Synopsis: Our Illinois Courts Demand IL WC Arbitrators Rule on WC Fraud—Will They??
Editor’s comment: In a controversial ruling that is a bitter pill to any IL WC risk manager or claims handler, it now appears the Illinois 3d District Appellate Court joined with the First District to determine there is no civil remedy for unquestioned workers’ comp fraud and theft of such benefits. The Appellate Court was divided on the question of whether a trial judge or jury had jurisdiction to decide whether an injured truck driver became ineligible for temporary total disability benefits by lying about physical limitations and abilities.
Presiding Justice Mary McDade wrote a biting dissent indicating she found that idea "untenable and unjust." As the IL WC Commission regularly denies having jurisdiction to decide if WC fraud was committed where there are alleged misrepresentations coming from an employer against an injured worker, Justice McDade complained the majority ruling leaves ABF Freight and other major and minor Illinois employers without any civil remedy in claims involving clear evidence of WC fraud.
Defendant Fretts was a tractor-trailer truck driver for Plaintiff ABF Freight. In 2009, Fretts filed two IL workers' compensation claims for alleged injuries to his right shoulder. The treating physician provided permanent lifting restrictions, and Fretts told ABF the restrictions would not allow him to work as an over-the-road driver. Relying on Fretts’ representations, ABF innocently paid Fretts substantial temporary total disability benefits. In September 2011, ABF learned Fretts was secretly working as a long-distance truck driver for Havener Enterprises. When ABF got the tip, they hired an investigator to conduct surveillance.
As part of a global investigation, the operative took startling videotape of Defendant Fretts lifting heavy weights at a local gym with his supposedly disabled arm and shoulder—at one point, Fretts was seen curling a whopping 55lbs. with each arm. An orthopedic surgeon who viewed the videotape confirmed Fretts fully recovered and appeared capable of exceeding the “permanent” lifting restrictions placed upon him by his treating doctor.
Using the video and the opinion of the orthopedic surgeon, ABF brought a motion for determination of workers' compensation fraud before the Illinois Workers' Compensation Commission. ABF contended Fretts made knowing misrepresentations regarding the extent and nature of his shoulder injuries, his asserted disabilities/recovery and his alleged inability to work. One week later, ABF filed a civil complaint against Fretts, stating claims for insurance fraud, work comp fraud and common-law fraud. In short, ABF wanted their money back from paying a fraud.
ABF's motion for determination of WC fraud was heard before an IWCC Arbitrator in August 2012. At the hearing, Fretts admitted he worked for Havener, driving a flatbed and a pickup truck from IL to Louisiana, but he claimed he was unable to locate other work. The Arbitrator determined a limited amount of driving work was not a basis to end Fretts' continued TTD benefits, and she found ABF failed to prove Fretts had intentionally or fraudulently acted in relation to the work admittedly performed for Havener Enterprises.
After the Arbitrator issued her decision, Fretts moved to dismiss ABF's civil complaint. Kankakee County Circuit Court Judge Wenzelman granted his motion, finding the doctrine of collateral estoppel or issue preclusion barred ABF from relitigating the same theories of fraud presented to and decided by the Arbitrator.
Last week, the Third District Illinois Appellate Court of Illinois ruled as a matter of law dismissal was proper because the Circuit Court lacked jurisdiction to even consider the case. The majority ruling indicated the IL WC Commission and the circuit courts have concurrent jurisdiction to decide workers' compensation cases, however the IL Supreme Court has said the IWCC "should be given wide latitude in resolving factual issues," while "questions of law are more appropriately answered by the circuit court." The majority outlined ABF's claims presented "questions of fact, such as the extent of Fretts' injury and his representations to medical personnel regarding his injury both before and during the workers' compensation proceedings." As such, the majority felt the IWCC was "in a better position" to address the allegations being raised.
Appellate Court Justice Schmidt wrote separately, saying he agreed ABF's complaint was properly dismissed, but he was not persuaded the IWCC had any sort of "special expertise that equips it better than the circuit court to deal with issues of fraud." He also said he believed ABF's fraud claim should have been barred by principles of res judicata or issue preclusion as opposed to an absence of jurisdiction.
