Keefe, Campbell & Associates, LLC

Editor’s Comments: Police officer injured in a car accident when responding to complaints of speeding was entitled to a line-of-duty disability pension. The court ruled the patrol officer was exposed to a “special risk” not encountered by ordinary citizens and thus was performing an “act of duty” when injured. We assure all of you this expansion of the Pension Code will cost Illinois taxpayers money. With deference to the court, we don’t see anything in this decision which indicates this was anything other than a random fender-bender to which we are all exposed. We ask all of you would it be a qualifying event if he were driving to a donut shop to get donuts?

In Jones v. Board of Trustees of the Police Pension Fund of the City of Bloomington, (Nos. 6MR 243 and 06 MR 276 September 15, 2008), the Illinois Appellate Court affirmed the decision of the trial court and held Plaintiff was entitled to a line-of-duty disability pension for injuries sustained while on normal police patrol. In interpreting the statute the Court found Jones was exposed to a “special risk” not ordinarily encountered by civilians in the ordinary walks of life, and therefore, was performing an “act of duty” when injured entitling him to a line-of-duty pension.

On June 13, 2005 Plaintiff, a 12-year veteran of the police force, was on patrol duty when he was involved in a motor vehicle accident. Plaintiff was driving normally on his way to investigate complaints of speeding. As he was driving toward the airport, a car shot out in front of his vehicle and hit the side of the police van. Plaintiff suffered injuries to his shoulder and back and later underwent back surgery. He filed an application for line-of-duty disability benefits. He alleged he could no longer perform full duties as a police officer due to his injuries.

The Pension Board held a hearing on the application and concluded Plaintiff was not entitled to a line-of-duty pension, but granted him a non-duty disability pension. The Board found Jones physically disabled for service so as to render him eligible for retirement and awarded him a non-duty disability pension totaling 50% of his salary as opposed to 65% he would have received for a line-of-duty disability pension. The Board relied upon White v. City of Aurora to conclude the driving a police van did not involve a “special risk” as required by the definition of “act of duty.” In White a divided panel of the Appellate Court held an officer who was on patrol when he slipped while exiting his vehicle to place a parking ticket on an illegally parked car was not entitled to a line-of-duty disability pension. The police department also employed civilians to issue parking citations. Therefore, the White court concluded the officer was not exposed to a “special risk” not ordinarily encountered by civilians in the ordinary walks of life. On administrative review, the circuit court reversed the Board’s decision.

On appeal, two issues were presented to the Court:

1. Whether the correct standard of review was a manifest-weight-of-the-evidence standard or one of de novo review.

2. Whether Plaintiff, as a patrol officer, was exposed to a “special risk” so as to constitute an “act of duty,” which would make him eligible for a line-of-duty pension.

The parties disputed the correct standard of review. The Board alleged a manifest-weight-of-the-evidence standard was proper because it was required to weigh facts in reaching its conclusion. Plaintiff argued de novo review was proper as relevant facts were undisputed and the appeal hinged on the definition of “act of duty,” which required statutory interpretation. The Court agreed with neither party and instead found before it a mixed question of law and fact. Thus the Court concluded the correct standard of review was a clearly erroneous standard. Applying this standard of review, the Court found the Board’s decision to deny Jones a line-of-duty disability pension was clearly erroneous and affirmed the trial court’s reversal of the Board’s decision.

On appeal, the Court discussed the requirements of the Pension Code. In doing so it found something more than being “on duty” is required for a line-of-duty pension. The statute defines “act of duty” as “any act of police duty inherently involving special risk, not ordinarily assumed by a citizen in the ordinary walks of life…” The court noted not all police activities involve “special risk.” For example, the Court discussed a case in which an officer who was injured in a fall from a chair while taking a police report was not entitled to a line-of-duty disability pension because the act of taking a police report did not involve a “special risk.”

The Court went on to discuss whether Jones faced a “special risk” while on patrol duty and concluded he did. In reaching this conclusion the Court expressly rejected the reasoning and holding in White cited by the Board. Instead it relied on Alm v. Lincolnshire Police Pension Board, where the court held an officer who was injured while riding his bike on patrol was entitled to a line-of-duty disability pension. The Alm court looked to the capacity in which the officer was riding his bike finding a “special risk” not encountered by ordinary citizens. The Court followed this reasoning holding the proper focus is on the capacity in which the officer was acting at the time of the injury.

