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Marque Medicos Fullerton, LLC v. Zurich American Insurance Co.

Court of Appeals of Illinois, First District, Sixth Division

June 30, 2017

MARQUE MEDICOS FULLERTON, LLC; MEDICOS PAIN & SURGICAL SPECIALISTS, S.C.; AMBULATORY SURGICAL CARE FACILITY, LLC; and MARQUE MEDICOS KEDZIE, LLC, for Themselves and All Others Similarly Situated, Plaintiffs-Appellants,
v.
ZURICH AMERICAN INSURANCE COMPANY, AMERICAN ZURICH INSURANCE COMPANY, ASSURANCE COMPANY OF AMERICA, and MARYLAND CASUALTY COMPANY, Defendants-Appellees. MARQUE MEDICOS FULLERTON, LLC; MEDICOS PAIN & SURGICAL SPECIALISTS, S.C.; and AMBULATORY SURGICAL CARE FACILITY, LLC, for Themselves and All Others Similarly Situated, Plaintiffs-Appellants,
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, TRAVELERS INDEMNITY COMPANY OF AMERICA, TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA, TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, THE PHOENIX INSURANCE COMPANY, FARMINGTON CASUALTY COMPANY, THE STANDARD FIRE INSURANCE COMPANY, and THE CHARTER OAK FIRE INSURANCE COMPANY, Defendants-Appellees. MARQUE MEDICOS FULLERTON, LLC; MEDICOS PAIN & SURGICAL SPECIALISTS, S.C.; and AMBULATORY SURGICAL CARE FACILITY, LLC, for Themselves and All Others Similarly Situated, Plaintiffs-Appellants,
v.
HARTFORD UNDERWRITERS INSURANCE COMPANY; HARTFORD INSURANCE COMPANY OF THE MIDWEST; HARTFORD ACCIDENT AND INDEMNITY COMPANY; HARTFORD INSURANCE COMPANY OF ILLINOIS; HARTFORD FIRE INSURANCE COMPANY; HARTFORD CASUALTY INSURANCE COMPANY; TWIN CITY FIRE INSURANCE COMPANY; TRUMBULL INSURANCE COMPANY; and SENTINEL INSURANCE COMPANY, LTD., Defendants-Appellees. MARQUE MEDICOS FULLERTON, LLC; MEDICOS PAIN & SURGICAL SPECIALISTS, S.C.; and AMBULATORY SURGICAL CARE FACILITY, LLC, for Themselves and All Others Similarly Situated, Plaintiffs-Appellants,
v.
AIG INSURANCE COMPANY, f/k/a Chartis Casualty Company; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH; ILLINOIS NATIONAL INSURANCE COMPANY; COMMERCE & INDUSTRY INSURANCE COMPANY; NEW HAMPSHIRE INSURANCE COMPANY; INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA; AMERICAN HOME ASSURANCE COMPANY; and AIG PROPERTY CASUALTY COMPANY, f/k/a Chartis Property Casualty Company, Defendants-Appellees.

         Appeal from the Circuit Court of Cook County. Nos. 15 CH 4580, 15 CH 4946, 15 CH 4949, 15 CH 4951 Honorable Rita M. Novak, Judge Presiding.

          ROCHFORD JUSTICE delivered the judgment of the court, with opinion. Presiding Justice Hoffman and Justice Delort concurred in the judgment and opinion.

          OPINION

          ROCHFORD JUSTICE.

         ¶ 1 In these consolidated appeals, plaintiffs-appellants[1] appeal from the dismissal, with prejudice, of four separate putative class-action lawsuits filed against defendants-appellees.[2] For the following reasons, we conclude that the circuit court had subject-matter jurisdiction to consider plaintiffs' claims and that those claims were properly dismissed with prejudice.

