Synopsis: Can this be the Dummest IL WC Deform in the History of Work Comp? IL Senate approves the “State of Illinois Fake Mutual Work Comp Insurance Co.”
Editor’s comment: My amazing brother Joe Keefe has been in comedy for decades. Whenever it comes to politicians, he always recommends you vote for the funny ones—when politics eventually get boring and they always do, Joe points out you can always laugh at the funny politicians.
The IL Senate just passed a law that is certain to remain humorous, silly, dopey and goofy if you understand what they are doing. Please note this isn’t law yet and we hope if this bill gets past the IL House that Gov. Rauner quickly vetoes it.
To my understanding, ITLA or the IL Trial Lawyers Ass’n doesn’t like to be told workers’ comp in this nutty State is more expensive than it is in other states. To counter or block that news, they came up with the hilarious PR or public relations story that our IL WC system isn’t pricey, the Evil Demon is the profit-hungry WC insurance companies. The PR line from ITLA continues to claim there were some IL WC reforms in 2011 and WC costs may not have gone down. This supposed phenomenon was not because of the legislation or the IWCC administration but the problem was the supposed hoarding of profits by those inconceivably wealthy WC insurance carriers.
In short, the IL Senate has now approved/voted for a bill that would take $10M from the IWCC Operations Fund to start a silly and fake government-run WC insurance carrier to supposedly offer discount WC coverage and embarrass the heck out of the major players in the IL WC insurance community. When we stop laughing out loud, we assure you the concept is stupid and we hope it is put to bed sooner rather than later. We assure our readers this should be forever called the “State of Illinois Fake Mutual Work Comp Insurance Co.”
Please also note the annual budget of the IWCC is about $30M. Every nickel of that money comes from IL business and local governments. My sources agree the IL Workers’ Comp Commission that has about 150 employees would have to lay off about 50 workers if they are to loan/give up $10M or 1/3 of their annual budget to this dopey fake mutual insurance concept. Not sure if anyone in the General Assembly even thought of that issue but we assure you, in a State with about $14.5 billion in unpaid bills and around $130 billion in pension debt, our legislators are again playing with what I call “magic money” that supposedly comes from nowhere to be spent by them on nothing for nobody.
The main reason I think the PR line from ITLA is completely balderdash is most of my top clients aren’t actually “insured” for their work comp risks and costs. All moderate to major employers in Illinois and across the country don’t truly pay WC insurance carriers for “first-dollar” coverage. Almost any moderate to major employer has a significant claims deductible or what is called a self-insured retention where the insurance carrier actually is acting as an excess carrier when providing coverage. For risks/costs from $250,000, $500,000, $1M or even $2M, the WC insurance carriers are spending my clients dollars and not their own. They make a relatively minimal profit managing WC claims for the employers and, when they act like a TPA or third party administrators, any insurance profits are greatly limited.
Please also remember there are over 300 WC insurance carriers and TPA’s in this State. The competition is intense and they are all looking to cut costs and be the least expensive to win the annual RFP’s that bring in more business and cold cash. I don’t know any successful insurance carrier/TPA that doesn’t greatly overtax the solid and hard-working IL WC adjusters who make the tough calls on their IL WC claims. IL WC adjusters struggle with the Peter Principle that says the most work in any organization flows to the most competent worker—if an IL WC adjuster can do a solid job handling 125 litigated, lost time claims, they may receive as many as 200 or more claims (without matching compensation or bonuses) to insure their employers are getting the most money from their dedicated work.
On a related note, at one point, across the U.S., there were lots of state-founded and later state-run WC insurance companies like the proposed insurance carrier our IL General Assembly may create. The concept failed miserably, for the most part. Those WC insurance carriers were moved out of politics and kookiness of their respective state governments to be forced to succeed in the private sector or close their doors. Some of the state-run WC insurance carriers survived, lots of them closed their doors. Please remember the mega-carriers in U.S. work comp are multi-billion dollar international corporations. The IL General Assembly comically thinks they can use their clunky government model to compete with these well-tooled international organizations with an opening ante for our new IL Mutual WC Insurance Company of only $10M. The chance the IL General Assembly can outfit and run a competitive state-run WC insurance carrier and compete with the big boys/girls in our industry is impossible and humorous to even contemplate. Everything the General Assembly in this State touches turns to lead and drops to the bottom of the nearest river or lake. In my opinion, they are throwing away $10M and jeopardizing lots of jobs and the management of IL WC claims in doing so.
So why is ITLA pressing this phony PR line to the point of having their puppets in the IL General Assembly pass a law that will require laying off half a hundred IWCC workers? Well, they know John Q. Public doesn’t understand what I am telling you above. They also feel many citizens might innocently believe WC insurance carriers are very profitable and are fighting to stop passing through the supposed giant savings that came with the 2011 Amendments to the IL WC Act.
