11-2-2015; Refocusing IL WC Reforms--How do We Fix the State's WC Defense Program?; Lindsay Vanderford, JD on New Mechanic's Lien Bond Law; Drones and Remote Cameras in Surveillance...

Synopsis: Refocusing Governor Rauner’s Proposed IL WC Legislative Reforms—Can Illinois Ever Fix the State’s WC Claims Defense Program?


Editor’s comment: As you read this, Governor Rauner and IL State Democratic leaders are battling for public opinion in a sort of “death spiral” with our state budget locked up over, among other things, several proposed IL WC legislative reforms. Governor Rauner and his team receive these emails and we want the Governor to know he has already “reformed” the IL WC system and may not know it. If he has other issues to fight about in Springfield, keep fighting the good fight but he can ease up on his current WC issues in our view and fight a real and simple WC reform fight he can and should win. Hundreds of millions in taxpayer dollars are at stake.


When We Say IL “WC Reforms” Are Already in Place, What Do We Mean?


The most critical aspect of IL WC claim costs are handled by our IWCC Arbitrators and Commissioners. If you aren’t aware, former Governor Quinn changed the IL WC Act so all of these hearing officers serve at the disposal of the Governor. If the current Governor wants you in, you get the job and keep it. If the Governor wants you out, you are basically out either this year, next year or the third year—you won’t last long without a continuing gubernatorial endorsement. We didn’t think this was a good idea because it strips the Arbitrators of any true job protection from politics but the Democrats created it and it is the law.


What Gov. Rauner has done in the last weeks and months is to bring in solid, professional and mostly conservative Arbitrators. Some of them are middle-of-the-road. Almost all of them know the IL WC Act and Rules backwards and forwards—if you follow common sense in implementing the IL WC Act, most of the proposed reforms like buttressing “primary cause” and defining “traveling employee” aren’t necessary. Intelligent hearing officers aren’t going to stretch the well-accepted outline of the IL WC Act to find compensability in a nonsensical fashion. If they don’t follow traditional WC values in their rulings, we hope the Governor’s team will have a little chat with them about such issues.


These Arbitrators have all been sworn in and they are hearing claims and making solid decisions. We are telling all of our readers, for the most part, we are seeing denials and lowered awards across this state. The impact of these decisions aren’t going to be felt this year. That said, we are certain they are going to be measured and compared to other states in the year ahead. We confidently predict our IL WC numbers for the 2016 State of Oregon WC Premium Rankings that will be released about a year from now are going to move from 7th Place among all the states to the middle of the pack.


We are okay with middle-of-the-pack. As long-time members of the IL WC community, we caution our industry leaders you don’t want to be bottom of the U.S. Workers’ Comp pack—it is hard to recruit solid workers if there is a perception you aren’t going to take care of them if they suffer an unforeseen injury at work. Illinois is anchored by one of the largest, most productive cities on earth. Like other large metropolitan areas such as New York and L.A., Chicago’s attractive infrastructure and talent pool for employers bring with it increased costs of living and doing business. We are not the same as our “sister states”.  Please remember the Indiana WC system provides comically low benefits for a 35 year old wife or husband with three kids when a catastrophic and life-changing injury occurs in the workplace. In that setting, IN WC only provides 10 years of benefits at a reduced rate. If the seriously injured worker has three kids under the age of seven when injured, there aren’t nearly the level of benefits to adequately sustain the family for any measurable period. In Illinois, such lower benefits would dissipate more rapidly, due to the higher cost of living.


 What Still Needs to Be Addressed In the WC Arena in Springfield.


Last week, we reported on a nutty WC claim for a prison guard/correctional worker named Fancher. Lots of folks are upset to hear he was in a fishing contest while getting benefits. Everyone can share the blame for that scenario--we are mad at the State, his employer along with him. Having thought more about this claim, we consider it a model or paradigm for how poorly our State Government manages its own WC claims. Governor Rauner and his troops have done literally nothing to make this part of their administration better. He was elected one year ago this month and he should have the ability to start moving things in the right direction right now. The defense team at KCB&A is offering our State Government free advice and counsel to set things in the right direction.


We are sure Governor Rauner’s current proposed WC reforms won’t get Corrections Officer Fancher and others like him off the fishing contest boat and back to work. We will try to prove it to you. Here are simple and common sense thoughts. This prison guard/government worker suffered a shoulder strain. He later had successful and uneventful shoulder surgery with post-surgical recovery to the same job; same rate of pay.