         ¶ 2 I. BACKGROUND

         ¶ 3 In March 2015, plaintiffs filed four putative class-action lawsuits, one each against the Zurich, Travelers, Hartford, and AIG defendants (collectively, defendants). On June 16, 2015, the suits against the Travelers, Hartford, and AIG defendants were reassigned, as related cases, to the courtroom where the initially-filed suit against the Zurich defendants was pending. The complaints filed in each lawsuit generally seek redress for defendants' alleged failure to comply with requirements contained in the Workers' Compensation Act (Act). 820 ILCS 305/1, et seq. (West 2014).

         ¶ 4 More specifically, plaintiffs allege that they-and a class of similarly situated others- had provided medical services to employees for work-related injuries. Pursuant to the Act, the employers of those employees had the responsibility to timely pay for those medical services, with those employers being insured for that responsibility by identical workers' compensation insurance policies issued by defendants. Noting that the Act requires that late payments to providers, such as plaintiffs, "shall incur interest at a rate of 1% per month payable to the provider" (820 ILCS 305/8.2(d)(3) (West 2014)), contending that this statutory provision was incorporated into the standard policies issued by defendants, and further contending that defendants had in fact made "many" untimely payments for such services without also paying interest, plaintiffs' complaints sought relief in four counts.

         ¶ 5 In each complaint, count I contends that plaintiffs were third-party beneficiaries of the standard policies defendants issued to employers and that plaintiffs were therefore entitled to recover for defendants' breach of those policies. Count II alleges that plaintiffs had an implied private right of action to recover for defendants' violation of section 8.2(d)(3) of the Act. Count III asserts that defendants had breached contracts with plaintiffs that were implied-in-fact. Finally, count IV seeks an award of attorney fees and statutory damages for defendants' vexatious and unreasonable refusal to pay accrued interest for late payments, pursuant to section 155 of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/155 (West 2014)). The complaints seek "the statutory interest that accrued and is payable to them on bills that were paid by Defendants but after the Due Date, for services covered by the Act, " attorney fees, prejudgment interest, and injunctive relief mandating that defendants "institute, maintain and follow" procedures that will ensure that, in the future, defendants will timely comply with the requirements of section 8.2(d)(3) of the Act.

         ¶ 6 Motions to dismiss each suit for failure to state claims were filed by defendants, pursuant to section 2-615 of the Code of Civil Procedure (Code). 735 ILCS 5/2-615 (West 2014). The motion to dismiss filed by the Travelers' defendants asserted, inter alia, that the circuit court lacked subject-matter jurisdiction over plaintiffs' claims because the Act vested exclusive jurisdiction to consider those claims with the Illinois Workers' Compensation Commission (Commission). The Hartford defendants had additionally sought to strike the class allegations, pursuant to section 2-619 of the Code. 735 ILCS 5/2-619 (West 2014).

         ¶ 7 On February 19, 2016, following a prior hearing on the motions, the circuit court entered a memorandum opinion and order in which it dismissed each of the plaintiffs' lawsuits with prejudice. In reaching that result, the circuit court concluded (1) plaintiffs were not third-party beneficiaries of the policies, (2) plaintiffs had no implied private right of action for a violation of section 8.2(d)(3) of the Act, (3) the facts alleged in plaintiffs' complaints did not support the imposition of an implied-in-fact contract, and (4) the remedies contained in section 155 of the Insurance Code do not extend to purported third parties such as plaintiffs. The circuit court's order did not specifically address the Travelers defendants' challenge to the court's subject-matter jurisdiction or the Hartford defendants' challenge to the class allegations.

         ¶ 8 Plaintiffs filed timely notices of appeal from the dismissal of each of the four lawsuits on March 15, 2016. This court consolidated the appeals in an order entered on May 11, 2016.

         ¶ 9 II. ANALYSIS

         ¶ 10 On appeal, plaintiffs contend that the circuit court improperly dismissed their lawsuits, with prejudice, for failure to state claims. Before we can address the substantive merits of the circuit court's dismissal of plaintiffs' complaints, however, we must first address defendants' contention that the circuit court lacked subject-matter jurisdiction to consider plaintiffs' claims because the Act "vests exclusive jurisdiction in the Commission to hear and determine direct claims under the Act."

