Keefe, Campbell & Associates, LLC

Editor’s comment: Hang on to your hats, readers. We feel a novice or outsider looking at the Illinois system of WC jurisprudence might consider some of what is done in this state to be unusual, to say the very least. We always find the rules to be fascinating and challenging for judges, lawyers, the parties and the public to truly understand and comprehend. Illinois Supreme Court Rule 23 allows our Illinois Appellate Court, at its sole discretion, to “non-publish” its orders disposing of cases. We have always been captivated to see how this Rule is employed by our higher court. “Non-publication” means the court’s ruling is not released for public consumption and is generally non-precedential. The parties alone are typically given a copy of the order and the case some times moves up to the Supreme Court or some times back to the Circuit Court or the litigation simply ends.

We note Rule 23 orders are issued in Illinois workers’ compensation rulings at least as much or perhaps even more than regular rulings. Your editor has handled several dozen Appellate Court cases before the five-member Workers’ Compensation Division of the Appellate Court—if you do the research, very, very few are actually published and out there for review. The vast majority of these carefully drafted rulings, some of them involving extraordinarily complex and intricate legal decisions, all remain “non-published” and are effectively kept secret from the public eye.

As you can tell from the tone of this Update, we prefer all legal and political rulings and decisions to always be made public. Good, bad, happy or sad, the public votes and pays the taxes that fund the courts and have a right to know what is going on and debate it in this free society. We particularly feel appellate court rulings with wild and mild impact should be out there for review and open for debate and comment from you and John Q. Public. We don’t like anything in the legal sphere to be intentionally or routinely kept from the public eye.

So, please understand our view is the “plain English” meaning of “non-publication” would indicate the members of the Court are affirmatively ruling the order isn’t to ever be published or generally disseminated. Not so fast, not so fast!! We always wonder why the Illinois Appellate Court would spend all the time and effort in carefully and thoroughly reviewing the facts and law and creating a serious dissertation on a specific matter and then “non-publish” it. Particularly in this day and age of super-fast communication and the worldwide web, one would think it is simple matter to publish even the simplest opinions. Every ruling of the august members of this Court is clean, clear and generally excellent—why hide them under a bushel basket? We assure all of you there are numerous legal services waiting to grab their orders and put them out there first.

What is even stranger is some of the “non-published” opinions are then occasionally leaked out and published!!! The editor of the quarterly Illinois State Bar Ass’n newsletter is a very solid and knowledgeable academician with whom we have debated this issue for some time. He feels there is nothing wrong with publishing or otherwise reporting “non-published” opinions of interest to the State Bar membership. The problem we have with that approach is John Q. Public and the business side of the WC industry can’t be ISBA members if they want to be—you have to be a lawyer to join. His newsletter is always well-thought out and contains excellent content that would be important for many of you to read. So, we guess it is up to us to re-publish his publication of the important non-published rulings for the greater good of everyone!

Accordingly, in the case of Carper v. CMT Enterprises, as affirmed in a Rule 23 decision by the Appellate Court of Illinois, Workers’ Compensation Commission Division, the Arbitrator awarded Petitioner, in an ex parte hearing, 21 2/7 weeks of temporary total disability benefits, $55,268.52 in medical expenses, Section 16 attorney fees in the amount of $12,302.47, Section 19(l) penalties in the amount of $1,490 and 19(k) penalties in the amount of $30,756.17. The Commission on review modified the order of the Arbitrator taking away the penalties/fees. It appears claimant’s counsel didn’t file a proper petition for them.

The critical concern you will see in this ruling is the problem with Illinois employers and adjusters hanging onto defense files until the last minute and beyond. We always caution adjusters, employers and claims managers to understand you make a massive mistake to hang onto a file until either just before or just after a hearing. While we trust many of our brethren on the other side, you also are taking a chance to rely on some members of the claimant bar. We actually had an adjuster hold a file until a deposition of claimant’s expert was taken on an ex parte basis pursuant to dedimus and then sent it to us for handling. It was technically impossible to then cross-examine the other side’s expert. When you do that, there isn’t much even the best defense lawyer can do to get a solid outcome.

When the adjuster holds the file after the litigation starts and motions are noticed and filed, the claim file may then be sent to the defense counsel. At that point, the defense attorney is then given the unhappy task of trying to straighten things out or reverse things in mid-stream. In the Carper case we cite above, Petitioner was injured and unquestionably gave notice to the employer and sought treatment in an emergency room. He was diagnosed as having fractures of the hand. He underwent surgery and was later scheduled for more surgery but it was cancelled due to non-authorization from the workers’ compensation carrier. Now, every veteran adjuster should know, at that point, you have a fight on your hands and truly need defense counsel.

Petitioner later developed an infection and osteomyelitis requiring further surgeries and treatment. He sought competent, veteran legal counsel who simultaneously filed an Application for Adjustment of Claim and a 19(b) petition. The claim was set on a notice of hearing and the Arbitrator assigned a trial date. Petitioner’s attorney notified the employer of the trial date—please note, under the Rules, the claimant attorney doesn’t have to send notice to the adjuster or insurance carrier/TPA; it only has to be sent to your account. No one appeared.

