Articles & Updates

Illinois Supreme Court Rules Third Party Atty. Is Entitled to Fee on Future Medical Payments in Bayer v. Panduit

by James M. Gallen

The issue of the attorneys’ fees and expenses owed by employers workers’ compensation subrogation liens in third party cases continues to evolve. In Zuber v. Illinois Power Co., 135 Ill. 2d 407 (1990), the Illinois Supreme Court held that the gross amount of reimbursement subject to attorney fees under this statute includes not only workers' compensation benefits already paid at the time of the third-party recovery but also the amount of such benefits the employer will be relieved from having to pay in the future by reason of the worker's recovery in the third-party action.. The question of whether the value of future medical care should be included in this calculation was decided in the recent case of Bayer v. Panduit Corp.

Ronald Bayer had suffered work related injuries for which his employer, Area Erectors, had paid $5,275,585.57 in indemnity and medical expenses.The employer received reimbursement for amounts paid prior to the third party judgement of $64,000,000.The employer was then entitled to suspend the its obligation to make future payments to Mr. Bayer until the credit against the recovery obtained by the worker from a third party has been exhausted.While recognizing that an attorney’s fee would be owed based on indemnity payments which will not be made because of the credit, a dispute arose over whether the employer would owe a 25% attorney’s fee on future medical expenses for which it would take a credit against the unused portion of the third party recovery.

In overruling the Appellate Court, the Supreme Court ruled that the attorney fees would be owed on future medical payments for which credit is taken.The Court pointed out that:

So long as the amount of the judgment against Panduit is not exhausted, Area Erectors will continue to receive reimbursement for workers' compensation payments, including payments for medical expenses, it is required to make to Bayer in the future. This reimbursement, which as we have explained includes the amount of benefits Area Erectors will be relieved from having to pay as a result of the third-party recovery, directly benefits Area Erectors by reducing its financial obligations with respect to Bayer's injuries. Allowing Area Erectors to reap that benefit without having to share inany of the responsibility for compensating the attorneys who made it possible would result in precisely the type of unjust enrichment that section 5(b) of the Workers' Compensation Act (820 ILCS 305/5(b) (West 2006)) was designed to prevent. Because Area Erectors has no fee agreement with Bayer or Bayer's lawyers, the section 5(b) statutory 25% fee rate controls.

Because the Supreme Court did not address the issue of how the legal fees are to be paid we cannot be sure how it would rule if that issue was presented but it did affirm the Circuit Court decision.The Circuit Court order provided that:

medical bills and/or loss wage statements or any other claims of compensation are to be submitted to [Area’s] insurance company, Arch Insurance Company, for reimbursement of twenty-five percent (25%) of attorney’s fees on said medical bills, wage loss, long term care, and compensation and benefits by [Bayer] in a reasonably timely manner and paid in a reasonably timely manner by [Area’s] insurance carrier…

The significant take-away from this case is that whenever you have a case in which the subrogation lien I less than the third party recovery and in which future indemnity or medical payments are expected, your calculation of future expenses must include a 25% attorney’s fee for any future indemnity or medical obligations that are relieved by the credit taken against the third party recovery.

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