Please note the three benefits in IL WC and all workers’ comp claims are medical benefits, then lost time (or TTD) then permanency/Impairment.


The way the State of IL handles State WC claims is a Smoking Mess.


If one of our private sector clients had a shoulder strain with surgery, the projected and typical WC claim would be


·         Medical bills of about $15-20K.


·         3-4 months of lost time or about $20K in lost time.


·         Permanency/impairment of about 10% BAW or about $24K for an operated shoulder with full duty release.


Total private sector costs for such a simple WC claim are $60K.


What the State of IL WC claims handlers did in this claim was provide these three simple benefits at these levels:


·         Medical bills that should be about the same as the private sector or $15-20K. The State could save money on WC medical bills if they would start or enroll in an IL WC PPP. The legislation is there to save money and the State WC claims team isn’t using it. Governor Rauner and his team probably doesn’t even know it exists.


·         Lost time where Claimant Fancher was allowed to stay off all work for almost a year with full pay—Cost $65K or triple the expected private sector cost. Governor Rauner’s suggested WC reforms won’t change this metric at all. A light work program is needed and no one is doing anything about it.


·         Permanency/impairment of $48K or double the private sector settlement values. Please note the State’s defense team didn’t “fight” and lose this issue before an Arbitrator—they voluntarily paid/settled for way more than a private sector claims handler would pay. Governor Rauner’s proposed WC reforms won’t change this at all. If the Governor is interested in saving taxpayers money in providing permanency to state workers, we are happy to help show his team how.


State WC claims mishandling on this simple shoulder claim cost taxpayers at least $133K. The total WC claim cost is more than double the private sector cost. If a claim were handled that poorly in the private sector, the claims handlers and defense attorneys would be fired. In State Government, we don’t know how to effectively let our new Governor and his team know there may be 15,000 to 20,000 such WC claims and the annual cost of overpaid IL WC government benefits for state workers is in the hundreds of millions of dollars.


Why does the State Routinely Mishandle WC claims like this?


For the same reasons the State provides their workers unaffordable and impossible-to-fund fake pensions—when state government workers support the party in power in Illinois they give you lots of taxpayer dollars while you are working and in retirement. And since voter turnouts are low, if you can get state workers to uniformly vote for you, you have a decided edge in any election. We bet Corrections Officer Fancher doesn’t want to hear about light duty work and getting off the fishing boat while being paid by Illinois taxpayers.


Can this sort of State of IL WC Claims Mishandling be “Reformed” by Legislation? 


Nope—the State WC Managers and defense lawyers probablyhave to be outed.


In 2011, the General Assembly legislatively created a IL State Gov’t Workers Comp Advisory Board to address this hilarious and continuing mismanagement. They clowned around for more than a year finding out who would sit on the blue-ribbon panel. Once the panel was constituted, they never met or made a single recommendation. The law doesn’t require them to meet or save taxpayers a penny. We are calling for the resignation of everyone on that board and asking Governor Rauner reconstitute it with folks who actually care about government waste.


Please remember the State pays over $150M or more in annual WC costs. In our view, there is no state other than nutty California that pays anything close to what we overpay in WC benefits to state workers. 


The City of Chicago pays over $100M a year in WC claim costs—again, other than goofy California cities, no U.S. city pays more to their workers in WC benefits. A reliable source told me to have 100 garbage/sanitation workers actually on the job, they need 133 workers on payroll because about 1 in 3 City sanitation workers are on TTD at any given time. And guess what, the City of Chicago just instituted a new monthly fee for garbage collection to pay for all the malingering. When Mayor Emanuel claims he has no choice and is “forced” to raise these fees, we ask when he is going to ask Alderman Burke to stop wasting millions on workers’ comp claims.


No efforts are being made to address such government WC claims mishandling. Very few people understand it. It isn’t sexy for voters but some day, someone is going to try to make it better and save taxpayers’ money. If either the State of Illinois or City of Chicago want us to consult for free and save taxpayers millions of dollars, send a reply. Trust us, we do it every day for major businesses across our state.


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Synopsis: Construction Law Alert – New Mechanics Lien Act Change Will Expedite Process. New Law Authorizes “Bonding Over” Mechanics’ Liens For First Time In Illinois. Thoughts and Analysis by Lindsay R. Vanderford, JD.

