Keefe, Campbell & Associates, LLC

Editor’s comment: In Cramer v Viacom Outdoor 2009 WL 3807341 (Ill.Indus.Com’n), Commission Panel B upheld denial of benefits determined by the Arbitrator based upon an injury which occurred at an employer sponsored charity bowling event. The pertinent facts noted the event occurred during the afternoon hours of what was otherwise a normal business day. The employees including Petitioner worked the earlier part of that day in the office up until 1:30 PM when they departed for the event at a local bowling alley. The employees were paid regular wages for the time they attended the event and if they didn’t attend, the office manager testified they would have been paid regular wages but would have been required to attend to regular office duties.

While bowling, Petitioner sustained a comminuted fracture of the articular surface of left distal radius and a comminuted fracture of the left humeral neck along with a tear of the left supraspinatus. She underwent an open reduction with internal fixation of hardware to repair the radius fractures. As a result she has lost significant range of motion in both the wrist and shoulder joints.

Even though Petitioner testified she felt “pressured” to attend the event the claim was denied. We note she did not testify that she was ordered or assigned to attend the event, as the statute would require for injuries to be compensable. The employer’s witness who was their Human Resources manager testified employees were not ordered or assigned to attend the event. While language in notice of event strongly encouraged everyone to participate, it provided employees not wishing to participate will be required to work their normal day. Employees were asked to advise whether or not they would be participating. Each participant was required to make a minimum $15.00 donation. However, the company promised to pay for the bowling and shoe rental.

The basis for the denial is the exclusionary language found in Section 11 of the Act. The relevant portion of Section 11 reads as follows: “Accidental injuries incurred while participating in voluntary recreational programs including but not limited to athletic events, parties and picnics do not arise out of and in the course of the employment even though the employer pays some or all of the cost thereof. This exclusion shall not apply in the event that the injured employee was ordered or assigned by his employer to participate in the program.”

Another key fact was an attendance record showing ten of the 36 employee staff (27%) did not sign up to attend the event, although they did make a donation and there was no evidence presented that any of the employees who did not attend the event were disciplined or discriminated against in any way by the company.

This case is a good example of an Arbitrator who heard all of the evidence and determined all appeared to be credible, but noted the language of the Act and the overwhelming facts in the matter did not support compensability under the Illinois WC Act. Respondents can also take away the lesson that good investigation and presentation of evidence still is an effective method of defending claims with actual defenses.

If you are planning a recreational outing for your workers now or in the future, we have a release form you can use to insure accidents occurring during the event are not compensable. If you would like a copy of the form, send a reply. This article was suggested by a knowledgeable reader and we thank her for the tip. It was then researched and written by Shawn R. Biery, JD. Please forward any comments or requests to sbiery@keefe-law.com.

Editor’s comment: Taking you back down memory lane, we recall the first Chairman appointed by our current Governor-out-on-bond, supported a change to the funding of the later renamed Illinois Workers’ Compensation Commission. It was the new Chairman’s goal to follow the model of the State of Missouri and a number of other states to move the Commission out of being funded by the General Revenue Fund for our state and into a new anti-business insurance and payroll surcharge which didn’t require him to go to the legislature and the Governor to make the changes he wanted to make at the Commission. We assure you some of the changes he wanted were to double or triple the number of Arbitrators, bring in or “appoint” any number of Plaintiff/Petitioner attorneys to serve in his image and likeness and more than double the budget of the Commission.

What he got was the Illinois Industrial Commission Operations Fund Surcharge. This was supported the Democrat House, Senate and Governor because they were then free to spend the monies they used to have to spend for the Commission on other fun stuff. In our view, the problems were two-fold.

Illinois business now had to fully fund the Plaintiff/Petitioner-oriented Commission to provide new laws and rules to be administered by folks beholden to Illinois labor;

The monies were used to basically increase workers’ compensation costs in this state to the stratospheric levels they have currently reached;

The surcharge added a new anti-business fee which would more than exponentially increase the budget of the Commission.

On April 22, 2004, the Illinois State Chamber of Commerce filed suit against the State of Illinois boldly challenging the newly imposed fees created by then-Governor Blagojevich’s new Industrial Commission Operations Fund Surcharge. The complaint alleged the statute imposed a surcharge on employers’ and workers’ compensation carriers intended to generate $31-million to fund the operations of the Industrial Commission, even though the actual budget for the Industrial Commission was dramatically lower. The complaint alleged the fees were unconstitutional and improper. The fee imposed the total cost of workers’ compensation administration and adjudication solely on Illinois employers. Most important, the bill over-funded the Industrial Commission for no particular reason.

In November 2004, Circuit Court Judge Patrick McGann declared unconstitutional the Industrial Commission Operation Fund Surcharge. That ruling called into question hundreds of business fees the state enacted or increased at the time. McGann ruled the surcharge created an arbitrary class of taxpayer and violated a provision of the state constitution that requires all new fees to operate like existing fees, which raise only enough money to cover specific activities. In the case of the workers compensation insurance surcharge, the fee ostensibly was to pay the cost of operating then-named Illinois Industrial Commission.

McGann ruled the surcharge had no “reasonable relation” to the cost. He noted in his ruling the workers compensation surcharge brought in $31 million and $22 million of it was not going to the Commission but to the state’s general fund. “The surplus resulting from this fee increase was clearly anticipated,” McGann wrote in his ruling. He added, “This is clearly beyond the role of fees in the financing of governmental operations.”

The Illinois Supreme Court later ruled McGann correctly refused the state’s request to dismiss the case, but added he had acted prematurely in ruling for the State Chamber and sought more factual findings. State Chamber President Doug Whitley was furious to see our highest court not simply note the State agreed with all the allegations and affirm the ruling. The litigation then ran on for five-six more years.

