9-14-15; Current IL WC Reform and Where We Are Going; Shawn Biery, JD Analyzes Important Ins. Coverage Ruling; What Do You Want in a Great Defense Team? and more
/Synopsis: Current Reform of Illinois Workers’ Compensation And Where We May Be Going.
Editor’s comment: Most work comp observers remain mildly stunned about the focus of our new Governor, Bruce Rauner. Almost the minute he took office at the beginning of this year, Governor Rauner announced a strong goal of greatly remodeling our IL WC Act. That drive continues today. What is somewhat unusual is the IL WC Act has been amended on three different occasions in the decade prior to the ascension of Governor Rauner to public office. Our IL WC Act was changed in 2005, 2006 and 2011. We feel the changes were made, in large part, to correct the corruption and skullduggery of the failed Blagojevich administration. What our former-Governor-behind-bars did to win his first gubernatorial primary in 2002 was to “sell” or give control of the IWCC to the Plaintiff lawyers in Madison County along with political/financial support from Plaintiff lawyers across our state.
Prior to that happening, IL WC legislative reform was generally performed by joint legislation calmly created between the two political parties—there was an “agreed bill process” which was used to allow give and take in quietly vetting and making needed changes to the Act. Once Blago got in, the agreed-bill process was tossed. All of a sudden the name of the Commission was changed from “Industrial Commission” to “Workers’ Compensation Commission.” The funding of the Commission was changed from the general state revenues to funding from a specific levy on IL business only. The new funding allowed the IWCC to more than double in size and hire lots and lots of new politically charged Arbitrators who were either former Petitioners’ lawyers or were very amenable to the labor side. Finally, a bunch of new and unprecedented IL WC Funds were created or cash was infused into old dormant funds to allow the party-in-power to attain political goals not previously funded—as an example, the Rate Adjustment fund is a levy on business to allow annual COLA increases to widows/widowers and folks receiving total and permanent disability awards.
Please note the four things we outline in the paragraph above aren’t truly “legislative” changes although legislation was required to enact them. We feel they should be more properly characterized as “administrative” changes. What we consider fascinating is the defense or business side of IL workers’ comp took an enormous hit with such administrative changes and related funding. The leaders on the business side, like the IL State Chamber of Commerce and IL Manufacturers Ass’n almost never seem to care about them or mention them as being needed for reform. Please note a lot of money from IL business could be immediately saved to take a hard look at the IWCC itself and evaluate its size and configuration and consider streamlining this bloated state agency. As one obvious example, the IL WC Second Injury Fund provides benefits to less than 100 Illinoisans at any given time—are we ever going to look at this hilariously outdated fund and get rid of it, as other states have done? As another obvious example, IL WC claims are dramatically down and we have nine Commissioners who each have two full-time attorney assistants, making for 27 administrative appeals lawyers—do we really need that many? As we have said in the past, if all 27 lawyers at this IWCC level issued just one contested decision a week, they would have literally nothing to do in about ninety days. If our readers want our best thoughts on administrative reform, send a reply.
Bruce, Is That All You Got?
We have started to wonder if our new Governor has anything else to bring to the table. He has been in office for nine months and we aren’t seeing much in the way of improvements in the way our State operates on a day-to-day basis. Work comp reform, property tax freezes and the other minimalist reforms being debated in Springfield aren’t that sweeping. In our view, there are also lots of simple administrative reforms that should and must be put out into place. For one example, the State of Illinois has 88 agencies with redundant department heads, unneeded managers and lots of waste—as we have asked our readers in the past, can our State get along with 44 agencies or 22 agencies? The State is paying over $100M a year to collect highway tolls where the State of Indiana has no payroll devoted to collecting highway tolls—all IN tolls are collected electronically. State government could make a simple, quick change to toll collection that would save taxpayers over $100M every year. The Illinois Policy newsletter indicated our State misspent at least $130M on workers’ comp costs for state workers last year—we need better claims, safety and legal help to attack that high and increasing cost—that isn’t occurring. We don’t see anything being done about almost any of the challenging money-wasting issues in state government. Other than the current five-issue reform deadlock in Springfield, we are wondering what else is in store from our new Governor to get this state computerized/organized and running lots better. As a beginning point, we suggest he create a government efficiency information drive, open a hotline and ask State workers and taxpayers for their best thoughts and ideas on how to streamline things and save money.
