Synopsis: When Is a Loss Covered by the IL WC Act?


Editor’s comment: The first thing an attorney, risk manager or adjuster must do when a new claim has been made is to evaluate whether the loss is covered by Illinois workers’ compensation law versus the various federal acts, general liability, or some other common law or other statutory remedy. If so, the next inquiry is whether Illinois workers’ compensation law applies versus the law of some other state or the federal system. Finally, if the case is properly an Illinois workers’ compensation claim, the adjuster must determine whether the policy in force at the time of the accident or disability covers the particular loss alleged.


            A. Is this an Illinois workers’ compensation claim?


This basic question is often overlooked. The assumption is that, if an Illinois workers’ compensation claim is filed, the case involves a loss that should be compensated under Illinois workers’ compensation law. However, in order to recover benefits under workers’ compensation law, the activities must be covered by the IL WC Act and not under any other benefit provision in a different system that may be considered exclusive.


For example, if an Illinois employee is working to maintain a watercraft when injured and the vessel is on a navigable waterway, such injuries would be covered by the exclusive provisions of the federal Longshore Harbor and Workers’ Compensation Act, administered by the OWCP. Such injuries would not be appropriately covered by the IL Workers’ Compensation Act, even though the employee was hired by and working for an Illinois employer. U.S. Postal workers are also covered by a similar federal-only WC Act. There are similar laws that have exclusive coverage to eliminate jurisdiction of the Commission to hear the claim.


Another aspect of the WC system coverage question is when the employee can bring a workers’ compensation claim against an employer and when the employee can also sue the employer for the same injuries in civil court. This concept is a possibility but under very limited circumstances. The basic model in the development of workers’ compensation throughout the industrialized world is the injured employee gave up his/her right to bring a common law action against the employer in exchange for workers’ compensation benefits that are more certain and more rapidly provided but potentially lower than what a jury might be able to provide for a similarly severe injury.


There have been a number of strange and complex legal devices that have allowed Illinois employees to maintain common law claims against third parties that might require the employer to pay a part of a jury verdict, but the general rule is supposed to be that the employee cannot sue the employer at common law if he/she is entitled to workers’ compensation benefits.


One clear exception to this concept is when an employer commits an intentional act or hires another to commit an intentional act to injure an employee. For example, if the employer were to hire a ruffian to injure/attack an employee due to a work-related dispute, the employee could seek workers’ compensation benefits and also sue the employer for the injuries suffered in the intentional attack.


In specialized circumstances, the employer and its carrier/TPA may have an ‘option’ with regard to payment of benefits under either workers’ compensation or general liability. For example, if an employer has an employee become injured as a result of slipping on ice and snow while working on company property, it is possible that you might successfully deny the claim for workers’ compensation benefits only to then face a premises liability or other general liability lawsuit which is possibly much more expensive to defend and potentially explosive due to the unpredictability of jury awards.


The employer can ‘opt’ not to fight the workers’ compensation claim and voluntarily pay workers’ compensation benefits which should block any third party claim against the employer if the employee knowingly accepts such benefits.

            B. Illinois jurisdiction


Once it has been established that the claim properly involves workers’ compensation benefits, the adjuster, attorney, or risk manager must determine whether Illinois is the proper jurisdiction for the claim to be heard versus a different state or the federal government.


It is critical to understand a claimant with a single injury, a worker could have a claim for workers’ compensation benefits in a multitude of states. The employer should receive ‘credit’ for any benefits paid in any state under the full faith and credit clause of the United States Constitution and not have to double or triple pay multi-state benefits. There is not much guidance on this legal principle, as such issues aren’t litigated often.


But remember, payment of Illinois benefits does not necessarily block the filing of a claim in another state or states. Conversely, the filing of a claim in another state for benefits or the receipt of such benefits does not preclude an Illinois claim.


Illinois has proper subject matter jurisdiction if one of the following tests are met:


            1. The accidental event occurs in Illinois. This concept applies even if the employee executed a written agreement prior to employment to only seek benefits in another state or forum;


            2. The accident occurs outside Illinois but the ‘contract for hire’ was formed in Illinois. This is the tactic most commonly used to bring out of state claims into Illinois. The contract for hire is said to be finalized where the employee ‘accepts’ the offer of employment which leads to a number of factual disputes;


            3. Employment was ‘principally localized’ in Illinois. This is utilized when the employer may have an out of state headquarters for employees who actually perform the majority of their work in Illinois. This situation frequently occurs in trucking claims where the petitioner establishes the principal localization of work in Illinois by logs indicating the aggregate number of miles driven in Illinois versus other states. There are also cases that hold where work is “centered” in Illinois—employment may be established here so as to create jurisdiction. The concept of “centered” work would mean the employee comes to or calls for assignments in Illinois but does most of their work outside the state.


Please also note the employment cannot be for the various branches of our federal government, nuclear industry or U.S. armed forces. Such workers are exclusively covered by the federal OWCP or Office of Workers’ Compensation Programs. State law does not regulate WC benefits for such workers.


