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Palos Electric Co. v. Industrial Commission

May 30, 2000


Appeal from the Circuit Court of Cook County, Illinois. No. 97 L 50610 Honorable JOHN A. WARD, Judge Presiding.

The opinion of the court was delivered by: Justice Holdridge

This appeal follows the Commission's denial of Palos Electric's petition under the Worker's Compensation Act, 820 ILCS 305/19(o) (West 1993). An employee of Palos alleged he suffered on the job injury and filed a claim for compensation under the Workers' Compensation Act. Palos, believing the claim to be non-compensable, requested that the insurer deny the claim. Sentry Claims Service settled the claim and paid the employee's the claim over Palos' objections. Palos filed a §19(o) petition requesting Sentry purge their records of the expense related to the claim. The Commission denied Palos' §19(o) petition and the Cook County Circuit Court affirmed the Commission's decision. Palos now appeals the Commission's denial of its petition.

Appellant, Palos Electric (Palos), employed Jeffrey Geibel (Geibel) as an electrician for approximately six years prior to July 25, 1994, the date of the alleged accident. After having suffered from numbness and tingling in his hand for three and one-half years, on April 19, 1994, Geibel saw a physician and was diagnosed with bilateral carpal tunnel syndrome. On July 26, 1994, he underwent surgery to correct his carpal tunnel syndrome. All medical expenses related to Geibel's carpal tunnel syndrome diagnosis and treatment were paid by his group health insurance. Geibel's treating physician, Dr. Henry Fuentes, a board certified orthopedic surgeon, offered no opinion as to the cause of Geibel's carpal tunnel but, on the group health insurance claim form, checked "no" in answer to the question "is condition related to [current or previous] employment." In a written statement, Geibel described how Tom Bulow, one of the three brothers who owned Palos, asked him not to file for workers' compensation. Tom asked him to accept a check from Palos that would get him through the four weeks he needed to be off work to recover from the surgery. Tom Bulow later stated that the money was not intended to prevent Geibel from filing a workers' compensation claim but rather was a bonus for Geibel's good work. Palos had paid Geibel a bonus on two prior occasions. Geibel accepted $2000 for the time he would need to take off work and agreed to come back after four weeks of recovery. After four weeks off, Geibel called Bulow to arrange his return to Palos but was told there was no work for him. Geibel stated that he believed that he was not given work as a result of his injury and the bad feelings about the money that Palos had given him. In September of 1994, Geibel resigned from Palos and, on October 1, began a new job as an electrician with another company. Palos stated that it believed Geibel quit because he could not get along with his co-workers.

On February 7, 1995, Geibel filed an Application for Adjustment of Claim (application) with the Illinois Industrial Commission against Palos for his bilateral carpal tunnel syndrome treatment and surgery. On his application, Geibel indicated that his accident occurred on July 25, 1994, one day prior to his carpal tunnel surgery. Palos forwarded the application to its insurer, Sentry Claims Service (Sentry). On March 17, 1995, Palos wrote to Sentry stating that it believed the claim was non-compensable and should be denied. Sentry undertook an investigation of the claim and hired an investigator to obtain the statements of Bill Bulow and Tom Bulow, Palos' principal officers. Sentry also hired a physician, Dr. Richard Shin, to examine Geibel. Dr. Shin agreed with Dr. Fuentes that Geibel did have carpal tunnel but did not conclude that the condition was caused or aggravated by his work as an electrician. Sentry's senior claims adjustor originally took the position that the claim should not be paid because Geibel had symptoms of the condition, tingling and numbness, since 1991. Sentry initially argued that the existence of symptoms over three years prior meant that Geibel's claim was time bared under the applicable three-year statute of limitations.

Pursuant to the insurance contract between Palos and Sentry, Sentry entered into settlement negotiations with Geibel. *fn1 Sentry and Geibel came to an agreement and settled the claim. They agreed on compensation for 10% loss in each hand, 38 weeks of compensation at $396.89 per week. A total lump sum payment of $15,071.82 was paid to Geibel in June of 1995. The settlement was approved by the Illinois Industrial Commission. Sentry did not pay Geibel any temporary total disability benefits or medical benefits. Included in the settlement was a statement by Sentry and Geibel stipulating that the matter was in dispute and the settlement did not constitute an admission of liability on the part of Sentry or Palos. Geibel is not a party to this case and would not be required to refund any payment received. See 820 ILCS 305/19(o) (West 1993).