As to true IL legislative WC reform, remember at its most basic form, workers’ comp benefits are three things: medical, wage replacement benefits (or TTD) and settlements/decisions. Right now, the IL WC system provides medical benefits to injured workers at rates/reimbursements lower than our sister state of Indiana. Yes, folks, IN doctors and hospitals get more money from insurers and businesses in the WC arena than IL medical caregivers receive. And right now, Governor Rauner is fighting to again cut medical reimbursements for IL surgeons and surgeries another 30%. We aren’t sure why this cut is needed and doctors/hospitals across our state are screaming mad about it—you may recall the great pieces written by Dr. David Fletcher, the CEO of SafeWorks Illinois and published here. Whether Gov. Rauner can enact these cuts remains open but we assure our readers IL WC medical costs are already low and may get much lower than our sister states.
On TTD or wage replacement benefits, rates continue to rise in this state. In the early 80’s a spiraling mathematical factor was enacted to insure such rates always rise. In our view, the current legislative proposals to require “major contributing cause” be shown by an injured worker along with clarification of the “traveling employee” standard may cause a minimal cut in IL WC costs. Another main cost-driver in IL WC TTD benefits remains the obdurate refusal of some of our biggest government bodies, such as the State of Illinois itself along with the City of Chicago in bringing injured workers back to work in light duty programs. We consider it a continuing scandal to report this is still occurring—at some point, Governor Rauner’s administration is going to have to take some responsibility and action to force his agencies to put light work programs in place across the board.
As to “settlements” or awards of permanent partial disability, former Governor Quinn’s administration brought in “impairment ratings” to allow the AMA Guidelines to be used in determining permanency. This remains a giant political football with Governor Rauner currently seeking to allow Arbitrators to consider that single factor in making awards. We don’t see that as a major change to “settlements” or permanency awards. What we do see and feel will have a giant impact are new conservative Arbitrators whose appointments we have been reporting to our readers. Already, we are advised settlements and awards for permanency are down 10, 20 or even 30% across the state—we feel that trend will continue in the weeks and months ahead. We understand another great new hearing officer will be announced by the Rauner administration this week. We predict she will be one of the smartest and sharpest WC hearing officers in state history and will insure benefits are properly awarded where true accidents and injuries occur and WC fraud will be greatly discouraged.
IL Workers’ Comp Costs are Dropping and Will Keep Dropping—the Math Will Take Time To Present Itself
What our politicians and WC observers aren’t doing is to let these earlier and ongoing changes occur and be measured for transmission across the country. We are absolutely certain the next evaluation of the IL WC system by the Oregon WC Premium Ranking that is due about one year from now is going to show dramatic and beneficial cuts in WC premiums and payouts due to the continuing impact of medical cuts already in place along with the drop in settlements and overall conservative approach that is coming from Republican arbitrator appointees. Please note concerns about ongoing IL WC reforms will be discussed by the KCB&A defense team at next month’s 2015 Illinois Workers’ Compensation Annual Seminar hosted by the IL State Chamber of Commerce. You are invited to attend and ask your best questions of us and challenge our team in every way possible. For information and to register, see below.
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Synopsis: If You Handle Claims For Multi-line Accounts, Knowing When There Is a Duty to Defend is Key. Analysis of Your Policy And of Relevant Pleadings Are A Must—Reviewing Policy Alone Is Not Sufficient. Analysis by Shawn R. Biery, J.D., M.S.C.C.
Editor’s comment: In Pekin Insurance Company v. Martin Cement Company, (issued September 2, 2015) Will Co. (O'BRIEN) the Appellate Court noted the decision of the Circuit Court erred in finding an injured worker's employer's insurer, to whom defense had been tendered in an underlying personal injury construction accident suit, owed no duty to defend a cement company alleged to be in charge of construction of building where injury occurred because the third-party complaint against an employer made sufficient allegations that actions or omissions of employer caused the employee's injuries.
This case involves injuries sustained by an employee of Platinum Steel named Swartz on or about July 14, 2010 while working on a construction project. The underlying complaint named The Frederick Quinn Corporation (FQC) and Martin Cement Co. (Martin) as defendants alleging Martin was in charge of the construction of the building where Swartz was injured when one of the rebar forms that he was working on broke away, causing Swartz to fall. The direct employer Platinum was working on the construction site pursuant to a subcontract agreement with Martin wherein Platinum agreed to provide labor and equipment to set rebar. The court noted count 1 of the underlying complaint was relevant as it alleges FQC and Martin owned and/or were in charge of the erection, construction, repairs, alteration, removal and/or painting on the construction project where the underlying plaintiff, Swartz, worked as an employee of Platinum--and further alleged FQC and Martin, through their agents, servants and employees were present and participated in coordinating the work; checked the work progress; inspected the work; and had the authority to stop work, refuse the work, and order changes in the work. It finally also alleged FQC and Martin were guilty of certain negligent acts, including “(g) failed to provide safe, suitable and proper support for plaintiff to work off of." Count II alleged direct negligence of Martin and FQC.
