News

May 02, 2008

On April 25, 2008, the First District Appellate Court, Fifth Division, decided the case ofMichael Evans vs. Doherty Construction, et al. which has ramifications for any employer who attempts to assign a workers’ compensation lien to avoid potential third party liability and still recover a portion of the lien, without incurring the 25% attorney’s fee prescribed by statute.

In Evans, the plaintiff was injured in a construction accident.  He subsequently brought suit against a general contractor and several sub-contractors who, in turn, filed Third Party contribution actions against the plaintiff’s employer.  The employer paid the plaintiff $152,000.00 in workers’ compensation benefits and claimed a lien pursuant to Section 5(b) of the Workers’ Compensation Act.  820 ILCS 305(b) (2006).

Prior to trial, all the direct defendants entered into an agreement with the employer to “purchase” its workers’ compensation lien for $90,000.00.   The defendants and employer informed the trial Judge that the lien had been “sold” to the defendants for $90,000.00.  As part of the assignment, the defendants agreed to dismiss the Third Party Complaints brought against the employer.

The following day, the defendants informed the Court they had reached a settlement with the plaintiff for $650,000.00 from which the $90,000.00 paid for the lien would be subtracted.  The trial court related that it understood the employer no longer had a lien to enforce but under Section 5(b) of the Compensation Act, the employer was liable to pay the plaintiff’s counsel a 25% attorney’s fee and its pro rata share of the recovery costs on the amount recovered by the employer.  The employer argued that it was paid for the transfer of its lien rights, and not for its lien, so the plaintiff’s attorney was not entitled to a fee and pro rata costs.  In ruling that the employer had to pay the plaintiff’s attorney a 25% fee and pro rata costs, the Court rejected the employer’s position that it received $90,000.00 not in satisfaction of the lien, but as an assignment of its lien rights.  The Court found this characterization to be a “distinction without a difference.”  The Court emphasized that the language in Section 5(b) requires that: “Out of any reimbursement received by the employer,” the employer has a duty to pay a 25% attorneys fee and its pro rata share of the costs arising out of the recovery.  It is the fact that the employer is reimbursed, and not the timing or characterization of the reimbursement that obligates the employer to pay attorneys fees and pro rata costs.  In its Order, the Trial Court required the employer to pay the statutory 25% attorney fee ($22,500.00) and its pro rata share of the costs.  The Appellate Court affirmed the trial court’s opinion.

Editor’s Notes:

The Court “would not buy” the employer’s primary position that the money it received from the sale of the lien rights was not “reimbursement” under the Act.  The plain and ordinary meaning of “reimbursement” means repayment or compensation for money spent.

Evans v. Doherty Construction, et al No. 1-07-1455, decided April 25, 2008

Thomas W. Weber Wiedner & McAuliffe, Ltd One North Franklin, #1900 Chicago, IL 60606 (312) 855-1105