Synopsis: Can the Current IWCC Chairman Throw the Money Lenders Out of the Commission?
Editor’s Comment: This week WorkCompCentral.com reports Lisa Rickard from the U.S. Chamber Institute for Legal Reform has written IWCC Chairman Michael Latz, Governor Quinn and Illinois Attorney General Lisa Madigan about the craziness that is lawsuit lending in Illinois workers’ compensation. The letter was sent prior to the Fourth of July. Since then, it appears nothing has happened. We note the IL WC Commission has nine members plus the Chairman and lots of other lawyers on staff, all who appear to be ignoring this request and it is starting to appear embarrassing during an election year. To paraphrase Ms. Rickard’s main points
Lawsuit lending is an important public policy issue for the U.S. Chamber Institute for Legal Reform or ILR and a national coalition of business groups. ILR is an affiliate of the U.S. Chamber of Commerce dedicated to making our nation’s overall civil legal system simpler, fairer and faster for all participants. It came to their attention various lawsuit lending firms are marketing and providing loans to injured workers compensation claimants in Illinois. They point out the Illinois Workers Compensation Act expressly prohibits assignment of any payment, claim, award or decision. (see 820 ILCS 305/21) In their view, any lender issuing loans in return for present or future payments from Illinois Workers Compensation claims is doing so in violation of the Illinois Workers Compensation Act. They formally asked the IWCC conduct an investigation and review of this potential violation by consumer credit lenders.
We strongly agree with their overall focus. If you want to read the language we have paraphrased above and attachments, see http://www.instituteforlegalreform.com/uploads/sites/1/ILR_on_Lawsuit_Loans_to_Workers_Compensation_Claimants.pdf
From the Petitioner’s Side of the Bar
Let’s take a stroll down memory lane. You may recall a very prominent central IL WC lawyer got into problems when he lent one of his claimants some money in anticipation of a future WC award or settlement. When Claimant finally got his money from his WC claim, he didn’t want to make good on the loan provided by his lawyer. The lawyer sued Claimant for the money and the whole matter made it up to the reviewing courts. In a simultaneous rebuke, the higher courts found the loan to be against public policy and dismissed the claim. They also made it clear Plaintiff/Petitioner lawyers couldn’t lend money to their clients as part of the services provided.
The other nuance you might miss is this sort of lawsuit lending can lead to a tawdry type of “auction” where an injured worker might go to two or more firms and sign an attorney representation agreement with the lawyer willing to lend the most money. If claimant wanted even more money, he/she might borrow a substantial sum from one Plaintiff/Petitioner lawyer and then fire that lawyer to borrow even more money from the second, third or fourth lawyer.
What came into Illinois and many states were independent or “third-party” lawsuit lenders who are more than willing to lend moderate amounts of money against WC claims in exchange for high interest rates as high as 60%. The loans allow the rates to compound with interest being charged on interest. In some situations, the entire settlement can quickly be owed to the lawsuit lender.
From these abuses, about three years ago, the New York City Bar Association outlined these pitfalls with litigation lending:
1. Illegality: The litigation lending agreement itself may be illegal. As outlined above, we agree with the U.S. Chamber’s Institute for Legal Reform to note the IL WC Act prohibits assignment of WC claims in this state. We feel the IWCC or courts should enforce the IL WC Act as written. There is no question these contracts outline or create a voluntary and impermissible assignment of workers’ comp benefits.
2. Attorney as Advisor: If asked to recommend a source for such financing, or review or negotiate such an agreement, the attorney should candidly advise the client of the costs and benefits of such arrangements and suggest alternatives. Costs may include fees that are “excessive relative to other financing options, such as bank loans.” On the other hand, a benefit may be the client’s ability to cover expenses and avoid the need for funds forcing the client into a premature (and lower) settlement.
3. Conflicts of Interest: The lawyer must be wary of conflicts of interest. For example, when may the lawyer accept a referral fee from the financing company? How does the lawyer advise the client objectively about financing when the client cannot afford the litigation without it and might drop a valid claim?
4. Waiver of Privilege: Disclosure of certain information to a litigation lending company may waive the attorney-client privilege, and the “common interest” privilege may not apply. A lawyer should obtain informed consent from the client before disclosing privileged information to the litigation lending company.