In December 2011, Martin’s attorney in the underlying case tendered Martin’s defense to Pekin based upon a Commercial General Liability Policy issued by Pekin as the insurer to Platinum for the effective policy period covering the date of accident. Under the subcontract agreement whereby Platinum, as the subcontractor, agreed to set rebar for Martin, as the contractor, dated June 15, 2010, Platinum was required to purchase and maintain this insurance coverage, naming Martin as an additional insured. The policy contained an additional insured endorsement titled “Contractors Additional Insured/Waiver of Rights of Recovery Extension Endorsement. Specifically, the policy provided coverage to Martin with respect to vicarious liability for bodily injury or property damage imputed from Platinum to Martin as a proximate result of Platinum’s ongoing operations performed for Martin. It did not provide coverage for Martin’s own negligence.
On January 13, 2012, FQC filed a third-party complaint against Platinum in the underlying case. That complaint sought contribution from Platinum if FQC was found to be liable to Swartz, based upon Platinum’s: failure to properly train and supervise Swartz; improper maintenance and control of the area where Swartz was working; failure to warn Swartz; failure to provide adequate safeguards; and failure to provide Swartz with a safe place to work.
In February 10, 2012, Pekin rejected Martin’s tender of the defense of the underlying case, stating that Martin was not listed as an additional insured on the Declarations page and the allegations against Martin in the underlying complaint were for negligence by Martin, which was excluded under the policy. Martin did not withdraw its tender of defense, so Pekin filed this declaratory judgment action on March 20, 2012.
On March 30, 2012, Martin filed a third party complaint against Platinum in the underlying case, making similar allegations to FQC in the contribution count, and adding a count for breach of contract. Pekin moved for summary judgment. With respect to Martin, Pekin argued it was entitled to summary judgment because it owed no duty to Martin under the additional insured endorsement when Swartz sued Martin for Martin’s own conduct and the policy provided no coverage for Martin’s own negligence. Martin filed a cross-motion for summary judgment, arguing the underlying complaint stated claims against Martin that Platinum was potentially responsible for, thus falling within the endorsement. In addition, FQC’s third-party complaint alleged Platinum was at fault. The Circuit Court granted summary judgment in favor of Pekin and against Martin. In so ruling, the Circuit Court determined it was not appropriate to consider Martin’s third party complaint, but it did specifically to rule on the argument that it could consider FQC’s third-party complaint. Martin appealed. Martin argued Pekin had a duty to defend it as an additional insured under the policy issued to Platinum because the underlying complaint, read in conjunction with the subcontract between Martin and Platinum, contained allegations Martin was sued for vicarious liability imputed from Platinum to Martin.
In their analysis, the Appellate Court noted an insurer’s duty to defend its insured is broader than its duty to indemnify and in determining whether an insurer has a duty to defend its insured, a court must look to the allegations in the underlying complaint and the relevant portions of the insurance policy, citing Outboard Marine Corp. v. Liberty Mutual Insurance Co. The court must focus on the allegations of the complaint, liberally construed in favor of the insured, citing United States Fidelity & Guaranty Co. v. Wilkin Insulation Co. If the allegations of the underlying complaint fall within, or potentially within, the policy coverage, then the insurer has a duty to defend per Outboard Marine Corp. The Appellate Court also noted summary judgment is appropriate only where “the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
The IL Appellate Court indicated they had in the past concluded the terms of the policy required the insurer to defend additional insureds against claims arising out of the insured’s work or “'ongoing operations performed for that Additional Insured during the Policy Period.” and as a general rule, as long as in so doing the trial court does not determine an issue critical to the underlying action, a trial court should be able to consider all the relevant facts contained in the pleadings, including third-party complaints and counterclaims, to determine whether there is a duty to defend and confirmed a trial court is not required to put on blinders and could consider a complaint filed by an outside party in determining duty to defend, even though it was filed after the declaratory judgment action, because there was no indication the outside complaint was filed to fill in information for coverage.
