12-26-2016; Two Gaffes by IL Defense Attorneys--Ooops!!; Happy New Year from the Gang At KCB&A!!!

Synopsis: Oops! Missteps in Handling of IL Workers’ Compensation Claims–Why Not Consider A Better Defense Team for 2017?


Editor’s comment: Why Hire the Rest When You Can Hire the Best at KCB&A To Handle Intricate IL WC Death Claims And For All Your Litigation Needs!


Gaffe Number One—Oops! Widow Will Collect WC Death Benefits About $300,000 More Than The IL Statutory Death Benefit Maximum.


In Sara Foster, widow v. Mitsubishi Motors, Foster's husband was an electrician at the now-closed Mitsubishi plant in Normal, Illinois. We are sad to report the 42-year-old suffocated when he was crushed performing maintenance work on an assembly line in October 2003.


Widow Foster sought WC death benefits on behalf of herself and her five young sons. She received an award from the Arbitrator assigned in January 2004, which provided death benefits in weekly payments of $1,304.78, based on the wages her husband earned. Illinois has a statutory maximum and minimum payable death benefit tied to the statewide average weekly wage. The current death benefit maximum is $1,428.74, but for deaths occurring in 2003, it was $1,012.01 — the maximum death benefit is $292.77 less than what the Arbitrator awarded Foster. it appears clear Mitsubishi did not challenge the erroneous award, but when it began making payments to Foster, it paid her only $2,024.02 every other week.


A panel of the Illinois Appellate Court just ruled Widow Foster was entitled to weekly benefit payments in excess of the statutory maximum rate, plus interest, all because of an uncorrected but obvious mistake in an Arbitrator's award. While we can’t be sure, we believe suspect Respondent presented what is called a “death prove-up.” The IWCC website indicates there was no Petitioner’s attorney retained by the widow so the only attorneys involved in 2003-2004 were the defense lawyers. In such a setting, the Arbitrator will review all evidence and typically consider a proposed decision presented by Respondent only. In a death prove-up, the defense lawyers have to obtain and present documentation and testimony confirming the passing of the worker, the status of the widow and dependent children and the appropriate handling of medical bills, burial benefits and the payment of the death benefit. The idea is to legally lock in the death benefits due and insure the right folks are getting the right amount of support.


How Did This Claim Go South?


We safely assume but can’t be entirely sure the defense firm drafted the proposed decision for the Arbitrator and included the death benefit rate at 2/3 of the average weekly wage without referencing the IL WC Act’s statutory minimums and maximums. We also assume the Arbitrator didn’t note the mistake in calculation of the inaccurate rate. While we feel this Arbitrator can be fairly criticized for not checking, we also feel sure the Arbitrator would have asked the defense firm and reasonably relied on their representations in presenting evidence and outlining the proposed death benefit award the Arbitrator filed. Once filed, the clock starts to tick on any needed corrections/changes to the award.


Section 19(f) of the Illinois WC Act provides a period of 15 days in which this Arbitrator could have recalled the decision to correct computational errors. The IL WC Act also establishes a 30-day window in which the parties can appeal an arbitrator's decision to the Workers' Compensation Commission. After those periods, the Arbitrator's decision became the final and binding decision of the Commission. To our understanding, it might be later changed due to clear evidence of fraud but we have never seen that occur. We are sure there was no evidence of fraud in this ruling—it was a simple computational error. 


The problem in Foster v. Mitsubishi Motors was the Arbitrator's decision provided for the payment of weekly benefits at a rate of $1,304.78, when the statutory maximum death benefit limited such benefits to no more than $1,012.10. In our view, someone at an excess carrier or a manager at Mitsubishi Motors apparently noticed the mistake, because when it started making payments to Widow Foster, it paid her at the $1,012.10 rate. Whoever did so never bothered to have the obvious mistake in the Arbitrator's decision corrected consistent with the Rules. Oops! The inaccurate payments went on for 11 years and the mistake might have been buried with the passage of time. Somehow, some one tooknotice the payments the Widow was receiving didn't agree with the award she had been issued. We assume efforts to settle all of it might have occurred but again we can’t be sure. We are sure a Petitioner lawyer get involved and filed the correct pleading—a 19G Petition to collect the amounts due in the final IWCC award. The Widow’s counsel also argued she was entitled to 9% interest on the balance of the unpaid amounts dating back to the entry of the 2004 award.


Mitsubishi filed a motion to dismiss Foster's 19G application, arguing it was barred by the five-year statute of limitations in Code of Civil Procedure Section 13-205. In the alternative, Mitsubishi argued enforcement of the weekly award should be limited to $1,012.01, since that was the maximum statutory amount recoverable in 2004. They argued an award in excess of the maximum was void in violation of public policy. Mitsubishi also maintained any interest payable to Widow Foster should be calculated using Section 19(n) of the Workers' Compensation Act, which provides a lower interest rate.