As Plaintiff was responding to a complaint of speeding at the airport and had to be prepared for any eventuality not faced by ordinary citizens in all walks of life, the Court, interpreting the statute liberally in favor of Plaintiff, concluded he was exposed to a “special risk” and thus performing an “act of duty” when he was injured. Therefore, he was entitled to a line-of-duty pension under the statute.

If you have thoughts or comments on line-of-duty versus non-line-of-duty disability benefits, please send a reply.

Editor’s comment: Here is a little-known Illinois legislative provision for your consideration. In this very tough economy, please read carefully and save every penny you can. Please understand Illinois death benefits are wildly high—we understand they are the second or third highest of the fifty United States. While we feel bad for widow(er)s and children, we truly feel death benefits have to be reasonably brought into line with our sister states, particularly when you remember this is a no-fault system and the worker may be part of the cause of his/her passing and benefits will still be due. It is also very unusual to see someone making $150 per week whose widow(er)s and dependents then get tax-free death benefits at a rate triple what their spouse/parent was making at the time of their passing.

The current Illinois death benefit minimum is $456.28 times 52 weeks times 25 years or $593,164.00. The current maximum is $1,216.75 times 52 weeks times 25 years or a cool $1,581,125.00.

If you already have a policy of life insurance for your associates, you can get credit for such benefits against workers’ comp death benefits that may also be due. The life insurance policy has to state the benefits will be paid in lieu of workers’ compensation death benefits. We are confident very few health, risk and safety managers know this little-known facet of Illinois WC law and practice. If the life insurance policy clearly states the insurance benefits are to be paid in lieu of workers’ comp death benefits, your organization saves the full value of the policy in the event of the untimely passing of an employee in a work-related accident. Please note the worker’s family and dependents will still get the full WC death benefit outlined above. The money will either be paid completely from your WC program (with the life insurance paid on top of that benefit) or it will be paid by both your WC program and the life insurance policy.

Please understand claimant lawyers typically don’t want such credits to be allowed. If there is a dispute about coverage and they win WC benefits for their clients, they don’t get a fee on the life insurance policy credit. You have to make certain the credit is very clear in the policy language. We ask all of you to take a look at the coverages afforded to insure you know whether you are going to get a credit or not. If you want a KC&A lawyer to review the policy provision, send it along and we will give you our opinion at no charge.

For one of our insurance client’s accounts, we were advised there was a $500K life insurance policy paid for by the account on their workers. The account would immediately save $500K on any death claim for their workers if you simply have the account or its insurer make the life insurance benefits payable in lieu of workers’ compensation death benefits due under the Act. The account could also save on the workers’ compensation premiums. If the life insurance policy doesn’t say the benefits are to be paid in lieu of workers’ comp benefits, the widow(er) gets both the full WC death benefit and the life insurance proceeds.

If you want the savings, please, please, please have your life insurance policies changed or let us review it at no charge.

The Illinois WC Act says:

Section 4(I): If an employer elects to obtain a life insurance policy on his employees, he may also elect to apply such benefits in satisfaction of all or a portion of the death benefits payable under this Act, in which case, the employer’s compensation premium shall be reduced accordingly.

We are certain the “election” has to be made prior to the passing of the employee. Please reply or call if you have further questions.

Editor’s comment: We salute the Court for getting another one right—this is a moderately complex case about where federal rights start and state WC rights may be added in. U.S. postal workers injured in Illinois only receive federal benefits—longshorepersons working on the water are treated the same way.

Please note a longshore worker who is on land when injured does get both state and federal WC benefits. While we don’t agree with such dual benefits, this will stay the law until the legislation is changed in either Washington, D.C. or Springfield—you can’t blame the courts for ruling in that fashion. Please also note such instances of concurrent jurisdiction are rare. This case follows longstanding Illinois precedent indicating a longshore worker injured working over the water gets federal benefits only.

In this case, a maintenance worker was injured while vacuuming water out of the bilge of a boat. There was no dispute he was entitled to federal benefits under the Longshore and Harbor Workers Compensation Act. Our client paid such benefits a long time ago.