At present, the parties have reached a class action settlement. Your organization may be able to get monies back. Preliminary approval for settlement of the lawsuit has been provided by the Circuit Court of Cook County. The sum of $3,300,000 which now resides in a Protest Fund will be placed in a claim fund to be distributed to class members who can support their claim for repayment. The support for claim can be made with documentation of cancelled checks, invoices showing the surcharge or other proofs of payment as long as they make a claim for repayment during the claims period in the appropriate manner. The method to make a claim is currently proposed to be with either mailing a claim form to the Administrator Robert Langendorf or emailing the Administrator at robert.langendorf@gmail.com.

The amount of refund will be limited to 45% of the Surcharge paid between July 1, 2003 to June 30, 2004 and 10% of the Surcharge paid July 1, 2004 to June 30, 2009. The current proposed settlement agreement can be seen on the web at IWCC-Chamber preliminary settlement agreement and the preliminary approval order can be found on the web at IWCC-Chamber settlement preliminary approval ORDER.

We urge our readers to continue to support State Chamber President Doug Whitley and the Illinois State Chamber of Commerce that is clearly out on point in trying to reform workers’ compensation in this state.

This article was researched and written by Shawn R. Biery, J.D. You can direct any questions, get help to handle or receive a claim form and/or claim form worksheet with reply to Shawn at sbiery@keefe-law.com.

Editor’s comment: As we advised last week, we are certain some of Illinois workers’ comp rates are now wrong. We had at least fifteen readers/clients suggest we write to see if they will address it and voluntarily change the rates to correct statutory values. With greatest respect, we are providing this pre-mandamus letter to the Chairman and all sitting members of our Commission (you may note Commissioner Paul Rink remains listed on their website but retired on February 26, 2010).

Please consider this our formal request to correct the rates posted on the web at http://www.state.il.us/agency/IIC/benefits.htm to be in compliance with §8(b)4 of the Illinois Workers’ Compensation Act. While we note the Commission’s website provides a caveat indicating the statute takes precedence, we do not want our clients to have to set rates at different values and litigate this on a piecemeal basis at a high cost to possibly contradictory outcomes.

We note the relevant parts:

From July 1, 1977 and thereafter such maximum weekly compensation rate in death cases under Section 7, and permanent total disability cases under paragraph (f) or subparagraph 18 of paragraph (3) of this Section and for temporary total disability under paragraph (b) of this Section and for amputation of a member or enucleation of an eye under paragraph (e) of this Section shall be increased to 133-1/3% of the State’s average weekly wage in covered industries under the Unemployment Insurance Act.

The website lists the rate as $1,243; however 133-1/3% of the State’s average weekly wage calculates to $1,229.93.

§8(b)4.1. Any provision herein to the contrary notwithstanding, the weekly compensation rate for compensation payments under subparagraph 18 of paragraph (e) of this Section and under paragraph (f) of this Section and under paragraph (a) of Section 7 and for amputation of a member or enucleation of an eye under paragraph (e) of this Section, shall in no event be less than 50% of the State’s average weekly wage in covered industries under the Unemployment Insurance Act.

The website lists the rate as $466.13 however 50% of the State’s current average weekly wage calculates to $461.23.

Because numerous sources have requested clarification on this issue, we believe time is of the essence and would appreciate a reply or correction posting by April 1, 2010 to allow us to resolve the matter or request more formal resolution.

This letter was drafted by Shawn R. Biery, J.D. It will be forwarded to Chairman Masters and the other Commissioners on March 9, 2010. We will post any reply in a future Update.

Editor’s comment: This is a decision that is hard to argue with. It appears some children are better off if their biological forebears are not working. In Illinois Department of Healthcare and Family Services Ex Rel. Elizabeth A. Black v Frank H. Bartholomew, the Fourth District of the Illinois Appellate Court affirmed a Circuit Court ruling allowing the payment of child support arrearage from a workers’ compensation award and ruled Illinois law and public policy allow a trial court to apply proceeds from a workers’ compensation settlement toward a child-support arrearage.

By way of background—in March 2005, Elizabeth and Frank, who were not married, had a son, Nicholas. Frank signed a voluntary acknowledgment of paternity and “accepted the obligation to provide child support” for Nicholas. On February 6, 2007, the Department issued an administrative support order pursuant to its authority under article X of the Illinois Public Aid Code (Code) (305 ILCS 5/10-1 through 10-28 (West 2006)) requiring Frank to pay child support of $428.52 per month. On August 23, 2007, the Department issued an income-withholding notice to Frank’s employer ordering it to withhold $428.52 per month for current child support, as well as $85.70 per month toward a delinquency of $6,602.34. On October 23, 2007, Elizabeth filed a petition to establish the existence of a father-child relationship and for other relief. With her petition, Elizabeth provided a copy of the voluntary acknowledgment of paternity, the administrative support order, and the income-withholding notice and alleged Frank had filed a workers’ compensation claim and was awaiting settlement. She asked the trial court to adjudicate Frank the father of Nicholas, order him to pay child support, prohibit him from dissipating any workers’ compensation settlement, and grant her 20% of any such settlement as current child support. On January 3, 2008, the trial court held a hearing on Elizabeth’s petition. Frank failed to appear.

On January 7, 2008, the court entered an order finding Frank the father of Nicholas, ordered him to pay child support pursuant to the administrative order, ordered Frank not to dissipate any of his workers’ compensation settlement without court order, and determined Elizabeth should receive 20% of the net settlement in addition to the child-support arrearage already owed her, which amounted to $6,602.34 as of August 23, 2007. On January 28, 2008, Frank filed a motion to vacate the part of the trial court’s order requiring payment of past-due support from his settlement, arguing such payment was barred by Section 21 of the Illinois Workers’ Compensation Act, which prohibited workers’ compensation awards from “be[ing] held liable in any way for any lien, debt, penalty[,] or damages.” On April 1, 2008, the court entered an amended order requiring Frank to place his settlement funds in trust until further order of the court determining the amount to be paid Elizabeth. Thereafter, Frank received a workers’ compensation settlement of $175,000. After multiple proceedings, an order was issued indicating funds previously ordered to be held in trust in the amount of $9,216.77 shall be applied toward the child-support arrearage and interest due under the administrative support order and Frank appealed from the court’s orders.