Editor’s comment: On July 29, 2015, the General Assembly passed and the Governor signed Public Act 99–0178, adding a new Section 38.1 (770 ILCS 60/38.1) to the Illinois Mechanics’ Lien Act. The newly enacted Section 38.1 authorizes interested parties in a mechanics’ lien dispute to petition for an order substituting an eligible surety bond for any lien rights arising in (1) the improved real property, and (2) the money or other consideration due or to become due from the owner to the general contractor. Section 38.1 now introduces the concept of “bonding over” mechanics’ liens in Illinois and provides a needed mechanism to clear clouds on title resulting from bona fide payment disputes. 


 Proponents say it will enable lien claimants to be paid faster and keep construction projects from being held up in court. However, Section 38.1 provides additional remedies, such as mandatory prevailing-party attorneys’ fees, that must be considered carefully before deciding to bond over. P.A. 99–0178 is set to take effect on January 1, 2016.


In Illinois, a mechanics lien claim can cause real estate development projects to grind to a halt while the interests of the parties are adjudicated. With a bond in place, the court may dismiss all parties to the case except the principal, the surety of the bond, and the lien claimant. This avoids lengthy litigation and can lead to lien claimants being paid faster. The bond would also remove the mechanics lien from the real property, allowing a construction project to progress forward.


In order to substitute a bond for a traditional lien claim, the statute requires a petition be filed with the clerk of the Circuit Court where the real estate is located. The petition must provide for a statutorily sufficient bond. In order to be sufficient, a bond must be a surety bond for 175 percent of the value of the lien claim, issued by a top-rated bonding company. The petition must be approved by a court after notice to the lien claimant. It must be filed within five months of the filing of a complaint or counterclaim to enforce the specific lien claim. If no complaint or counterclaim has been filed, the bond petition may be filed at any time.


Once the petitioner establishes the proposed surety bond is an eligible surety bond pursuant to the Act, the bond will be substituted for the property securing the lien claim. The court will also enter an order substituting the lien claimant’s right to recover on the bond for the lien claimant’s causes of action pursuant to Sections 9, 27, or 28 of the Act.


Important Considerations Include:


  • In a proceeding to foreclose the lien and sell the property under section 9 of the Mechanics Lien Act, or a joint action against the owner and contractor under section 28 of the Act, all of the lien claimants share the total amount the owner is required to pay. If the property is sold to satisfy lien claims, the proceeds of sale may also have to be shared with mortgage lenders and other non-mechanics lien claimants.
  • In traditional proceedings, even after the lien claimant gets a judgment, there is no assurance the lien claim will be satisfied. If the suit is on a section 38.1 statutory bond, the lien claim will be resolved more quickly, and it is more likely the lien claimant's judgment will be paid in full.
  • The new bond procedure makes it easier for lien claimants to enforce their claims because it limits the number of necessary parties and their defenses to the claim. Proceedings on a bond claim will likely be shorter than those on a standard lien claim because the bond proceeding does not require the adjudication of the claims of other lien claimants. It only requires it of those who are subject to the bond.
  • The new provision is not without risk for lien claimants. Under the bond provision, a prevailing party is able to recover its attorney's fees. A lien claimant is deemed to be a prevailing party if the final judgment amount is at least 75 percent of the lien claim, and the party that petitioned for the bond is a prevailing party if the final judgment is equal to or less than 25 percent of the lien claim. In all other cases, neither party will be deemed a “prevailing party” for purposes of awarding attorneys’ fees. Under prior law, which is not affected unless a party invokes Section 38.1, an attorney-fee award cannot be entered against any party other than the owner or the lien claimant. Further, the Act did not allow attorneys’ fees to be added to the judgment unless the court found, in its discretion, the owner or lien claimant acted without just cause or right. These limitations do not apply to an action on the bond under the new statute.
  • Section 38.1(i) provides “the principal and surety . . . shall be jointly and severally liable to the lien claimant for the amount that the lien claimant would have been entitled to recover under this Act if no surety bond had been furnished, subject to the limitation of liability of the surety to the face amount of the bond.” Therefore, it is possible a party invoking Section 38.1 will become personally liable where no personal liability previously existed.
  • Finally, Section 38.1 may cause unintended consequences for general contractors. If a general contract requires the contractor to bond over liens filed by sub-subcontractors or material suppliers with whom they do not have a direct contract, that contractor risks becoming personally liable to a lower-tier lien claimant for the amount of the lien, plus attorneys’ fees and interest. Contractors should consider carefully any such contract requirement in light of the above provisions, and should understand the additional risks such a requirement could impose.