A new trend started about three years ago in which a number of claimant attorneys in southern Illinois started filing for both federal Longshore benefits and Illinois WC benefits for injuries occurring on the water. Basically, what they were trying to do is to circumvent the more stringent federal rules on medical care—the feds actually follow utilization review. The claimant attorneys were also seeking to cash in on Illinois’ wonderful permanency “smorgasbord” that allows claimants to get lots more money in PPD—the feds use AMA guidelines or “ratings” that typically restrict such recoveries to permanent losses that have to be demonstrated and not conjured up. If these claimants were allowed to have concurrent state and federal jurisdiction of their claims, they could get the best of both worlds.

The matter was heard by one of the sharper Arbitrators in the system and we were surprised to see she awarded state benefits on top of the federal scheme. The matter was appealed to the Commission that affirmed in a 2-1 decision with a short but clear defense dissent by Commissioner Basurto. The claim was then taken before Madison County Circuit Court Judge Thomas Chapman who then reversed the Commission and denied benefits by writing a truly solid and detailed decision, completely unexpected in one of Illinois’ most Plaintiff-oriented counties.

Thereafter, claimant and counsel took the matter to the five-member Illinois Appellate Court, Workers’ Compensation Division. In a unanimous decision, the appeals court concluded the circumstances of claimant’s employment did not allow him to seek compensation under the Longshore and Harbor Workers Compensation Act and the Illinois Workers’ Compensation Act. In Uphold v. Workers’ Compensation Commission, (No. 07-MR-230, 9/25/08), claimant was injured in August 2005 working for National Maintenance and Repair. He was vacuuming bilge water out of the bottom of a ship when the vacuum stuck to the floor. As he pulled on the vacuum to dislodge it, it released suddenly and his back struck a nearby pipe. The impact with the pipe threw him forward and he caught himself on the bulk head. The boat he was working on was in a floating dry dock barge, which was attached to a dock.

After claimant filed his Illinois claim, we filed a motion to dismiss for lack of jurisdiction, alleging his sole remedy was under the Longshore and Harbor Workers Compensation Act (LHWCA). The arbitrator ruled claimant could file a claim under the Illinois Workers’ Compensation Act and awarded claimant about 19 weeks of temporary total disability, and $8,310 in medical expenses.

The appellate majority ruled the claim under the Illinois Workers Compensation Act was pre-empted by the LHWCA. The appellate judges examined the history of the LHWCA, and determined claimant could receive coverage under the LHWCA because he was injured in the scope of employment on navigable waters working for a statutory employer. Next, the court analyzed whether claimant had jurisdiction to bring a claim under the Illinois Workers’ Compensation Act. Claimant relied on the arbitrator’s decision, which held he was eligible to bring a claim under both Acts. The arbitrator reasoned that in the U.S. Supreme Court’s decision in Davis there was eligibility under both Acts when employment was “maritime but local.”

The appellate court’s opinion describes this status as a “twilight zone” between the two Acts. The appellate justices concluded the claim did not fall into the “twilight zone” because claimant was injured on navigable waters performing a traditional maritime activity. The court was not persuaded by claimant’s argument that he fell within the “maritime but local” doctrine because of his argument he was not a longshoreman, had never worked as a longshoreman, was not a member of a longshoreman’s union, his employer was a “local” employer, and he strictly worked at and received his paycheck from the same “local” location.

The court stated “[b]ecause claimant has not established that his employment lacks a direct connection to navigation or commerce and that the application of local law would not materially affect the uniformity of maritime law, we conclude that his employment does not fall within the maritime but local doctrine.” The court also noted claimant could still bring a claim under the LHWCA despite its one-year statute of limitations, because of a tolling provision.

If you have questions or concerns about this interesting decision or any issue about Illinois jurisdiction in workers’ compensation settings, please send a reply.

Editor’s Comments: In Franzen v. Ellis (Nos. 07-2009, 07-3358 September 10, 2008) the Seventh Circuit Court of Appeal held Plaintiff was not entitled to damages under the FMLA as he failed to mitigate his damages and was barred from recovery. Plaintiff was not entitled to a second jury trial on the issue damages as

(1) Plaintiff was unable to return to work at end of FMLA 12-week leave period,

(2) He failed to mitigate damages by failing to look for work of any kind and no reasonable jury could have concluded otherwise.

Finally, Plaintiff was not entitled to attorneys’ fees under the FMLA fee-shifting provision as the district court properly entered judgment in favor of defendant on the issue of damages and an interlocutory jury verdict did not constitute a judgment in favor of employee as required by the statute.