There was no objection to the use of Frank’s workers’ compensation settlement to pay current child support. He argues, however, a request for payment of an arrearage pursuant to a child-support lien for payment of a past-due support obligation is a debt that is barred from collection from his compensation settlement. Frank argues workers’ compensation benefits are exempt from judicial process for child-support arrearages.

Section 21 of the Act provides, in pertinent part, as follows: “No payment, claim, award[,] or decision under this Act shall be assignable or subject to any lien, attachment[,] or garnishment, or be held liable in any way for any lien, debt, penalty[,] or damages.” 820 ILCS 305/21 (West 2008).

The exception to income exemptions from judgment appears in section 15(d) of the Income Withholding for Support Act (Withholding Act) (750 ILCS 28/15(d) (West 2008)), which provides as follows: “(d) ‘Income’ means any form of periodic payment to an individual, regardless of source, including *** workers’ compensation ***[.] * * * Any other [s]tate or local laws which limit or exempt income or the amount or percentage of income that can be withheld shall not apply.”

The Court noted the language of section 15(d) of the Withholding Act is clear and straightforward. Any other state or local law purporting to exempt statutorily defined income, which includes workers’ compensation benefits, does not apply to proceedings involving the collection of child support and further noted that if the legislature wanted to exempt workers’ compensation payments from collection of child-support arrearages, it could have done so when it enacted the Withholding Act in 1999. Instead, the language of section 15(d) of the Withholding Act is clear.

The Court also noted applying Frank’s workers’ compensation settlement funds to his past-due child support also serves the intent of the Act because the Illinois workers’ compensation scheme (THEIR TERM, NOT MINE) was enacted “to furnish a measure of financial protection to the workman and his dependents for injuries received by him which arose out of and in the course of his employment.” They further noted Sections 7 and 8 of the Act recognize a worker’s dependents are intended beneficiaries. Section 7 provides for compensation to go directly to a worker’s dependents in the event of a fatal injury (820 ILCS 305/7 (West 2008)), and Section 8(b) provides a worker’s compensation for nonfatal injuries is increased if he/she has a spouse and/or child (820 ILCS 305/8(b)(1), (b)(2), (b)(2.1) (West 2008)).

Because dependents are intended beneficiaries of workers’ compensation awards, the public policy furthered by the exemption in Section 21 of the Act is to protect workers and their dependents from the claims of outside creditors, not to shield workers from their own internal family obligations. As the Supreme Court explained in Logston, the purpose of income exemptions in general is to ensure creditors cannot deprive debtors of the means of supporting themselves and their dependents. Logston, 103 Ill. 2d at 279-80, 469 N.E.2d at 172-73. Illinois law and public policy allow a trial court to apply proceeds from a workers’ compensation settlement toward a child-support arrearage. Accordingly, the trial court did not err when it ordered Frank’s child-support arrearage plus interest be paid from his workers’ compensation settlement.

So the bottom line is that at some point if you get some benefit, the state and the taxpayers will expect you to take care of you obligations to your family. I highlight the fact the settlement was $175,000 and the amount of child support in arrears was less than $10,000. It is difficult to fathom why the time and effort was spent trying to avoid paying child support which was past due. Here is hoping little Nicholas learns his lessons from someone other than his proud papa. The ruling is on the web at http://www.state.il.us/court/Opinions/AppellateCourt/2009/4thDistrict/December/4090197.pdf. This article was written by Shawn R. Biery, J.D. Please feel free to email Shawn at sbiery@keefe-law.com with your thoughts and comments.

Editor’s comment: The following debate is one reason we need watchdogs as solid as Keefe, Campbell & Associates partner Shawn Biery and George Picha of the Rockford firm of Picha and Salisbury in relation to our state officials. With all the other information posted on the excellent website of the Illinois Workers’ Compensation Commission, we have no idea why they wouldn’t fully disclose what they were doing with rates when the SAWW went down for the first time in recent memory. We don’t agree at all with the position they are taking and it is now incumbent on our readers to tell us your thoughts.

The Illinois Statewide Average Weekly Wage in Illinois went down from $932.25 to $922.45 in the January 15, 2010 changes. However, the calculated amount of the 133-1/3 of the SAWW remained at the previously level of $1,243.00 instead of lowering with the SAWW to the appropriate calculation of approximately $1,230.18. The IWCC website bluntly indicates “* As provided in Section 8(b)4, there is no increase in the benefit rates for 1/15/10 – 7/14/10 because the SAWW decreased.”

However, §8(b)6 of the Illinois Workers’ Compensation Act indicates “(t)he Department of Employment Security of the State shall on or before the first day of December, 1977, and on or before the first day of June, 1978, and on the first day of each December and June of each year thereafter, publish the State’s average weekly wage in covered industries under the Unemployment Insurance Act and the Illinois Workers’ Compensation Commission shall on the 15th day of January, 1978 and on the 15th day of July, 1978 and on the 15th day of each January and July of each year thereafter, post and publish the State’s average weekly wage in covered industries under the Unemployment Insurance Act as last determined and published by the Department of Employment Security. The amount when so posted and published shall be conclusive and shall be applicable as the basis of computation of compensation rates until the next posting and publication as aforesaid” (emphasis added).

Based upon the SAWW declining to a point under the January 15, 2009 rates, it appears only appropriate Illinois employers would receive the relief of a rollback to those rate maximums.

To illustrate further—there are multiple rates affected and by plain reading of the Act, the rates posted and promulgated by the IWCC directly controvert the plain language of the Act. §8(b)4 of the Illinois Workers’ Compensation Act says in relevant parts:

The maximum weekly compensation rate from July 1, 1975, except as hereinafter provided, shall be 100% of the State’s average weekly wage in covered industries under the Unemployment Insurance Act, that being the wage that most closely approximates the State’s average weekly wage.