Illinois is the last state to adopt a bond procedure for mechanics liens. However, unlike bonding provisions in some jurisdictions, the posting of a surety bond under the new Illinois law will not operate as a release or discharge of the lien. The option to post a surety bond can nevertheless benefit parties to a lien dispute by providing the successful claimant a ready source of recovery in the form of cash proceeds, preserving the owner’s right to possess the property by removing the threat of foreclosure and sale, and allowing parties other than the claimant, principal and surety to avoid unnecessary legal expense by excusing their participation in litigation.


This article was researched and written by Lindsay R. Vanderford, JD.  Lindsay can be reached with any questions related to construction bonds, workers’ compensation defense and employment law defense atlvanderford@keefe-law.com.




Synopsis: Drones and Unmanned Remote Cameras for WC and Other Surveillance Operatives—Anyone Using Them?


Editor’s comment: We had a reader in the surveillance industry ask a simple question that we want all of our readers to consider and share your collective genius. Can WC surveillance operatives use drones or unmanned remote cameras to try to catch malfeasance and scammers?


Our short answer is we don’t know. One concern we are all aware of is the problem with putting a remote camera on a neighbor’s fence or other building without their permission. To do so is clearly trespassing and might result in a beef against the license of the surveillance provider. However, there are lots and lots of neighbors who don’t like to see scam artists taking advantage of employer and might otherwise agree to allow the remote camera, particularly if it doesn’t look like a remote camera. Our vote for surveillance operatives is to quietly and carefully ask and see what you get. One willing neighbor might break a claim wide open.


A secondary issue for surveillance providers is the problem with invasion of privacy—you don’t ever want to videotape someone in their home or any building where there is an expectation of privacy, like a dressing room at a swimming pool. Again, to do so is going to invite litigation and licensing complaints.


We recommend all surveillance providers be sensitive to remote security cameras already present and in operation on private and commercial properties. The defense team at KCB&A had a very successful outcome in a fully disputed WC claim where Petitioner thought he was at a truck dock that had no security cameras—he didn’t notice the children’s preschool next door had statutorily required security cameras which taped him. The computer video from those cameras proved him to be a liar and cheat. If the owner won’t voluntarily give such video up, a wily defense lawyer can send a subpoena for them.


As to drones, the U.S. Government is getting rapidly involved to strongly regulate drones due to the potential for terrorism or risk to commercial and private aircraft. We are sure drones used by surveillance operators would be regulated, commercial drones. The proposed rule would require an operator to maintain visual line of sight of a small UAS. The rule would allow, but not require, an operator to work with a visual observer who would maintain constant visual contact with the aircraft. The operator would still need to be able to see the UAS with unaided vision (except for glasses). The FAA is asking for comments on whether the rules should permit operations beyond line of sight, and if so, what the appropriate limits should be.


“We have tried to be flexible in writing these rules,” said FAA Administrator Michael Huerta. “We want to maintain today’s outstanding level of aviation safety without placing an undue regulatory burden on an emerging industry.” 


Under the proposed federal rule, the person actually flying a small unmanned aircraft system or UAS would be an “operator.” An operator would have to be at least 17 years old, pass an aeronautical knowledge test and obtain an FAA UAS operator certificate. To maintain certification, the operator would have to pass the FAA knowledge tests every 24 months. A small UAS operator would not need any further private pilot certifications (i.e., a private pilot license or medical rating).


The new rule also proposes operating limitations designed to minimize risks to other aircraft and people and property on the ground:


·         A small UAS operator must always see and avoid manned aircraft. If there is a risk of collision, the UAS operator must be the first to maneuver away.

·         The operator must discontinue the flight when continuing would pose a hazard to other aircraft, people or property.

·         A small UAS operator must assess weather conditions, airspace restrictions and the location of people to lessen risks if he or she loses control of the UAS.

·         A small UAS may not fly over people, except those directly involved with the flight.

·         Flights should be limited to 500 feet altitude and no faster than 100 mph.

·         Operators must stay out of airport flight paths and restricted airspace areas, and obey any FAA Temporary Flight Restrictions (TFRs).


You might quickly note most of the commercial drone rules are going to make it challenging for surveillance operatives to use drones. However, we consider most surveillance operatives to be competitive and nerdy enough to at least try to one-up their competition.


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