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Gen. Am. Life Ins. Co. v. Industrial Com.





Appeal from the Circuit Court of Cook County, the Hon. Arthur L. Dunne, Judge, presiding.


Claimant, Alice Karneffel, filed an application for adjustment of claim with the Industrial Commission seeking benefits for the death of her husband. A lump-sum settlement contract between claimant and her deceased husband's employer was presented to an arbitrator for approval. Petitioner, General American Life Insurance Company, filed an objection to approval of the settlement. Petitioner sought to intervene and obtain reimbursement for medical benefits it paid to claimant's husband from 1966 until 1976 under a group medical insurance policy. The arbitrator found petitioner lacked standing to intervene in the proceeding and denied its claim for reimbursement. She reasoned the Industrial Commission was not the forum for such a determination and approved the settlement. The Industrial Commission affirmed, and the circuit court of Cook County confirmed the Commission's decision.

Claimant's husband, George Karneffel, worked as a baker for Dinkel's Bakery, Inc. (Dinkel). Dinkel's employees were covered by a group medical policy issued by petitioner. This policy specifically excluded benefits for "sickness covered by Workmen's Compensation law, occupational disease law, or laws of a similar character."

Karneffel suffered from bronchial asthma which was aggravated at the bakery, because of his sensitivity to flour. In 1966, he submitted a claim for medical benefits to petitioner. Initially, petitioner denied the claim, contending it involved a work-related illness not covered under its policy. Karneffel then sought benefits from Dinkel's workmen's compensation carrier. This insurer, however, sent a letter to him denying coverage on the ground that his illness did not come under the provisions of the Act. Although not explained in the letter, presumably coverage was denied on the basis that his asthma was an ordinary disease of life to which the general public is exposed outside of employment. (See Ill. Rev. Stat. 1965, ch. 48, par. 172.36(d); Western Foundry Co. v. Industrial Com. (1943), 384 Ill. 420; Stewart Warner Corp. v. Industrial Com. (1941), 376 Ill. 141.) Diseases of this kind were not compensable under the Workmen's Occupational Diseases Act until it was amended in 1975. Compare Ill. Rev. Stat. 1975, ch. 48, par. 172.36(d), with Ill. Rev. Stat. 1973, ch. 48, par. 172.36(d). See Bunney v. Industrial Com. (1979), 75 Ill.2d 413, 418; International Harvester Co. v. Industrial Com. (1973), 56 Ill.2d 84, 93; Rockford Transit Corp. v. Industrial Com. (1967), 38 Ill.2d 111, 113-14.

Karneffel notified petitioner that Dinkel's workmen's compensation carrier denied coverage of his claim. Petitioner then made several medical benefit payments to him for his asthmatic condition from 1966 until 1976. According to petitioner's own detailed statement, submitted for the record as part of an exhibit, these payments, and a few others for unrelated illnesses, totaled $7,172.94. Of this amount, only $130.40 was paid to Karneffel for his asthmatic condition subsequent to the effective date of the 1975 amendment. However, Karneffel never filed a workmen's compensation claim against his employer under either the Act, or the Workmen's Occupational Diseases Act as amended, for the $130.40 or any other amount.

On February 18, 1977, Karneffel died from "acute status asthmaticus" due to "severe allergy to wheat." In March 1977 claimant filed her claim against Dinkel seeking benefits for the death of her husband. Over the next three years, petitioner corresponded with Dinkel's workmen's compensation carrier and indicated it wanted reimbursement for the medical benefits it paid to Karneffel if any workmen's compensation benefits were paid to the widow. Subsequently, claimant and Dinkel reached an agreement to settle her claim for a lump sum of $20,000.

In October 1980 petitioner was served with notice that a hearing would be held on November 5, 1980, for the purpose of approving the settlement and that if petitioner had a claim it should make it on that date. Petitioner appeared and objected to approval of the settlement until it was first reimbursed for the benefits it paid Karneffel.

The question presented for our review is: Did the circuit court and the Commission err in denying petitioner the right to intervene in this proceeding to obtain, out of the widow's lump-sum settlement, reimbursement for the medical benefits it paid to her deceased husband?

Relying on Hammond v. Prudential Insurance Co. of America (1966), 75 Ill. App.2d 15, petitioner argues the widow's settlement with Dinkel conclusively establishes that decedent's diseased condition was compensable. Based on this premise, it reasons it should be reimbursed from her settlement by receiving a credit under the authority of section 8(j) of the Act (Ill. Rev. Stat. 1975, ch. 48, par. 138.8(j)) for the full amount of the benefits it paid to Karneffel from 1966 until 1976.

Hammond is distinguishable from the instant case. Moreover, it does not support petitioner's contention that all of the benefits it paid to Karneffel under its group policy were compensable under either the Act or the Workmen's Occupational Diseases Act. In Hammond, the employee filed a claim alleging his injuries were compensable under the Act. The arbitrator denied his claim and he appealed. Pending review, he entered into a lump-sum-settlement contract in which he agreed to accept and later received $4,000 in full settlement of all claims against his employer. This settlement specifically included all medical and hospital claims and was approved by the Commission.

The employee then brought suit in the circuit court to recover medical expenses from the group health insurer for the same injury. The health insurance policy excluded benefits for injuries covered by the Act regardless of whether such protection was afforded. The employee contended the policy exclusion was not applicable. He asserted his compromise settlement was substantially less than the benefits payable under the Act for his injuries. In addition, he maintained that, at the time of the accident, he was not acting within the scope of his employment. On this basis, he argued the settlement did not establish that his injuries were compensable and did not preclude recovery from the health insurer.

The court rejected his arguments indicating the merits of his claim under the Act were immaterial. The court concluded that to the extent his lump-sum settlement contained the medical expenses, such expenses were to be deemed compensable. Thus, they were excluded from coverage under the insurance policy.

Unlike the situation in Hammond, the employee in the instant case never collected any amount from his employer under the Act. There is no concern here over an employee attempting to be recompensed a second time in a separate suit for his medical expenses as there was in Hammond. Moreover, Hammond did not involve a claim filed by the widow seeking death benefits.

Petitioner also cites Collier v. Wagner Castings Co. (1980), 81 Ill.2d 229, and Aulich v. Aetna Life Insurance Co. (1981), 101 Ill. App.3d 661, for the proposition that Karneffel's diseased condition was compensable from 1966 to 1976. ...

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