NEWSLETTER - December 2006

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December 2006

This month we have news of victories at the Illinois Worker's Compensation Commission and a cash surge from recent recoveries on liens on our Intervening Petitions and Third Party Defendant claims. We also update the status of the Borrowman and Lenart decisions and discuss an Appellate Court ruling on Section 19(g) of the Act, dealing with interest calculation on awards.

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• Firm Happenings
• Case Law Update
  • Supreme Court Accepts Appeal Of Gallagher v. Lenart, Looking To Resolve Conflict Regarding Waiver Of Liens In Worker's Compensation Settlements
  • Court Limits Attorney's Fees And Interest In Sec. 19(g) Proceeding

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Firm Happenings

Leo Plucinsky recently received an excellent decision from Arbitrator Mathis on an 8(a)/19(b) proceeding in Springfield. At issue was a surgery recommendation by the petitioner's treating physician for a cervical fusion, along with significant past TTD and future TTD and disability if the surgery were awarded. Petitioner testified that she was injured while working for the respondent company on both June 9, 2003 and July 20, 2003. On cross-examination, the petitioner admitted that she had not worked or looked for work since July 20, 2003.

Medical depositions were taken of the treating physician and our IME and the case proceeded to trial. Petitioner proposed that the Arbitrator find that the petitioner had not reached maximum medical improvement, that the respondent authorize and pay for the anterior cervical fusion recommended by Dr. Pencek, and award TTD from June 20, 2003 through June 8, 2006, totaling over $50,000.00.

Arbitrator Mathis agreed with Leo that the three level cervical decompression and fusion recommended by Dr. Pencek was not reasonable, necessary, or related to either alleged accident. Instead, the Arbitrator found that the petitioner was entitled to temporary total disability benefits only through December 16, 2003. The Arbitrator also found that the petitioner had concluded treatment for the work injury and awarded her 10% loss of use of a person as a whole. After crediting the pretrial TTD payments to Respondent, the petitioner actually owes the respondent $257.46.

Grace DiGerlando also registered a victory before Arbitrator Giordano in Rock Island. Similar to Leo's case, the petitioner was seeking authorization for medical treatment for reflex sympathetic dystrophy, along with commensurate TTD payments. Arbitrator Giordano adopted the opinions of respondent's IME that the claimant did not suffer from RSD, an opinion that was also adopted by a University of Iowa physician to whom the claimant was sent for consultation at the request of his treating surgeon. Grace also convinced Arbitrator Giordano to render a finding that the Petitioner is not credible for various reasons, after which the arbitrator spent two pages explaining why! End result: all TTD and prospective medical bills, as well as any medical bills related to the alleged RSD, were denied.

Finally, Christmas has come early for the civil liability section of the firm as we have recently recovered over $125,000.00 in worker's compensation liens in cases in which we had either intervened or were defending the insured on a Third Party Complaint while protecting the client's lien rights. In addition, we have an agreement in place for a recovery of an additional $100,000.00, and a possible resolution of a death claim from 2004 at the Commission for a $1.00 settlement in return for a lien waiver in the civil case.

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Case Law Update

Supreme Court accepts appeal of Gallagher v. Lenart, looking to resolve conflict regarding waiver of liens in Workers' Compensation Settlements

As reported in our recent Breaking News link and email, the Fourth Appellate District of Illinois made a controversial ruling on a Section 5(b) lien asserted by an employer in an employee's third party action arising from his work injury. In Borrowman v. Prastein, 356 Ill.App.3d 546 (4 Dist. 2005) the Court held that terms of a lump sum settlement contract entered in an underlying workers' compensation claim which stated in part, AThe above constitutes a full, final and complete settlement of any and all claims constituted a waiver of the respondent's lien.

In a decision issued at the end of August, the 1^st District strongly disagreed with Borrowman. In Gallagher v. Lenart, 367 Ill.App.3d 293, the 1^st District ruled against a Defendant's motion to adjudicate its worker's compensation lien to zero based on Borrowman. The Court stated:

We find this [Borrowman] holding unsupported by case law, contrary to several principles behind the Act, and at odds with general contract law. Accordingly, we reject it.

