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Court of Appeal, First District, Division 4, California.

Jim D. GALLAMORE, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD of the State of California, San Ramon Glass Company and Truck Insurance Exchange, Respondents.

Civ. 41874.

Decided: August 01, 1978

Maurice S. Marcus, Inc., Valerie M. Chapla, Pleasant Hill, for petitioner. Mullen & Filippi, David V. Costa, San Francisco, for respondent Truck Ins. Exchange.

Having sustained an injury in the course and scope of his employment, Jim D. Gallamore (hereinafter “applicant”) commenced a proceeding for benefits pursuant to the workers' compensation law. In two petitions subsequently field with respondent Workers' Compensation Appeals Board, he claimed the right to have a separate 10% penalty assessed against respondent insurance carrier for each of three alleged transgressions on its part. In proceedings to be described, a Board referee awarded him a stipulated amount for permanent disability, assessed 10% thereof against the carrier for one of the three transgressions claimed, and declined to assess penalties for the other two. The Board affirmed the referee's action in an opinion and decision after reconsideration. Applicant's petition for a writ of review was subsequently granted.1

Applicant was injured on August 22, 1975. He commenced the proceeding for worker's compensation benefits on January 23, 1976. His two petitions were filed later in 1976, and were heard together in March of 1977. The facts underlying his claims for three separate penalty assessments were shown at the hearing. We summarize them, in a necessarily detailed chronology, as they occurred during the procedural sequence described.

On August 27, 1975, respondent carrier sent applicant a notice stating that it had been informed of his August 22 injury and would pay him temporary disability benefits commencing as of August 23. It shortly commenced to pay them, as noticed, at the rate of $117 per week.

The August 27 notice did not tell appellant that he was entitled to be reimbursed for transportation expenses he might incur in travelling for necessary medical examinations. He subsequently travelled, for medical examinations by two separate physicians, on several occasions in late 1975 and early 1976. The physicians sent the carrier dated bills on these occasions. The carrier paid the bills as they were received.

The events next recited occurred in 1976. In a letter received by the carrier on January 30, applicant's attorney requested reimbursement of his travel expenses based upon the dates shown in the examining physicians' bills and a statement, in the letter, of the mileage applicant had travelled for each visit. In a letter written to applicant three days later, the carrier acknowledged his attorney's request, asked him to furnish it with the dates of his medical examinations, and stated that his travel expenses would be paid. The only response to this letter was applicant's first petition, filed on April 27, in which he sought to have a 10% penalty assessed against the carrier for its “unreasonable” failure to reimburse him “for his transportation within a reasonable time after demand.” In his prayer, he requested the assessment “with respect to all benefits to which applicant may be entitled for temporary disability and further medical treatment subsequent to February 19, 1976.”

After the carrier had answered the petition, it was set for hearing on June 24. It was ordered off calendar on that date because an itemization of claimed travel expenses, which it incorporated by reference, had been omitted from it. Applicant delivered the missing itemization to the carrier at the end of June. The carrier sent him a check for the expenses approximately six weeks later.2

The carrier terminated applicant's weekly temporary disability payments effective August 13. The reason for this action, as stated in another notice sent him on August 18, was that one of the examining physicians had reported that his condition had become “permanent and stationary” as of August 10. The notice also informed him that the temporary disability payments previously made to him had included an overpayment for four days. This assertion was based on information that he had attempted to work on four days.

The carrier did not commence to make advance permanent disability payments when it terminated the temporary disability benefits effective August 13. Two weeks later, his attorney urged by letter that permanent disability advances be commenced “to avoid the possibility of a penalty.” The carrier did not comply. Applicant filed his second petition on September 13, seeking the assessment of “separate and distinct 10% penalties” against the carrier for the separate and distinct and “unreasonable delays” involved in (1) its “failure to pay advances against permanent disability” and (2) its having claimed the four-day “overpayment” credit without authorization from the Board.3

The carrier answered the second petition on September 22. It did not otherwise respond until September 29, when it paid applicant a first advance on his permanent disability. The delay in making the advance was caused by personnel problems in the carrier's claims office. When it was made, the carrier applied the claimed “overpayment” credit by deducting its amount from the check. It paid applicant this amount later, after having learned that he had not been paid for the four days' work he had attempted.4 It is undisputed that the credit was claimed and applied without authorization from the Board.