Plaintiff was employed as a mechanical engineer. In April 2002, Plaintiff was seriously injured in an automobile accident. On May 2, 2002 he notified the company’s Human Resources Manager he had been injured and was unsure when he would be able to return to work. Plaintiff requested a doctor’s note to establish eligibility to receive leave under the Family and Medical Leave Act (“FMLA”) and short-term disability.

In May 2002, Plaintiff received a packet in the mail including a medical certification form to qualify for FMLA leave and short-term disability. He had 15 days, until May 28, 2002, from date of receipt to return the paperwork or any absences would be considered unexcused. Defendant employer contended despite numerous phone calls to Plaintiff it did not receive the required documentation by the deadline and so denied the request for FMLA leave. His absences through May 28, 2002 were considered unexcused and he was terminated. At no time following his termination did Plaintiff seek employment of any kind.

Plaintiff filed a federal suit alleging Defendant interfered unlawfully with his right to take medical leave under the FMLA and discriminated against him for taking leave. Plaintiff further alleged Defendant breached its employment contract and violated a state law against retaliatory discharge.

Defendant moved for summary judgment on all claims. The federal district court dismissed the contract and state law claims, but found a genuine issue of material fact as to the FMLA claims. The trial was bifurcated into liability and damages phases. The jury heard evidence on liability and rendered their verdict in favor of Plaintiff. The sole issue before the jury was whether Defendant received requisite medical documents from Plaintiff prior to the FMLA deadline.

The district court conducted a bench trial on damages and held Plaintiff was not entitled to any damages due to his failure to mitigate his damages, refused to grant Plaintiff’s request for attorneys’ fees and dismissed the case with prejudice. Plaintiff filed a motion to amend or alter judgment contending he was entitled to attorneys’ fees because the jury had found Defendant violated the FMLA. Plaintiff submitted Defendant should have been estopped during the damages trial from introducing evidence of Plaintiff’s inability to work because this had been implicitly decided by jury. The district court denied the motion.

On appeal, Plaintiff employee raised three issues:

• Whether the district court erred in denying Plaintiff a jury trial on the issue of damages in violation of the FMLA and Seventh Amendment;
• Whether Defendant should have been estopped during the damages phase of trial from introducing evidence of Plaintiff’s inability to work as this issue had been implicitly decided by the jury; and
• Whether the district court erred in denying Plaintiff’s request for attorneys’ fees.

In affirming the judgment of the district court, the Seventh Circuit held Plaintiff was not entitled to a jury trial on the issue of damages under the FMLA and Seventh Amendment because (1) Plaintiff was unable to return to work at end of 12-week FMLA leave period, (2) he failed to mitigate damages by failing to look for work of any kind, and no reasonable jury could have concluded otherwise. If the district court had held a jury trial on issue of damages, it would have been required to direct a verdict for defendant.

The Court held Defendant should not have been estopped during the damages phase of the trial from introducing evidence of Plaintiff’s inability to work as the sole question before the jury was whether Plaintiff had proved by a preponderance of the evidence Defendant employer received the requisite documentation before the deadline. Plaintiff’s ability to work was not presented to the jury.

On the issue of attorneys’ fees, the Seventh Circuit upheld the judgment of the district court denying an award of attorneys’ fees. The Court discussed the liberal fee-shifting provision of the FMLA. In so doing, it noted, that pursuant to the plain wording of statute, an actual “judgment” in favor of plaintiff was necessary to trigger an award of attorneys’ fees.

In the instant case, the district court did not enter judgment in favor of plaintiff. Although the jury found termination of employment violated the FMLA, the district court found Plaintiff failed to prove he was entitled to damages, dismissed the case, and entered judgment in favor of the employer. The Seventh Circuit held an interlocutory jury verdict on issue of liability alone was insufficient to constitute a judgment awarded to plaintiff. An award of zero damages supported by a rational basis in the record was generally considered a judgment for defendant.

Editor’s comment: We love the news service brought in by the administration and again salute their improved technical expertise.