As we outline above, Justice McDade was the lone dissent, arguing there is no tribunal in Illinois to resolve ABF's justiciable claim of fraud under the majority's reasoning, because the IWCC has repeatedly ruled it won't decide fraud cases. In 2010, the IWCC handed down a ruling in Leviege v. Ford Motor Co. in which the Commission panel expressly indicated it can make findings regarding credibility of witnesses and weight of evidence but "(it) does not have jurisdiction to determine what, if any, fraud was committed." That issue, the IWCC said, "is the jurisdiction of another tribunal." Thus, Justice McDade contended, "if the majority is correct in stating our courts do not have jurisdiction to rule on issues of fraud in workers' compensation benefits cases and the commission is also correct in concluding it too lacks jurisdiction," then ABF is left without a tribunal from which it can seek a remedy. Justice McDade suggested the more prudent course of action when the commission has already clearly stated that it is not the proper forum for determinations of fraud, is for the courts to step up.
We point out WC fraud is stealing. If someone stole a tractor-trailer from ABF, we assume SWAT teams might be called and every judge and justice would be quick to put the stop to theft or fraud. We remain completely baffled how and why our judiciary seem confused about WC fraud. We ask our readers the question—if you innocently paid an injured worker a million dollars in IL WC benefits to then learn the claimant was a liar and cheat and made the whole thing up—don’t you feel our courts should be a place you could go to get your money back? In our view, the IWCC would simply deny the claim and not award anything—that doesn’t get you a penny in return.
Please also note there are lots of WC issues that are decided in our circuit courts:
1. In Kelsay v. Motorola, claims for retaliatory discharge for filing a workers’ comp claim are to be brought in the civil courts. Please note the proscription against such retaliation is contained in the IL WC Act.
2. Claims to adjudicate a workers compensation lien under Section 5 of the IL WC Act can and are typically brought in the civil courts. While the IWCC could adjudicate a “set-off” of benefits in this setting, most of the time such issues are handled by our circuit court judges.
3. In their ruling in Illinois Graphics v. Nickum, the civil courts ruled when WC benefits were paid in error, the litigation to recover such monies had to be brought in the circuit court.
The IL WC Commission Can’t Decide All Claims of WC Fraud Because All WC Claims Aren’t at the IL WC Commission
Please also note our courts seem to presume all WC benefits arise from litigation—in fact the opposite is true. The vast majority of IL WC claims are medical only or medical only-lost time claims. The IWCC may only get involved in such claims at the very end, if there is a settlement. There is no current method for the IWCC to handle WC fraud claims in non-litigated settings because the only proper party Petitioner in an IL WC claim is the worker—there is no provision for an employer to file an Application for Adjustment of Claim to seek redress for fraud or anything else.
In a similar vein, we assure our readers workers’ comp litigation in this state is driven by the Petitioner’s bar. If they won’t want to go to hearing, cases are very rarely heard. If a Petitioner was caught red-handed creating a claim for a fake accident or working while on TTD, all they would have to do is stall, stall and stall some more until all the witnesses for Respondent have disappeared or died.
Where Is IL WC at Right Now With WC Fraud Remedies?
This ruling has nothing to do with criminal investigation and prosecution of WC fraud in this state—that concept hasn’t changed at all;
Our Governor is trying to move the initial WC fraud investigation from the minimally active IL Dep’t of Insurance to the IWCC—we strongly support that concept to bring some accountability to WC fraud investigations;
In the right case with clear evidence of WC fraud, our readers, clients and the WC defense industry should present Petitions for WC Fraud before the Arbitrator assigned consistent with above ruling and the First District ruling in Country Financial Services v. Roberts.
We hope the judges and justice in this state start to understand the extent of the WC fraud problem caused by miscreants such as the one who is the subject of this article. IL WC managers want to pay injured workers what is due but they do not want to be misled or stolen from.
We appreciate your thoughts and comments. Please post them on our award-winning blog.
Synopsis: Win! Win! For IL Employers--Employer’s Settlement Agreement is Good to Go and No Need to Pay 25% Attorney Fees For Suspended Future Medical Payments. Analysis by Bradley J. Smith, J.D.
Editor's Comment: In Bayer v. Panduit Corporation, the Illinois First District Appellate Court affirmed the circuit court judge’s entry of a good-faith finding related to Area Erectors, Inc.’s (Area) direct settlement with Plaintiff Bayer. Simultaneously, the Appellate Court reversed the circuit court judge’s award of attorney fees to Bayer’s attorneys to be paid by Area. On June 20, 2007, Bayer, an employee of Area, was working as an ironworker on a construction site when he allegedly fell and sustained injuries. As a result of those injuries, Bayer became a quadriplegic. Bayer filed a workers’ compensation claim against Area.