McLean County Circuit Court Lawrence determined the statute of limitations barred Widow Foster from claiming any deficiency in the payment of death benefits for any payments made more than five years before she filed her application for judgment. Judge Lawrence also ruled Foster was entitled to payment at the $1,304.78 rate, which meant Mitsubishi had been short-changing her by $292.77 each week. That meant the company owed Widow Foster $81,682.83 for the five years pre-dating the filing of her 19G petition, to the date of the Court’s order. Judge Lawrence also added $19,738.15 in judgment interest, and directed Mitsubishi to make its future payments to Foster at the $1,304.78 per week rate.


Mitsubishi appealed and the IL Appellate Court last Tuesday affirmed Judge Lawrence's ruling in full. Oops.


I was quoted by WorkCompCentral to confirm failing to check the accuracy of the benefit awarded to Foster will likely prove to be a costly mistake for Mitsubishi, amounting to an initial ‘bonus” payment of more than $300K as it will be about $15,000 a year until 2023. I noted the same rules and deadlines that sank Mitsubishi in this case would also apply with equal force to a worker who got an award for less than the worker should have gotten, too, but in that scenario, I indicated our Illinois courts might "bend over backwards" to try to find some way to grant the worker the relief this major IL employer was denied.


Should This Outcome and the IL WC Act Be Changed/Reformed Before It Cuts Again?


Take a look about where I quote Section 19(f) of the IL WC Act that allows only 15 days to correct a clear computational error. I have no idea why that 15-day limit is there and don’t agree with it at all—why not be sure the benefits are accurate at any possible time? Shouldn’t the statutory limits either low and high be considered “hard” or mandatory limits? What if the widow had a stupid lawyer who made a dumb mistake and wrote a proposed decision with a typo awarding her $1 a week? If her stupid lawyer wrote such a decision and the Arbitrator assigned missed the mistake for whatever reason and entered the proposed ruling, would anyone want the widow and her children to starve because of it?


In short, this legal sword sliced into the fair and reasonable expectations of this major manufacturer but that sword could have cut both ways. Our courts now mandate Mitsubishi is almost certainly going to pay about $300,000 more than would otherwise have been owed—we think they should appropriately complain that is unfair. This same legal sword could have cut into the fair and reasonable expectations of the widow and her then-young kids—if the award had been under the minimum, these facts might have stripped her of any real opportunity to get money to feed and house the kids and like the poor folks in Indiana and other rock-bottom WC benefit states, they would be off work comp on welfare or some other benefit stream. Please note the IL WC death benefit which this family would have received using the accurate number of $1,012.10 a week would be a whopping $1,052,584.00! The widow and family will now receive about $1,356,971.20 from Mitsubishi (see below, as the actual payout will be signficantly higher). In contrast, the maximum Indiana WC death benefit, by our calculation is only $390,000.00, which in our view would basically cut this family’s expected annual income by more than half and possibly turn this unfortunate family into paupers. As we tell our readers all the time, Indiana WC benefits save their businesses money while possibly starving widow(er)s and children.  I fell somewhere between IL WC’s much-too-high death benefit and IN WC’s much-too-low death benefit is a fair and reasonable middle ground.


Remember the IL WC RAF Eventually Makes Our IL WC Death Benefits Very, Very High!!!


Please also remember the IL WC RAF or Rate Adjustment Fund pays staggeringly more in additional monies to widows and T&P claimants. This fund is managed by annual levies issued at the sole cost of Illinois business and local government. The annual not-actually-COLA increases are paid by the IWCC to widows like Sara Foster and her kids while eligible. As decedent passed away in 2003, by now, she would be getting almost 14 years of compounded annual increases that would almost double the weekly death benefit at the end of the 20 year term. I estimate her actual RAF benefit due by now would be about 50% of the amount being paid or what would be $1,012.10 times 50% or approx. $1,500 a week or the inaccurate value of $1,304.78 times 50% totaling $1,957.17 each week. The admitted wrong rate with RAF increases would make the widow’s approx. tax-free annual income $101,772.84 which is about 20% more than decedent’s take home pay at the time of his passing. This RAF benefit will continue to rise until she is getting about $130,000 each year on a tax-free basis at the end of the 20 year term in year 2023. I don’t know and can’t tell anyone if the RAF should be paid by calculating the weekly benefit at the arguably “wrong” weekly benefit rate or the accurate rate, using the then-applicable maximum. I do know none of our surrounding states pay anything like this giant amount of money in a death claim and these combined benefit costs are, in my view, very high.

To try to flip this outcome, it is possible Mitsubishi could bring a due process and equal protection argument to the IL Supreme Court because this ruling is forcing them to pay dollars they shouldn’t owe under the law—the chance of the ultra-liberal IL Supreme Court considering that argument and ruling for a major employer are somewhere between a scintilla and a soupçon. We do remember the Alvarado v. IWCC ruling where our Supreme Court magically re-opened a “final ruling” to resolve an attorney fee dispute—we don’t feel that magic will apply here because, it is my view, the IL courts don’t care about jobs or the best interests of IL business.