On the hearing date, Petitioner’s attorney asked the Arbitrator to enter an order specifically setting the matter for a second trial setting about one month later. The order was specific and noted, “Petitioner filed a petition for immediate hearing with the Application for Adjustment of Claim. The Commission issued notice…for the status call. Petitioner appeared and a trial date was set. Respondent [or its counsel] failed to appear. This matter is now set for [a second trial date]. No further continuances will be allowed. Respondent’s failure to appear for trial will result in a trial ex parte.” On the second setting of the hearing, the employer’s president and owner appeared before the Arbitrator, acknowledged he received a copy of the order setting the matter and he forwarded a copy of the order to his insurance carrier/TPA who acknowledged receipt. The respondent/owner declined to participate in the proceedings and left the hearing room before the hearing. Thereafter, the matter proceeded ex parte. After a hearing on the merits of the case the adjuster apparently sent his file to a defense attorney. The defense attorney then sought to set aside the evidence by filing a motion to strike the evidence presented during the hearing on the grounds of defective notice. The Arbitrator denied that motion and entered his decision as stated above. As we indicate, the matter went all the way to the Appellate Court who entered a very clear and well-researched ruling that we hate to say we have to agree with.

The message from this article is three-fold:

1. Don’t hang onto unquestionably disputed defense files to save a dollar or two—the cost can be perilously high if you get whacked as the result of an ex parte hearing. If you know you are in a fight, get someone to fight for you and protect you at the hearings. Illinois workers’ compensation claims are becoming increasingly expensive and rapidly moving into the six and seven-figure ranges.
2. Keefe, Campbell & Associates’ attorneys know we are sometimes like firefighters. If you need assistance at the last minute, send us an email or call the numbers at the bottom of these Updates. We have attorneys across the state who handle every status call in Illinois, every month. We are used to trying to catch up rapidly but please give us a fighting chance—the more time for preparation you can provide the better but, if things fall through the cracks, send us an email with the file, give us a shout and we will do our fighting best.
3. If this excellent and well-reasoned ruling was important enough for the Illinois State Bar Association to learn about it, it should be important enough for everyone in the industry to read. As court observers, we again ask the great and storied members of our Appellate Court, Workers’ Compensation Division to put simple, moderate and critically important rulings out there for everyone to read.

We appreciate your thoughts and comments. Please don’t hesitate to post them on our award-winning blog at: http://www.keefe-law.com/blog

Editor’s comment: We report this to be sure everyone in HR, benefits and safety is aware of it for future preventative measures and training. Without intending to sound insensitive, we ask our readers to tell us how this amount of money can bear any semblance of common sense when one considers this young lady has no visible or permanent physical injury of any kind. Yes, we do feel bad for her and we are certain she had some psychological impact but, in our minds, she will be laughing while toting her millions in a stretch limo all the way to the bank.

We consider this a patent example of an awful fact of American life and modern personal injury litigation–something bad happened so a random corporate defendant has to pay heavily. We feel one could just as easily have blamed the phone company for providing the phones used in the scam, the surveillance camera installers who put in cameras that recorded the event but didn’t stop it or any random police department you want to pick—their “culpability” for the bad and unfortunate choices made by the employees of McDonalds during and after this event was just as strained. When the U.S. personal injury system starts to look like a poor person’s lottery, as it does here, we think reforms are needed.

At some point, starting in the mid-1990s, some moron started to call fast food restaurants and masquerade as the local police, FBI or other authority. The caller would then ask company managers to start ordering workers to do strange things, like impromptu cavity searches or jumping jacks as part of a purported criminal investigation. Numerous incidents were reported around the country. The actual bad guy(s) got away and their identities remain unknown.

What happened in one rural McDonald’s in Mt. Washington, Kentucky clearly went dramatically over the top. We cannot publish all the details because your spam blockers will not let them all through but suffice it to say the young employee and those around her underwent substantial discomfiture as part of the hoax. The corporate defendant came under attack because they were alleged to have “known” of this scam by a random goof and did not take steps felt necessary to warn or train folks not to lose their minds and all sense of decency and judgment when they received such calls.

The matter went to hearing before a jury. We are confident the legal department of McDonalds was stunned when they ruled claimant was entitled to $6.1 million in compensatory and punitive damages. The Kentucky Court of Appeals just issued a ruling which exhaustively looked at all the facts and law but still affirmed. The ruling and details are on the web at:

http://www.leagle.com/unsecure/news.do?feed=yellowbrix&storyid=1000038480

The corporate office of this major U.S. food retailer made their position crystal-clear in an official statement:

We are extremely disappointed with today’s Appellate Court decision. McDonald’s is not disputing that what happened to [Plaintiff] was wrong. However, it has been our position throughout these proceedings that she was the victim of a malicious hoax perpetrated by individuals not representing McDonald’s.

