1-20-14; When Do We Reach Out to Bruce Rauner?; GL Settlements Move to the Fast Lane, Analysis by Chris St. Peter; Federal Magistrate's Ruling May Herald Change in Attorney-Client Privilege and more

Synopsis: When Does the IL WC Community Reach Out to Bruce Rauner?


Editor’s comment: We met with IL Gubernatorial candidate Bruce Rauner last week to discuss the role workers’ compensation will hold for his administration if he is elected governor—we were greatly impressed with this political neophyte and hard-working businessman. As you read this, Mr. Rauner has a commanding lead over the other three candidates for the Republican spot in the general election. The primary is set for March 18, 2014 and barring some major change, Rauner is almost certain to swamp his other primary rivals.


In a head-to-head battle with incumbent Governor Quinn, Bruce Rauner also appears to compare very favorably. Pat Quinn’s current voter approval rating is at a record low. We strongly suspect any Republican opponent will repeatedly point out Pat Quinn was Blago’s Lieutenant Governor and apparently didn’t know or perhaps want to know or care about what was happening in Springfield during those dark years. The recent circus about IL gov’t pension reforms is completely unpredictable and only addressed 4 of the 5 state pension programs. The proposed pension changes don’t start until June 2014 and even that may be delayed/rejected, as no one has any idea if the courts will uphold the law. IL Judges/justices pensions weren’t touched and their “pensions” or lifetime post-employment income from you could pay them as much as $1M per year of service, if they plan it right (if you don’t believe this one, send a reply and we will explain). The only things you can be sure of are Pat Quinn has been in IL state government since 1990, our current pension deficit is over $100B and the deficit keeps inexorably rising by several million dollars every day. While we applaud our Governor for his work to get whatever slim and slippery reforms that might stick in the face of staunch union opposition, none of it sounds like much in the way of effective and lasting “pension reform” to us. Only in Illinois can you see the absurd paradox of IL state government unions fighting, screaming and suing the Governor over these reforms while simultaneously giving him millions in campaign cash to avoid a great manager like Bruce Rauner!


The Illinois Governor Has to Worry about Three Different WC Issues

A.   Illinois Workers’ Compensation Benefits, B. The IWCC—Our State Agency That Administers Them and C. State Government Workers’ WC Claims


On the workers’ compensation front, in 2002 Blago traded control of the good ole Industrial Commission to the Plaintiff bar from Madison County, IL. As fast as they got in, they changed the name and funding of the place and the cost of Illinois WC benefits went out of sight—IL went from the middle of the U.S. to the top five. As our second-in-command in state government at the time, one would have thought Quinn would have voiced at least some concern about the enormous change this caused in our business climate. At the time, we don’t remember Pat Quinn making a peep about the drastic changes to the IWCC. It is difficult for us to believe the Governor is now suddenly more concerned about Illinois competitive advantage (or lack thereof) as it relates to the Workers’ Compensation Commission. We do agree Governor Quinn got involved and was part of the genesis of the 2011 Amendments to the IL WC Act.


Illinois Workers’ Compensation Benefits


In covering the 2011 Amendments to the IL WC Act, we note they have been in place for about 28 months from the September 1, 2011 effective date. The jury is still out on the overall WC benefit savings. It seemed to take years to put the biggest cost-saving tool, WC PPP’s into place. We consider the delays inexcusable. WCRI and national sources do indicate enormous savings have been made in cutting rising IL WC medical costs but the total savings are still in question. On the judicial side, we have watched our “activist” reviewing courts issue many odd, unprecedented and arguably inexplicable WC rulings that one can’t blame on the Governor or his team. However, some of these controversial appellate rulings were affirmations of earlier decisions from the IWCC Commissioners who are appointed by the Governor.


The IWCC—Our State Agency That Administers WC Benefits


While we feel the Workers’ Compensation Commission remains somewhat “creative” or controversial and appear to sometimes circumvent the statute in relation to the facts, we must acknowledge, as Governor Quinn began to take an active role at the IWCC, we do agree Chairman Latz, the nine Commissioners and our Arbitration staff have become more middle-of-the-road and now reach high professional standards. We don’t agree the IWCC’s rising budget at a cost of about $30M per year matches the dramatic drop in Illinois WC claims. It appears no matter how many or few hearing officers are at the IWCC, IL WC claims still move at a relative snail’s pace in relation to our sister states. In our view, while professionalism is much stronger, there have been few demonstrable cost-saving administrative efficiencies at the IWCC under Governor Quinn.