Applicant's two petitions were heard together in March, 1977. Although no petition for an award of permanent disability had been filed, the parties stipulated at the hearing that his injury had resulted in partial permanent disability rated at 421/2%. The matter was submitted after the Board referee had heard the evidence summarized above. He filed an award (“Findings And Award”) on March 29, 1977. This was the first and only award of benefits, as such, made in the entire proceeding. It granted applicant permanent disability indemnity in the amount of $13,702.50, calculated on the basis of the stipulated rating. It also assessed a single 10% penalty on that sum, on the stated ground that the carrier “did unreasonably refuse to provide compensation benefits.” The referee explained his disposition of the two penalty petitions in an accompanying “Opinion On Decision.”5

Applicant petitioned the Board for reconsideration, indicating his concurrence with the assessment of the one 10% penalty but pursuing the other two. (See fn. 3, ante.) In its answer to the petition, the carrier conceded the one but resisted the others. After the referee had reported on the petition, the Board granted it pending further study of the issues.6 In its subsequent opinion and decision after reconsideration, the Board reiterated its version of the three penalty theories (see fn. 6, ante ) and stated: “We . . . are persuaded that the Board's authority to issue multiple penalties for successive delays in the factual context of this case is discretionary. We find no abuse of discretion by the . . . (Referee) . . . in awarding one ten percent penalty on the Findings and Award of March 29, 1977. We . . . therefore affirm his award . . . .” (Emphasis added.)

On the present review, respondent carrier does not dispute the validity of the single 10% penalty assessed for its delay in making permanent disability advances. (See fns. 5 and 6, ante.) Applicant continues to pursue the other two. The carrier resists their imposition upon the stated ground that the Board “has no power to impose multiple penalties in one decision for successive delays in furnishing benefits.” This argument (which we quote from the carrier's answer, with added emphasis) understates the Board's penalty role in two significant respects. Labor Code section 5814 invests the Board with an obligation to penalize in specified circumstances, not a mere “power,” and it exacts the obligation when a workers' compensation insurer has unreasonably “refused” benefits as well as “delayed” them.7 The extent of its application in this case requires further analysis of its terms and a few decisions which have interpreted it.

The first sentence of section 5814 establishes the broad principle that a 10% penalty is to be assessed against an employer or insurance carrier for unreasonable delinquency in the “payment of compensation” to which an injured employee is entitled under the workers' compensation law. The 10% factor obviously cannot be applied in a vacuum; there must be a base figure to which it may be applied by way of surcharge. The first sentence meets this requirement by providing that the base figure is the “full amount of the order, decision or award,” and which “shall be increased by 10 percent” to effect the penalty.

The statute's third sentence provides the mechanics of a penalty assessment where an employer or insurance carrier has been unreasonably delinquent in complying with an “order, decision or award” after the Board has made one. In the post-award delinquency situation, the base figure to be surcharged with a 10% penalty is the “full amount” of the award itself. If the award includes more than one category of “compensation,” and there is a post-award delinquency in “payment” of only one, the “full amount” may nevertheless be surcharged because the statute is explicit to this effect. (Adams v. Workers' Comp. Appeals Bd. (1976) 18 Cal.3d 226, 229-231, 133 Cal.Rptr. 517, 555 P.2d 303; Sierra Pac. Industries v. Workers' Comp. Appeals Bd. (1977) 67 Cal.App.3d 413, 415, 136 Cal.Rptr. 649.)

The present case does not present a post-award delinquency situation because respondent carrier's alleged transgressions occurred before the one assessable award was made on March 29, 1977. This distinguishes the decisions just cited, and the parties have given us no authority controlling the pre-award delinquency situation except section 5814 itself. Its first sentence clearly permits the 10% penalty to be assessed for a delinquency occurring before “an” award is made by the Board, but the base figure to be surcharged must await “the” award to which the sentence refers; until one is made, there is nothing to augment by 10%. Applicant does not dispute this, but contends that the requisite base figure emerged when the $13,702.50 permanent disability award was made on March 29, 1977. Although the undisputed single penalty assessed on its “full amount” at that time yielded him $1,370 which is not disputed now, he claims the same sum for each of the separate delinquencies charged to respondent carrier in his petitions.