The dollar amount McDonalds owes as of November 15th is $10,900,000. As we indicate above, we were reluctant to publish this sad legal note but we want our readers to understand you need to address it as part of your training programs to avoid the chance someone pulls such a prank on your organization.

Editor’s comment: We feel claims and risk managers should always look for the “Alphas” among the defense bar to assist and counsel you in difficult litigation. In the Illinois’ workers’ compensation, employment law and general liability legal community, risk/claims managers are always faced with an arena that is filled with trepidation and concern. We have heard of claimant attorney after claimant attorney who bullies, badgers and sometimes even screams at adjusters and claims handlers seeking to be Alphas and thereby get their way. Claimant lawyers are not shy to point out their political ties and fund-raising efforts and “clout” in the judicial and administrative arenas. We are also amazed at how many times we get questions from claims adjusters who are completely befuddled because an attorney on the other side has passively confused them or actively misstated case law or the Workers’ Compensation Act or Rules.

In social animals, the Alpha is the individual in the given community holding the highest rank. Other members in the same social group may exhibit deference or other symbolic signs of respect particular to their species towards the Alpha. In the animal world, Alpha animals are given preference in food and all other benefits. Other animals in the community are usually killed or ousted if they violate this rule. The status of the Alpha is often achieved by means of superior physical prowess. The individual in the Alpha position usually changes to a Beta when another challenges it to a fight and wins.

In the world of lawyers, the Alpha defense lawyer is the one who brings a number of critically important assets to our hopefully-less-than-deadly battlefield. An Alpha defense lawyer will regularly demonstrate:

• Above-average or superior intelligence;
• Current knowledge of all applicable case law and legislative developments;
• An understanding of political factors that may affect outcomes;
• They are very responsive and accessible;
• They are intrinsically cost-effective in their approach;
• They can provide realistic expectations;
• They anticipate regular or typical developments;
• They render unpredictable litigation as predictable as possible.

You may also note these same attributes apply to claims handlers. We are confident corporate risk managers who oversee Illinois claims are looking for Alpha claims handlers who are willing to stand up for themselves and obtain best possible outcomes in all their claims. It is a rare and beautiful thing to see a veteran claims manager who knows the respective litigation system like a book and is willing to stand up and be counted in the fight. As we have said many times, it is critically important for the adjuster to “pay the good (or bona fide) ones, fight the bad or questionable ones and know the difference.”

Going back to members of the defense bar, most important in finding the “Alpha” in any Illinois defense lawyer is their willingness to participate wisely in the battlefield. Every risk/claim manager has to be confident their selected attorney is willing to fight for you and present themselves in any fight in a fashion you would present it. Trust us; there are a lot of lawyers out there who are afraid of members of the Plaintiff/Petitioner bar and similarly cower in front of some of our brilliant but challenging judges and Arbitrators—that sort of lawyer is clearly a Beta or less. There are a lot of very solid and successful claimant attorneys who will push and push as the Alphas of their side of the bar. On the defense side of the matrix, you need someone with a lot of spine to sit up, properly prepare and seek the best possible outcome in this difficult state.

All defense lawyers in our hierarchic legal community have a certain rank. Three of these ranks have attracted special attention in etiology and been given special names: Alpha, Beta and Omega. We feel Beta defense lawyers are the second-tier and routinely lose to Alphas on the other side. We feel they are men and women defense lawyers who are difficult to reach, ill-prepared, afraid of the fight and always willing to rapidly settle any claim.

Finally, Omega defense lawyers refer to the lowest caste of the legal hierarchical society. An Omega defense lawyer is subordinated to all others in the community. We are told some members of the in-house counsel community may fill this bill while we are also certain many members of house counsel staffs range from Alphas to Omegas, like every other hierarchy.

If you have any questions or comments, please forward them to our resident Blog Administrator, Arik D. Hetue, J.D. who can be reached at ahetue@keefe-law.com or post them later today on our award-winning blog at www.keefe-law.com/blog.

Editor’s comment: From our review, it would appear lawsuit lenders may be funding allegedly work-related surgeries in central Illinois. We are learning more and more about this interesting medical/surgical situation. A hand/arm surgeon appears to be diagnosing “repetitive trauma” conditions and then doing numerous arm, elbow, wrist and hand surgeries on workers’ compensation claimants. We understand the surgeon is doing bilateral CTS releases, he also does repeat bilateral CTS releases. In our experience, most hand surgeons do not repeat or perform revision CTS releases. For example, take a look on the web at: http://content.karger.com/produktedb/produkte.asp?typ=fulltext&file=000167875

Our research further indicates this hand/arm surgeon is joining with a lawsuit lender and is clearly mining what we have called the “Tunnels of Illinois” by doing not only bilateral CTS releases; the surgeon also combines that type of surgery with bilateral cubital tunnel releases. In some patients, this surgeon does the “Big Six” by doing six surgeries on the same claimant, sometimes based on subjective complaints alone. The surgeon does both carpal tunnels, both cubital tunnels and both shoulders, sometimes on patients with minimal, moderate or non-existent EMG/NCV findings. As we have advised in the past, we feel the incidence and prevalence of cubital tunnel surgeries in Illinois workers’ compensation vastly outpaces the incidence of this rare surgery anywhere else on the planet—the reason for the high level of cubital tunnel surgery is the reward. Most folks currently receive $15K-$50,000 in permanency for what is truly a minor surgical revision of the elbow(s)—while that is a lot of money anywhere, it is a pile of gold in depressed central Illinois.

