MOUNT VERNON – Effingham County Circuit Judge Daniel Hartigan improperly granted double recovery to a wrongful death client of Edwardsville lawyer Brian Wendler, Fifth District appellate judges ruled on May 15.
The Justices advised Hartigan to reconsider his denial of a motion for sanctions against Wendler’s client, the estate of Arnold Rexroad Sr.
Judge Hartigan had assigned all misconduct to the estate’s opponent, Mid-West Truckers Risk Management Association.
The association operates an insurance pool for workers’ compensation claims.
According to background in the ruling, Rexroad, driving for Hetzels Overland Transport, died in a crash. His widow Cathy Rexroad then began receiving workers’ compensation benefits.
Arnold’s estate obtained an administration order in Effingham County probate court in 2012, and filed suit against a third party in Indiana.
The truckers risk association petitioned to intervene in probate court in 2014, for the purpose of protecting its lien under the Worker’s Compensation Act.
The association pleaded that it became aware of a settlement in Indiana, and that it wanted to participate in the probate court’s approval of the settlement.
In 2015, Wendler moved for authority to distribute attorney fees.
Wendler wrote that a claim against one defendant, Lindsay Measel, settled for $100,000, and he proposed to disburse $25,000 to his firm.
Association counsel James Kelly of Peoria did not object to the motion but claimed a lien of about $70,000, representing 75 percent of benefits it had paid.
Kelly argued the lien was also subject to a setoff for prorated costs of the estate.
In February 2016, Wendler and Kelly reached agreement.
Wendler moved without opposition to disburse $25,000 to his firm, about $12,000 to Kelly’s firm, and about $63,000 to the association as repayment for the lien.
The last defendant in Indiana settled, bringing the proceeds to $1.58 million.
In October 2016, Wendler asked Hartigan to strike the lien in its entirety.
Wendler accused the association of improperly communicating with family, prohibiting the estate from interviewing its employees, refusing to provide the truck and trailer, failing to pay full workers’ compensation, and reneging on the prior agreement.
Kelly responded that Hartigan shouldn’t consider those issues in determining the association’s entitlement to the lien. He valued it at $1.38 million and wrote that the court had an obligation to protect it.
He followed with a request for sanctions against the estate under Supreme Court Rule 137, which prohibits frivolous, vexatious, and harassing lawsuits.
Kelly wrote that the purpose of reimbursement provisions in workers’ compensation law is “to avoid the inequities of a double recovery by the employee.”
“It is undeniable under Illinois law that the estate entered into an unlawful settlement,” Kelly wrote.
He wrote that a settlement is invalid without an employer’s written consent or a court order fully indemnifying or protecting the employer.
He also wrote that the estate distributed proceeds it had no right to distribute, and that it distributed to attorneys, a litigation loan holder, and beneficiaries without settling whether any of them were entitled to proceeds.
“The estate sought no court order ratifying its actions, nor can it find basis in law for what it has done,” Kelly wrote.
He wrote that the association should be reimbursed for the extensive litigation and should not be responsible for any attorney fees going forward.
He wrote that the association shouldn’t be required to bear the cost of the estate’s frivolous litigation.
Hartigan held a hearing last June and struck the lien in its entirety in August.
He ruled that the estate owed the association nothing in reimbursement.
On appeal, Fifth District judges found that established interpretation of workers’ compensation law imposes on a court a duty to protect an employer’s lien.
Justice Randy Moore wrote that Illinois courts treat an employer and its insurance carrier as interchangeable for purposes of protecting a lien.
Moore wrote that an employer’s right to reimbursement of the full amount of benefits paid or to be paid to the injured or deceased worker is absolute.
“This important public policy, that an employer, even if it is not negligent, should compensate the employee for an injury incurred on the job, is predicated upon there being no other recovery available,” Moore wrote.
“However, when recovery is obtained from the parties actually responsible for the employee’s injury, fairness and justice require that the employer be reimbursed for the workers’ compensation benefits he has paid or will pay.”
Moore wrote that the estate did not cite any Illinois case suggesting a circuit court could limit or strike a lien based on the conduct of an employer or an insurer.
He found no basis in Illinois law to hold that the association’s conduct, even if true, outweighed the absolute right to reimbursement.
With regard to the estate’s allegations, he wrote that the law provided a method of addressing those issues as they presented themselves.
He wrote that on remand, the circuit court would need a new calculation of the lien and a new hearing.
The lower court should reconsider the association’s request for sanctions, “in light of this opinion and the language and spirit of Rule 137,” Moore wrote.
Justices Thomas Welch and David Overstreet concurred.