Effective July 1, 1987 and on July 1 of each year thereafter the maximum weekly compensation rate, except as hereinafter provided, shall be determined as follows: if during the preceding 12 month period there shall have been an increase in the State’s average weekly wage in covered industries under the Unemployment Insurance Act, the weekly compensation rate shall be proportionately increased by the same percentage as the percentage of increase in the State’s average weekly wage in covered industries under the Unemployment Insurance Act during such period.

The maximum weekly compensation rate, for the period January 1, 1981 through December 31, 1983, except as hereinafter provided, shall be 100% of the State’s average weekly wage in covered industries under the Unemployment Insurance Act in effect on January 1, 1981. Effective January 1, 1984 and on January 1, of each year thereafter the maximum weekly compensation rate, except as hereinafter provided, shall be determined as follows: if during the preceding 12 month period there shall have been an increase in the State’s average weekly wage in covered industries under the Unemployment Insurance Act, the weekly compensation rate shall be proportionately increased by the same percentage as the percentage of increase in the State’s average weekly wage in covered industries under the Unemployment Insurance Act during such period.

From July 1, 1977 and thereafter such maximum weekly compensation rate in death cases under Section 7, and permanent total disability cases under paragraph (f) or subparagraph 18 of paragraph (3) of this Section and for temporary total disability under paragraph (b) of this Section and for amputation of a member or enucleation of an eye under paragraph (e) of this Section shall be increased to 133-1/3% of the State’s average weekly wage in covered industries under the Unemployment Insurance Act.

Wage Differential Maximum—For injuries occurring on or after February 1, 2006, the maximum weekly benefit under paragraph (d)1 of this Section shall be 100% of the State’s average weekly wage in covered industries under the Unemployment Insurance Act.

4.1. Any provision herein to the contrary notwithstanding, the weekly compensation rate for compensation payments under subparagraph 18 of paragraph (e) of this Section and under paragraph (f) of this Section and under paragraph (a) of Section 7 and for amputation of a member or enucleation of an eye under paragraph (e) of this Section, shall in no event be less than 50% of the State’s average weekly wage in covered industries under the Unemployment Insurance Act.

While it may not affect the majority of cases as it deals with maximum levels of benefits, we feel it illustrates an example of the IWCC actively presenting information which ignores the plain language of the Act to the detriment of Illinois employers. Assume we will see a change without notice as we saw in the stealth increase in the PPD maximum within the prior year’s changes. It doesn’t take a degree in economics to know that increased business costs are inversely proportional to job creation. This article was researched and written by Shawn R. Biery J.D. Please reply to Shawn with your thoughts and comments.

Editor’s comment: While the duty to pay TTD when restricted from full work and after a job search shows lack of employability is in line with prior Illinois holdings, the denial of partially unrelated care resulting in penalties/fees appears to open a door to even more hardship for Illinois employers who will be penalized at times of what appears to be “true controversy” which should provide a defense to penalties. On a final note, the Court did note penalties and fees under the WC Act were sufficient to protect the injured employee’s interests and denied Supreme Court Rule 375 sanctions.

In Residential Carpentry v. The Workers’ Compensation Commission (No. 3-08-0122WC March 27, 2009), Plaintiff Tibbitts filed an Application for Adjustment of Claim alleging a work-related injury to his shoulder. The Arbitrator found Claimant credible and awarded him 28 weeks temporary total disability (TTD), existing and prospective medical expenses, as well as penalties and attorney fees. The Workers’ Compensation Commission adopted that decision, and the Will County Circuit Court confirmed its decision. Respondent Residential Carpentry appealed the TTD and penalties and fees.

The Appellate Court also noted claimant’s request for sanctions under Supreme Court Rule 375 (155 Ill. 2d R. 375) to “hopefully minimize the need for injured workers to have to endure this process to this extent in the future.” The Court noted imposition of sanctions under this rule is a matter “left strictly to our discretion” and further noted they believed the fees and penalties imposed by the Commission adequately protect that interest and rejected claimant’s request.

It was noted Petitioner worked light duty for a period of approximately 17 months prior to layoff and only requested TTD after layoff resulted in his claimed inability to locate employment. The layoff was for purely economic reasons and Respondent argued this fact should result in denial of TTD. From the decision, it appears TTD would more than likely have been denied except for the fact of a job search which met the standard of the Archer Daniels Midland case in which it was noted evidence of a diligent search for employment was sufficient to show claimant was not employable resulting in TTD being owed. This job search including search logs and ongoing union contacts to locate work shifted the burden to Respondent to show work would have been available and it does not appear any evidence was presented on behalf of Respondent to show there may have been work available.

In relation to the appeal of penalties and fees, Respondent asserted its refusal was reasonable under the circumstances because a portion of the condition of claimant’s shoulder was not related to his employment and Respondent did authorize the repair of claimant’s rotator cuff, and it only denied authorization for the clavicle resection portion of the surgery which was in dispute. The Court noted the Arbitrator correctly observed it would not be reasonable to have a doctor operate on one part of claimant’s shoulder, but not on another part that could be addressed during the same procedure. In essence, it was not reasonable for Respondent to attempt to subdivide a region of claimant’s body in a manner contrary to how it would be treated in the normal course of medical practice. The Court refused to state the Commission’s decisions to award claimant fees and penalties were against the manifest weight of the evidence due to testimony of the treating physician relating the entire condition.

This case is another example of the proposition confirming TTD will be due if work is shown to be unavailable to an injured worker. The more disturbing issue raised is the systemic penalty at every level to a Respondent who—while agreeing to pay for the portion of a procedure deemed related—refused full authorization based upon a medical dispute based upon a medical opinion from Dr. Betzelos who denied relation of a portion of the condition and was penalized for their decision to rely on a medical opinion providing the basis for the dispute. While we are sure most Petitioner attorneys will trot out the age old “IME doctor gets paid for his opinion” adage to pooh-pooh the legitimacy of the dispute, it should be noted that the treating physician also gets paid—generally at a higher rate of WC claims and also always has an “interest” in obtaining approval for expensive procedures. If Respondents are to now try to determine whether they will be penalized for relying on an expert, the employees of the state can start house hunting in our sister states now because the only thing slowing down the exodus out of Illinois will be the annual road construction which has started to slow the travel.