The real story is clear—medical costs in IL WC are down a notch. That savings is being “passed along” to my clients. WCRI’s most recent reliable statistical report confirms such costs have dropped about 6%. The problem with that cost-cutting is our sister states have cut even more overall WC costs. If you look at our surrounding states, if we can cut IL WC costs about 10%, we would and should be in the middle of that pack.
As a cautionary concept, we aren’t going to catch the cheap-o Indiana WC system as I assure you their WC benefits are terrible and they should be ashamed of how they treat catastrophically injured workers and/or widows and widowers. If you don’t believe me and want my thoughts on that issue, send a reply.
If IL WC is to cut even more costs to get to the mid-stream, we told you in the past weeks there are two simple ways to do so. The first is to immediately roll back the PPD values to the pre-2005-2006 numbers. This would be a 7.5% savings the day it would be enacted. We believe the Plaintiff bar in this State would accept that roll-back. The second and even easier way to cut IL WC costs is for Governor Rauner to tell the IWCC administrators who work for him to cut WC benefits by 10% or whatever value he feels best. If they won’t cut benefits, start to cut the administrators who aren’t listening. In response, we believe the Plaintiff bar will deal with mildly lower IL WC costs and some of them may not be able to afford a second Maserati or Ferrari but they will get along just fine.
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Synopsis: IL Supreme Court Confirms Petitioner Attorney Has To Abide By Fee-Sharing Agreement.
Editor’s comment: It is hard to believe it was worth all this litigation! We assume they wanted to make a point and I agree with the outcome. It is just a shame there isn’t some easier and faster way to reach it—please note the first of these claims appears to have arisen in 2007.
The Illinois Supreme Court last week ruled a claimants’ attorney had to follow the written attorney fee-sharing arrangement he had with a different firm. He was not allowed to stiff the law firm that referred numerous IL WC cases to him because of an alleged technical violation of the Supreme Court’s Rules of Professional Conduct. Under the rules, two lawyers or law firms who split a fee generated by the representation of a client will both face joint liability if the client later complains of malpractice. Accordingly, the rules require Illinois lawyers and law firms expressly agree to share in this potential for joint liability to the client at the time they agree to share in the fees.
Although the clients also need to consent to the fee-splitting arrangement, our highest Court said clients do not need to be specifically informed of the fact both firms can be held financially responsible for mishandling their claims. The Court concluded the fee-splitting agreements between attorney Anthony Esposito and the law firm of Ferris, Thompson & Zweig were not rendered unenforceable just because their clients weren’t told about their joint financial and/or malpractice responsibility for their cases.
This decision marked the second time the Supreme Court had to weigh in on the long-running dispute between Esposito and the Ferris firm over the division of $109,390.89 in fees. Two years ago, the Court confirmed the IL Workers’ Compensation Commission didn’t have jurisdiction to decide the validity of the agreements, which entitle Ferris firm to payment of $49,225.90. The Ferris firm was hired by ten injured workers between 2007-2010 to pursue work comp claims for benefits. The Ferris firm contracted with Esposito to represent the workers in filling the Applications and later for proceedings before the IWCC.
Under the terms of the written arrangement, Esposito agreed to pay the Ferris firm a 45% share of attorney fees awarded in these IL WC cases. Consistent with IL Supreme Court Rules, the injured workers were all informed of the arrangements. They provided written consent to the division of fees.
Thereafter, Attorney Esposito negotiated settlements in the cases and secured attorney fee awards ranging from $700 to $46,000 each. The total attorney fees for all 10 cases amounted to $109,390.89 The Ferris firm then demanded payment of its 45% share, but Esposito refused to honor the agreement. The Ferris firm responded by filing a breach-of-contract claim against Attorney Esposito in Lake County Circuit Court.
Esposito moved for summary judgment, arguing the fee-sharing agreement was invalid because it did not comply with Rule 1.5 of the Illinois Rules of Professional Conduct. That Supreme Court Rule governs the fees attorneys may charge their clients. Subsection (e) addresses the division of fees between lawyers who are not in the same firm. The rule has three subparts, which say a fee split is appropriate “if the primary service performed by one lawyer is the referral of the client to another lawyer and each lawyer assumes joint financial responsibility for the representation;” the client “agrees to the arrangement, including the share each lawyer will receive;” and the total fee is “reasonable.”
Esposito argued the Supreme Court Rule requires the client consent not only to the division of fees, but also to the joint financial responsibility of the attorneys. Lake County Circuit Court Judge Thomas M. Schippers agreed. Judge Schippers cited a 2014 Appellate Court case Donald W. Fohrman & Associates v. Mark D. Alberts for the principle that referral agreements involving the division of fees between lawyers who are not in the same law firm are not enforceable unless they strictly comply with the provisions of Rule 1.5(e). In the Fohrman case, the First District Appellate Court’s found a fee-splitting agreement wasn’t enforceable because it failed to provide the client with notice the lawyers had assumed joint financial responsibility for the matters, among other deficiencies.