1. The Arbitrators are undergoing statutorily required judicial training September 25-26, 2008; No hearings will be held. There will be no hearings or approval of settlement contracts—it is interesting to note the Commission is asking claimants not be brought to the Commission. We aren’t aware of who is teaching the defense side of the training and we are pretty sure you can’t find out if you have to.
2. The Commission has created a form with which attorneys may notify the IWCC of a change of address.  If you do change address, please submit one IC26 form for each case and be sure to include your attorney code number. The form is on their website or just click on the link: http://www.iwcc.il.gov/ic26form.pdf.
3. Photo IDs needed to enter Thompson Center—the Commission is warning all system participants persons entering their Chicago office in the Thompson Center must present a valid photo identification card.
4. Last but not least, there is a good-bye party for Chairman Dennis Ruth on Thursday, September 25 on the 2nd floor of Midtown Kitchen & Bar starting at 5:00 p.m. Your editor has a prior commitment but wishes the Chairman all the best in his new judicial endeavors. As we have said many times, we didn’t agree with some of his decisions but we respect him for doing what he felt best for the citizens of our state.

Editor’s comment: As we advised last week, wage loss differential claims have skyrocketed since the 2005 Amendments to the WC Act. Claims for wage loss are now based on simple knee and shoulder surgeries—we had one knee claim involving simple surgery where claimant will not settle for less than $300K. We are aware of one truck terminal where every claimant with any medical problem wants wage loss benefits. We consider this new trend to be an Illinois “employer-buster” due to the six- and seven-figure exposures present. Rates and WC payouts are certain to go up as the economy continues to go down.

We have a reader give us a brilliant answer to our query about wage loss differential benefits for Illinois workers in last week’s KC&A Update. We are certain this benefit creates “legalized fraud” for a variety of reasons we outline below. We are also certain there are literally hundreds of questionable wage loss claims coming at Illinois employers and something is going to have to be done to stem the tide. Sadly, we are pretty confident it may not come from the current state administration.

Wage loss differential benefits are supposed to be reserved for severely injured workers who can no longer work in the same trade or occupation and suffer significant wage loss due to the permanent job change. This goal is a valid and bona fide concern for anyone who cares about someone who suffers such a loss—it is unfair for the injured worker to lose their status in life along with the possibility of losing their home, car or the ability to educate their children due to a serious and life-changing work injury. Similarly, it is unfair for an employer to have to pay wage loss differential benefits whose income rises to a level above their pre-injury status.

Please remember the above description is what is “supposed” to occur. For those of us in the trenches of Illinois workers’ compensation practice, that model is far from what actually occurs. We are seeing wage loss differential cases arise not from complex and serious injuries but from simple knee and shoulder surgeries. We recently saw a wage loss claim being made and later settled over our objection for someone who had an injury to the fifth finger of their hand—the work claimed the injury made it harder to grip and lift, therefore he had permanent lifting restrictions, therefore he could no longer do the job!! We truly felt the client panicked and should have let that claim play itself out but they are grown-ups, it is their money and risk so we don’t question.

The reason we make the bold assertion wage loss differential benefits creates legalized fraud is what we call “bad job right away.” This occurs when a construction worker, trucker, nurse or other well-paid worker suffers a moderate injury and very quickly moves into a much lower paying or minimum wage job. Right after they have such work, their attorney fires into the Commission and starts demanding a rapid hearing. In response, the insurance carrier/TPA tries to get a vocational counselor working to get the person a better paying position. The problem with vocational counseling at that point is the person already has a full-time position and it is much harder to get them better paying work when they are busy during the work day and have a minimum wage job on their current resume. Most employers start asking the right questions and understand there is a wage loss differential claim being made and want to avoid a trouble-maker. Some times the job candidate will make certain the job interviewer is aware of their claim of disability and set themselves up as a problem candidate to avoid the “good” job and reinforce their wage loss differential claim.

Why would someone want to stay in a lower paying job? Well, the rewards are great. What someone noticed a long time ago is insurance carriers/TPAs don’t like to manage the claims as the statute contemplates. There is an expense to paying for years of weekly wage loss benefits. So the carriers/TPAs try to “lump out” the benefits.

Here is where things start to go south. When six-figure lump sum settlements started to land, what claimants and lawyers began to focus on was not the need to stay at the same level of income, as the statute is designed. Suddenly, wage loss differential claims become a giant and sad-for-business “game” of trying to get a large lump sum settlement that is tax-free to claimant. Once the large lump sum check is cashed, in the vast majority of claims, the worker later returns to the same job at the same rate of pay. As we previously reported, there is a major Illinois claimant firm whose website brags they got not one but two “career-ending” settlements for one claimant. Please understand there is no proscription in Illinois law for a claimant to seek five or even ten “career-ending” wage differential lump sum settlements—this system doesn’t have a method to police such abuses.