This article was researched and written by Shawn R. Biery, J.D. If you have thoughts and comments or need the case citation, please send a reply to sbiery@keefe-law.com.

Editor’s comment: While most medical providers in this state are upset over the reduction of their fees for patient care, like the theory of “one bad apple spoiling the bunch”, many suffer due to the sins of others. However, between cases of excessive treatment and attempts to circumvent or manipulate the Fee Schedule, we believe providers will continue to see bills reduced until they begin to police themselves.

In Martis v. Grinnell Mutual Reinsurance Company, No. 3-08-0004 Illinois Appellate Court Third District (March 27, 2009), Plaintiff—a chiropractor—filed a class action complaint against Defendant, Grinnell Mutual Reinsurance Company, alleging conspiracy, unjust enrichment, violation of the Illinois Consumer Fraud Act and breach of contract. The trial court dismissed all but Defendant’s breach of contract claim. The trial court then granted Plaintiff’s motion to certify a class. On appeal, Defendant argued

(1) Plaintiff does not have a valid breach of contract claim, and

(2) The trial court abused its discretion by certifying a class.

The Appellate Court Third District held Plaintiff cannot state a claim for breach of contract against defendant and thus, reversed and remanded.

Plaintiff chiropractor began treating an employee of Water Management Corp. of Illinois who was injured while working. Water Management had a workers’ compensation insurance policy from Defendant Grinnell Mutual Reinsurance Company. That policy listed Water Management Corp. of Illinois, employer, as the insured. The policy stated: “We [Grinnell] will pay promptly when due the benefits required by you [employer] by the workers compensation law.” Another provision of the policy stated: “We [Grinnell] are directly and primarily liable to any person entitled to benefits payable by this insurance. Those persons may enforce our duties; so may an agency authorized by law. Enforcement may be against us or against you [employer] and us.”

After Plaintiff provided medical treatment to the Water Management employee, Plaintiff submitted bills to Defendant for payment. Plaintiff’s bills were reviewed by a third-party medical invoice review firm, which applied PPO discounts to Plaintiff’s bills even though Plaintiff did not have a PPO agreement with Defendant. Defendant paid Plaintiff the discounted amounts.

In response, Plaintiff filed a seven-count complaint against Defendant, seeking to represent a class of Illinois health care providers who submitted bills to Defendant under workers’ compensation insurance and had bills reduced because of a PPO discount even though the providers did not have a PPO contract with Defendant. Defendant filed a motion to dismiss Plaintiff’s complaint.

The trial court granted the motion in part and denied it in part. The court then ruled on Plaintiff’s motion to certify a class action. The trial court concluded Plaintiff, as a class representative, could not prevail on his consumer fraud count, but could potentially prevail on his breach of contract claim, as a third-party beneficiary of the workers’ compensation policy. As to count IV, the court certified the following class: “All licensed Illinois healthcare providers who: (a) submitted claims for medical expenses pursuant to a Grinnell workers’ compensation policy; (b) received or were tendered payment between October 20, 1996 and October 20, 2006 in which Grinnell took a PPO discount; and (c) did not have a PPO contract with Grinnell.” Defendant filed a petition for leave to appeal pursuant to Supreme Court Rule 306(a)(8) (210 Ill. 2d R. 306(a)(8) (2006)), which was granted.

The Court noted the need to first show an actual cause of action before any class could be certified. The Court further noted Plaintiff was not a party to the contract which would be a prerequisite for maintaining a breach of contract claim. Here, the provision relied upon by Plaintiff, which makes Defendant liable to “any person entitled to benefits payable by this insurance” did not identify any third parties and Plaintiff was not a “person entitled to benefits” pursuant to the Illinois Workers’ Compensation Act. See 820 ILCS 305/4(g) (West 2004) (only “the employee, his or her personal representative or beneficiary” are entitled to benefits under a workers’ compensation policy and have standing to sue an insurer to enforce such a policy). Plaintiff failed to identify any provision in the policy which referenced him or “medical providers,” the class to which he belongs. He did not sustain his burden of proving he was a third party beneficiary of the workers’ compensation policy and because he was not a third party beneficiary of the workers’ compensation policy, he had no right to enforce it. Thus, Plaintiff’s breach of contract action was dismissed. Since Plaintiff’s breach of contract claim is the only cause of action upon which his class action was allowed, Plaintiff’s class action against Defendant was also dismissed.

Plaintiff asked for the other dismissed counts to be reconsidered, but the Court noted he had not filed a cross-appeal and therefore was not allowed to challenge those decisions. The Court nevertheless noted they would also have found the other counts were properly dismissed due to the failure to state a cause of action because he could not meet the standard of unjust enrichment or show Defendant owed him any duty.

This case is also an example of the increasing trend of medical providers moving into the courts in what appear to be attempts to circumvent the workers’ compensation system by either refusing to abide by the Medical Fee Schedule, refusing to bill within reasonable guidelines or in many cases, refusing to participate in the IWCC process to attempt to justify their charges.

Your author spoke to two different Petitioner attorneys who noted they didn’t mind the providers suing the insurance companies because it was a welcome change from their point of view of the refusal of some medical providers to attend a hearing to justify their charges and instead attempting to pursue injured workers for unpaid balances in clear violation of the Illinois Workers’ Compensation Act. One attorney suggested a similar provider had already indicated he would spend more in legal fees in other venues trying to find an alternative method to collect his balances rather than appear before an Arbitrator who would discount the charges on almost every occasion. This article was researched and written by Shawn R. Biery, J.D. If you have thoughts and comments or need the case citation, please send a reply to sbiery@keefe-law.com.

