October 02, 2011

Appellate Court Upholds Sanctity of Section 5b

October 02, 2011

Loryann Johnson vs. Ayalnesh A. Tikuye and Amigo Driving School No. No. 1-10-0114

Loryann Johnson was employed by the Secretary of State as a license examiner.  She was injured while working, administering a driving test to Ayalnesh Tikuye. She collected workers’ compensationbenefits for her injuries, which included medical payments, lost wages and a lump sum settlement.  She also brought suit against Tikuye and Amigo Driving School for having caused her injuries.  The parties proceeded to a binding arbitration when Johnson was awarded a gross amount of $118,700.00.  The Arbitrator reduced Johnson’s award by 20% due to comparative fault and a pre-existing condition and awarded $94,960.00, but did not provide a breakdown of the award.

Central Management Services (CMS) intervened on behalf of the State of Illinois to recoup the amounts permitted under Section 5(b) of the Act for the payments made in the workers’ compensationcase.  CMS asserted the right to Johnson’s arbitration award less 25% for the statutorily-prescribed attorney’s fees set forth in Section 5(b).  Johnson argued that the lien could attach only to those proceeds related to her injuries resulting from the accident.  At a hearing on this issue, Johnson offered evidence that a substantial portion of the treatment she received following the occurrence which was claimed in the workers’ compensationcase was excessive and related to her pre-existing condition.  Petitioner’s chiropractor stated that he could not determine what portion of the condition for which he provided treatment could be attributed to the accident versus a pre-existing condition.  Following this hearing, the circuit court reduced the Section 5(b) lien by the same percentage that petitioner’s damages claim in the negligence action were reduced by the Arbitrator.

When this issue was presented to the appellate court, the court stated that an employer has a right to reimbursement for compensation paid an employee due to an injury sustained as a result of third-party negligence.  In relevant part, the Statute provides:

“Where the injury . . . for which compensation is payable under this Act was caused under circumstances creating a legal liability for damages on the part of some person other than his employer to pay damages, then legal proceedings may be taken against such other person to recover damages notwithstanding such employer’s payment of or liability to pay compensation under this Act.  In such case, however, if the action against such other person is brought by the injured employee . . . and . . . settlement is made with such other person . . . then from the amount received by such employee . . . there shall be paid to the employer the amount of compensation paid . . . to such employee . . .

Out of any reimbursement received by the employer pursuant to this Section the employer shall pay his pro rata share of all costs and reasonably necessary expenses in connection with such third-party claim . . . and where the services of an attorney . . . have resulted in or substantially contributed to the procurement … of the proceeds out of which the employer is reimbursed, then . . . the employer shall pay such attorney 25% of the gross amount of such reimbursement.”

In sum, the Court stated the purpose of Section 5(b):  prompt and equitable compensation paid to employees who have suffered injuries while working regardless of fault, but allowing both the employee and employer to recover from the true offender while preventing a double recovery.

Considering this principle, the court found that the CMS lien should have been enforced without reduction, other than for reasonable fees and costs.  CMS compensated Johnson for more than the third-party recovery, but adjusted its lien accordingly, requesting only the amount Johnson recovered from the tortfeasors, less the 25% statutory attorney’s fees and reasonably necessary costs and expenses.  The court concluded that the statute does not provide for an arbitrary lien reduction such as the trial court imposed.

“(T)he legislature removed impediments to the employer’s full reimbursement, and specified setoffs thereto only for costs, expenses and attorney’s fees.  If the legislature intended the employer’s reimbursement to be subject to additional setoffs, the legislature would have supplied them.” 

Therefore, the trial court’s decision to reduce the lien by a percentage equal to the amount the Arbitrator reduced Johnson’s request for relief was “baseless.”

The court went on to say that there are instances where it may be necessary for a trial court to conduct an evidentiary hearing.  Generally, these involve consortium claims by spouses who also file suit against the tortfeasors who cause a claimant’s injuries; also, there are instances where claimants have multiple compensation claims, only one of which may involve a third-party tortfeasor.  In these cases, a hearing is necessary to allocate that part of the civil recovery attributable to the compensation claim against which the employer is asserting its lien.  In the present case, however, an evidentiary hearing was not necessary merely because the arbitration award was reduced.  Last, the court found petitioner’s argument that her medical expenses and time off work were not related to the 2004 accident at work “disingenuous.”


This decision marks the third in the recent past where the Appellate Court has chastised a lower court for permitting circumvention of the Section 5(b) lien.  The Supreme Court in Gallagher vs. Lenart made a very strong ruling on this subject and one is perplexed that claimants continue to seek to avoid the workers’ compensationlien provision of the Act.  Of particular note in this case was the petitioner’s “disingenuous” argument that since the Arbitrator in the negligence claim reduced her damages due to a pre-existing condition that the medical bills her employer otherwise paid were not be subject to the workers’ compensationlien.

One cannot fail to appreciate the irony of an employer having to pay alleged excessive medical bills awarded by the Commission, and then have its lien reduced by the circuit court when the claimant says her treatment was excessive.  One suspects we will not see the last of this type of claim.  However, we can expect the courts to continue to enforce the Section 5(b) lien, as they have to date.