In the vast majority of patients we are aware of, this surgeon has not recommended any pre-surgical conservative care for any of them. Therefore, it remains unknown whether conservative care could have alleviated the symptoms. We understand these surgeries are being financed by what we feel is an unusual financial/medical practice of this hand/arm surgeon selling “accounts receivable” to the subsidiary of a lawsuit lending company named MedFinance for 48.5% of the applicable CPT code in the Illinois Medical Fee Schedule. MedFinance is on the web at http://www.medfinance.us/index.asp.

The “accounts receivable” sale occurs either before or immediately after surgery is performed to insure the surgeon is paid the 48.5% of the Medical Fee Schedule amount immediately. The surgeon claims MedFinance is in the “risk buying” business. If the disputed surgical bill is later awarded by an Arbitrator and affirmed by the Commission, MedFinance gets as much as 100% of the fee schedule and, having already paid 48.5% out, they would receive the balance when paid. It would appear obvious that someone somewhere thinks the chance of getting an award on the most questionable carpal tunnel, cubital tunnel and shoulder surgeries is a wildly easy bet in this state. It is our further understanding that, in their view, there is no “kickback” in such an arrangement and they are not charging or sharing medical fees. It is our understanding MedFinance asked this hand/arm surgeon to set up shop downstate. We also understand the hand/arm surgeon has never sold an account receivable to MedFinance on anything other than a WC case. The hand/arm surgeon has advised he sold his “accounts receivable” to MedFinance prior to surgery actually being performed.

The hand/arm surgeon advised the various patients do not undergo conservative care as no one would treat them because they did not have the means to pay for it. We counter to indicate it is our understanding the surgeon is not checking for group medical coverage—the patients where this is happening all come from the workers’ comp arena.

We did the research and the Illinois Secretary of State’s website indicates MedFinance is owned by a corporation named LAWSUIT CASH ADVANCE LLC. It is a Minnesota based company with its corporate headquarters listed in Minneapolis, MN. You can readily find this organization on the web at: www.lawsuitcashadvance.com. These are the nice folks who will lend a claimant $5,000 today and, if they get a lawsuit recovery in 36 months, they have to pay back a mere $28,000. Don’t take our word for that—they have a calculator on their website that provides the result. Trust us, that math is making lots of workers’ comp claims start to move like greased lightning.

What is troublesome for the Illinois WC industry when one sees such hand, arm and elbow surgeries being financed and paid for in the unusual fashion outlined in the middle of this article is Illinois’ sky-high permanency values that come with each related surgery. For example, most of these surgeries will provide the worker with permanency values of 15-25% loss of use of the hand for the CTS release and 20-60% loss of use of the arm for the combination of cubital tunnel and rotator cuff surgeries to a single arm. When such surgeries are being performed on both hands/elbows and shoulders, if the employee returns to work at the same job and same rate of pay, the PPD value for even a mid-range income will be well into the six-figure range. As we have told all of you, if the employee gets the “golden diagnosis” of permanent restrictions and cannot return to the same job at the same rate of pay, an Illinois claim falls into the wage differential dance and the claim moves into the high six-figure to low seven-figure range.

We know there are folks at the IWCC who are learning of these issues. We are asking everyone to start taking a hard look at the need for surgeries when there is no attempt at pre-surgical conservative care. We hope our honest and hard-working Arbitrators and Commissioners at the IWCC are going to start to ask tough questions about these interesting surgical and financial practices. Our advice to our defense clients is to start to learn and further investigate what is going on and fight, fight, fight—the Commission can’t take any action if you blindly accept what is going on.

We appreciate your thoughts and comments.

Editor’s comment: We sent this to one of our readers and thought we should share it with all of you.

Summary:

1. Open claims generate new claims.

2. Your defense witnesses and defense case-in-chief may disappear.

3. Reserves sit and mess up your cash position and/or credit lines.

4. Costs and exposures rise as claims sit.

5. Doctors, doctors, doctors.

6. Why reward defense lawyers who don’t close claims effectively?

Open claims generate new claims.

The more claims a company has pending, the more employees you may have with pending claims. Those employees start to look at workers’ compensation claims as money in the bank with solid long-term potential. They know they will cash in some day and usually get the highest possible return in a state that usually rewards old claims.

When they see even a soft-tissue strain/sprain, the same employees are also likely to tell other employees to start “workers’ comp bank accounts” by filing whenever the other employee has an injury. They will caution their friends to expect to have to wait but also expect they will get a nice bonus some day when the case finally comes to a close. In the interim, the employee coaching new employees to file claims may also tell them to get lots of treatment to insure a solid outcome and settlement.