         ¶ 11 A. History and Scope of the Act

         ¶ 12 We first provide some context with respect to the history and scope of the Act, which will guide both our jurisdictional analysis and our subsequent discussion of the merits of the circuit court's dismissal of plaintiffs' claims.

         ¶ 13 In general terms, the Act:

"substitutes an entirely new system of rights, remedies, and procedure for all previously existing common law rights and liabilities between employers and employees subject to the Act for accidental injuries or death of employees arising out of and in the course of the employment. [Citation.] Pursuant to the statutory scheme implemented by the Act, the employee gave up his common law rights to sue his employer in tort, but recovery for injuries arising out of and in the course of his employment became automatic without regard to any fault on his part. The employer, who gave up the right to plead the numerous common law defenses, was compelled to pay, but his liability became fixed under a strict and comprehensive statutory scheme, and was not subjected to the sympathies of jurors whose compassion for fellow employees often led to high recovery. [Citation.] This trade-off between employer and employee promoted the fundamental purpose of the Act, which was to afford protection to employees by providing them with prompt and equitable compensation for their injuries." Kelsay v. Motorola, Inc., 74 Ill.2d 172, 180-81 (1978).

         ¶ 14 These purposes and goals have been effectuated in the various provisions of the Act, which when taken together represent a "comprehensive statutory administrative scheme." Bradley v. City of Marion, Illinois, 2015 IL App (5th) 140267, ¶ 15. Thus, the Act creates a new administrative agency, the Commission, and provides that the "Commission shall administer this Act." 820 ILCS 305/13 (West 2014). "All questions arising under [the] Act, if not settled by agreement of the parties interested therein, shall, except as otherwise provided, be determined by the Commission." 820 ILCS 305/18 (West 2014). This authority includes resolution of "[a]ny disputed questions of law or fact, " which the Act provides will be initially decided following an administrative hearing before an arbitrator assigned by the Commission. 820 ILCS 305/19 (West 2014). Any decision entered by such an arbitrator is subject to review, first by the Commission and then by the circuit court. 820 ILCS 305/19(b), (f)(1) (West 2014).

         ¶ 15 The "compensation" allowed under the Act for accidental, non-fatal injuries includes both payment of lost wages (820 ILCS 305/8(b) (West 2014)), and payment for "all the necessary first aid, medical and surgical services, and all necessary medical, surgical and hospital services thereafter incurred, limited, however, to that which is reasonably required to cure or relieve from the effects of the accidental injury" (820 ILCS 305/8(a) (West 2014); Bayer v. Panduit Corp., 2016 IL 119553, ¶ 30).

         ¶ 16 In order to protect an injured employee's ability to recover, an employer must demonstrate to the Commission sufficient proof of its financial ability to pay the compensation required by the Act. 820 ILCS 305/4 (West 2014). One way of doing so is for an employer to "[i]nsure his entire liability to pay such compensation in some insurance carrier authorized, licensed, or permitted to do such insurance business in this State." 820 ILCS 305/4(a)(3) (West 2014). "Every policy of an insurance carrier, insuring the payment of compensation under this Act shall cover all the employees and the entire compensation liability of the insured ***." Id. Furthermore, "[i]n the event the employer does not pay the compensation for which he or she is liable, then an insurance company, association or insurer which may have insured such employer against such liability shall become primarily liable to pay to the employee, his or her personal representative or beneficiary the compensation required by the provisions of this Act to be paid by such employer. The insurance carrier may be made a party to the proceedings in which the employer is a party and an award may be entered jointly against the employer and the insurance carrier." 820 ILCS 305/4(g) (West 2014).

