and ordered that the penalty be computed at 10 percent “of the total amount payable for medical treatment ” awarded on January 10, 1979, and “includ[ed] ten percent against interest which accrued at the rate of seven percent on $16,000.00 commencing January 10, 1979.”  (Emphasis added.)   The Board did not compute the actual amount of the penalty.

Defendant petitioned for a writ of review in this court;  that petition was denied on April 9, 1981.  (3 Civ. 20474.)

On July 3, 1981, applicant moved for imposition of a second penalty because of defendant's delay in paying the remaining interest and the first penalty.   On March 24, 1982, a workers' compensation judge fixed the amount of the first penalty at $11,694.55, and imposed a second penalty of $12,191.71.1

According to applicant, on April 13, 1982, defendant paid the first penalty and the rest of the original interest owed, but it has not paid the second penalty.

Defendant petitioned the Board for reconsideration, challenging both the first and second penalties;  the Board denied the petition.

Defendant seeks to annul the March 24, 1982, findings and award, arguing (1) the Board's denial of reconsideration was not supported by sufficient findings (Lab.Code, § 5908.5), (2) the Board violated due process in denying reconsideration because of defendant's late motion,2 and (3) the second penalty was improper.   We have concluded the findings and award must be annulled, and have determined it was improper to assess the first penalty against the total value of medical benefits paid.3

Labor Code section 5814 provides in part:  “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 award shall be increased by 10 percent․”  The leading case interpreting this provision is Gallamore v. Workers' Comp. Appeals Bd. (1979) 23 Cal.3d 815, 153 Cal.Rptr. 590, 591 P.2d 1242.   In Gallamore the court held that “the phrase ‘full amount of the ․ award’ in section 5814 refers to the full amount of the award for the particular class of benefit delayed or withheld,” (p. 826, 153 Cal.Rptr. 590, 591 P.2d 1242) and therefore that “each penalty must be assessed only against the class of benefits which was actually delayed or refused.”   (Emphasis added;  p. 821, 153 Cal.Rptr. 590, 591 P.2d 1242.)

The courts have been consistent, holding that if an employer delays in furnishing permanent disability benefits, the 10 percent penalty should be computed only on those benefits, and should not include any amounts of temporary disability previously awarded.  (Manning v. Workmen's Comp. App. Bd. (1970) 10 Cal.App.3d 655, 89 Cal.Rptr. 76;  Kaminski v. Workers' Comp. Appeals Board (1981) 126 Cal.App.3d 778, 179 Cal.Rptr. 125.)   Conversely, where a penalty is imposed for delay in paying temporary disability benefits, the penalty is assessed solely against those benefits.  (Garcia v. Workmen's Comp. Appeals Bd. (1972) 6 Cal.3d 687, 100 Cal.Rptr. 149, 493 P.2d 877.)   The following types of benefits have also been held to be individual “classes” of benefits, so that delay in paying them incurs a penalty computed against the class only:  preaward temporary disability payments (Daniels v. Workmen's Comp. Appeals Bd. (1972) 27 Cal.App.3d 504, 104 Cal.Rptr. 129);  medical-legal benefits (Adams v. Workers' Comp. Appeals Bd. (1976) 18 Cal.3d 226, 133 Cal.Rptr. 517, 555 P.2d 303);  travel expenses (Gallamore, supra, 23 Cal.3d at p. 827, 153 Cal.Rptr. 590, 591 P.2d 1242);  self-procured medical treatment (Bauer v. Workers' Comp. Appeals Bd. (1979) 94 Cal.App.3d 250, 156 Cal.Rptr. 400);  penalties assessed under Labor Code section 132a (Burton v. Workers' Comp. Appeals Bd. (1980) 112 Cal.App.3d 85, 169 Cal.Rptr. 72);  rehabilitation benefits (Yellow Freight Systems, Inc. v. Workers' Compensation Appeals Board (1978) 44 Cal.Comp.Cases 21);  and attorney fees (State Comp. Ins. Fund v. Workers' Comp. Appeals Bd. (LaFavor) (1981) 117 Cal.App.3d 143, 172 Cal.Rptr. 557).

In Anderson v. Workers' Comp. Appeals Bd. (1981) 116 Cal.App.3d 954, 172 Cal.Rptr. 398, a second penalty had been assessed for delay in paying a first.   The court held the penalty was assessable against the entire award plus the first penalty.   We view the approach utilized in Anderson as inconsistent with the weight of authority discussed and not authority to be followed.

In the present case, the delay that incurred the first penalty was the delay in paying interest on the sums owed for attendant care.   The issue, then, is whether “the particular class of benefit delayed” is, as defendant argues, the interest, or, as the Board ruled, the interest plus the underlying medical benefits on which the interest arose.   The question is one of first impression for a Court of Appeal, although one decision of the Board has held that such a penalty should be assessed against interest plus underlying benefit.  (United States Fidelity and Guaranty Company v. Workers' Compensation Appeals Board (1981) 46 Cal.Comp.Cases 270.)

We disagree with this Board decision, finding it to be in conflict with previously established legal principles.   We think it plain that interest is a separate “class” of benefit, so that a penalty for delay in paying interest should be assessed only against the interest originally owed.   First, the clear language of Gallamore directs this conclusion.  Gallamore holds that a penalty may be assessed only against the class of benefits actually delayed.   Here there is no assertion that the sums for attendant care were delayed;  what was delayed was interest.   It would run counter both to Gallamore and common sense to conclude that the class of benefits delayed is interest and attendant care, when only the former was actually delayed.