After the settlement had been paid, Palos again wrote to Sentry contending that Geibel's injury had not been work related and should not have been compensated. Palos requested that Sentry remove any record of the settlement from Palos' file so that no loss or expense would be reflected for the purpose of determining Palos' insurance rates. Sentry responded by letter and informed Palos that it had two physicians' opinions, Geibel's treating physician, Dr. Fuentes, and the independent physician hired by Sentry, Dr. Shin, both supporting Geibel's claim that his injury was work related. Sentry refused to remove record of the loss from Palos' experience rating.

On March 8, 1996, Palos filed a petition under 820 ILCS 305/19(o). §19(o) allows an employer to challenge payments made by its insurance company for claims that the employer believes should not have been compensated. Palos filed a §19(o) petition seeking: 1) a finding that Geibel's claim was not work related nor compensable; 2) an order requiring Sentry to purge its records of any loss or expense associated with Geibel's claim; 3) reimbursement of attorney's fees; 4) reimbursement on any payments made to Sentry for the rate adjustment fund or second injury fund; and 5) an order that any loss or expense related to this claim not be factored into Palos' future insurance rates with Sentry. After oral arguments, the Commission, en banc, unanimously denied Palos' §19(o) petition. The Circuit Court of Cook County affirmed the decision of the Commission. This appeal followed.

Under §19(o) of the Workers' Compensation Act (the Act), an employer may be protected from increased insurance premiums which may result when an insurer settles a workers' compensation claim that should not have been compensable. The purpose of this section is to prevent an employer from bearing the additional cost burden of increased insurance premiums if its insurer opts to pay a non-compensable claim in order to save itself the cost of defense and administration. See Comments of Senator Bruce, State of Illinois, 81st General Assembly, Senate Transcription Debates, July 1, 1980, at p. 24. Section 19(o) allows the Commission to order an insurer who has paid a non-compensable claim to purge its records of any loss or expense associated with the claim, preventing the claim from being reflected in the employer's record for the purpose of determining future insurance rates. 820 ILCS 305/19(o) (West 1993).

Palos first argues that Sentry violated §19(o) of the Act when it paid Geibel's workers' compensation claim. 820 ILCS 305/19(o) provides that:

(o) By the 15th day of each month each insurer providing coverage for losses under this Act shall notify each insured employer of any compensable claim incurred during the preceding month and the amounts paid or reserved on the claim including a summary of the claim and a brief statement of the reasons for compensability. A cumulative report of all claims incurred during a calendar year or continued from the previous year shall be furnished to the insured employer by the insurer within 30 days after the end of that calendar year.

The insured employer may challenge, in proceeding before the Commission, payments made by the insurer without arbitration and payments made after a case is determined to be non-compensable. If the Commission finds that the case was not compensable, the insurer shall purge its records as to that employer of any loss or expense associated with the claim, reimburse the employer for attorneys' fees arising from the challenge and for any payment required of the employer to the Rate Adjustment Fund or the Second Injury Fund, and may not reflect the loss or expense for rate making purposes. The employee shall not be required to refund the challenged payment. The decision of the Commission may be reviewed in the same manner as in arbitrated cases. No challenge may be initiated under this paragraph more than 3 years after the payment is made. An employer may waive the right of challenge under this paragraph on a case by case basis. (West 1993).

