Synopsis: Head Off the Latest IL WC “Sneak Attack” on Settlement Contract Finality—You Now Need an Anti-Assignment Clause! Analysis by Bradley J. Smith, J.D.
Editor's Comment: We recently saw a revoltin’ development where a self-insured IL employer settled a fairly simple IL WC claim for less than $1,000. Having settled the matter, everyone assumed the claim was paid and closed. The next thing we saw was a Circuit Court lawsuit by a medical provider in the settled WC claim for thousands of new dollars against the employer and third party administrator. The medical provider claimed they have “standing to sue” because the patient signed an “assignment of their rights” to allow the provider to try to collect directly from the employer and outside the IL WC system. In our view, on the first office visit, the “pro-assignment” medical providers are giving the patient a bunch of documents to complete and sign like a medical history, HIPAA-GINA release and they sneak in an assignment of the rights of the employee to collect the medical bills in Circuit Court if they remain unpaid at the time of WC settlement. We would assume very few injured workers would have the slightest idea of the legal nature of the document they are signing.
When we first saw this new phenomena, the defense team at KCB&A was able to extricate our client, the TPA from the Circuit Court mess. We understand the employer settled with the medical provider for a substantial amount of money but much less than the actual medical bills being claimed. Their general counsel is a very solid and veteran attorney who immediately understood defending the claim would cost more than the eventual settlement amount. Please note the company still had to pay the Circuit Court appearance fee and other court costs, along with obtaining counsel to defend—we assume there is no one in the IL WC defense industry who would like to defend such a claim after you think you have put the WC claim completely to bed via settlement. We also aren’t sure how the insurance industry is going to handle/cover such claims, as they are only supposed to be insuring for WC exposure at the IL WC Commission and not this new and odd liability in the Circuit Courts.
But the fact the litigation started at all is what we want the IL WC defense community to understand, anticipate and take steps to prevent. In our view, these recent developments should require you to explicitly include a clear anti-assignment clause in your IL WC settlement contracts to protect against direct civil lawsuits by workers’ compensation benefit providers in a post-settlement setting.
We feel all IL workers’ compensation defense attorneys have to become vigilant and insure they are using “air-tight” workers’ compensation settlement contracts. Particularly, the recent issues with Petitioners putatively assigning (whether knowingly or unknowingly) their workers’ compensation benefits has come to the forefront. In our view, these purported assignments of benefits are clearly in violation of the intent and purpose of Section 21 of the IWCA. Nonetheless, to fully protect our clients, KCB&A is now incorporating language in our workers’ compensation settlement contracts confirming there has been no assignment of any workers’ compensation benefits by Petitioner and further requiring an explicit agreement there will be no assignment of any potential current or future payments in violation of the IWCA.
Under Section 21 of the IWCA, “[n]o payment, claim, award or decision under th[e] Act shall be assignable or subject to any lien, attachment or garnishment….” Obviously, due to the clearly delineated provision of the IWCA, workers’ compensation benefits are ostensibly non-assignable. Regardless, it has recently come to light in Illinois the liberal Circuit Court Judges are outlining differing opinions related to the non-assignability of workers’ compensation benefits. Although some Judges agree, others are allowing civil claims from private medical providers to continue against employers, insurers, and/or Third-Party Administrators.
Despite the ostensible invalidity of any procured assignments, we feel language has to be included in IL WC settlement contracts delineating the non-assignability of any past or present benefit, and further to obtain confirmation from Petitioner that they have not and will not assign any of their workers’ compensation benefits in aberration and contradiction of the IWCA. Clearly, as a workers’ compensation settlement is generally reached to close an open claim, or to lock-in any further benefits solely for Petitioner, something must prevent them from assigning their rights under the IWCA. Although it is highly likely Illinois courts will eventually catch on to these arguably subversive tactics, to anticipate and counteract them, your defense attorneys must understand and implement certain provisions into the workers’ compensation settlement contract to seek to protect against these types of collateral civil claims.
Moreover, to properly protect against any purported assignments in violation of the incorporated anti-assignment clause, there should be further language that in the event an invalid assignment was made and any claim is brought against the employer, insurer, and/or Third-Party Administrator under the arguably void assignment, Petitioner and/or his attorney should have the duty to indemnify, hold harmless, and defend the Employer/Respondent if a Circuit Court claim is filed. These indemnification clauses may help to allocate risks of future lawsuits for the workers’ compensation benefits that were supposedly settled within the workers’ compensation litigation. We have sample language for the IL WC industry to consider.
The research and writing of this article was performed by Bradley J. Smith, J.D. Bradley can be reached with any questions regarding this article, workers’ compensation, employment law, and general liability defense at email@example.com.
Synopsis: Getting Rid of Trouble-Makers 101. More Great Legal Analysis by Bradley J. Smith, J.D.