         ¶ 17 In addition to generally providing for the payment of compensation to employees, the Act also contains a number of provisions designed to encourage the "prompt" payment of compensation by an employer or insurer and to penalize any failure to make such prompt payment of compensation. See 820 ILCS 305/19(l), (k), 4(c) (West 2014). Additional such measures were included in amendments to the Act enacted in 2005 and 2011, to be discussed below.

         ¶ 18 In turn, the Act also contains the protections for employers discussed above. As such, it specifically states that "[n]o common law or statutory right to recover damages from the employer [or] his insurer" is available to "any employee who is covered by the provisions of this Act, to any one wholly or partially dependent upon him, the legal representatives of his estate, or any one otherwise entitled to recover damages for such injury." 820 ILCS 305/5(a) (West 2014). The Act therefore "provides that the statutory remedies under it shall serve as the employee's exclusive remedy if he sustains a compensable injury." McCormick v. Caterpillar Tractor Co., 85 Ill.2d 352, 356 (1981). "Under this comprehensive statutory administrative scheme, the legislature has vested exclusive original jurisdiction in the Commission over matters involving an injured worker's rights to benefits under the Act and an employer's defenses to claims under the Act." Bradley, 2015 IL App (5th) 140267, ¶ 15. "The role of the circuit court in compensation proceedings is appellate only." Hartlein v. Illinois Power Co., 151 Ill.2d 142, 157 (1992).

         ¶ 19 In 2005, the Act "was amended, bringing significant changes to the Act which resulted from an extended negotiation between labor and business." Brad A. Elward, Survey of Illinois Law: Workers' Compensation, 34 S. Ill. U. L.J. 1107, 1110 (2010); Pub. Act 94-277 (eff. July 20, 2005). Of particular relevance here, the 2005 amendments included changes with respect to the payment for medical services for injured workers, implementing a medical fee schedule limiting the maximum amount that could be charged by a provider for covered medical services. Pub. Act 94-277, § 10 (eff. July 20, 2005) (adding 820 ILCS 305/8.2(a)).

         ¶ 20 The 2005 amendments also included relevant new procedures with respect to how and when medical services provided pursuant to the Act would be paid for, and the consequences for any late payments. Central to the claims at issue here, section 8.2(d) was added to that Act, which provided:

"When a patient notifies a provider that the treatment, procedure, or service being sought is for a work-related illness or injury and furnishes the provider the name and address of the responsible employer, the provider shall bill the employer directly. The employer shall make payment and providers shall submit bills and records in accordance with the provisions of this Section. All payments to providers for treatment provided pursuant to this Act shall be made within 60 days of receipt of the bills as long as the claim contains substantially all the required data elements necessary to adjudicate the bills. In the case of nonpayment to a provider within 60 days of receipt of the bill which contained substantially all of the required data elements necessary to adjudicate the bill or nonpayment to a provider of a portion of such a bill up to the lesser of the actual charge or the payment level set by the Commission in the fee schedule established in this Section, the bill, or portion of the bill, shall incur interest at a rate of 1% per month payable to the provider." Pub. Act 94-277, § 10 (eff. July 20, 2005) (adding 820 ILCS 305/8.2(d)).

         ¶ 21 Additional procedures were included in a new section 8.2(e) of the Act, which set limits upon the ability of providers to attempt to collect from injured employees while the compensability of medical services was being disputed before the Commission while also protecting providers' ability to ultimately receive payment by tolling any statute of limitations during any proceeding pending before the Commission. Pub. Act 94-277, § 10 (eff. July 20, 2005) (adding 820 ILCS 305/8.2(e)). Finally, a new section 8.2(e-20) provided:

"Upon a final award or judgment by an Arbitrator or the Commission, or a settlement agreed to by the employer and the employee *** the employee shall be responsible for payment of any outstanding bills for a procedure, treatment, or service rendered by a provider as well as the interest awarded under subsection (d) of this Section" Pub. ...

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