State Government Workers’ WC Claims


Please also remember State of IL government is one of the biggest employers in the state. In our view, our state governments’ own workers’ compensation claims handling system remains a complete mess and is still paying something like $100M per year in runaway workers’ comp benefits. The 2011 Amendments to the IL WC Act created the State Workers’ Compensation Advisory Board that you can find online if you dig a little. In our view, this Board is another one of those IL Gov’t boards created solely for outward appearances and to hand out nifty board membership plaques. We were recently advised there is an ongoing feud between the CMS managers who were “sort-of” replaced by the West Coast TPA brought in to handle State Employee claims. From a management perspective we consider it comical to replace the state adjusters with outside private adjusters and not get rid of the state employees who you have replaced! Both sides are now fighting over control of the WC claims, including battles about choice of vendors and when to cut off and dispute benefits. We still note the U. of IL Hospital in Chicago is still being “defended” by a successful Plaintiff lawyer! None of these changes have resulted in efficiencies or lower payouts that we can tell. We are sure many of the silly carpal tunnel claims by key-turning prison guards have been routinely denied and that is a good thing. In the bigger picture, all of appears ineffective and appears embarrassing to our Governor and his administration.


We were also advised thousands of state workers still enjoy “odd-lot” permanent and total disability benefits that are effectively “pensions” with guaranteed COLA increases paid for by Illinois business. We were advised the cost of those lifetime benefits on an annual basis is well over $10M that could be immediately saved if the state would locate sedentary or light work when they have openings for the claimants. The reason no one beefs about it is because the workers love to get paid as if they are working but don’t have to—they aren’t going to complain. Like lots of things with our state government, no one is watching out for taxpayers, particularly if the media doesn’t know enough to beef about it. We would applaud a state-wide investigation similar to that executed in New York, where dozens of government workers were nabbed for their disingenuous and similarly specious claims for total disability.


Anyone Remember AG Madigan’s and State Auditor Holland’s Blistering Critiques in 2012?—In Our View, There Was No Effective Response/Reform from the Current Governor or His Administration To Most of the Issues


Please note these problems were chronicled to some extent in a blistering WC report in March 2012 by IL Attorney General Lisa Madigan. The Attorney General's report contained a raft of policy recommendations aimed at tightening up the claims process to make it more straightforward and consistent. IL State Auditor General William Holland's office also threw its weight behind the idea of reform, revealing from 2007-2010, Illinois paid out $295 million on the advice of claims adjusters with caseloads exponentially higher than the industry standard. In our view, Governor Quinn has done almost nothing in what is almost two years to effectively address AG Madigan’s or Auditor General Holland’s many valid concerns. AG Madigan’s report is online here:http://ilchamber.org/wp-content/uploads/2012/05/Workers-Compensation-analysis-and-recommendations-4-12.pdf


Either way, from the most impartial of perspectives, the main metrics of record high taxes and highway tolls, billions in unpaid state bills, 48th worst among all states’ unemployment stats and a generally rotten business climate aren’t going to bode well for candidate Pat Quinn. As we indicate above, his main support is from our wealthy state government union leaders who want to keep your taxes and highway tolls sky-high and appear unconcerned about a bad business climate so long as their union members keep getting a hefty cut of the pie. We were also stunned to hear IL Senate President Cullerton tell the media last October our state can’t go “bankrupt” despite not being able to pay bills timely but we are certain to raise and raise taxes—most taxpayers don’t like to hear that news, particularly after being hit with the highest income tax increase in IL history when many better-run states don’t even have an income tax.


We Don’t Recommend the WC Community, Particularly Business Participants Ignore Bruce Rauner


He may be the immovable force or the irresistible object. The current administration enacted legislation to give our Governor full control of all IWCC positions and whoever gets the Governor job this fall should get control of the CMS team that is managing the State Workers’ Compensation Board. With that power comes a strong ability to change things for the better.


Our concern for IL workers’ comp participants is insuring candidate Bruce Rauner has some strong idea of what he is getting into and where he can take the three facets of this important system. We don’t want him to “throw out the Commission with the bath water” if he ends up taking over the reins of IL government in early 2015. We hope Bruce Rauner will be in touch with IL State Senator Matt Murphy along with DuPage County Board Chairman Dan Cronin who are both veteran and knowledgeable workers’ compensation system members. Outgoing IL Chamber President Doug Whitley and his legislative gurus should be another important stop for candidate Bruce Rauner. We also support the candidacy of Attorney Dan Ugaste who is a long-time IL WC defense lawyer who is running on the Republican side for state rep in the 65th District—we hope Dan is able to provide input to candidate Bruce Warner later this year. If you want to help Dan with his campaign, as we have, please send a reply.