Similar to any other construction jobsite, there were multiple parties involved. Panduit was the general contractor on the jobsite. Panduit hired Garbe Iron Works, Inc. (Garbe) for the expansion of Panduit’s warehouse facility. Garbe then hired Area, to “[f]urnish all labor and equipment (including supervision) to upload and erect” structural steel, in exchange for $520,485.00. The purchase order specified Area would name Garbe and Panduit as additional insureds on a $2 million insurance policy.
On September 19, 2007, Bayer filed a civil lawsuit against Panduit alleging negligence. In turn, on April 30, 2009, Panduit filed a third-party complaint for contribution against Bayer’s employer, Area, contending Area was also negligent in failing to ensure the safety of its employees, including Bayer. On October 1, 2012, Area and Bayer filed a joint motion for a good-faith finding and approval of a settlement agreement between Bayer and Area. The motion for a good-faith finding alleged that Bayer had filed a workers’ compensation claim against his employer, Area; that Area has honored Bayer’s workers’ compensation claim and Bayer had been paid and continued to be paid temporary total disability and medical expenses; that the amount of workers’ compensation lien to date totaled $5,275,585.57; that Bayer and Area, through area’s insurer Arch Insurance Company, have entered into a settlement agreement through an arm’s length bargaining process; and the settlement agreement was supported by consideration. Routinely, the motion for a good-faith finding also attached a copy of the settlement agreement.
Shortly after the finding for good-faith settlement, Garbe also settled with Bayer leaving only Panduit for trial. At trial, a jury awarded Bayer $80 million dollars in damages, but reduced it by 20% for Bayer’s own contributory negligence, for a total of $64 million verdict against Panduit.
Panduit argued the settlement agreement was not made in good faith. Specifically, Panduit contended the settlement agreement lacked consideration. The Appellate Court reviewed the circuit court’s finding on an abuse of discretion standard lending discretion to the circuit court’s decision. In order to prove whether a settlement agreement was negotiated in good faith, the settling parties carry the initial burden of making the preliminary showing of good faith. Once that showing is made, the burden of proof shifts to the non-settling party, who challenges the good-faith settlement. The standard of proof is by a preponderance of the evidence. Area made the initial showing by attaching its settlement agreement to the motion. The Appellate Court found Panduit failed to demonstrate—by a preponderance of the evidence—any showing of bad faith by the settling parties
The Appellate Court cited multiple consideration contained within the settlement agreement supporting the good faith finding. The essential element of consideration is a bargained-for exchange of promises or performances that may consist of a promise, an act, a forbearance, or the creation, modification, or destruction of a legal relation. There were multiple contingency lien waivers in the settlement agreement, which were sufficient consideration. Additionally, the agreement not to suspend workers’ compensation payments to Bayer at any time prior to the final resolution of the litigation against all of the parties also qualifies as adequate consideration. Accordingly, the Appellate Court affirmed the circuit court’s good-faith finding.
Also, on appeal, was the circuit court’s entry to a 25% attorney fees award to Bayer’s attorneys from Area. The motion for attorney fees, citing section 5(b) of the Workers’ Compensation Act (IWCA) and the holding in Zuber, requested the circuit court enter an order compelling Area to pay attorney fees in an amount representing 25% of future workers’ compensation benefits for Bayer that had been suspended by statute as a result of the underlying settlements in the negligence action.
As the issue required the interpretation of provisions under the IWCA, which is a question of law, the Appellate Court considered the issue under the de novo standard of review. The Court reviewed the language of Section 5(b) of the IWCA, to find the IWCA does not require an employer to pay attorney fees for suspended future medical payments. Further, the Court reasoned had the legislature intended for fees under section 5(b) to include future medical expenses, the legislature could easily have drafted section 5(b) to say that the employer’s right to reimbursement included the amount of compensation paid or to be paid by the employer to or on behalf of the employee, which would have encompassed the medical expenses paid “to the provider on behalf of the employee” under section 8(a) of the IWCA. Consequently, the Appellate Court reversed the circuit court’s entry awarding Bayer’s attorney 25% attorney fees on future suspended medical payments.
Since 25% of any future award of medical payments—in this case—is a significant recovery, we are continuing to monitor Bayer’s request for a petition for certiorari to appeal the issue to the Illinois Supreme Court. We will update you once we are aware whether or not the petition for certiorari is granted or denied.
