Provo v. ICAO, 01CA1239 (September 12, 2002): In 1998, an Administrative Law Judge (ALJ) ordered employer to pay for treatment of claimant by a particular chiropractor. The ALJ found that "occasional chiropractic treatment for temporary relief is especially reasonable and appropriate . . . medical benefits for a claimant with such severe injuries." Claimant later received treatment from the chiropractor. Employer's attorneys advised employer that the ALJ's order had not required employer to pay any specific medical benefits. Based on this advice, employer refused to pay for the treatment. In 1999, a second ALJ found that the 1998 order did require payment of the chiropractic treatment and held that employer's refusal to pay was wrongful, deliberate, willful, unreasonable and legally unsupportable. The second ALJ assessed penalties against employer under C.R.S. § 8-43-401(2)(a) in the amount of 8% of the wrongfully withheld medical benefits.
Claimant next sought penalties of $500 per day against employer's attorneys under C.R.S. § 8-43-304(1). Claimant asserted that the attorneys failed to obey the 1998 order, refused to perform their duties, and interfered with claimant's medical care. The second ALJ denied the attorneys' motion to dismiss the penalty claim; however, a third ALJ granted a second motion to dismiss filed by the attorneys. The third ALJ found that the 1998 order was directed to employer, not the attorneys, and because they were not parties to the order, they could not be held liable for the refusal to pay medical benefits.
The Court of Appeals affirmed in part, reversed in part, and remanded the case for further proceedings. The Court agreed with claimant that § 8-43-304(1) is applicable to attorneys representing employers or insurers because the statute states that penalties may be assessed against "any officer or agent" of the employer or insurer "or any other person" for violating any provision of the Act, failing or refusing to perform "any duty lawfully enjoined," or failing, neglecting, or refusing to "obey any lawful order." Although the general rule is that attorneys cannot be held liable for advice given to clients, the Court noted that the rule has at least two exceptions: Where there is a finding of fraud or malice, and where an attorney has willfully violated an order that specifically directs the attorney to act. The Court also indicated that negligent misrepresentation might be a third exception, but was not raised as an issue in this case.
The Court held that employer's "attorneys may be held liable for penalties under § 8-43-304(1) only upon a finding that their conduct was fraudulent or malicious." The case was remanded to give claimant the opportunity to prove that the attorneys fraudulently or maliciously advised employer to violate the 1998 order, and if so, the attorneys would be directly liable to claimant for penalties.