Employees with pending claims also know claimant lawyers. In Illinois, those lawyers give out business cards and may give “bonuses” to claimants who bring them more claimants. We would bet veteran risk managers see lots of the same lawyers handle claim after claim against your company—this demonstrates there may be a “mole” or “shill” at your facilities who are directing employee after employee to the same attorney.

You may be able to prevent all of it with a litigation avoidance plan and more aggressive litigation management approach.

Your defense witnesses and defense case-in-chief may disappear.

If you don’t push claims to closure, your defense witnesses and defense case-in-chief may disappear. We have seen bona fide disputes and strong cases made to refute any claim for benefits completely erode and potentially disappear when cases are allowed to sit for months and years. People come and go in your organization with expected rapidity—we are a mobile society. While you may have a willing supervisor or co-employee ready to testify and completely rebut a claim of injury this month, in three years or more, such individuals may be half-way around the world or retired or simply lose any interest in the matter. All of it works to the detriment of the company and not claimant.

Any veteran defense attorney will tell you even the most conniving claimants will typically remain interested in the case while it is pending. Claimants have a strong financial interest in a phony claim. Due to the financial potential, they are typically going to remember their stories and the “plot line” in a phony case. In Illinois, it is incumbent on the employer to locate and obtain the return of your defense witnesses to testify if you are going to maintain denial of a disputed claim. The longer you let a major disputed case sit, the lesser your chance of having the ammunition needed to demonstrate the dispute to the Arbitrator. Many veteran claims managers in Illinois have paid claims they know they might have won if the witnesses were present and testified consistent with their prior statements—this potential makes it imperative to try fully disputed cases earlier rather than later.

Reserves sit and mess up credit lines.

There is no question the more claims you have pending, the higher your reserves may be. Any accountant will tell you that your company is going to have to keep monies set aside, in either cash or lines of credit to reflect the loss and potential payout. When a company has numerous pending claims, the reserves clog up cash or credit that can be used for much better things. This year, we audited claims for a major hospital chain. They have several million dollars in reserves sitting for 3-5 years awaiting claim closure. Many of the claims were simple and undisputed matters but the corporate powers-that-be didn’t take action to move the files. This is what we assume you may be doing in handling claims.

So for one example, this hospital group had a claimant with a broken hand. The case had a settlement value of $15,000. The reserves were for “worst-case” value of $40,000. We took a look at the file, knew opposing counsel, called the attorney and settled the matter in ten days for $15,000. In doing so, we freed up $25,000 in reserves. If you assume the hospital group had 75 similar claims and we could work to close all of them in the same fashion, we would free up almost $2,000,000 in reserves by simply paying fair value on accepted claims.

Costs and exposures rise as claims sit.

When claims are allowed to intentionally age in Illinois, they usually age poorly. Claimants like to get lots of medical care to justify the value of the matter. Claimants will try to stay off work longer to insure they get the best possible outcomes. Some injured workers will also seek restrictions and limitations on their work as the years roll on.

We have seen a number of rulings in Illinois where hotly disputed claims finally get tried after two, three, four years of fighting. The employer or insurance carrier appeared to be making efforts to “wait out” the current liberal administration. When the matter finally got tried, the employee was awarded years and years of disputed TTD. For most of your employees who have generally favorable rates, an award of three years of TTD can force you to pay $100,000 or more in benefits. We feel you are much better served to drive to drive claims to rapid resolution to bring more predictability to the outcome.

We also hate to see hotly disputed and denied claims sit to the point the injured worker can come to the Commission and cry and moan about being broke due to the actions of the employer. The liberal administration likes to penalize employers and reward big money to such claimants in a punitive fashion. It can all be avoided simply by bringing the matter before an Arbitrator sooner rather than later.

Doctors, doctors, doctors.

We feel Illinois has a cadre of treating doctors who are notorious for over-treating patients. These doctors will order lots of tests and esoteric surgical procedures. If the patient keeps showing up and complaining the doctors will perform lots of trimming and then start replacing joints or fusing backs/necks. The medical costs can quickly escalate into the mid six-figure range.

These doctors/surgeons are very well-known in the Illinois workers’ compensation claims community. They have learned the system won’t typically slow them down and they expect to get paid under Illinois’ favorable WC medical fee schedule. Every veteran claims manager and defense attorney has used independent medical examination and utilization review to try to slow these physicians/surgeons down.

However, the best way to shut them off is to close accepted claims quickly or fight disputed claims faster. The best thing about Illinois workers’ compensation is you can effectively close medical rights if the employee has left your organization at the time of settlement.

Why reward defense lawyers who don’t close claims effectively?

We have learned over the years of auditing defense files and handling claims that defense lawyers love clients who will sit on claims. The costs of sitting on claims are a boon to the defense industry. There is no question the longer a claim is allowed to sit idle, the more your legal fees increase.

Such lawyers are thrilled to call and meet and regularly entertain such clients. They are hoping to keep making more money and get similar rewards as the years roll on.

