December 01, 2007

Caterpillar Allegedly Promises to Pay for Medical Services Provided to Its Employee by Rosewood Care Center

December 01, 2007

Rosewood Care Center v. Caterpillar, Inc No. 103212

Background of Case

All of the evidence in the case is provided by the pleadings.  Rosewood is a skilled nursing care facility.  It alleges that on October 21, 2001, Betty Jo Cook, suffered injuries while working for Caterpillar and was hospitalized on that date until January 30, 2002.  Caterpillar requested that Rosewood admit Cook on a “managed care basis (fixed rate)”.  Rosewood would not accept Cook on those terms.  Shortly thereafter, on January 10th, Dr. Norma Just, Caterpillar’s Medical Director, requested that Cook be admitted to Rosewood and stated that the cost of Cook’s care would be paid directly by Caterpillar to Rosewood, with a zero deductible and no maximum limit.  Just further advised Rosewood that Cook had been precertified for four weeks of care (later reduced to two weeks) and instructed Rosewood to send the bill for Cook’s care to Caterpillar’s Workers’ Compensation Division. Further oral authorizations were given by Caterpillar to Rosewood every two weeks until June 13, 2002, with the charge for Cook’s care totaling $181,857.  Caterpillar, although receiving bills monthly, never questioned the charges but ultimately refused to pay for services rendered to Cook.

In its complaint, Rosewood alleged that in the past, Caterpillar had requested and approved care and treatment at Rosewood for other injured employees and had paid for the service.  Rosewood claimed that it would not have admitted Cook without Caterpillar’s promise to pay.

Caterpillar moved to dismiss the case and argued that the claims were barred because its alleged agreement to take responsibility for the cost of Cook’s care was not in writing, as required by the statute of frauds.  The supreme court remanded the case to the trial court for further hearings.  The language of the supreme court is important in determining the law in Illinois.

The term statute of frauds comes from an English statutory law passed in 1677 and describes certain types of contracts that must be made in writing and signed by the party against whom the claim is to be enforced.  In other words, the statute of frauds renders the oral contract unenforceable.  This portion of the statute, referred to as the surety provision, provides in relevant part as follows:

No action shall be brought *** whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person *** unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized.

This section had been unchanged, except for two material aspects, since 1819; 1) Illinois will enforce the oral promise even though the final amount has not yet been established; and 2) Illinois will also enforce the promise if the promissor, while purporting to speak for another, is actually concerned about his own liability.

Editor’s Note:

Under the original Statute of Frauds, the oral promise would not be enforced.  But, Illinois law has the two permitted variations: 1) the debt need not be pre-existing or finalized at the time of the promise; and 2) the debt can refer to a promise for another (that of the employee), providing that the promissor (the employer) is ultimately the surety for the employer.

The claims representative must understand that a telephone or other oral commitment may be binding on the employer who is actually the person liable for the promised payment.

Rosewood Care Center v. Caterpillar, Inc. No. 103212, decided November 1, 2007

Frank J. Wiedner, Editor Wiedner & McAuliffe, Ltd One North Franklin, #1900 Chicago, IL 60606 (312) 855-1105