So the easy answer is don’t do lump sum settlements of wage loss claims, right? Well, there is a major road-block to paying them out over the injured worker’s lifetime and hoping the injured worker makes more money in the future. In Cassens Transport v. Industrial Commission, the Appellate Court was faced with a claim that a worker receiving a substantial weekly wage differential benefit was asked to disclose additional new income so the benefit could be adjusted.

With deference to the Court, they ruled wage loss benefits could not be changed solely based upon new or increased income to claimant. The Court ruled there had to be a change in the “disability.” Please note most legal scholars consider this a political ruling—there is nothing in the statute that sets out such a requirement. Wage loss is set by considering both disability and wage levels; why would modification of the benefit look only to disability?

This legal concept sets up this possible scenario:

1. Claimant makes $1,500 per week or $78,000 per year driving trucks.
2. Claimant strains his back and has surgery with a permanent 50-lb lifting restriction—this restriction precludes truck driving.
3. Claimant gets a new, lower-paid job and is adjudicated to have a weekly wage loss differential of $500 per week.
4. On top of his new pay, claimant is paid $500 per week in weekly wage loss benefits by his former employer for two years.
5. His employer pays for training and claimant then finds a much better paying job as a certified computer technician making $2,500 per week or $130,000 per year.
6. Claimant’s old employer goes to the IWCC, points out the great new job they helped claimant to get and seeks relief from having to keep paying $500 per week.
7. Under the Cassens Transport ruling, claimant is entitled to the annual salary of $130K and they keep getting the $500 per week—under current medical science, we can safely assume he still has the sequalae of back surgery and a 50-pound lifting restriction.

Please note this scenario is one of the reasons many observers feel the defense side of the 2005 Amendments to the Workers’ Compensation Act were misled when they were told the period of time to modify wage loss cases was “extended” from thirty to sixty months. Basically, this legislative change made it possible to not change wage loss differential claims for up to sixty months.

So what do we do? Well, the sharp reader we mentioned above gave us a great model. First, legislatively throw out the Cassens Transport ruling and modify wage loss based on current wages and disability. She felt wage loss differential benefits could and should be modified every twelve months for the first five years. At the end of each year, the employee has to submit their tax returns and the employer and claimant could agree to seasonally modify the weekly benefit due. If they can’t agree, either side could go the IWCC and ask the Arbitrator to enter an appropriate order.

Thereafter, make it incumbent on the employee to report any wage loss changes at five-year intervals.

Further, we truly feel there should be some limit on eligibility for wage loss differential benefits—for example, you can make $150,000, $200,000 or $500,000 per year and still be entitled to wage loss benefits. If you think we are kidding, there is a decision for one of the Chicago Bears who still got wage loss benefits despite making $400K per year after leaving the team. We consider that to be completely unnecessary; at a certain point, you shouldn’t need assistance to be even wealthier than you already are.

Finally, wage loss benefits should end whenever wages end. At present, wage loss differential is paid or calculated for the entire life of claimant. Very few workers work to the end of their lives. If the employee retires or withdraws from the workforce, the employer should be able to stop supplementing “wages” the employee isn’t seeking.

As usual, our goal isn’t to end bona fide wage loss differential benefits. Our goal is to keep them as a benefit in an appropriate situation. Please reply with your thoughts and comments.

Editor’s comment: As we have told our readers, one preliminary aspect to any WC claim is a valid contract of employment. Frank Keres, a top-notch construction risk manager advised us of a landmark ruling from the East Coast that highlights the importance of that concept.

In Freeman v. Rothrock, the North Carolina Court of Appeals applied common law contract theories to deny workers’ compensation benefits. In that case, the injured employee/plaintiff, had previously suffered back injuries while working as a truck driver from a prior employer. There was no dispute the driver received substantial workers compensation benefits from the previous employers. After the most recent of the prior injuries, he was advised that his physical restrictions would make him incapable of working as a truck driver, and he should therefore seek employment.