To the contrary, we feel lawyers who get to the point and win or settle cases effectively are the sort of legal talent that should be rewarded and nurtured. Litigation is uncertain and expensive. The less litigation a company has, the more predictable your costs are. It is a challenge to close litigated files in Illinois but the harder a company works to close them and avoid what caused the litigation in the first place, the better suited you will be moving forward.

How to do it

Keefe, Campbell & Associates is devoted to closing WC, GL and EPLI claims faster than our competitors. We have an Illinois litigation management plan that should allow you to

• Avoid litigation in accepted claims in the first instance;
• Make every possible effort to keep your injured workers away from lawyers where possible;
• Focus on implementing pro se settlements whenever prudent;
• When the worker goes to a lawyer, move quickly to bring the matter to closure via trial or settlement;
• Conduct “settlement days” for litigated claims at the Illinois Commission to induce file closure;
• Conduct claim “exit interviews” to see if you can learn from the issues that led to litigation and lawyers and avoid it moving forward.

We would be happy to outline the overall approach for any of our readers. If you are interested in these suggestions, please let us know. If you know any defense competitor in Illinois that closes claims faster, please let us know how they do it!!!

Editor’s comment: We consider this a major development all risk managers should be aware of, even in union settings. Arbitration clauses in collective bargaining agreements can serve a greater purpose than the traditional resolution of contractual disputes arising from the terms of the collective bargaining agreement in grievance hearings. Now, U.S. employers may utilize arbitration clauses to expressly require resolution of statutory disputes, such as claims of age discrimination arising out of the Age Discrimination and Employment Act (ADEA). In a recent decision, 14 Penn Plaza LLC v. Pyett et. al., (No. 07-581 April 1, 2009), the Supreme Court upheld an arbitration clause that specifically mandated arbitration of any age discrimination claim and ruled that such arbitration clauses are enforceable as a matter of federal law. In other words, an employer can legally obligate the employee and their union to arbitrate an age discrimination claim rather than dealing with a charge of age discrimination from the Equal Employment Opportunity Commission, Illinois Department of Human Rights along with related litigation with flows from the administrative agencies.

It has been our experience most employment law claims are inherently anti-employer. You can fight even a bona fide claim and be forced to pay high defense fees to your typical employment-law defense firms who charge $400-800 per hour in handling them. In contrast, Keefe, Campbell & Associates charge less than $200 per hour to fight such matters. Even with more reasonable defense fees, you still may be looking at paying double-fees if Plaintiff prevails and even gets $1 from a jury! Our vote is to try to end the possibility of such litigation at the earliest opportunity.

In 14 Penn Plaza, the Service Employees International Union withdrew its request to arbitrate a grievance alleging age discrimination on behalf of employees that had been reassigned to less desirable positions, allegedly on the basis of age. The union withdrew its request because they agreed to allow the company to enter into a new contract for services that caused reassignment of the aggrieved employees. The aggrieved employees later filed an EEOC charge claiming age discrimination. Once the EEOC issued a “right to sue” letter the employees filed suit in Federal Court. The employer tried to compel arbitration of the employees’ age discrimination claims, however, the District Court and the Federal Court of Appeals ruled another Supreme Court case forbids enforcement of collective bargaining provisions requiring arbitration of ADEA claims. Prior to 14 Penn Plaza, the respective Courts of Appeals were divided on the issue of whether a clear waiver of statutory rights was legally enforceable. Some courts held a collective bargaining agreement could not waive covered rights to a judicial forum for causes of action created by Congress and other courts held the opposite. As a result of this dichotomy in the Courts of Appeals below, the U.S. Supreme Court in 14 Penn Plaza, accepted the case and agreed to decide the issue.

In this claim, two federal laws were at issue: the National Labor Relations Act and the Age Discrimination and Employment Act. The Supreme Court reasoned courts generally may not interfere with a bargained-for exchange in the collective bargaining context, rights guaranteed under the NLRA, and thus held the collective bargaining agreement’s arbitration provision must be honored unless the ADEA itself removes this particular class of grievances from the NLRA’s broad sweep. The Court reasoned ADEA does not preclude arbitration of claims brought under the ADEA. The Supreme Court specifically reasoned when the parties collectively bargain in good faith and agree employment-related discrimination claims are to be resolved in arbitration, this agreement constitutes a clear and unmistakable waiver of the employee’s right to pursue rights created by statute and thus is enforceable.

We again urge U.S. employers to avoid unnecessary litigation and concomitant costs and negotiate arbitration clauses that require your union(s) and employees to remedy any claim of age discrimination in arbitration. The basis of this obligation must be a clearly written arbitration clause that which outlines precisely which statutory rights are specifically waived. Employers with collective bargaining agreements should review the arbitration language and consider the feasibility of negotiating a modification or propose a change in the language during contract renewals.

Please forward your thoughts and comments on this new ruling.

Editor’s comment: As consultants to Illinois risk managers and claims handlers, we are constantly asked about one topic—how do we nail down accident investigation on every single claim? How do we make sure to pay the good ones and fight the bad ones? What is the best evidence for an Arbitrator to truly deny a phony case?