Second, interest is readily classifiable as a separate kind of benefit.   Gallamore says:  “Our analysis of both the statutory language and the applicable authorities convinces us, ․ that if, as in the usual case, an award is readily severable into the different classes or categories of compensation as defined in the Workers' Compensation Act (Lab.Code, § 3200 et seq.), then the penalty is to be assessed against only the amount awarded for the particular benefit of the kind delayed or refused.”  (Emphasis added;  23 Cal.App.3d at p. 824, 153 Cal.Rptr. 590, 591 P.2d 1242.)   It has been held that a benefit or payment is “compensation” under the workers' compensation laws if it is conferred under division 4 of the Labor Code.   (Adams, supra, 18 Cal.3d at p. 231, 133 Cal.Rptr. 517, 555 P.2d 303.)   Medical-legal benefits are such a benefit (see Lab.Code, § 4600), and, as noted, they have been held a separate class of benefit for purposes of the 10 percent penalty.  (Ibid.)  Attorney fees are “compensation” (they are authorized under Lab.Code, § 4903, subd. (a)), and have been held a separate class of benefit.  (LaFavor, supra, 117 Cal.App.3d 143.)   Penalties assessed under Labor Code section 132a, although not provided under division 4, have been termed “compensatory,” and found to be a separate class of benefit.  (Burton, supra, 112 Cal.App.3d at p. 90, 169 Cal.Rptr. 72.)   Interest, as a payment conferred under division 4 (see Lab.Code, § 5800;  Laucirica, supra, 17 Cal.App.3d at p. 683, 95 Cal.Rptr. 219), is a severable category of “compensation,” and should be considered a separate class of benefit under Gallamore.

Third, and most important, our conclusion comports with the broader policy considerations enunciated in Gallamore.   There the court wrote:  “In penalty cases the board should proceed with a view toward achieving a fair balance between the right of the employee to prompt payment of compensation benefits, and the avoidance of imposition upon the employer or carrier of harsh and unreasonable penalties.”  (23 Cal.3d at p. 828, 153 Cal.Rptr. 590, 591 P.2d 1242.)   The goal is evenhandedness.  Section 5814 provides that when compensation has been delayed, “the full amount of the order, decision or award shall be increased by 10 percent․” (emphasis added);  yet the Gallamore court rejected a literal reading of this provision as being unduly harsh toward employers.   At the same time, the court recognized that the penalty should be assessed against the entire class of benefit—not just the net amount unpaid—so as to maintain the employer's incentive to make prompt payments.  (23 Cal.3d at pp. 826–827, 153 Cal.Rptr. 590, 591 P.2d 1242.)   In the present case, too, the balance is best struck by concluding that the penalty should have been assessed only against the interest originally owed.

The first penalty, imposed because of delay in paying the full $1,000.35 in interest owed on the award of attendant care, should have been computed as 10 percent of $1,000.35.   The penalty ordered by the Board was unlawfully assessed and is annulled.   Further, because this first penalty was improperly calculated—indeed, computed to be much higher than it should have been and protested by the employer—the second penalty (for delay in paying the first) must also be annulled.

The penalty decisions are annulled and the matter remanded to the Board for further proceedings consistent with this decision.

FOOTNOTES

1.   The first penalty—for delay in paying interest on the sums for attendant care—was based on the following figures supplied by applicant:  $11,021.72 (10 percent of $110,217.17, the total amount paid for all medical treatment from October 1, 1977, to December 2, 1981, the date applicant submitted these figures), plus $580.35 (the original interest still owing), plus $84.04 (interest on the $580.35 from January 10, 1979, to December 2, 1981), plus $8.41 (10 percent of the $84.04 in interest).   The second penalty—for delay in paying both the original interest and the first penalty—represented 10 percent of the total medical payments of $110,217.17, plus 10 percent of the first penalty.

2.   There is no indication reconsideration was denied for this reason.

3.   Applicant seems to suggest that a challenge to the first penalty is foreclosed because defendant challenged that penalty in a previous petition, the petition was denied, and no further action was taken.We do not agree.   Summary denial of a petition for an extraordinary writ will not be deemed to have been on the merits unless the sole possible ground for denial is that the court reached the merits.  (Laucirica v. Workmen's Comp. Appeals Bd. (1971) 17 Cal.App.3d 681, 684, 95 Cal.Rptr. 219;  Hagan v. Superior Court (1962) 57 Cal.2d 767, 770, 22 Cal.Rptr. 206, 371 P.2d 982.)   We cannot say that is so in this instance.   The court, considering the first petition for review, might have denied it as premature, since no actual penalty had yet been fixed at the time the petition was brought.  (See Minton v. Workers' Compensation Appeals Board (1975) 40 Cal.Comp.Cases 313.)   The previous denial adjudged “nothing except that, for reasons sufficient to the court, that writ should not issue;  ․”  (Confidential, Inc. v. Superior Court (1958) 157 Cal.App.2d 75, 78, 320 P.2d 546.)

EVANS, Justice.

REGAN, Acting P.J., and CARR, J., concur.