Four years later, Plaintiff sought employment with Defendant. As part of the employment application process, Plaintiff completed a medical history questionnaire in which he denied suffering any prior back conditions, denied having any health issues that would prevent him from working, denied having any work restrictions or any impairments and denied having ever filed a workers compensation claim. On a form for a medical exam, which was required for employment, he left the spaces pertaining to prior medical history blank.

Two years after being hired, Plaintiff again hurt his back and filed a claim for workers compensation benefits, which he was awarded, based on the conclusion of the North Carolina Industrial Commission normal standards for compensation were satisfied. The North Carolina Court of Appeals reversed the award. Recognizing the basic principle there should be no “judicial legislation” in the interpretation of workers compensation statutes, the Court of Appeals ruled common law rules apply to “construing the provisions” of the Workers’ Compensation Act. Specifically, the court held common law rules apply in determining if there was an employment relationship at the time of the injury.

In examining the facts of the case, the court examined the thorough application process and medical questionnaire on which Plaintiff knowingly misrepresented his medical condition and Defendant’s reliance on that misrepresentation in its decision to hire Plaintiff. The court also found a direct connection between the misrepresentation and the subsequent injury. Looking to the workers compensation statute, which defines an employee as a person engaged in employment “under any appointment or contract of hire …, express or implied, oral or written,” the court found the willful misrepresentation of material information and the direct link to the subsequent injury satisfied the common law definition of fraud in the inducement of employment; therefore, no employment relationship ever actually existed. Thus, fraud in the inducement of employment would render the employment contract void. In the absence of a valid employment contract, a claimant would fail to meet the statutory definition of an ‘employee’ and would therefore lack standing under the Workers’ Compensation Act.

This matter is presently pending appeal in the state’s Supreme Court. We are certain it will be watched by employers across the U.S. If you have thoughts or comments, please send a reply. For your construction risk management needs, Frank Keres can be reached via email at frank.keres@constructionriskassociates.com.

Editor’s comment: As we await word on whether our current Gov will be indicted, we note with cautious optimism the rising tide of reform coming from our Illinois State Chamber of Commerce. The current president, Doug Whitley has thrown his hat into the political ring and will be seeing if the grass-roots support is there for him to run as a reform candidate for Governor of Illinois in the fall of 2010. We truly feel Doug is honest, hard-working and as knowledgeable about Illinois state government as any human on this planet. He has lived a career devoted to improving the lot of Illinois business in a state that has some times appears driven to torture and punish business at every turn. We are confident Doug’s campaign will center on jobs, good jobs and more jobs for Illinois citizens.

Doug and his supporters are forming an exploratory committee to test the water for a run at the Governorship. Many of our readers have been encouraging about such a candidacy in the past and Doug hopes you will be again as he moves forward with this tremendous undertaking. Doug will be a great champion of WC changes and Commission revisions and is hopeful our readers will use your networks, outreach and communications tools to help recruit critically important campaign seed funding. The immediate goal is 100 business and/or individuals giving $10K each. Unlike the federal elections there are no limits to state and local candidates and the corporate/business funds are welcome. We are going to send our initial donation this week and encourage all of our readers to consider doing so now and not later.

This weekend Doug expects to exceed the financial threshold for forming a political committee and filing with the state board of elections the committee “Whitley for Illinois”. The committee’s P.O. Box is 156, Batavia, Illinois 60510 and is open for business. After receiving the blessing of the Chamber’s Board of Directors last week, organizing matters have moved quickly this week. Doug and his staff expect to open a bank account, file with the state board of elections and launch a web site.

If you did not note the September 9 President’s Message announcing the move it is accessible from the chamber web site http://www.ilchamber.org/ under E Publications, President’s Archive.

Editor’s comment: Another change that occurred during the 2005 Amendments to the Act was raising the bar on wage loss claims. In a claim that used to follow the PPD maximum we saw, for reasons justified only by the forces of Illinois labor, wage loss differential limits raised to a level much higher than previously used. What happened is a “gold rush” of new wage loss claims at every level.

Commission observers will tell you that total and permanent disability claims remain tough for a claimant to obtain—the Commission still has something of a “hard-working Yankee” mentality when it comes to giving out lifetime benefits for those who claim they can do no work of any kind. However, wage loss differential claimants are working, albeit at lower wages. Arbitrators and Commissioners are much more likely to allow them “half-a-loaf” that allows claimant’s attorney to cash in if they can convince the carrier/TPA to provide a lump sum settlement.