Editor’s comment: In a strikingly similar claim several years ago, the author of this case summary recovered a substantial lien amount as part of a settlement of a third party claim by arguing the lien could be waived post judgment even while the esteemed Circuit Court Judge disagreed. In many third party claims, the employer is pressured to waive their lien to allow additional recovery to a claimant or limit the liability of the third party in contribution. This case is an example of why an employer should hold firm in negotiations for at least partial lien recovery when a third party contributes since the only jeopardy in allowing trial to proceed should be potential loss of the lien amount.

In Baltzell v. R & R Trucking Co. — F.3d —-, 2009 WL 249981 C.A.7 (Ill.) 2009 (February 4, 2009), Millard “Skeeter” Baltzell was critically injured when he was crushed by a tractor-trailer while working for The Ensign-Bickford Company. Skeeter sought and received workers’ compensation from Ensign-Bickford, and along with his wife Ruth Ann, brought strict liability claims against three companies-R & R Trucking Company, the owner of the tractor-trailer; Freightliner Corporation, the tractor manufacturer; and Lufkin Industries, Inc., the trailer manufacturer. These Defendants then sought contribution by filing third party claims against Ensign-Bickford.

The Baltzells prevailed before a jury, which found the other Defendants and Ensign-Bickford collectively liable for $13,980,120.00. Ensign-Bickford then moved to dismiss the contribution claims against it in exchange for waiving the statutory lien it had on the Baltzells’ recovery. The District Court denied Ensign-Bickford’s motion and entered judgment against the other Defendants and Ensign-Bickford. The Seventh Circuit Court of Appeals concluded the Illinois Workers’ Compensation Act and the Illinois Supreme Court’s decision in LaFever v. Kemlite Co. required the court’s judgment to be vacated and remanded for further proceedings consistent with their opinion.

The Federal Appellate Court noted Illinois has a workers’ compensation system in which employers compensate their employees for job-related injuries or illnesses, regardless of fault. In return for not having to prove fault, employees receive only workers’ compensation benefits from their employers and cannot sue their employers to receive more damages. Sometimes parties other than an employer might cause an employee to be injured at work. An employee in this situation can sue these third parties for damages and these third parties can in turn seek contribution from the employer or an employer may choose to exercise its right to intervene in the suit before satisfaction of judgment to recover their lien for amounts paid. If an employee ends up recovering money from a third party for a work-related injury, it is implicit the employer was not solely responsible for the accident. Illinois law gives the employer a lien on any recovery an employee obtains from a third party for a work-related injury. An employer who exercises this lien gets first crack at any recovery the employee gets from the third party. To calculate the amount of the employer’s lien, one begins with the recovery the employee receives from the lawsuit and then reduces this value by an amount equal to the amount found by the trier of fact to be the employer’s pro rata share of the common liability in the action. The amount of the employer’s lien cannot exceed its total workers’ compensation obligation.

Illinois law caps an employer’s contribution liability at “an amount not greater than the [employer's] workers’ compensation liability.” Kotecki v. Cyclops Welding Corp. This value, which is generally referred to as the “Kotecki cap,” represents the maximum amount an employer has to pay in contribution. Illinois law provides employers with a second option–an employer can escape contribution liability altogether by waiving its lien on an employee’s recovery from third parties. See LaFever. An employer who takes this option can no longer share in damages the employee recovers from a third party. However, the employer can then be certain its only payment obligation will arise under workers’ compensation.

In this case, Illinois law limited Ensign-Bickford’s contribution liability to the present cash value of its total workers’ compensation obligation (i.e., its Kotecki cap). But the IWCC hadn’t yet finally determined what Ensign-Bickford’s total workers’ compensation liability would be, so the District Court required Ensign-Bickford to submit an estimate of this amount. Ensign-Bickford submitted documentation its Kotecki cap was $4,085,571.21, and it had already paid $873,953.31 in workers’ compensation to the Baltzells. Neither the Defendants nor the Baltzells disputed these values, which the District Court proceeded to adopt. Ensign-Bickford then moved to waive its lien on the Baltzells’ recovery and sought to dismiss the defendants’ third-party contribution claims. On October 4, 2005, the District Court denied this motion, reasoning to waive its lien now would more than partially frustrate the purpose of the Contribution Act, and it would do nothing to promote the purposes of the workers’ compensation statute. The Court then reduced the total judgment of $13,980,120 by the amount Ensign-Bickford would pay and determined cumulative liability for the three defendants, thereby making R & R liable for $5,654,027, Freightliner liable for $2,827,013, and Lufkin liable for $1,413,506. The court entered judgment in favor of the Baltzells in these amounts.

Ensign-Bickford then filed various post-judgment motions, including another motion to waive its workers’ compensation lien and dismiss the third-party contribution claims against it. Meanwhile, the Baltzells and the Defendants entered a settlement agreement in which Defendants agreed to pay their respective pro rata shares of the judgment but reserved their right to litigate contribution and setoff issues. On February 13, 2006, the District Court denied Ensign-Bickford’s post-judgment motions, setting the stage for the current appeal. Defendants also filed related cross/contingent appeals regarding setoff and contribution issues in the event the judgment entered against Ensign-Bickford was vacated.

The Seventh Circuit noted LaFever still held even though the employee in LaFever already paid out the workers’ compensation benefits it owed the employee and was not required to make any future payments while Ensign-Bickford estimated it still owed about $3 million in future workers’ compensation payments. The Seventh Circuit concluded the District Court should have allowed Ensign-Bickford to waive its lien on the Baltzells’ recovery in their lawsuit against Defendants and dismissed the contribution claims against Ensign-Bickford. Since Ensign-Bickfor was not liable for contribution (but still owed workers’ compensation benefits), they next determined an employee should not get a double recovery from a third party for the same injury, so Defendants here were entitled to a setoff for any workers’ compensation benefits the Baltzells have already received from Ensign-Bickford. They further noted the need for setoff of future benefits as they were paid absent an agreement between all parties to resolve the issue. The court noted the most efficient solution might be for all the parties to agree any future workers’ compensation payments be held in trust and distributed to Defendants according to their pro rata liability, but the Seventh Circuit did not actually take this step and order it done.