Editor’s comment: We are concerned your Release/Resignation Agreements May Not Be Compliant with OWBPA. Many of our defense clients want us to settle the WC claim and simultaneously make sure Claimant
· Leaves their employ and
· Doesn’t file any other claims against the client at the EEOC, Illinois Department of Human Rights, Circuit Court retaliatory discharge claims, union grievances or anything else.
One growing concern as our working population keeps aging are the additional rights and benefits that may be due to workers who are over 40 years of age. Such workers can file age discrimination claims if they feel they were canned/let go due to their age. To obtain a valid release of an age discrimination claim you must comply with certain requirements under the OWBPA. In 1990, Congress amended the Age Discrimination in Employment Act (ADEA) by passing the Older Workers Benefit Protection Act to establish specific requirements for a “knowing and voluntary” release of ADEA claims. Particularly, the OWBPA requires seven factors be present within the release/resignation agreement to be considered a “knowing and voluntary” release of any cognizable ADEA claims.
Those factors are:
1. A waiver must be written so it can be clearly understood by individuals at the level of comprehension and education of the average individual eligible to participate. In addition, the waiver must not mislead, misinform, or fail to inform participants and must present any advantages or disadvantages of agreeing to the waiver.
2. A waiver must specifically refer to rights or claims arising under the ADEA by name.
3. A waiver must advise the employee in writing to consult an attorney before accepting the agreement.
4. A waiver must provide the employee at least 21 days to consider the offer. The 21-day consideration period runs from the date of the employer’s final offer. If material changes are made to the final offer, the 21-day period starts over.
5. A waiver must give an employee 7-days to revoke his or her signature. The 7-day revocation period cannot be changed or waived by either party for any reason.
6. A waiver must not include rights and claims that may arise after the date on which the waiver is signed.
7. A waiver must be supported by consideration in addition to anything to which the employee is already entitled.
Unfortunately, if a waiver of an ADEA claim fails to meet any of the aforementioned requirements, it is invalid and unenforceable. Consequently, it is recommended to include appropriate language in the release/resignation agreement compliant with the requirements of the OWBPA so that you can obtain a full release of a claimant’s potential ADEA claims. Unfortunately, an individual cannot waive his or her right to file a discrimination charge with the EEOC or to participate in an EEOC investigation. Consequently, an executed release/resignation agreement cannot validly prohibit an individual from exercising his or her rights to file a charge or to participate in the investigation.
Even when the release/resignation agreement is acquiescent with the OWBPA, a waiver of ADEA claims, like waivers of Title VII and other discrimination claims, will be invalid and unenforceable if an employer used fraud, undue influence, or other improper conduct to coerce the employee to execute the waiver. Numerous courts have found ADEA waivers invalid for failing to meet just one of the many statutory requirements, especially when groups or classes of employees are involved.
The professionals at Keefe, Campbell, Biery & Associates, LLC recommend our clients consider OWBPA compliant language when seeking a release/resignation agreement. Missing one of the 7 factors outlined above could be fatal to obtaining a valid waiver of any potential age discrimination claims. The research and writing of this article was performed by Bradley J. Smith, J.D. Bradley can be reached with any questions regarding employment law and general liability defense at firstname.lastname@example.org.
Synopsis: Iowa WC Insurers take notice! Multi-Million Dollar Bad Faith Verdict Resulting from an Iowa Workers’ Compensation Denial. Analysis by Daniel J. Boddicker, JD. who is open for our KCB&A defense business across the great State of Iowa!
Editor’s Comment: On February 11, 2015 a Pottawattamie County, Iowa jury returned a verdict including $25 million in punitive damages in a bad faith claim. In Thornton v. American Interstate Insurance Company, Plaintiff Toby Thornton (“Thornton”) filed to recover damages against American Interstate Insurance Company (“American”) for bad faith and abuse of process following American’s actions in defending Thornton’s Iowa workers’ compensation claim. Thornton was working as a truck operator for Clayton County Recycling on June 25, 2009 and he was injured when his truck rolled and crushed the cab with him inside. Among his injuries Thornton suffered several vertebral fractures, leaving him paralyzed from the chest down, entirely without the use of his left hand and with only minimal use of his right hand. Soon after the date of accident American set aside a lifetime reserve based on permanent total disability (“PTD”) for Thornton’s claim. American calculated maximum statutory weekly benefits and began weekly payments dating back to June 26, 2009. Weekly payments continued until June 6, 2014, when American paid Thornton’s partial commutation in a lump sum.
In Iowa an insurer acts in bad faith when it (1) has no reasonable basis for denying an insured’s claim and (2) knew or had reason to know its denial or refusal was unreasonable. The parties disagreed over whether Thornton’s claim was denied. American accepted the claim and paid weekly benefits, without designating Thornton as a PTD, and without agreeing to stipulate to a partial commutation of Plaintiff’s benefits. Before the Commissioner in the workers’ compensation claim, American denied Thornton’s PTD petition, moved to reconsider the adverse finding, and later denied a partial commutation of Thornton’s benefits was in his best interests.