At present, the weekly wage differential maximum is $912.56. This means that a worker seeking a maximum wage loss differential is entitled to as much as $47,453.12 tax-free on an annual basis for life. The undiscounted value of a maximum rate wage loss case for a 25-year-old worker is a chilling $2,372.656.00.

We are now starting to see claim after claim filed seeking to take advantage of the largesse afforded by Illinois law. The buzz-words needed are “permanent restrictions” from a treating physician. Once one has such restrictions or limitations, the key to big money awaits at the IWCC. We know of one truck terminal in the south suburbs of Chicago where every claimant is seeking wage loss benefits.

We recently saw a claim where a young worker suffered bilateral carpal tunnel syndrome. He was making about $30.00 per hour. Following surgery, his doctor gave him the new “lottery winner” diagnosis—he provided permanent work restrictions. The well-meaning employer brought the worker back to work at a lower-paid permanent light-duty position paying $15.00 per hour.

Following a hearing, the Arbitrator issued an award allowing the employee to collect a lifetime benefit that will be a tidy $790,000, if he lives to his full life-expectancy. We aren’t kidding—if you want a copy of the award, send a reply.

Present value of that award is just shy of $400,000. We are certain the forces of labor feel this is a solid outcome—the young man gets to keep a good job with benefits and cash a regular tax-free check for annual benefits or get a lump sum of about $400K. We assure our readers the forces of Illinois business are revolting at the very thought of such an award or payment, particularly to someone who can buy a new home or several cars and flout their new-found wealth at the plant or work site. The cost of paying for medical care, lost time and that much money for permanency will bankrupt some companies.

The problem for business in this state is what to do about it? Well, trying to reform wage loss claims will be a true challenge. The attorneys and claimants driving such claims will be heard in Springfield, claiming they are being abused if they don’t get such awards. We expect some businesses with high-risk jobs will have to consider moving to our sister states that don’t provide lottery-winner-type permanency benefits.

We need your thoughts. What do you think is the best method to insure someone keeps the same approximate level of income but that doesn’t wildly penalize the employer?

Editor’s comment: Someone is going to have to step up and stop these abuses. Is anyone troubled by the fact the surgeon is getting a small fraction of the cost of the room where they are doing all the work?

Example A.

• Claimant goes for routine shoulder surgery. The physician/surgeon’s charges under the Illinois Medical Fee Schedule for four procedure codes total approximately $6,000.00.
• The outpatient or ambulatory surgicenter, from the Kankakee area, is not bound by the Medical Fee Schedule and charged more than $44,000!
• Even at the 76% discount provided by the Medical Fee Schedule, the cost remains prohibitive and we feel clearly represents gouging.
• As we previously reported, we feel such charges represent costs in excess of $10,000 per hour for providing the room, lights/supplies and waiting room magazines.

Example B.

• Claimant needs and receives routine injections to the spine.
• The physician/surgeon only gets $624.91 for CPT 64483 and $399.95 for CPT 64484.
• The Ambulatory Surgery Center from Chicago bills $14,000+ for procedures that take about twenty minutes.

Example C.

• Claimant undergoes “mini-open” repair shoulder surgery. The physician/surgeon charges and is paid about $6K for the same coding in Example A above.
• A different Ambulatory Surgery Center in Chicago bills $17,000 for procedures that take less than one-half of a day.
• This is dramatically lower than Example A above but the cost still doesn’t justify the services being provided.

Please understand there are a number of methods to stop this silliness. One is to try to set surgeries and other outpatient procedures outside of Illinois! We hate to make such recommendations to our clients and readers but, if the Illinois WC system is going to continue to allow Ambulatory Surgery Center costs exceeding $10,000 per hour, you could fly a patient to Europe and get the same treatment there!!!

We also point out there is no reason, none, that Illinois business should pay dramatically more simply because they accept the claim under workers’ compensation. There is no chance that Blue Cross/Blue Shield® or any similar group medical provider would consider such amounts for ASC services.

Our concern is this problem was caused by the 2005 Amendments to the Act and seeing case after case where there are abuses present cries for further reform. Obviously, just closing the gap is the easiest method to move forward. As it has been three years since enactment of the 2005 Amendments, it is hard to imagine why nothing has happened.

If you have thoughts, comments or questions, please send a reply.