We are sure our IL Plaintiff Bar is going to side with the incumbent and treat the challenger as a pariah. Our advice to them and all of our readers, clients and business leaders is we will be much better served to at least reach out to Bruce Rauner to insure he understands the nuances and needs of our WC system and brings the needed efficiencies to the debate and possibly, his future administration. Everyone’s goal should be having better state government in Illinois.


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Synopsis: Illinois GL Settlements Move to the Fast Lane—What Every Illinois Defendant and GL Claims Adjuster Needs to Know. Analysis by Chris St. Peter, J.D.

Editor’s comment: Claims and risk managers can’t ignore this one! A new Illinois law effective January 1, 2014 requires certain types of general liability settlements to be finalized and paid in a short timeframe. We want to ensure our clients are prepared to comply with the new law and avoid the statutory penalties. At a minimum, every Illinois general liability, WC and Employment Practices defendant and adjuster needs to know the following:

  1. The new statute applies to settlements reached in cases involving personal injury, property damage, wrongful death, or tort actions involving claims for money damages.
  2. The settling defendant or its adjuster must tender a release to the plaintiff within 14 days of written confirmation of the settlement.
  3. The setting defendant or its adjuster must pay all sums due to the plaintiff within 30 days after the plaintiff tenders the necessary settlement documents (e.g., executed release, dismissal order, and/or signed release of liens).
  4. If the settling defendant or its adjuster fail to comply with the statute, a judgment will be entered for the amount of settlement, with interest from the date the settlement was reached.
  5. Settling parties may contract around the statute by agreeing to other terms. We strongly recommend every applicable settlement agreement include alternative deadlines and/or an express waiver of the new statute.

If you want to learn more about this important new law, read on.

Background: 735 ILCS 5/2-2301 (eff. Jan. 1, 2014) Requires Rapid Payment of Certain Types of Settlements

On August 26, 2013, Gov. Quinn signed into law Public Act 098-0548, which creates a new statutory section addressing settlements and liens in civil cases other than workers’ comp. The new statute, 735 ILCS 5/2-2301 (Section 2301), provides deadlines for exchanging settlement documents with rapid payment after a civil matter is “settled.” The section imposes penalties upon settling defendants and their adjusters, including entry of judgment and costs, if the settling defendant does not comply with the deadlines set forth in the statute.

The statute went into effect for settlements on or after January 1, 2014. Your GL claims handling has to adjust to avoid unhappy surprises.

Section 2301 applies to settlements reached in cases involving personal injury, property damage, wrongful death, or tort actions involving claims for money damages. The statute does not apply to certain entities, such as the State of Illinois, state agencies, state employees, municipalities, and local governments. Additionally, the statute does not apply to class action lawsuits. We also note the statute does not apply to workers’ compensation settlements, and it is unlikely to apply to release/resignations negotiated as part of workers’ compensation settlements, as such agreements involve the plaintiff forgoing any civil cause of action related to the work injury. However, the contours and applicability of the new statute have yet to be addressed by the courts.

Section 2301 creates two main requirements for settling defendants and their adjusters:

First, it requires a settling defendant or its adjuster to tender a release to the plaintiff within 14 days of written confirmation of the settlement. Written confirmation includes all communication by written means. “Tender” is defined as “personal delivery or delivery by a means providing a return receipt.”

Second, the settling defendant is now required to pay all sums due to the plaintiff within 30 days after the plaintiff tenders certain settlement documents. These include:

  • The executed release,
  • A copy of the order approving settlement (if applicable), and
  • Signed releases of liens or other writings addressing handling of liens.

Penalties: Immediate and Collectible Judgment Against Defendant for the Amount of the Settlement Plus Interest and Costs

The new rule provides if, after a hearing, a court finds timely payment has not been made by the defendant or its adjuster, “judgment shall be entered against that defendant for the amount set forth in the executed release, plus costs incurred in obtaining the judgment,” plus interest, calculated from the date of tender. This means that if the defendant or its adjuster provides the settlement draft one day after the 30-day deadline, 31 days’ interest is added to the settlement amount, plus any costs the plaintiff incurred in obtaining the judgment.

Interestingly, while the statute imposes deadlines upon Defendants, no deadlines for the execution of signed releases and other documents are imposed upon Plaintiffs. For example:

  • If a settlement requires court approval, or if a lien-adjudication hearing is necessary, the plaintiff has no deadline to schedule these hearings.
  • If additional time is necessary to negotiate with a lien holder, the plaintiff has no deadline to complete these negotiations.