Thornton identified four different instances of denial: (1) failure to classify Thornton as permanently totally disabled even while providing weekly payments, (ii) failing to agree to a partial commutation of benefits, (iii) denying both PTD and a partial commutation at the workers’ compensation trial, and; (iv) moving for reconsideration of the Commissioner’s adverse finding. On summary judgment the court found American took a course of action which first challenged and ultimately denied Thornton’s PTD status and eligibility for partial commutation, and if successful would have reduced or cancelled Thornton’s benefits. The court held Thornton’s claims were denied.
On the issue of whether a reasonable basis existed for denying Thornton’s claims, the court noted to avoid bad faith liability an insurer may only challenge those claims that are “fairly debatable,” and may only delay commencement of benefits for a period that is “necessary for the insurer to investigate the claim.” The court noted either will establish a reasonable basis for denial or delay, but that reasonable basis must exist at the time of the denial. American contended its denial of Thornton’s claim for PTD benefits was reasonable because: it paid weekly benefits while investigating and later challenging the claim; it had a right to file an answer; it was investigating the possibility of vocational rehabilitation for Thornton; no bad faith penalty benefits were awarded at the underlying workers’ compensation trial and it wished to force a reasonable settlement. The Court held none of the arguments established a reasonable basis for challenging Thornton’s claim.
The court took notice American was made aware of the nature of Thornton’s catastrophic injuries almost immediately. American investigated whether its liability could be offset by training Thornton to perform new or modified job tasks. American sought the advice of three practitioners none of whom indicated Thornton was a candidate for vocational rehabilitative services. The court further noted American was informed by its counsel Thornton was both clearly eligible for PTD benefits and a partial commutation of his benefits would very likely be found to be in his best interests. Prior to trial, American learned Thornton would not be released for vocational rehabilitative services by his insurance-assigned physician. American chose to go to trial because it “wanted its day in court” in order to make a favorable settlement more likely. The court held American put off granting Thornton’s PTD and partial commutation requests as long as possible in order to force a settlement at less than the full policy amount despite knowing Thornton’s claim was not “fairly debatable”. The Court held there was no reasonable basis for denying Thornton’s claims.
The Court also held given the severity of Thornton’s injuries and the lack of any factual basis in the record upon which “reasonable minds could differ,” American knew or had reason to know it had no reasonable basis to deny Thornton’s claim for PTD and partial commutation once its counsel advised it of such. After granting summary judgment on liability, the Court returned the matter for trial on damages only. The Iowa jury in Pottawattamie County gave a resounding message to Iowa insurers the actions taken by American are not welcome, finding $284,000 in compensatory damages and $25,000,000.00 in punitive damages.
It is important to follow this and other similar rulings that affect Iowa insurers. We recommend contacting our firm to discuss your potential liabilities and/or defense of any litigation. This article was researched and written by Daniel J. Boddicker, JD. Dan can be reached with any of your questions or concerns regarding Illinois or Iowa workers’ comp, municipality defense and or general liability defense at email@example.com. Our new Iowa office address is 1103 Buckeye, Suite 104, Ames, IA 50010.
Synopsis: With Our Deepest Respect to a Great Jurist, Here is Our Answer to Your Pension Question, Justice Thomas.
Editor’s comment: We listened to the arguments made before the IL Supreme Court last week about the viability of government pension reform. Our Attorney General is trying to keep the government pension reforms in place to protect IL taxpayers and avoid chaos. Justice Robert Thomas appropriately asked how there could be an “emergency” about our spiraling gov’t pension problem when our state income tax just decreased.
Our answer is there wasn’t a true “emergency” when the RMS Titanic hit an iceberg. By that we mean, the contact with the large iceberg didn’t cause any injuries or require anyone to get immediate care. What actually happened when the iceberg struck the side of the ship was to set things in motion so the great ship and many of its passengers and crew would be on the bottom of the ocean in rapid course. That was the true emergency.
Right now, IL taxpayers have awoken to learn our State Government is on its way to the bottom of the financial ocean. We pay lots more to our state workers after they are done working for us than when they were actually doing their jobs. No government or business can do that—it is a financial model that is certain to sink and it is just a matter of time for that to occur. IL government pensions are similar to a Ponzi scheme—they are doomed to fail. Please note we owed about $52B in debt in 2009 and the amount has more than doubled to what is now a shocking $110B in debt. Like other credit card junkies, we now owe both enormous principal and interest and still have to keep borrowing to make payments. As our leaky financial boat keeps taking on more debt, the State may soon be over $150B, $200B, $250B or more in debt in five more years. At some point, someone in the financial markets is going to “pull the plug” on more borrowing. That is what happened to the City of Detroit where they borrowed and borrowed until their ship sank. Unless we change IL law either through the legislature or by amending the Constitution, that is where IL Government is certain to go. We consider that state of affairs an awful future for every Illinois citizen to contemplate.
We don’t think our legislators can tax their way out of this looming financial cataclysm. The fake government pension system has to be changed and we hope our highest court allows the changes to stand. We appreciate your thoughts and comments. Please post them on our award-winning blog.