This case is an example of the bargaining power an employer should have when, after doing the right thing and paying workers’ compensation benefits, they are pressured to waive recovery to allow a potential responsible third party to only pay a part of what they may ultimately be responsible. At KC&A we always recommend our clients seek the most beneficial resolution. This may take many forms—from waiving a lien with $1 contracts to forcing a third party case to trial to recover the lien. This case confirms the strategy is sound as the only thing to lose is the amount you are liable (and may have already paid) for the workers’ compensation claim since you can waive your lien at anytime prior to a decision becoming final. This article was researched and written by Shawn R. Biery, J.D. If you have thoughts and comments or need the case citation, please send a reply to sbiery@keefe-law.com.

Editor’s comment: While the ability of the EEOC to investigate potential discrimination is important, the facts of this case lead the editor to believe the EEOC hasn’t figured out how to focus on potential instances of ongoing harmful discrimination rather than past policies of now non-existent companies which do not appear to have been harmfully discriminatory at first blush. It is hard to imagine which anyone really believes a policy of not hiring violent criminals is unacceptable discrimination—if your company makes it a policy to hire violent criminals, please reply as we have some vocational claims which may provide you with a steady stream of available employees.

In EEOC v. Watkins Motor Lines, Inc., No. 08-2483 (January 23, 2009) the Seventh Circuit on appeal from the United States District Court for the Northern District of Illinois, Eastern Division was presented with a question regarding whether the EEOC has subject matter jurisdiction to complete investigation including the power to ask the District Court to adjudicate subpoena enforcement actions even after the charging party asks to withdraw their charge.

By way of background, in June 2004 after experiencing three episodes of employee-on-employee murder or attempted murder, Watkins Motor Lines decided which it would no longer hire anyone who had been convicted of a violent crime. Three months later Watkins rejected Lyndon Jackson’s application because of his criminal record. He filed a complaint with the Equal Employment Opportunity Commission, which opened an investigation to determine whether the policy had a disparate impact on minority applicants—and, if so, whether it was “job related for the positions in question and consistent with business necessity”. Watkins did not cooperate in the investigation, and on April 8, 2005, the EEOC issued a subpoena seeking pertinent information which was ignored. Jackson and Watkins reached a settlement in January 2006 and Watkins insisted the settlement be contingent on the EEOC’s abandonment of its investigation. Jackson told the EEOC he was withdrawing his charge of discrimination however the EEOC’s regulations give it discretion whether to allow a charge to be withdrawn, and the EEOC decided to press ahead with an investigation which may cover persons in addition to Jackson. In September 2006 Watkins Motor Lines sold its operating assets to FedEx. Since Watkins remains potentially liable to Jackson and any similarly situated applicants, the proceeding was not moot. The district court did not act on the subpoena until March 2008, when it dismissed for lack of subject-matter jurisdiction the EEOC’s motion (filed in July 2007) to enforce the subpoena. The judge believed Jackson would be best served by the settlement, and since settlement was contingent on withdrawal of the charge the agency should have allowed him to withdraw it, reasoning the agency’s contrary decision was arbitrary so it was as if no charge had been filed—and, if no one makes a valid charge, the EEOC is not entitled to investigate.

The Seventh Circuit notes the judge appears to have believed the lack of a pending charge deprives the court of subject-matter jurisdiction, however two provisions of Title VII itself authorize district courts to adjudicate subpoena-enforcement actions filed by the EEOC and 28 U.S.C. §1345 creates subject-matter jurisdiction for any suit filed by the United States or one of its agencies. A district court’s belief the EEOC should not have investigated or sued does not detract from the fact it did ask the court to enforce its subpoena. A statute authorizes the court to adjudicate this request.

Watkins contends Jackson’s request to withdraw his charge should have been granted. Yet withdrawing a charge does not mean a valid charge was never filed. Watkins didn’t contend, and the district court did not find Jackson’s charge was invalid when filed. Once one has been filed, the EEOC rather than the employee determines how the investigation proceeds. The Seventh Circuit noted the suit affects legal rights of persons other than the initial plaintiff, and some other member of the class is entitled to intervene to carry on with the litigation. The Seventh Circuit further noted allowing settlement contingent on vacatur of all judicial decisions made so far, in order to relieve the parties of any preclusive or precedential effects which the decisions carry would almost be automatic if allowed. The problem with this type of decision would be allowing litigants to achieve their settlement by injuring other, unrepresented persons. The Seventh Circuit noted many a defendant would love to decapitate a class after the statute of limitations has run by paying off the sole representative plaintiff, and thus avoiding potential liability to all other class members. The Seventh Circuit noted the EEOC and the judiciary are not obliged to abet this strategy by preferring Jackson’s interests over those of other workers. Jackson and Watkins Motor Lines are free to resolve their own dispute but may not compromise the interests of other employees and applicants in the process. The EEOC’s regulation says “[a] charge filed by or on behalf of a person claiming to be aggrieved may be withdrawn only by the person claiming to be aggrieved and only with the consent of the Commission . . . where the withdrawal of the charge will not defeat the purposes of Title VII”. The agency is entitled to vindicate the interests of all employees and applicants.

Finally, the Seventh Circuit appears to hint Watkins should have asked to affirm the judgment on the ground the subpoena was needlessly burdensome or otherwise inappropriate and the Seventh Circuit further noted they (like the district judge) questioned whether the EEOC is acting prudently by devoting time of both its staff and Watkins to short-lived practices by an entity which is no longer an operating company, and whose rule may well be amply supported by “business necessity” given its history of workplace violence. But the Seventh Circuit confirmed the Executive Branch rather than the Judicial Branch is entitled to decide where investigative resources should be devoted and a charging party’s change of mind does not diminish the agency’s authority to investigate on its own behalf so the judgment of the district court was reversed, and the case was remanded with instructions to enforce the subpoena.

