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December 3, 1996


Appeal from the Circuit Court of Lake County. No. 92-MR-475. Honorable Stephen E. Walter, Judge, Presiding.

As Corrected January 8, 1997. Released for Publication January 6, 1997.

The Honorable Justice Thomas delivered the opinion of the court. Geiger and Hutchinson, JJ., concur.

The opinion of the court was delivered by: Thomas

JUSTICE THOMAS delivered the opinion of the court:

The plaintiffs, Roadside Auto Body, Inc. (Roadside), and Liberty Mutual Insurance Company (Liberty Mutual), filed this declaratory judgment action in the circuit court of Lake County against the defendants, Scott Miller and the Industrial Commission (Commission), seeking to vacate as fraudulent a workers' compensation settlement agreement approved by the Commission. Following a bench trial, the trial court found that Miller fraudulently filed a workers' compensation claim, and, therefore, the settlement agreement entered into by the parties was void. The court entered judgment in favor of the plaintiffs for $56,465.78, which represented the amount the plaintiffs had paid Miller for temporary total disability and medical benefits. The court further ordered that the order of the Commission awarding Miller penalties and attorney fees be set aside. Miller appeals.

Jim Best testified that he was the owner of Roadside and that Miller was one of his employees in 1990. In May 1990, Miller reported that he had suffered an injury to his back while working at Roadside on March 26, 1990. As far as Best knew, there were no witnesses to the accident. Best had some concerns that Miller's back injury was due to a preexisting condition, so he called Liberty Mutual, Roadside's insurance carrier, to voice his concerns. Best was told that, as long as the injury occurred at Roadside, it was compensable, even if the employee had a preexisting condition.

On March 4, 1992, Best was informed that Liberty Mutual had settled Miller's workers' compensation claim. At that time, Ron Hinde, an employee of Roadside, told Best that he thought there was something wrong with Miller's claim but he did not elaborate. Thereafter, Best contacted John Simon and Larry Cozzi of Liberty Mutual to discuss Miller's claim. At that time, Best had no additional information about the legitimacy of Miller's claim. On March 13, 1992, and March 18, 1992, Best talked with John Kaminski, a fraud investigator for Liberty Mutual, about Miller's case. Prior to March 18, 1992, Best did not have any specific information from Hinde indicating that Miller's claim was not valid. After refreshing his recollection from labor control records, Best stated that on the date of the alleged accident Miller did not perform any work on the truck he claimed to have been working on when he injured his back.

Charles Whitley testified that he was the first Liberty Mutual claim representative assigned to Miller's workers' compensation claim. According to Whitley, Miller told him that he had injured himself while attempting to lift some equipment with the help of the owner of the vehicle, Ed Dominick.

John Simon, a claims specialist for Liberty Mutual, testified that he received the Miller file on January 30, 1992. When he reviewed the file and performed some follow-up investigation in February 1992, there was no indication at that time that the claim was not compensable. On March 4, 1992, Simon settled the claim with Miller's attorney. That same day, Simon received a call from Best who told Simon that Miller may have previously injured himself somewhere else. Simon informed Best that a preexisting injury that is aggravated is still compensable under the Workers' Compensation Act (Act) (820 ILCS 305/1 et seq. (West 1994)). Despite the lack of evidence indicating fraud, Simon sent the file to Kaminski for further review. Simon also noted that on March 5, 1992, he conferred with Ed Makauskas, a claims manager for Liberty Mutual, and advised him that the insured thought the claim was fraudulent. However, Makauskas did not believe fraud was involved. Simon explained that often an allegation of fraud on the part of the employer simply turns out to be a case involving an aggravation of a preexisting condition.

Dawn Benjamin, the office manager at Roadside, testified that her duties included submitting insurance forms. On May 21, 1990, Miller reported his March 26, 1990, injury for the first time. Miller told Benjamin that the injury occurred while he worked on Ed Dominick's truck. Miller did not miss any work between March 26, 1990, and May 21, 1990.

Michael Nitti, the shop manager at Roadside, testified that, from the date of the alleged injury until it was reported, he did not observe Miller having any difficulty completing his employment responsibilities. Nitti further testified that lifting an axle assembly into place, as Miller claimed he had been doing at the time of the accident, was typically a two-person job that was not physically possible to accomplish without help. Nitti stated that Roadside had a policy requiring all employees to immediately report on-the-job injuries to him. He first learned of the alleged incident when it was reported to Benjamin on May 21, 1990.

Edward Dominick was the owner of the truck that Miller allegedly worked on when he was injured. Dominick testified that he did not assist Miller in working on any part of his truck and did not witness the alleged accident.

Ron Hinde testified that Miller was his co-worker at Roadside and prior to that at All Tune and Lube. While both men were working at Roadside, Miller told Hinde that he was going to report an on-the-job back injury so that he could get his back repaired, which he had injured while in the military. Hinde did not believe that Miller injured his back at Roadside. Hinde did not come forward with this information immediately because he did not want to get involved. He eventually told Kaminski on March 18, 1992, about Miller's previous back injury and his plans to have surgery through workers' compensation. Hinde further testified that Miller approached Hinde periodically pressuring him to corroborate Miller's story. When Hinde refused, Miller became verbally abusive and threatened to burn down Hinde's house.

John Kaminski, supervisor of field investigations for Liberty Mutual, testified that his unit often received fraud claims only to find out that the allegation of fraud was simply an aggravation of a preexisting condition. When he received Miller's file, he did not find anything to indicate that Miller's claim was fraudulent. Rather, he thought this was another case involving an aggravation of a preexisting injury without any evidence of fraud. When Best voiced his concerns about fraud on March 5, 1992, there was no indication of fraud. Nonetheless, to address Best's concerns, Kaminski scheduled a meeting with Best for March 13, 1992. Kaminski noted that he met with Best on that date but nothing surfaced at that meeting to suggest anything other than an aggravation of a preexisting condition. When Kaminski returned to Roadside on March 18, 1992, Best asked him to talk with Hinde and Nitti. After he talked with Hinde, Kaminski concluded that Miller had fabricated his workers' compensation claim. He immediately contacted Simon to determine the status of the ...

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