June 01, 2007

Workers’ Compensation Subrogation Denied Because of Terms of Settlement Contract

June 01, 2007

Burgess v. Tashonda Brooks No. 5-06-0273

In our April, 2005 Newsletter and the January, 2007 Newsletter, we reported on the issues being created because of the terminology, or lack thereof, in the settlement contract.  In the Borrowman case decided by the Fourth District Appellate Court, the settlement contract constituted a full release of all causes of action resulting from the industrial injury and concludes that the employer failed to reserve its right even though it knew of a pending malpractice case.

The Gallagher case, which arose in the First District, noted that most settlement contracts contained no reference to subrogation and that the Borrowman opinion was unsupported by case law.

In the Burgess case, the Fifth District Appellate Court agreed with the Borrowman case and also contended that the employer had explicitly waived any rights to subrogation, relying on the language in the settlement agreement providing: Each party waives any right to ever re-open this claim under any section of the Act.

Unfortunately, parties frequently fail to read carefully the terms of the settlement with unhappy results.  As stated previously, from the employer’s viewpoint, the terms should clearly provide that the rights under Section 5(b) are being retained and not waived.  Presumably, the Illinois Supreme Court will eventually resolve the apparent dispute.

Burgess v. Tashonda Brooks No. 5-06-0273, decided May 21, 2007

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