The Ferris firm appealed Judge Schippers’ ruling, and the Second District Appellate Court reversed Judge Schippers last summer. The Second District rejected the idea strict compliance with Rule 1.5(e) required referral agreements involving fee sharing to expressly provide notice the lawyers and firms assume joint financial responsibility. Since the Ferris firm and Esposito undisputedly accepted joint financial responsibility for the representation of the workers in the 10 referred cases, the Second District said Supreme Court Rule 1.5(e) was satisfied.
In their recent ruling, the Illinois Supreme Court agreed. The Court noted “the current joint financial responsibility requirement is included in a different subsection of the rule than the provision addressing what the client must agree to.” Rule 1.5(e)(2) just says the client must agree to the “arrangement” between the lawyers/law firms, the court said, reasoning the “arrangement” is “the referral of the case and the division of fees between the referring and receiving lawyers.” The Court determined the joint financial responsibility requirement in Rule 1.5(e)(1) is not part of the “arrangement” referenced in subsection (2), deciding that “each of Rule 1.5’s three subsections constitutes a separate condition that must be satisfied in order for a fee-sharing agreement to be enforceable. Rule 1.5 reads like “a checklist in which each of the enumerated items must be crossed off before moving to the next, and all must be checked off before the fees may be divided,” the Court said.
The Court added the Fohrman case does not establish a contrary rule, since the Fohrman decision didn’t say that Rule 1.5(e) requires the agreement from the client to include a provision regarding the attorneys’ acceptance of joint financial responsibility. The agreements involved in the Fohrman case “suffered from numerous deficiencies, and the attorney seeking to enforce them did not dispute that they failed to conform to Rule 1.5(e),” so the decision just assumed there was a requirement that a client receive notice of joint financial responsibility without finding the requirement existed.
The Court further noted that “if the clients in this case had retained a single law firm with multiple partners, our Rules of Professional Conduct would not have required the retainer agreements to expressly notify the clients, in writing, as a precondition to enforcement of the fee agreement, that the partners would be subject to liability along with the attorney providing the actual legal services if that attorney committed malpractice.”
The Court said it didn’t see any reason why the situation should be any different where “the lawyers involved have agreed to assume the very same joint financial responsibility but simply do not practice in the same firm” since “the clients are protected either way.”
In my view, the lengthy course of litigation it took to get this decision from our highest Court, this case likely cost the parties far more than the amount of fees at issue. It is a shame our Courts can’t work stuff like this out cheaper and faster—the issues are not that complex.
To read the court’s decision, click here.
Synopsis: Join Shawn R. Biery, J.D., MSSC for a nationally broadcast Webinar July 17th, 2017 3:00 PM to 4:15 PM ET
Editor’s comment: Workers’ Compensation: Return to Work Issues & Strategies
Can't attend live? By registering, you will be able to view the course live, view a recording at any time for 12 months, or both. This webinar will provide an overview of strategies and tips for reintegrating injured workers to production. In addition, the course will also provide tools for effectively managing claimants’ expectations and implementing protocols for claim management.
Upon completion of this course, you will be able to:
- Analyze options which can be utilized on a claim by claim basis to set targets for return to work
- Understand avenues to develop relationships with key stakeholders to assist in management of claim issues with focus on rapid return to work
- Set targets for accommodated and full duty return to work for injured workers
- Determine more specific strategies for your industry to minimize lost time claims
- Describe HIPAA compliance issues
Receive a 35% discount for being a friend of the firm by using the promo code: SPKR35
You can sign up to attend at:
Please contact Shawn at firstname.lastname@example.org with any questions or to find out how to have one of the KCBA attorneys provide a presentation to your office!
Workers’ Compensation in Illinois is complicated . . . Do you know everything you need to know about the Illinois WC system? Attorney Jim Egan of Keefe, Campbell, Biery & Associates will begin with a review of the basics of Workers’ Compensation in Illinois, including benefits, the Workers’ Compensation Commission, and handling a claim of injury from the beginning to end. He will then analyze and discuss in-depth important topics such as Temporary Total/Partial Disability, Nature and Extent of Injury, Wage Loss Differential, Discovery, Liens and related claims against WC benefits in Illinois, Surveillance, Retaliatory Discharge and How to Handle WC Death Claims.
The final section of the day will include a number of essential factors to be considered when you are dealing with any workers’ compensation claim. You will receive helpful information on pushing your claim targets, using real time examples. Keeping in touch with your workers and how to drive claim closure are key, so these will also be discussed.
This is a not to be missed workshop for anybody who handles Workers’ Compensation claims in Illinois.
Tuesday, June 20, 2017
10:00 am - 4:00 pm
Holiday Inn Express, 1000 Plummer Drive, Edwardsville, IL 62025
Early Bird - (For everybody) - Sign up before June 10 - $249.00
Member (For members of the Illinois Chamber & local chamber partners) - $299.00
Retail Price - $349.00