5. Control Over the Proceeding: Attorneys must guard against the litigation company exerting undue control over the legal proceeding.
We are aware of many challenging ethical issues for Petitioners’ firms in handling and dealing with such loans. To our understanding Petitioner firms are asked and provide some sort of estimate of future “value” of Petitioner’s claim. They also agree to let the litigation lender know when the settlement or decision is being paid.
From the Defense/Risk Side of the Bar
Why don’t businesses and their defense teams, like KCB&A want litigation lending? We are advised as many as 40% of IL WC claims involve litigation lenders. The impetus for some work injury claims are fast money and litigation lenders provide it. Insurance carriers, self-insured employers and others see questionable claims that might not even start without such lending. We also see claims run on for years because no one wants to tell claimant they are not going to get any money at the end of the claim because the shylocks will now get it all.
We appreciate your thoughts and comments. Please post them on our award-winning blog.
Synopsis: IL WC Advisory Rates Not Big News in IL Governor’s Race—Expect the Real News in October.
Editor’s comment: Late last week Gov. Pat Quinn announced a 5.5 percent drop in IL WC rates for 2015 was being recommended by the National Council on Compensation Insurance. The Quinn administration said if enacted it would represent a cumulative 18 percent cut in the ethereal advisory rates since the IL work comp reforms were enacted by the current administration in 2011.
However, the latest IL WC advisory rate announcement keeps with the same silly trend we have seen once a year at the IWCC for decades. Just last November, we addressed this annual announcement in which NCCI recommended lower advisory rates for WC insurance should drop. One funny thing we have seen once every year for decades and decades is an annual announcement in August about the stat-rats at NCCI recommending advisory rates for WC insurance should drop, by either a little or a lot. We consider this to be similar to selling stock in the Golden Gate Bridge—it sounds good but it isn’t worth anything to anyone. Last fall, the PR mill at the IL WC Commission just dropped this WC advisory rate hot flash:
NCCI files for 4.5% decrease in 2014 WC advisory insurance rates-The National Council on Compensation Insurance filed for an 4.5% decrease in voluntary advisory insurance rates, effective January 1, 2014, following the 3.8% decrease in 2013.
Before we start popping champagne corks and tossing confetti, we recommend everyone calm down. We have no true idea what advisory rates might be and why anyone thinks they are news. If rates dropped as much as NCCI says they should, WC insurance should be free in this state! Every year, year in and year out, NCCI recommends decreases in IL WC advisory rates. In the 2009 IWCC annual report, the IWCC heralded the fact advisory rates dropped 33% from 1990 to 2008. The IWCC indicated the massive reduction in advisory rates was calculated using advisory rates filed annually by the National Council on Compensation Insurance, a rating organization authorized to file rates on behalf of companies pursuant to Section 459 of the Illinois Insurance Code (215 ILCS 5/459).
Blah, blah, blah. In 2012, IL WC advisory rates dropped 3.8%.
In 2011, IL WC advisory rates dropped 8.8%. Starting to notice a trend?
Please don’t tell us any more about IL WC advisory rates and how they are dropping. Advisory rates are clearly trumped by actual WC insurance premiums. The every-other-year analysis by the State of Oregon is the best source for the actual WC premium ranking that we were advised will be again published this October::
There is nothing advisory about these metrics—the State of Oregon looks at what IL business is actually paying and, when last published we were number 4 in the country. By number 4, they mean fourth highest or, to be more blunt, fourth worst. premiums. Yes, folks; we care about actual premiums; not advisory and ethereal rates. Let’s hope IL WC has moved back to the middle of the pack and gotten out of the top ten worst.
As good news, we do feel significant progress has been made at the IL WC Commission. IL WC Medical reimbursements are dramatically lower. There is no question PPD values have dropped in a solid but fair fashion. We feel the IL WC Arbitrators are professional, knowledgeable and very sensitive about claims involving WC fraud or over-reaching. We still feel our Arbitrators and Commissioners can make improvement in getting claims to hearing or reasonable settlement but we are also sure they might have their own recommendations for the attorneys who appear before them. In contrast to the IWCC hearing officers, we don’t feel the reviewing courts have any concerns at all about the cost-effectiveness of their “activist” or liberal rulings.
