News

November 01, 2007

All of us have had the experience of appearing for pre-trial conferences where the trial judge attempts to adjudicate the distribution of the settlement proceeds between the recovery being made by the employee in his third party case and the employer who seeks reimbursement for his workers’ compensation payments.  Too frequently, the trial judge may seem overly concerned about providing a significant return to the employee, even though such disposition results in a denial of all or a portion of the compensation lien.  In the case of Smith v. Louis Joliet Shoppingtown, L.P., the trial court felt that the employer’s representative was not responding promptly and, consequently, held that the employer should receive $30,000 from a total settlement amount of $110,000.  Liberty Mutual Insurance Company, the workers’ compensation insurer, appealed to the appellate court and reversed the trial court.  After quoting Section 5(b) of the Act, the court stated:

This provision grants the employer, or in this case, Liberty Mutual, a statutory lien on any recovery the employee receives from a liable third party equal to the amount of the workers’ compensation benefits paid or owed to the employee.  One purpose of section 5(b) is to compensate the injured employer to reach the true tortfeasor.  Another purpose is to prevent the employee from obtaining a double recovery.  Therefore, an employee is entitled to retain only that portion of a recovery from the tortfeasor that exceeds the workers’ compensation benefits he received.  Further, an employee is obligated to reimburse the employer for the full amount of its workers’ compensation payments, regardless of the amount that the employee recovers.  If the amount of compensation benefits exceeds the employee’s third-party recovery, the employer is entitled to the entire recovery, less fees and costs.

In this case, Liberty had paid $143,000 in compensation benefits, whereas the total plaintiff’s recovery on the civil case was $110,000.  As noted above, the court stated that if the amount of compensation benefits exceeds the employee’s third-party recovery, the employer is entitled to the entire recovery, less fees and costs.  In this case, Liberty would be entitled to $110,000, less 25% for attorney’s fees, or a total of $82,500.

Editor’s Note:

Admittedly, the employer and its carrier may agree to a lesser amount but the trial court may not dictate what that amount shall be.  In this case, the opinion notes that Liberty had agreed to accept $50,000, which offer was rejected by the employee.  The trial judge had suggested that the failure of the Liberty Mutual adjustor to respond quickly to the employee’s counteroffer could be construed as being estoppel or waiver of his rights to object to the court’s order.  In response, the appellate court stated:Liberty Mutual’s absence from the later part of the settlement negotiations can be viewed as neither voluntary conduct that would preclude seeking reimbursement of its statutory lien nor an intentional relinquishment of a known right.

Smith v. Louis Joliet Shoppingtown, et al No. 1-07-2988, decided October 30, 2007

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