Plaintiff appealed this decision, and the Supreme Court recently agreed to hear the appeal. What is somewhat troubling is the Supreme Court had rejected the employer's appeal of Borrowman earlier this year, suggesting that it may have agreed with the 4^th District's analysis. The Supreme Court rejects most applications for appeal, however, and with the direct split in opinion demonstrated by the two appellate districts, they may have determined that their input was now necessary. We certainly agree with the 1^st District's strong criticism of Borrowman, and hope that the Supreme Court resolves this favorably for employers (and basic principles of contract law and waiver) once and for all.

Court limits Attorney's fees and interest in Sec. 19(g) Proceeding

In Radosevich v. Industrial Commission, 367 Ill.App.3d 769, the Appellate Court, Fourth District, held that a claimant who filed a Sec. 19(g) action in Circuit Court to enforce an unpaid arbitration award is not automatically entitled to a 20% attorney's fee of the entire unpaid amount. The Court also held that the lower interest rate of Sec. 19(n) would apply from the date of the arbitration decision until the entry of the circuit court judgment, rather than the 9% judgment interest under Section 2-1303 of the Code of Civil Procedure.

Sec. 19(g) is a seldom used portion of the Act which enables a party, once an arbitration award has become final, to file an action in Circuit Court for entry of a formal judgment.

Section 19(g) of the Act reads "In a case where the employer refuses to pay compensation according to such final award or such final decision upon which such judgment is entered the court shall in entering judgment thereon, tax as costs against him the reasonable costs and attorneys fees in the arbitration proceedings and in the court entering the judgment for the person in whose favor the judgment is entered." 820 ILCS 305/19(g)

In this case, on August 31, 1999, claimant injured her left shoulder. On September 17, 2002, the arbitrator awarded claimant various accrued benefits totaling over $90,000, as well as ongoing weekly permanent total disability benefits and maintenance costs. Neither party sought review of this award.

On December 13, 2002, claimant filed an application for entry of judgment pursuant to Section 19(g) of the Act, requesting attorney fees and costs for employer's alleged refusal to pay the arbitration award. On January 2, 2003, a hearing was held on claimant's Section 19(g) application. On January 2, 2003, and January 3, 2003, employer issued payment to claimant totaling $84,307.65. On January 10, 2003, employer issued payment to claimant totaling $5,884.16.

Although the Circuit Court agreed that the employer wrongfully had refused to pay the arbitration award, it denied the claimant's request for $32,310.35 in attorney fees as excessive and unreasonable. Instead, the Circuit Court awarded claimant $6,000 in attorney fees and $847.20 in interest.

The Appellate Court agreed that the award of attorney's fees by the Circuit Court was reasonable and not against the manifest weight of the evidence. It agreed that the typical 20% amount contained in Section 16 of the Act, is a different standard than the language under Sec. 19 (g), which provides for the taxation of "reasonable costs and attorney fees against the party who has refused to pay an award. (820 ILCS 305/19(g). The Court noted that the legislature intended "reasonable costs and attorney fees" under Section 19(g) to mean something wholly different from the Section 16 fee arrangement.

The Appellate Court also clarified that Sec. 19(n) interest rate of 1.64% applied to the pre-judgment payments made by Respondent, with the higher civil judgment interest rate of 9% only applicable to unpaid amounts of the award after the Circuit Court judgment date. Since the employer paid most of the award during the pendency of the 19(g) petition, the 9% interest rate only applied to the unpaid portion, but dated back to the Arbitrator's award, not the entry of the Circuit Court's judgment on the 19(g) petition.

This leaves open the question of the proper interest rate to be applied when a case reaches Circuit Court judgment, but the award is then timely paid. The Court noted that Section 2-1303 provides that judgments shall draw interest at the rate of 9% per annum from the date of judgment, and "[w]hen judgment is entered upon any award, report or verdict, interest shall be computed at the above rate, from the time when made or rendered to the time of entering judgment upon the same, and included in the judgment." 735 ILCS 5/2-1303. This may be the subject of further litigation for cases not decided under Section 19(g) petitions.

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