Perhaps this year's announcement of a recommended drop in advisory rates is only compelling because it precedes the upcoming Illinois gubernatorial election. Work comp costs are an emerging election issue. Both candidates continue to address this issue. If Oregon's October 2014 report shows little or no improvement, Mr. Rauner may have proof that the reforms did not go far enough. If that's the case, support for Mr. Rauner may certainly increase his lead over Mr. Quinn, who is already shown to be behind as much as fourteen points in a July poll. Regardless of the election and all politics aside, the KCB&A defense team is hopeful this new study will show improvement for the State of Illinois. Decreasing work comp rates and premiums will only help Illinois' work comp system and our business environment become more competitive with other states in our region.
This article was researched and drafted by Jennifer Maxwell, J.D. along with your editor. You can reach Jenn to discuss this and other defense issues at firstname.lastname@example.org.
Synopsis: Jewel Companies Dodges Bullet on Challenging Down Syndrome Worker’s ADA Beef--Important Seventh Circuit ADA Ruling with analysis by Michael L. Shanahan, J.D.
Editor’s Comment: The Seventh Circuit Appellate Court in Reeves v. Jewel Food Stores granted summary judgment in favor of Jewel Food Stores on an Americans With Disabilities Act (“ADA”) failure to provide a reasonable accommodation claim because the Plaintiff’s parents did not make reasonable efforts to determine what accommodations were necessary. This decision appears to be a victory for employers as it promotes joint responsibility for developing and providing reasonable accommodations to disabled workers.
EMPLOYERS MUST ENGAGE IN AN “INTERACTIVE PROCESS” TO ARRIVE AT A REASONABLE ACCOMMODATION
The centerpiece of the ADA—in terms of workplace rights—is the right to request a reasonable accommodation. A reasonable accommodation is a change to the work environment, in the workplace, the job itself, or process that would allow a person with a specific disability to apply for a job or perform the essential functions of the job once in the position.
Under the ADA, it is illegal for an employer to discriminate against any employee who requests or needs a reasonable accommodation. After the employee requests or the employer learns the employee needs a reasonable accommodation, the employer and employee should discuss possible solutions and try to arrive together at an accommodation that works for the employee. This discussion is formally known as the “interactive process.” However, the employer does not have to provide a reasonable accommodation if it requires significant difficulty or expense. Nonetheless, whether a reasonable accommodation requires significant difficult or expense is a factual intensive inquiry that is beyond the scope of the instant article.
In Reeves, the employee worked as a bagger at Jewel and suffered from Down Syndrome. When Plaintiff was initially hired, Jewel provided a job coach, an individual training program on the daily tasks, and a supervision policy in tandem with the employee’s parents. Additionally, the employee was exempt from certain duties such as collecting shopping carts from the parking lot.
Over the course of Plaintiff's employment, there were several instances where he cursed at managers or fellow coworkers in front of customers and on one occasion where he took a pin without realizing they were for sale. However, despite these incidents, the Plaintiff was not terminated. Following the pin incident, the Plaintiff's parents requested Jewel hire a job coach again, but Jewel thought it was unnecessary and Plaintiff's parents no longer persisted. Ultimately, Plaintiff was terminated after an outburst where he cursed and yelled at a fellow coworker in front of customers.
In granting Jewel summary judgment on the merits, the Court found Plaintiff's parents did not make reasonable efforts to decide and convey what reasonable accommodations were necessary. It appears the Court relied heavily on the fact Plaintiff's parents did not press the job coach issue further, they did not request an alternative accommodation, and they did not indicate that said coach could have prevented future profane outbursts. Furthermore, the Court found the request was made after the pin incident, which did not imply an accommodation for inappropriate verbal outbursts.
This decision is an indication that the “interactive process” is more than simply a request. Instead, the “interactive process” requires a meaningful discussion with specific recommendations and suggestions by both the employer and the employee (or in this case, the parents on behalf of the disabled employee/Plaintiff).
Nonetheless, despite Jewel’s victory, employers would be wise to investigate reasonable accommodations requested by their employees with diligence. Notably, if the request by Plaintiff’s parents was related to the cursing and yelling repeatedly committed by Plaintiff, then Jewel likely would have had to engage in an “interactive process” to review whether they could have provided the reasonable accommodation as requested.
This article was researched and written by Michael L. Shanahan, J.D. He is available for answers to any questions about general liability, employment law, or workers’ compensation at email@example.com.