On a preliminary basis, we assure our readers accident investigation is a paramount importance in Illinois workers’ compensation claims handling and legal practice. Our system is very demanding—defense counsel is not allowed the right to depose or send written interrogatories or requests to produce to their opponents. If the employer doesn’t maximize the opportunity to investigate claims at the early stages of reporting, the claims handler and attorneys may be “flying blind” in trying to protect you from a questionable claim. The only true method to avoid paying WC or employment claims you may not owe is to insure you have an aggressive accident investigation system in place and insure all of your managers are keenly aware of its importance.

With that in mind, we want all of our readers to understand there is a very simple and somewhat inexpensive tool we feel would dramatically nail down and improve accident investigation protocols. It is called a video camera. We are so used to them and they are so ubiquitous, we almost forget how powerful they would be, if properly used in the claims environment. This is particularly important in Illinois where any opportunity to maximize accident investigation is so critical.

At present, we feel the vast majority of outside claims representatives and in-house risk managers focus on developing paper files. If a recorded statement is taken, it is transcribed onto paper. Accident investigation forms are all paper. Claimants, supervisors and witnesses are all routinely asked to fill out paper forms. Effective immediately, we are trying to get all of you to think about what investigating accidents on paper means. If the dispute is about the condition of a set of stairs—say for example, claimant says the stairs were damaged and in a state of complete disrepair; we consider of questionable value to have a supervisor look at the stairs and say they are in a state of good repair. Many Arbitrators in the state would routinely rule claimant was correct and will view the supervisor’s statements as suspect—the worker fell so something had to be wrong? In contrast, if the supervisor took out a camera phone and took ten pictures of the stairs, it locks in the facts. The Arbitrator can view the “independent” video evidence and see a much more accurate view of the stairs.

We will give you another example of a simple questionable claim. The matter involves a fully disputed cervical fusion for an Illinois truck driver. If you have any medical or claims background, rest assured, such a claim has a six or even seven-figure exposure. Medical care for a cervical fusion by itself may cost $50-300,000 in this state for surgeon’s fees, hospital charges, pre-surgical workup and post-surgical physical therapy. In this claim, the injured worker reported the disputed claimed event as occurring the Tuesday before Thanksgiving. He doesn’t tell anyone about the claimed event for three weeks. He fills out the report and says he strained his neck lifting freight.

Thereafter, three co-workers step forward and all three of them indicate the injured worker told them a dramatically different tale. All three independent witnesses confirm the injured worker told them he injured himself at home on Thanksgiving. This sets up a fraud case and a solid defense to compensability. However, at present, everyone in Illinois WC claims would have them write stuff down on a piece of paper.

We are telling all of you simply taking written reports is a minimalist thing to do when you are investigating major losses with six and seven-figure values. A much better approach would be to have all of the defense witnesses provide videotaped statements on a webcam or other video camera to the claims adjuster. The adjuster should then burn all of it to a DVD. If you have clear videotaped statements from all three witnesses who independently verify claimant is lying, what can you do with them? You could:

1. Send them to claimant’s counsel and tell him/her to drop the fraudulent claim and not waste their money getting medical records and IME’s for a phony;
2. Send them to the IDFPR and have them start a fraud investigation—the videos could be forwarded to the appropriate states’ attorney for prosecution of claimant;
3. Send them to your defense attorney for use in defense of the claim;
4. Send them to the IME doctor for their consideration in reviewing the medical chart.
5. Use them at pre-trials to get the Arbitrators to see how strong your defenses are and to try to get the other side to drop or discount their case.
6. Use them at any later hearing to support testimony given at trial.

Are such videotaped statements admissible into evidence? Well, you would need the person on the tape to be present to provide foundation and make themselves subject to cross-examination by Petitioner’s counsel. We are also suggesting a better “second-step” in phony claims is to get an expedited videotaped evidence deposition of your crucial defense witnesses. In so doing, defense counsel is locking in your case-in-chief. The concern we have is most Petitioner’s attorneys put questionable claims on the back burner—they want the claim to sit to avoid having to confront their clients and deal with the phony claimant. They also don’t want to invest time and money in questionable claims. This works directly contrary to insuring a defense attorney has a solid case.

Every day that goes by, defense witnesses quit, get fired, lose interest and forget details. In a major claim, every veteran risk manager knows claimant is certain to eventually come forward and tell a well-prepared tale of woe. It is much harder to track down and prepare a defense witness who has nothing to gain by participating. If you have videotaped evidence depositions of your lead witnesses, you are ready whenever the other side gets their ducks in a row. Our vote in major claims is take the extra step and be sure you are ready. Take advantage of your advantage.

Please let us know your thoughts and comments.

Editor’s comment: In Herman v. Power Maintenance & Constructors, LLC, No. 4-08-0509 (February 19, 2009), the Appellate Court was faced with a claim in which Plaintiff was a third-year apprentice boilermaker. He claimed he was terminated due to an injury occurring at work and a subsequent claim for workers’ compensation benefits. Turns out, claimant wasn’t actually terminated he was laid off, later he would claim the employer wouldn’t recall him, as they did with others.