Other factors sometimes cited by the Commission and the courts in subject matter jurisdiction claims include the state of petitioner’s residence, the location of the principal work site and the level of business conducted by the employer in Illinois. These concepts are not contained in the Illinois statute and shouldn’t be germane. The facts are sometimes utilized by the Commission or courts stretching to find jurisdiction by looking for factors considered in other areas of law involving jurisdictional fights.


            C. Pre-injury agreements with regard to jurisdiction


Several years ago, this was an interesting trend among some employers but has waned in recent years. We caution you to be wary of pre-injury agreements to have an employee select or agree to the jurisdiction where benefits will be received upon suffering an injury. We have seen employers with multi-state operations or traveling employees routinely require employees to execute such agreements.


These documents will generally be ignored in Illinois and do not have any real legal effect in this state. However, we are not aware of any prohibition in any state with regard to such agreements. If they are designed to confuse unsuspecting workers after they suffer injury, they may be considered an attempt to defraud the worker of benefits under the law and we consider them unethical for that reason.


It is possible an employee or their attorney will not become aware of his or her ability to make a claim for benefits in Illinois and may act consistent with the agreement with regard to jurisdiction. If workers’ compensation benefits will be paid timely in the state that they have agreed to and a dispute does not arise, this concept may be successful.


           D. ‘Multi-state settlements’


Also, when any workers’ compensation claim is settled, you may attempt to block the filing of other claims by indicating that the settlement is for claims in any state. This technique is employed more for the perception of the employee and his attorney than for its legal effect. Most IL Arbitrators won’t approve such agreements.


For technical reasons which do not bear repetition, this concept probably wouldn’t be legally effective. It does leave petitioner and his counsel with the sense that closure has been reached and may cause them to refrain from filing subsequent claims in other states.


For neophyte lawyers, please remember you can’t ethically provide legal advice and counsel about workers’ compensation rights in states in which you aren’t licensed. If you are asked to do so, you need to tell the client of this concern or join with the client in seeking assistance from a licensed lawyer in the other state.


            E. Insurance Policy Coverage


The adjuster or risk manager must also consider whether the specific policy written for the employer to cover the injured worker covers the loss. The date of accident or disability must fall within the dates/states of coverage although this issue becomes clouded in repetitive trauma claims where no specific incident is identified. It is not uncommon for two or three different insurance carriers to argue the actual manifestation of onset of pain occurred during a different carriers’ policy.


If a coverage question is precipitated by the lapse of the workers’ compensation policy prior to the accident taking place, the insurance carrier must prove the policy was properly terminated. This requires notice to the employer/respondent as well as the IL Workers’ Compensation Commission. Otherwise, the Workers’ Compensation Commission may require extension of coverage through the date of accident to ensure the injured party gets WC benefits.


An additional consideration in policy coverage is the employment position of a given petitioner. If petitioner is a sole proprietor, owner or partner of a business, it is legally possible for such executives to opt out of insurance coverage for injuries and thereby save the premium cost. If there is no election for coverage, the principal may not be entitled to workers’ compensation benefits paid by the carrier. This does not mean WC benefits might not be sought—they would just be not covered by the insurance policy, but by the company the executive worked for. This also might not affect any other common law rights available.


One interesting quirk in Illinois workers’ compensation claims practice is the insurance carrier may be named as a party respondent by petitioner in filing the application for adjustment of claim. This is a little-known and rarely used facet of the IL WC Act. In Section 4(g) of the Act, the employee may join the insurance carrier as “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.” If there are concerns about the financial status of the employer, it may be a prudent thing for the attorney for a claimant to include the insurance carrier as a party to insure any award or settlement is paid.


F. The Statute of Limitations in Illinois Workers’ Compensation


Section 6(d) outlines a relatively unusual statute of limitations for workers’ compensation claims. Generally speaking, a claim for benefits under the Illinois Workers’ Compensation Act will be barred if an application for adjustment of claim is not filed within three years of the date of accident, or within two years from the last payment of compensation, whichever is later.


Most of the confusion with the statute of limitations is based upon the definition of the ‘last payment of compensation.’ If petitioner is receiving ongoing temporary disability benefits, the statute of limitations can be extended indefinitely. In pure theory, the statute might be extended until well after death!


The Workers’ Compensation Commission is very liberal in their definition of payment of compensation and therefore, an adjuster must be careful not to provide payment to the petitioner close to the running of the statute of limitations. Such a payment, whether it be medical, temporary disability, or permanent disability may allow petitioner two additional years from that payment to file an application for adjustment of claim.


Payment of group disability benefits or medical expenses under a group plan might also extend the time for filing an application.


In the landmark ruling in Durand v. IC, 224 Ill. 2d 53, 64 (2006), the IL Supreme Court indicated they would not apply the statute of limitations to bar a claim where the employee “worked in pain” for the period of the delay. In the perspective of many legal observers, the Durand ruling potentially extends the WC statute of limitations indefinitely because any worker could always testify they “worked in pain” for the period of delay in filing.


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