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U.s. Steel Corp. v. Industrial Com.

OPINION FILED AUGUST 27, 1986.

UNITED STATES STEEL CORPORATION-SOUTH WORKS, APPELLEE,

v.

THE INDUSTRIAL COMMISSION ET AL. (BETTY JO DE LA GARZA, WIDOW OF PAUL

v.

DE LA GARZA, DECEASED, AND MOTHER AND NATURAL GUARDIAN OF MARK BRICE DE LA GARZA ET AL., APPELLANTS).



Appeal from the Circuit Court of Cook County; the Hon. James C. Murray, Judge, presiding.

JUSTICE WEBBER DELIVERED THE OPINION OF THE COURT:

This is an appeal by the widow and dependent children of a deceased steelworker who succumbed to injuries after being doused by molten steel at United States Steel's South Works plant (U.S. Steel). At the time of his death, decedent was covered by a group life insurance policy, a fringe benefit under the collective-bargaining agreement between U.S. Steel and the National Steelworkers Union. The policy expressly provided that the decedent was entitled to designate the beneficiary of the life insurance proceeds and that he could change that designation at will.

Decedent's widow and children filed an application for adjustment of claim with the Industrial Commission. The arbitrator awarded death benefits, burial expenses, and attorney fees. U.S. Steel contended that the proceeds from the life insurance policy payable to the deceased's beneficiary, in this case his widow, should be set off against the amount of death benefits payable under the authority of section 4(i) of the Workers' Compensation Act (Act). (Ill. Rev. Stat. 1983, ch. 48, par. 138.4(i).) The arbitrator denied the setoff. On review, the only issue raised was the company's right to a setoff. The Commission affirmed the arbitrator and, in addition, awarded interest to the claimants.

On review in the circuit court, U.S. Steel again urged its entitlement to the setoff. In defense, for the first time, claimants argued that the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq. (1982)) preempted section 4(i) of the Act, rendering it unconstitutional or unenforceable. U.S. Steel objected on the basis that this issue had neither been raised before the arbitrator nor the Commission. The circuit court, without deciding the ERISA question, nevertheless, set aside the decision of the Commission and awarded U.S. Steel a setoff on death benefits. Petitioners appeal.

Section 4(i) of the Act (Ill. Rev. Stat. 1983, ch. 48, par. 138.4(i)), which became effective on September 15, 1980 (Pub. Act 81-1482, sec. 1, eff. Sept. 15, 1980), provides:

"If an employer elects to obtain a life insurance policy on his employees, he may also elect to apply such benefits in satisfaction of all or a portion of the death benefits payable under this Act, in which case, the employer's compensation premium will be reduced accordingly."

The petitioners argue that there is no evidence that the company made an "election" within the meaning of the Act. The facts reveal that a collective-bargaining agreement had been in effect for a number of years prior to decedent's death. As a particular contract expired, a successive contract would be entered between the employer and the union. The fringe benefit of group life insurance had been an element of the benefit package for many years prior to decedent's death. The company paid the premiums and the employee chose the beneficiary. The contract in effect on the date of the employee's death was entered into several months after section 4(i) of the Act became effective.

U.S. Steel argues that the mere existence of the policy for which the company paid the premiums, irrespective of its relationship to a collective-bargaining agreement, is an "election" under section 4(i) to obtain a life insurance policy on the employee. U.S. Steel further maintains that, once the employee died and, by the terms of the policy, his widow became the beneficiary of the proceeds, the company promptly "elected" to apply those benefits in satisfaction of a portion of the death benefits otherwise payable to the widow and children.

Petitioners counter that the Act provides two methods by which the company may make an election; neither of which occurred here. The employer may either purchase additional, supplemental life insurance for the employee without regard to any life insurance which may be provided to an employee as part of a collective-bargaining agreement, or the company can negotiate this potential setoff as a part of the benefit package encompassed within the collective-bargaining agreement.

We have addressed the matter of what constitutes an "election" under section 4(i) of the Act in the case of United States Steel-South Works v. Industrial Com. (1986), 147 Ill. App.3d 398, which considered the identical collective-bargaining agreement and group insurance policy as that involved here. In Cimochowski, we stated that, since the life insurance was part of the employment package which the company was contractually obligated to provide pursuant to its agreement with the union, obtaining the life insurance was not the assertion of a right of or election under the Act because U.S. Steel would have breached its contract if it had not obtained the insurance, and the decision to obtain the insurance was jointly made by the company and the union. Thus, because respondent did not have the right not to obtain the life insurance and because the choice to obtain it was not the company's alone, U.S. Steel did not "elect" to obtain life insurance under the plain terms of the Act.

This court also considered the question of the company's right to subsequently "elect" to apply life insurance proceeds against death benefits. Noting the terms of the policy which gave the employee the absolute right to choose the beneficiary, and the absurd result which would obtain if the company were allowed to set off benefits when the designated beneficiary of the policy was someone other than the widow or dependent children of the deceased employee, we held that the more reasonable interpretation of the Act required that such an election could only occur "if the employer is the policy's sole beneficiary, or if the policy, regardless of who might otherwise be the beneficiary, provides that if death is compensable under the Workers' Compensation Act, the employer may elect to apply the policy's benefits in satisfaction of death benefits under the Act." United States Steel-South Works v. Industrial Com. (1986), 147 Ill. App.3d 398.

• 1 We also seriously question the characterization of section 4(i) as a setoff to death benefits. Benefits payable by the employer to the widow and dependents are set out in section 7 of the Act (Ill. Rev. Stat. 1983, ch. 48, par. 138.7). Section 4(i), on the other hand, is contained within section 4 of the Act (Ill. Rev. Stat. 1983, ch. 48, par. 138.4) which relates exclusively to the relationship between the employer and the Industrial Commission. Accordingly, we believe section 4(i) cannot be interpreted to permit interference with or diminution of benefits otherwise payable under section 7. Section 4(i) only affects the relationship between the employer and the Commission by permitting an employer to reduce its compensation premiums. Section 4(i) may affect an employer's liability but it does not act to reduce death benefits payable under section 7. This interpretation of the Act necessarily obviates the potentially absurd results which might occur under U.S. Steel's characterization of the Act.

• 2 Since the question here is virtually identical to that presented in Cimochowski, we are necessarily constrained to reach the same result. Accordingly, we hold that under the facts present, U.S. Steel did not make either an election to provide life insurance coverage or an election to apply benefits as an offset within the plain meaning of the statute.

• 3 The petitioners have also raised an issue pertaining to Federal preemption. They argue that ERISA (29 U.S.C. § 1001 et seq. (1982)) preempts section 4(i) because it relates to employee benefit plans. Initially, we note that this argument was raised for the first time in the trial court and, although the trial court may have jurisdiction to entertain a claim for relief predicated upon ERISA (Pierce v. P.J.G. & Associates, Inc. (1986), 112 Ill.2d 535, 494 N.E.2d 482), as U.S. Steel correctly points out, the issue may be considered waived because the circuit court, on certiorari, has no authority to consider evidence or arguments not presented before the Commission. (Gunthorp-Warren Printing Co. v. Industrial Com. (1979), 74 Ill.2d 252, 384 N.E.2d 1318; Yellow Freight Systems v. Industrial Com. (1984), 124 Ill. App.3d 1018, 464 N.E.2d 1256.) Furthermore, our holding in this case obviates the need to address the issue presented. Nevertheless, because the issue has arisen in the past (see United States Steel-South Works ...


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