After taking discovery, Defendant asserted, in a motion for summary judgment, it was entitled to summary judgment because plaintiff made three admissions in his deposition that were fatal to his case. Plaintiff had admitted

(1) Defendant laid him off rather than discharged him;

(2) In laying him off, defendant had no intention of retaliating against him for exercising his rights under the Act; and

(3) Defendant had a valid, nonpretextual reason for laying him off, namely, his physical inability to perform the work.

The Appellate Court ruled because the doctrine of judicial admissions was not intended to punish unintentional mistakes and confusion, plaintiff’s misstatement at first summary judgment hearing that plaintiff’s cause of action accrued when defendant initially laid plaintiff off will not be treated as a binding judicial admission.

Further, the Appellate Court ruled the trial court erred when it granted Defendant’s motion for summary judgment, dismissing plaintiff’s complaint for retaliatory discharge; because, although defendant initially laid plaintiff off when his medical limitations as result of a work-related injury prevented him from performing the work that was required, its subsequent letter to union refusing to recall him allegedly because of poor work performance could have been pretextual reason for retaliation because he filed a workers’ compensation claim in the interim.

If you need the cite or have any questions about retaliatory discharge claims, please send a reply.

Editor’s Comment: In the wake of this decision, employers looking to recover workers’ compensation costs pursuant Section 5(b) of the Act are cautioned to spend the money and perfect filing of their own complaint prior to the running of the statute of limitations, or at minimum, ensuring the complaint filed by their employee/Plaintiff has named the proper parties and is timely filed. Failure to do so may cause the employer to lose your lien completely or accept a nominal lien recovery where the employee accepts a far lower settlement than the amount sought by the employer or his/her case is dismissed.

In Pederson v. Mi-Jack Products, Inc., No. 1-07-2327 & 1-07-3228 Cons. (March 10, 2009) 2nd div. (Hall), Plaintiff was injured while at work when a boom from a crane fell upon him. Substantial workers’ compensation benefits were paid and not in dispute. Plaintiff’s civil complaint for product liability, however, named the wrong defendant as the manufacturer of the crane. Further, the statute of limitations had already run.

Plaintiff’s counsel withdrew, citing an impending malpractice suit. Plaintiff proceeded to settle on a pro se basis with the remaining defendants after firing counsel for alleged malpractice. The employer, seeking to recover far more on their lien, then filed their own complaint against the defendants. Defendants motioned for dismissal of the employer’s obviously untimely complaint.

Please note in Eastman v. Messner, Illinois courts ruled an employer of an injured worker had no workers’ compensation lien in a legal malpractice suit brought by an injured worker against their lawyer who committed malpractice, as claimant’s counsel arguably did in this matter. With respect to our courts, we strongly disagree with the Eastman v. Messner ruling and consider it to guarantee double recovery by the injured worker which is precisely what numerous cases outline is what the legal concept of subrogation recovery as defined in Section 5 of the Illinois Workers’ Compensation Act is designed to prevent.

In Pederson, the Appellate Court affirmed the dismissal of the employer’s complaint in the products liability action, since their filing was clearly beyond the statute of limitations. The Court also approved the proposed settlement between Plaintiff and Defendant for an amount less than employer’s workers’ compensation lien, subject to payment of lien. The Court reasoned that, Plaintiff’s incentive to settle with Defendant in order to pursue his legal malpractice claim against his attorneys for suing the wrong company did not give the employer the right to control litigation or settlement of the present claim.

The Court went on to rule that, pursuant to Section 5(b) of Workers’ Compensation Act, the employer has surrendered the right to participate in the litigation after it failed to file suit within three months of expiration of statute of limitations. We find this aspect of the ruling too far-reaching, as it implies the employer cannot “participate” in the civil litigation at all, except as a third party defendant. We feel the Courts should appreciate employers/insurance companies may have workers’ compensation liens approaching $1 million or more in some instances of catastrophic injury. To suggest they have no right to actively participate in the related civil litigation process is unsettling, especially when it leaves the fate of the litigation in the hands of a sometimes unpredictable Plaintiff or their counsel. It is our reasoned impression that, once an employer files their petition to intervene, they should have the option to pursue and protect their lien to the fullest extent, regardless of the agreement reached by Plaintiff in the case.

This case stands for the legal principle that employers should not ever rely on Plaintiff’s counsel to protect their lien interests, particularly when you have clear liability and a substantial workers’ compensation lien. To do so, puts you at risk for what happened in this claim—a bumbling lawyer sues the wrong party or misses the statute of limitations and your rights are lost. The higher your lien rises, the stronger your need to reach out to competent defense counsel who understands the nuances of lien recovery.

This article was drafted by John P. Campbell, Jr., Esq. If you have thoughts or comments on these concepts or need the actual ruling, please send a reply to John at jcampbell@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.