This case is a pretty straightforward example of the power of governmental agencies to conduct their investigations and how a single charge, however lacking in basis or evidence—even lacking cooperation of the charging party—can continue to create legal issues for a company. It is difficult for us to recommend a company consider not implementing rules or policies which may offend the “senses” of parties from whom you are attempting to protect you business or workforce at large. Instead, we suggest consideration of the common sense approach to litigation where you detail the lack of evidence, the valid purpose behind your policy and the valuable time and resources being wasted. Based upon the decision reviewed, it appears the courts still value their time even if our government agencies do not. This article was researched and written by Shawn R. Biery, J.D. If you have thoughts and comments or need the case citation, please send a reply to sbiery@keefe-law.com.

Editor’s comment: This case reiterates and is arguably a potential expansion of a theory already noted in various areas of Illinois law which generally holds a party who controls the work/worksite potentially liable for injury to subcontractors’ workers, even though they are not direct employees of the controlling party. It should be noted—the “control” exerted here involved removing an essential “tool” of the job which was to be contractually provided. In Carcia v. Wooton Construction, LTD (No. 1-07-1883 December 29, 2008), the Illinois Appellate Court, First District, First Division was presented with two questions: (1) whether Wooton retained sufficient control over the work by Cullen to impose a duty of reasonable care under section 414 of the Restatement (Second) of Torts) and (2) whether a material question of fact existed as to the proximate cause element of Plaintiff’s negligence claim against Wooton.

By way of background, in August 2002, a condominium complex known as “Kingsbury on the Park” in Chicago was being developed. The property was owned by Smithfield Properties. Wooton Construction, the general contractor, was a subsidiary of, or otherwise affiliated with Smithfield. Wooton contracted with Zalk Josephs Fabricators, to fabricate structural steel. Zalk subcontracted with Plaintiff’s employer, JP Cullen & Sons, to erect the steel. A crane was to be provided, however at some point Wooten indicated they were taking the crane for use by another party. Shortly before his lunch break on August 28, 2002, Plaintiff, an ironworking apprentice with the Cullen raising gang, was in the process of unloading a crane basket containing approximately 10 kegs of bolts which weighed between 100 and 200 pounds and plaintiff felt something “pop” in his back and he experienced severe pain. He reported the injury and, on September 4, 2002, went to Northwestern Hospital and was eventually diagnosed with a herniated disc for which he underwent surgery, but was not “cleared” by his doctor to return to ironworking.

On August 10, 2006, Plaintiff filed a second-amended complaint. Plaintiff alleged Defendants committed nine instances of negligence. The Court noted Defendants failed to provide a crane or other mechanical device to move the kegs of bolts. Subsequently, Plaintiff voluntarily dismissed Smithfield. Zalk’s motion was also granted and was not raised on appeal. Ultimately, Wooton filed a motion for summary judgment. Wooton contended it did not owe a duty to Plaintiff because it did not retain control over Cullen’s work under section 414 of the Restatement (Second) of Torts. Wooton also argued Plaintiff could not establish its acts or omissions proximately caused injury.

In its written order granting summary judgment, the trial court gave two grounds. First, Wooton owed no duty of care to Plaintiff. Second, in any event, Plaintiff could not show his injury was proximately caused by Wooton’s alleged breach of its duty of care. This Court noted the general rule—one who employs an independent contractor is not liable for the independent contractor’s acts or omissions. Section 414 provides an exception to this general rule. “One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care.” Restatement (Second) of Torts §414, at 397 (1965).

This exception, known as the “retained control exception,” was recognized by our supreme court in Larson v. Commonwealth Edison Co. In order for this exception to apply, it must be shown the general contractor retained sufficient control over the work of the subcontractor so the law recognizes the existence of a duty to exercise “supervisory control with reasonable care.” In this claim, the analysis focused on whether Wooton retained a level of control sufficient to give rise to a duty of reasonable care. In essence, Plaintiff contended a sufficient degree of control over the work by Cullen was exercised by Wooton’s control over the only crane available at the work site. The Cullen raising gang, of which Plaintiff was a part, required the use of a crane to perform its work. The contract between Wooton and Zalk, which was incorporated into the contract between Zalk and Cullen, expressly stated Wooton would provide the crane and, in accordance with industry practice, would control its use. Plaintiff argued Wooton, in controlling the use of the crane, had a duty to exercise reasonable care in taking the crane from use by Cullen. With Wooton assuming control over the only crane at the work site and in light of the conceded need for the use of the crane for the raising gang to perform its work, it followed Wooton retained some degree of control over the manner in which the work of the Cullen raising gang was done. Wooton controlled the “means and methods” of the work contracted to be done by the Cullen raising gang, by Wooton depriving Cullen of the use of the crane to do crane-dependent work. The Court noted direct evidence was presented of Wooton’s exercise of control over the unloading of the kegs of bolts by Plaintiff when a Wooten representative directed the basket full of kegs of bolts be unloaded manually. The Court noted this holding did not mean Wooton was liable for Plaintiff’s injuries; the alleged breach of the duty remained a question for the jury.

On the second question of proximate cause, the Court found Plaintiff presented sufficient evidence to support his claim—he would not have lifted the kegs manually but for Wooton’s control over the crane, which it sought to take from Cullen to give to another subcontractor. Based upon their findings, the Court noted the facts could give rise to a duty of care and it was for a jury to decide the question of proximate cause so they reversed and remanded for those determinations.

This case should be important to most general contractors. It may now be important to note to your various foremen and supervisors that they not only may create liability by “directing” the subcontractors in the manners by which duties are performed, but they now also may be creating liability by actions which affect the ability for the subcontractor to perform the duties such as moving equipment to other areas of the job. Our initial suggestion would be to review agreements with subcontractors to avoid providing equipment if possible or by allowing for the use of the equipment with a penalty for use past certain deadlines to cover the cost of delays caused by deadline overruns involving shared equipment. Obviously all new contracts would have to be reviewed on a case by case basis to make determinations of any potential “control by subtraction”. This article was researched and written by Shawn R. Biery, J.D. If you have thoughts and comments or need the case citation, please send a reply to sbiery@keefe-law.com.