In this case, there were two third party complaints filed, the complaint filed by FQC before the declaratory judgment action was filed and the complaint filed by Martin after the declaratory judgment action was filed.Thus, while Martin’s own third party complaint against Platinum, filed after the declaratory judgment action was filed, was arguably potentially self serving in that it was filed by the putative additional insured after the declaratory judgment action was already filed, there is no similar reason to bar consideration of FQC’s complaint, which was filed prior to the declaratory judgment action. That complaint makes sufficient allegations that actions or omissions of Platinum caused Swartz’s injuries, making summary judgment in favor of Pekin on the duty to defend in error.
The best way to make sense of your duty to defend in situations such as this or any situation is an initial analysis of your policy to determine all areas of potential coverage and once those are determined, a cross review of all underlying pleadings to determine if there is any chance a judgment on one of the counts alleged would arguably fall under that coverage. As you can see from this case, the courts will find that duty to defend much more liberally than they will potentially find liability. This article was written and researched by Shawn R. Biery. If you have any questions about this case or regarding specific issues with duty to defend on a policy for one of your claims, please reply or email Shawn at sbiery@keefe-law.com and we will give you an initial opinion.
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Synopsis: What Would Make KCB&A the Best WC Defense Firm for Your Needs/Goals?
Editor’s comment: We have a national client advise during the last fiscal year, we assisted them in saving $2,000,000 from their year-earlier WC payout. We greatly appreciated the news! What they want us to do is to let all U.S. businesses know how we can work with you to save money off the bottom line and make you look great to your bosses.
Among other things, the defense lawyers at KCB&A have a
· Continuous hotline for All WC questions - We are happy to help all claims adjusters on a 24/7/365 basis--send your claims inquiries and toughest questions to ekeefe@keefe-law.com for answers to your toughest claims questions for the States of IL, IN, WI, IA and MI. Give us 24 hours and we will get back to you with reasoned thoughts and suggestions, recommendations on pro se settlements and best practices in handling difficult and complex claims concerns.
· WC File Closers – We close litigated claim files faster than any defense firm in the U.S. We have a number of solid strategies to make that happen. If you need your old dog claims closed, try the team at KCB&A.
· Ethics - We may be the most ethical law firm in the U.S. and can prove it—if you need a presentation on Claims Ethics with CLE’s/CEU’s, we will come to your office, cater lunch and present an interesting and information program on Claims Ethics.
· Winning outcomes - Next, we prepare, try and win lots of cases, when you can’t favorably and rapidly settle them. If you don’t believe it, take a look at actual winning results from the top defense firm in Illinois, Wisconsin, Michigan, Indiana or Iowa by going to this link: http://www.keefe-law.com/Successful_Decisions_Document.pdf
· Free Text Books and Resources - We also have a free book/materials on all aspects of Illinois/Indiana/Wisconsin/Iowa/Michigan Workers’ Compensation Law and Practice. If you are unfamiliar with these Acts and Rules and want a resource book, please send a reply.
· Accuracy of Reserves - We provide free answers to questions adjusters have about appropriate reserves on your claims, usually within 24 hours. We employ WestLaw© research in rendering our evaluation for your complete file. If you have interest in a legal opinion to support your reserve calculations, email ekeefe@keefe-law.com.
· Free Legal Audits - We are happy to provide a free legal audit of your worst litigated claims. Our goal is to advise how to best bring such claims to rapid closure within authority. We have had solid outcomes from such reviews. All of our handling is attorney-client privileged. If you have interest in a legal audit, send a reply to ekeefe@keefe-law.com.
· Great experts - We have a strong list of medical, diagnostic, pharmacological, vocational, utilization review, nurse case managers, surveillance, accident reconstruction, ergonomics, safety and other top-notch experts for your consideration to use in workers’ compensation, general liability and employment law defense litigation. Such recommendations are free. We update such lists continuously. We can also provide research backing up the credentials of such experts. If you have a need for an expert, send a reply.
· Medicare Set-Aside Experts – We have two certified MSA experts on staff, Shawn R. Biery and Matt Ignoffo. They can help with getting pricing, approval and all aspect of handling of MSA’s for your claims. You can reach out to them directly at sbiery@keefe-law.com and mignoffo@keefe-law.com.
· Other Related Legal Fields – Our defense team can assist you with employment practices/discrimination claims, motor vehicle and general liability practice, wage and hour law and commercial litigation of all types.
If the factors above don’t cover anything and everything you need to save money in your workers’ comp claims program, please tell us what, if anything, more might be needed and we will put it into place with and for you. We appreciate your thoughts and comments. Please post them on our award-winning blog.