This provision requires only that Sentry notify Palos of any compensable claim paid during the month prior and to provide a summary of the claim and the reasons for compensability. There is no allegation in Palos' brief that Sentry failed to provide such notice or any such summary of the claim or compensability. Additionally, the statute provides what the insurer may be required to do if the claim is deemed by the Commission to have been non-compensable. In the present case, no finding of noncompensibility was ever made by the Commission. We hold that mere payment of a claim is not enough to violate §19(o) as the statute speaks only to the required notice and the extent of information that must be provided to the employer. For these reasons, Sentry could not have violated §19(o) where they paid a claim that it determined was compensable, notified Palos that payment was made, and where the Commission also found the claim to be compensable. Palos next contends that the Commission erred by imposing the burden of proving the causal connection on the employer. While normally the burden of proof is on a claimant to establish the elements of his right to compensation (Hansel & Gretel Day Care Ctr. v. Industrial Comm'n, 215 Ill. App. 3d 284, (1991)), we hold that Palos, as the party challenging the compensation under §19(o), had the burden to prove that the claim was not compensable or to prove an alternative cause of the injury. Although this is an issue of first impression in Illinois, we find guidance in other challenges to court orders and administrative decisions. Courts have consistently held that the party challenging a court's or an agency's order carries the burden of proof. See Murneigh v. Gainer, 177 Ill. 2d 287 (1997) (The party challenging the constitutionality of legislation bears the burden of proof and must overcome the presumption of constitutionality); People v. ex rel. Hartigan v. Illinois Commerce Comm'n., 148 Ill. 2d 348, 367 (1992) (The party challenging the [Commerce] Commission's order carries the burden of proof); Rehg v. Illinois Department of Revenue, 152 Ill. 2d 504 (1992) (All statutes are presumed to be constitutional and the challenging party bears the burden of clearly establishing the statute's unconstitutionality); Bennett v. City of Chicago, 24 Ill. 2d 270, 273-274 (1962) (The party challenging the validity of the zoning ordinance bears the burden of proof). Perhaps most persuasive is the line of cases holding that settlements terms are presumed to be in good faith and valid. See Johnson v. Belleville Radiologists, Ltd., 221 Ill. App. 3d 100, 103 (1991); Pritchard v. SwedishAmerican Hospital, 199 Ill. App. 3d 990, 996-97 (1990); Ruffino v. Hinze, 181 Ill. App. 3d 827, 829 (1989); Barreto v. City of Waukegan, 133 Ill. App. 3d 119, 128 (1985). Courts have held that the burden of proof is on the party challenging the good-faith nature of the settlement. Pritchard, 199 Ill. App. 3d at 996-997; Barreto, 133 Ill. App. 3d at 128. Under this guidance, we now hold that the party challenging an insurance settlement under §19(o) of the Act has the burden of proof to demonstrate the non-compensability of the claim. To find otherwise would discourage insurance companies from settling claims for fear of challenge from their insured.

Palos further argues that Sentry should not have compensated Geibel's claim. If Geibel's claim was not related to his employment with Palos and therefore non-compensable, Sentry should have been ordered by the Commission to purge its records with reference to this claim, reimburse Palos certain costs associated with the claim, and to disregard the cost of the claim when determining Palos' future insurance rates. The primary issue on appeal before this Court, therefore, is whether Geibel's claim was compensable under the insurance policy. The injury is compensable if it was related to Geibel's employment.

Whether or not an employee's claim should have been compensated is a question of fact and is therefore reviewed to determine if the decision was against the manifest weight of the evidence. Heath v. Industrial Comm'n., 256 Ill. App. 3d 1008, 1015-16 (1993). A decision is against the manifest weight of the evidence when the opposite conclusion is clearly evident. Chicago Park District v. Industrial Comm'n., 263 Ill. App. 3d 835, 843 (1994). Credibility of witnesses and causal connection are questions for the determination of the Industrial Commission. Certi-Serve, Inc. v. Industrial Comm'n, 101 Ill. 2d 236, 244 (1984). It is well established that in a Workers' Compensation claim, liability cannot rest upon imagination, speculation, or conjecture, but must arise out of facts established by a preponderance of the evidence, and further, that although a claimant's testimony standing alone may be sufficient to allow an award, an award is not justified if all of the facts and circumstances in the record preponderate in favor of the opposite conclusion. Allis-Chalmers Mfg. Co. v. Industrial Comm'n, 35 Ill. 2d 367 ...

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