The “full amount” of an award is the appropriate base figure for penalty assessment where the party to be penalized has been delinquent in complying with the award itself. This is true, even if the delinquency affected compliance with only part of the award, because it is the “full” award which has been violated. (Cf. Adams v. Workers' Comp. Appeals Bd., supra, 18 Cal.3d 226 at p. 230, 133 Cal.Rptr. 517, 555 P.2d 303; Sierra Pac. Industries v. Workers' Comp. Appeals Bd., supra, 67 Cal.App.3d 413 at p. 415, 136 Cal.Rptr. 649.) As applied in these cases, the “full amount” concept reflects the calculated role of section 5814 in policing compliance with Board awards and implementing their enforcement.

The concept should also apply in aid of enforcing the payment of “compensation” benefits which are not awarded as such, but which are fixed and guaranteed by law. In their case, as is true of any benefits actually awarded, the “full amount” subject to penalty assessment is established. Because it is, the obligated parties have foreknowledge of the risk and cost of default. The enforcement purpose is served.

This is not true where there is a pre-award delinquency in the payment of “compensation” of which the law requires payment but not in any fixed amount. They have no “full amount” of record, and none appears as a penalty base unless and until there is an “award” of them as such. That award cannot be violated before it is made. As to any type of such guaranteed but unliquidated “compensation,” we interpret section 5814 to require that the base figure subject to 10% assessment, by way of penalizing delinquency in the payment of such “compensation” not yet awarded, is the “full amount” of the specific “compensation” as fixed if and when it is awarded. This interpretation comports with the legislative intent which is perceptible in the statute. It leaves an aggrieved employee free to petition the Board for the specific compensation and the penalty alike. It does not mean that he must do this before he can receive the compensation, the amount of which remains subject to informal adjustment; it does mean that he must do it to recover a penalty for delay. It does not permit him to have the penalty assessed against the “full amount” of other benefits awarded him.

The allegedly delayed transportation expenses were “compensation” for which unreasonable delay in payment would warrant a penalty under section 5814 (ss 3207, 4600; cf. Adams v. Workers' Comp. Appeals Bd., supra, 18 Cal.3d 226 at p. 231, 133 Cal.Rptr. 517, 555 P.2d 303), but they fall in the category we have defined above as “guaranteed but unliquidated.” For this reason, our interpretation of section 5814 will not permit a 10% penalty for delay in their payment to be assessed on the “full amount” of the $13,702.50 permanent disability award. The interpretation thus avoids the draconian consequence of a $1,370 penalty for a delay in paying $62. (See the text at fn. 2, ante.)

Applicant's remedy for the delay was to petition the Board for an award of his transportation expenses and a penalty for the delay when it occurred. He has never done both; the only petition he filed on the subject requested a penalty but not the expenses. In the circumstances of the delay recited above, his claim to the penalty is by no means compelling. Controversy as to the amount was resolved when he accepted $62 without dispute. (See fn. 2, ante.) Any residual 10% penalty would be de minimis. For all these reasons, we treat the penalty as not recoverable. In the order and decision under review, the Board affirmed the denial of the penalty as permissibly “discretionary.” This reason was not necessarily correct (as will appear), but the result was. We affirm it accordingly. (See 6 Witkin, California Procedure (2d ed. 1971) Appeal, s 226, pp. 4215-4216.)

Our interpretation of section 5814 will affect applicant's other penalty claim, but subject to further proceedings before the Board. The claim is based upon the so-called “overpayment” credit which respondent carrier asserted when it terminated temporary disability benefits as of August 13, 1976, and collected by deducting the amount from the delayed permanent disability advance it paid applicant on September 29, 1976. (See the text at fn. 4, ante.)

The undisputed penalty assessed on the $13,702.50 award compensated applicant for the delay in making the permanent disability advances prior to September 29. The deduction made on that date amounted to a separate and distinct delay in making the same advances. The advances were also “ compensation” which was “guaranteed but unliquidated” pending a permanent disability award to be made on subsequent petition. Applicant did not petition for the award as such, but the parties' stipulation to his permanent disability had the same effect. If the separate and distinct delay was unreasonable, he is entitled to a separate and distinct 10% penalty on the award finally made to him for his permanent disability. This comports with our interpretation of section 5814.