The statute also addresses how a settling plaintiff can protect a third-party’s right to recovery or subrogation interest, including liens by attorneys, healthcare providers, and insurance companies. In such cases the plaintiff may protect the third-party's interests by tendering to the defendant one of several different kinds of written communications putting the defendant on notice of the third-party claims. The communications named in the statute include a signed release of a lien held by an attorney or healthcare provider; a letter from the plaintiff's lawyer agreeing to hold the full amount of the settlement funds in a client trust account pending final resolution of the lien; an offer that the defendant hold the full amount claimed by the third party pending resolution on that matter; or several other written promises with how the parties will handle the money properly.

While the new statute is designed to expedite payment of settlements, the statute will likely have the unintended consequence of creating additional litigation related to settlement enforcement. For example:

  • Issues may arise if the settlement must be allocated to multiple plaintiffs or amongst various types of damages. Because the statute is silent as to these specific issues, the settling defendant should include all such conditions and terms in the release so as to avoid alleged violations of Section 2301.  


  • Issues may arise when the settling defendant or its adjusters have not received all information necessary to issue a settlement draft. For example, a tax identification number and/or a W9, a signed release of any liens, and proper documentation from Medicare regarding any MSA or satisfaction of Medicare’s lien are often requested by the defense as part of settlement. A prudent adjuster or its defense counsel should request such documents early in the settlement process, and well before a settlement is reached. If, while nearing a settlement, the defendant does not believe the plaintiff has submitted all necessary documentation or documentation is insufficient, the plaintiff’s counsel should be advised in writing what documents or information is still required prior to payment. That writing should also advise the plaintiff has not complied with the statute, and the 30-day deadline has not begun to run.

In summary, defendants, their adjusters, and defense attorneys must now pay close attention to deadlines surrounding a settlement’s completion. Any delay in the settlement process, such as a delay in requesting the check or a delay in obtaining the necessary information to request the check, has the potential to put the defendant up against the 30-day deadline.

In plaintiff-friendly Cook, Madison, and St. Clair counties, plaintiffs’ attorneys will be aware of this new statute and we are sure they have told their friends on the bench. We are sure hyper-aggressive plaintiff attorneys in these venues will seek costs and request judgment be entered against you and then immediately initiate collection proceedings.

Of particular note, the statute expressly states it applies to all personal injury, property damage, wrongful death, and tort actions involving a claim for money damages, “except as otherwise agreed by the parties.” We feel this language allows settling defendants and their adjusters to contract around the statute if an agreement can be reached to modify or waive the deadlines set forth in Section 2301. We strongly recommend considering such alternative terms in all settlement negotiations and can offer sample language upon request.

This article was researched and written by Chris St. Peter, J.D. and your editor. Please feel free to provide your thoughts and comments to Chris at cstpeter@keefe-law.com.




Synopsis: Concerns Raised In Federal Ruling About Attorney-Client Privilege When Attorneys are Involved Early in Your Investigation.


Editor’s comment: We have a number of top-notch clients who want us, as their defense counsel, to be involved early and often in accident or claims investigation. Their thinking, and we agree with them, is to make some or most of the investigation privileged. As court watchers and legal observers, we want our clients and readers to understand possible changes to this concept.


In a recent Federal court decision from Massachusetts, the U.S. Magistrate cast some confusion and/or uncertainty about this concept. In Koss v. Palmer Water Department, et. als., the Federal Court did not uphold the attorney-client privilege, effectively finding the attorneys were involved too much in determining the nature of the claim and forming defenses to allow their work to remain wholly privileged.


The ruling demonstrates why employers should give careful consideration to the attorney-client privilege before conducting an investigation in the workplace.?This U.S. Magistrate in Massachusetts held the employer had waived the attorney-client privilege because its outside counsel actively managed another attorney’s investigation of a sexual harassment complaint and had discussions with an outside investigator which directly impacted whether the privilege could be upheld.


Koss should serve as a cautionary reminder to employers, risk managers and claims adjusters to consider the boundaries of the attorney-client privilege, at the outset of every claim, when deciding how to best manage the investigation, so as to minimize the risk of having to disclose what you might feel is confidential information. Please note this isn’t an appellate ruling and we don’t know if the concept will gain more traction or acceptance across the country, particularly in WC or personal injury litigation. We still strongly recommend defense counsel be involved as early as possible in important accident and other claims investigations to minimize risk, assist in forming defense, move claims to rapid settlement or closure and best define reserves. The ruling is online at:?http://pacer.mad.uscourts.gov/dc/cgi-bin/recentops.pl?filename=neiman/pdf/koss%2010%2013.pdf.


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Synopsis: Correction—we thought we were perfect but we were wrong. New IL WC Arbitrator Jessica Hegarty is not the wife but the daughter of Attorney Terrence K. Hegarty. We sincerely apologize for any confusion this may have caused.