The research and writing of this article was performed by Bradley J. Smith, J.D. Bradley can be reached with any questions regarding general litigation defense and workers’ compensation defense at firstname.lastname@example.org
Synopsis: Catalyst RTW Might Not Be the Answer for the IL WC Return to Work Challenge. Thoughts and analysis by John A. Karis, JD.
Editor’s comment: In Perkins v. Turner Industries Group (issued June 19, 2015), Petitioner was a carpenter for 29 years and was injured at work. An FCE released Petitioner to medium physical demand level position. Petitioner began vocational rehabilitation with Coventry from April 2011 to January 2013. Petitioner allegedly applied for 1000 jobs but claimed he was unable to secure employment. We consider it comical for anyone to claim they have looked for 1,000 jobs without success—in our view, claimant had to be doing something to avoid locating medium-level work, as there are literally hundreds of available jobs that fit that description in this state.
In January 2013, Respondent Turner obviously decided to take action about ongoing TTD. Petitioner received a letter from a national company named Catalyst RTW offering him at home-based employment through a company called AllFacilities. The website for this company is http://www.catalystrtw.com/. According to Petitioner he never applied for this position—it was given to him. On March 25, 2013 Petitioner began working for AllFacilities. However, on July 10, 2013 Petitioner was terminated from AllFacilities due to his failure to produce enough “A leads.”
Catalyst RTW's purpose in cases such as the one at bar is to assist companies in saving money on workers' compensation claims and markets itself as providing lower workers' compensation settlements when they have been involved in a case. Catalyst specifically markets that if an individual is non-cooperative, declines the offer of work or is terminated for cause they will document those facts and be available to testify for Respondent. Their witness testifies about 25 to 30 times per year, or more than twice every month according to testimony by a Catalyst RTW employee. Catalyst RTW takes difficult cases, a case such as this and then usually refers them to AllFacilities which provides them with at home employment within their restrictions.
The Arbitrator noted the insurance company paid Catalyst RTW to arrange the interview, paid AllFacilities to hold the interview, paid Petitioner's wages while at AllFacilities, paid an administration fee to AllFacilities to allow Petitioner to perform this activity, and would have gotten a refund of their initial costs if AllFacilities had not offered Petitioner work.
The Arbitrator in his decision stated a review of the testimony and evidence in this case revealed the at-home work positions with AllFacilities were not found to be competitive or “real” employment. The record indicated of the 661 referrals from Catalyst RTW only three unsubsidized workers were still employed there. The Arbitrator further noted it was clear a referral to AllFacilities through Catalyst RTW has a nearly non-existent chance of turning into long-term employment. The Arbitrator reasoned less than ½ of 1% of the individuals referred to AllFacilities from Catalyst RTW in the last three years continue their employment with AllFacilities after their subsidized work period has ended.
Additionally, a review of the testimony of two vocational counselors led the Arbitrator to the conclusion the system in place between Catalyst RTW and AllFacilities was not a legitimate attempt to return the injured worker into the job market. The vocational counselor explained in her testimony Petitioner was “doomed” to fail at this position. Therefore, the Arbitrator awarded permanent total disability benefits. We consider that a very challenging decision.
Although Catalyst RTW sounds like a tool to assist in difficult IL WC cases involving return to work, our IL WC readers may want to carefully consider using their services and possibly choose more bona fide vocational counselors. As we have advised our readers, there are lots of claimants out there who try to appear to look for work while never actually finding work. It is our understanding some attorneys coach them to do so. Our vote is to push reluctant claimants into trucking, ambulance or 911 dispatch jobs that are seated positions and actually pay solid money. If you have interest in this approach, send a reply.
Synopsis: Congrats from the U.S. Workers’ Comp Community to Beau and Mary Claire Spreck!!
Editor’s comment: Last weekend at the Drake Hotel in Chicago, Beau and Mary Claire Spreck were united in matrimony. Beau and Mary Claire both attended Lyons Township High School and lived just down the street from each other in the Arrowhead Farm subdivision. In the summer of 2006, they started officially dating. They remained a couple through college and finally tied the knot!
More information on their wedding can be found online at: http://www.weddingwire.com/weddings/3304726/wedding_new_website#!/website/2429769 We note both sides of the IL WC matrix were present with Jim and Mary Marszalek present for the Petitioner side and Shawn/Debbie Biery and Gene/Angela Keefe holding down the fort for the defense side.
Beau is with EagleOne CMS, a leading solutions-based independent medical case management company in the United States providing workers compensation case management services since 1991. You may see him at national, regional and local events.
We wish this great couple the very best as they continue a wonderful relationship and start to build a family.