Before the penalty may be assessed, “(t)he question of delay and the reasonableness of the cause therefor shall be determined by the appeals board in accordance with the facts.” (s 5814. See fn. 7, ante.) The necessary inquiry was not made because the referee treated the penalty claim as “moot” (see fn. 5, ante ), and the Board affirmed its denial as “discretionary.”

In Davison v. Industrial Acc. Com. (1966) 241 Cal.App.2d 15, 50 Cal.Rptr. 76, it was held that section 5814 authorized the Board's predecessor to assess successive penalties for successive delinquencies in the payment of compensation. (Id., at p. 18, 50 Cal.Rptr. 76.) The decision involved successive proceedings for penalties, but it establishes that the assessment of a penalty for one delinquency does not preclude another if there are separate delinquencies in fact. Given that premise, there is no reason that separate penalties may not be assessed in the same order. The assessment sought on the so-called “overpayment” credit was therefore neither “moot” nor “discretionary” when the permanent disability award was made. The necessary inquiry into reasonableness must still be made. It may be accomplished on the remand hereinafter ordered.

The opinion and decision after reconsideration is affirmed insofar as it (1) awards permanent disability indemnity, (2) argues a penalty against it, and (3) affirms the denial of a penalty for delay in the payment of transportation expenses. In all other respects, the opinion and decision is annulled. The cause is remanded to respondent Workers' Compensation Appeals Board for further proceedings consistent with this opinion.


1.  We denied the petition in the first instance. The Supreme Court granted his petition for hearing, transferred the cause there, and retransferred it to this court with directions to issue the writ of review.

2.  The check was for $62.72. There is no indication in the record that it was rejected or that its amount was protested.

3.  The theories of penalty expressed in this petition are stated here as the Board and the parties treated them later. (See fns. 5 and 6, post.) The petition actually propounded still another theory based upon the unreasonableness of the carrier's “termination of temporary disability” on August 13. As pertinent, its prayer requested only “three separate and distinct 10% penalties for each of the unreasonable delays set forth . . . .” No amount to be assessed at 10% was specified.

4.  Neither the date nor the amount of this payment is shown in the record. On the basis of four days and a weekly compensation rate of $117, the amount would approximate $66.

5.  The referee there stated as follows: “Applicant seeks a penalty based on three theories. It is apparent that there was an unreasonable delay in advancing permanent disability. The carrier's . . . (notice) . . . dated August 18, 1976, clearly indicated that there would be permanent disability. No advances were made for six weeks. Applicant had been off work for over a year and was informed he would not be able to return to his usual trade. Such an interruption of weekly benefits is deemed unreasonable. The other claimed theories are deemed moot in view of this finding.” (Emphasis added.)

6.  In his report to the Board, the referee stated: “Applicant's claim for penalty was made on the following basis: 1. Defendant's failure to advise applicant (that he) was entitled to transportation expenses. 2. There was a delay in providing permanent disability advances. 3. The carrier's unilateral determination of four days' credit resulted in interruption of applicant's benefits without order of the Board. Penalty was found on the basis of the second theory. It was this . . . (referee's) . . . understanding that only one penalty could be imposed. . . . Since there was no decision as to the other two theories of penalty, if the Board believes that more than one penalty is possible, then reconsideration should be granted and the case referred back for further decision on the other theories.” (Emphasis added.)In its order granting reconsideration, the Board expressed the first penalty theory as based upon the carrier's “failure to notify the applicant of his right to transportation expenses and failure to provide such expenses within a reasonable time after demand.” (Emphasis added.) This version of the theory comported with applicant's expression of it in his first penalty petition.

7.  All statutory references herein are to the Labor Code. Section 5814 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 award shall be increased by 10 percent. The question of delay and the reasonableness of the cause therefor shall be determined by the appeals board in accordance with the facts. Such delay or refusal shall constitute good cause under Section 5803 to rescind, alter or amend the order, decision or award for the purpose of making the increase provided for herein.” (Emphasis added.) In the construction of the code generally, “shall” is mandatory and “may” is permissive. (ss 5, 15.)

RATTIGAN, Associate Justice.

CALDECOTT, P. J., and PAIK (Assigned by the Chairperson of the Judicial Council), J., concur.