I do feel the defense industry might reach out to Governor Rauner and his great team to ask them to “reform” this sort of problem. In the instance where there are clear and unquestioned computational errors like this it would not be hard to make the maximum and minimum benefits “hard” limits. To read the court's decision, click Foster Ruling


We get called on a regular basis for advice from attorneys on both sides regarding the proper handling of death claims. There is a lot of money at stake, so send us an email and we will get you accurate answers and appropriate backup research. One advantage you have in retaining the defense team at KCB&A is our firm is headed by three adjunct professors of workers’ compensation law at The John Marshall Law School in Chicago.


Gaffe Number 2 Averted: Oops! Insurer's Legal Malpractice Suit Against Prominent IL WC Defense Attorney Fails.


The federal U.S. Seventh Circuit Court of Appeals just upheld dismissal of a legal malpractice suit filed by West Bend Mutual Insurance Co. against an Illinois WC defense attorney for allegedly failing to adequately represent it against a workers' compensation claim filed against one of its policyholders. We agree with the Seventh Circuit Court of Appeals stating the bullet of legal malpractice missed its mark under these facts. It appears to be a case of Monday morning quarterbacking to some extent. That said, we do consider this ruling to be required reading for all Illinois defense lawyers to see where criticism and possibly litigation might arise. We are unsure whether the lawyers involved in such claims have a self-reporting obligation to the ARDC.


In West Bend Mutual Insurance Co. v. Schumacher, issued 12/21/2016, Plaintiff West Bend Mutual Insurance hired a defense law firm to defend an IL workers' compensation claim filed by a worker named Marzano against a West Bend insured. Plaintiff West Bend alleged an independent medical examiner wrote a report favorable to its position, but defense counsel decided to forego deposition of the doctor and instead appears to have taken a unilateral “short-cut” to agree with the claimant's attorney to put a redacted version of the expert report into evidence. It does not appear this strategy was cleared with or approved by the West Bend claims adjuster. Further Plaintiff West Bend alleged defense counsel did not call any potential witnesses to contradict statements made by Claimant Marzano until one day before the hearing was scheduled, only to learn a crucial potential witness who were out of town. The Complaint also indicated the Defendant (attorney) unilaterally agreed to pay temporary disability benefits to Claimant Marzano without West Bend's approval, damaging its defenses.


The IWCC website indicates more than four years of TTD were paid and the underlying claim settled for $350,000. After settling for this significant amount, Plaintiff West Bend filed suit against their defense attorney who handled the case. A U.S. District Court judge dismissed the action, finding the insurer failed to appropriately plead how Defendant Schumacher's alleged actions damaged the defense case. While the insurer objected to Schumacher's unilateral agreement to pay some TTD benefits, those payments did not preclude the carrier from contesting Marzano's claim, the District Court found.


West Bend appealed to the U.S. 7th Circuit Court of Appeals in Chicago. The federal appellate court ruled in order to prevail, West Bend would have to allege and prove not only that its former attorney breached his duty but the breach caused the carrier to lose a valid claim or defense in the underlying WC action. The federal appellate court ruled Plaintiff West Bend gave only sketchy information about Marzano's workers' compensation claim in its amended complaint and was also not clear about the impact of Schumacher's alleged negligence. The insurer pled that Schumacher's actions placed it in a "disadvantageous position" and had "greatly compromised" its ability to defend the claim without providing a clear basis for the allegations. The Court confirmed those were "conclusory assertions and certainly do not set forth a plausible description of a lost defense that, absent Mr. Schumacher's alleged neglect, would have assured West Bend's success on the underlying claim." Similarly, Plaintiff West Bend asserted Defendant failed to seek a continuance even though a key witness was unable to testify. Yet, for reasons unclear to us, the insurer’s malpractice attorneys did not provide a detailed description of the specific evidence that could have been presented to ensure a successful outcome in the case. 


As we indicate above, a bullet was dodged to get the malpractice claim dismissed. Regardless, it is challenging to read about a defense attorney who was alleged to:


      Agree to pay benefits without authority and

      Enter into a trial stipulation without permission and

      Tried a claim without a defense witness.


However, it is difficult to know the nuances of the underlying workers’ comp litigation to know exactly what led to these decisions as trial approached. For example, we don’t know whether the Arbitrator compelled a hearing even without defense witnesses available. When such instances occur, we always instruct our attorneys to make a proper  “offer of proof on the record” as to the excluded evidence, preserving the issue for further appeal. An evidentiary “offer of proof” can be critical to preserving rights on appeal. If you would like to learn and understand more, please contact our office.


To read the decision, click here West Bend v. Schumacher. We appreciate your thoughts and comments.

Synopsis: Happy New Year from the Gang at KCB&A!!


Editor’s comment: There is no chance, none that we are about to enter 2017--where has the time gone?


Please have a safe and prosperous New Year!!