News

March 02, 2009

Mark Matranga of our office has called our attention to exposure for medical expenses when the settlement contract is not sufficiently explicit.

The Appellate Court, Fifth District, recently decided a case which will affect the practice of how medical bill issues are addressed in lump sum settlement contracts.  The claimant, Thomas Hagene, injured his right shoulder as a result of a fall from a scaffold, underwent surgery to this member, and was paid temporary total disability benefits for 39 weeks.  When he settled his case in July 2005 by way of the customary lump sum settlement form provided by the Compensation Commission, the contract contained a statement on page one, in the “Medical Expenses” section, that his employer had paid all medical bills.  Medical bills were also addressed on the second page of the contract, in the “Terms of Settlement” section, where the terms purported to settle all “past, present and/or future medical and hospital bills,” and contained a statement that petitioner had submitted all related bills and that respondent had “fully satisfied same” prior to the approval date of the contract.  Counsel for respondent drafted the contract.

Petitioner filed an application for judgment pursuant to section 19(g) of the Act in January 2007, alleging that the settlement required respondent to pay $19,977.25 in bills due his surgeon and the facility where the surgery took place, among others, which remained unpaid.  Respondent moved to dismiss on the basis that the “Terms of Settlement” section of the contract disposed of all questions relating to medical bills.  The circuit court held that the respondent’s obligation to pay related bills had been satisfied by the contract and dismissed the application for judgment.

On appeal, the court reversed, citing the purposes of the Act and what it considered an ambiguity in the contract.  First, the court emphasized that the obligation to pay medical bills flows not from a settlement contract but from the Act.  If there is a dispute over whether an employee’s injuries are causally connected to an on-the-job accident or if there is a disagreement over whether all or part of the medical bills are causally related, the parties may resolve these disputes as part of a settlement.  However, there was no indication in the settlement contract that there was a dispute regarding whether any of the bills were causally related –  the “Medical Expenses” section indicated that all bills had been paid.  And the court noted that the settlement amount was equal to 30% loss of the arm, so that it was clear that no part of the settlement was allocated to unpaid medical bills.

An injured employee can waive his rights under the Act, but any waiver must be explicit.  The court disagreed that the “Terms of Settlement” constituted an explicit waiver, citing the need to give effect to all relevant contractual language, namely the recital on page one of the contract wherein respondent stated that all medical bills had been paid.  This language constituted the context through which the “operational portion” of the contract should be understood.  In light of the recital on page one of the contract, the court held that the parties did not intend to discharge respondent’s statutory obligation to pay petitioner’s past related medical bills.  The “surrounding circumstances” made clear that the settlement was premised on the understanding that all bills had in fact been paid, and to find otherwise would result in a windfall for respondent.  The court reasoned that the parties never could have intended this result and that the court would not interpret a contract “in such a way to defeat a claim not then in the minds of the parties.”

The Hagene decision will have application in any case where there has been no dispute over liability: the respondent will be liable for unpaid bills as long as the page one recital of the contract states that all medical bills have been paid.  In order for an employer to avoid liability for past unpaid bills, the contract must be unambiguous that medical bills are in dispute and that the disputed bills will be petitioner’s responsibility.  This will be necessary in any contract where no sums are settled on a claimant for medical bills.  Given the strong wording of this decision, it is doubtful an employer will escape responsibility for medical in an apparently undisputed case unless the contract contains explicit reference to the “surrounding circumstances” for the dispute wherein liability for medical bills transfers to the claimant.

Hagene v. Derek Polling Construction,No. 5‑07‑0225, Fifth District, decided February 24, 2009

Frank J. Wiedner, Editor Wiedner & McAuliffe, Ltd One North Franklin, 19^th Floor Chicago, IL 60606 (312) 855-1105