Hagene v. Derek Polling Construction

• Court: Appellate Court of Illinois
• Decided: February 24, 2009
• Docket: 5-07-0225 Rel
• Status: Published

Opinion

NO. 5-07-0225 N O T IC E

Decision filed 02/24/09. The text of IN THE this dec ision m ay b e changed or

corrected prior to the filing of a APPELLATE COURT OF ILLINOIS P e t i ti o n for Re hea ring or the

disposition of the same. FIFTH DISTRICT ________________________________________________________________________

THOMAS HAGENE, ) Appeal from the ) Circuit Court of Petitioner-Appellant, ) Perry County. ) v. ) No. 07-MR-2 ) DEREK POLLING CONSTRUCTION, ) Honorable ) James W. Campanella, Respondent-Appellee. ) Judge, presiding ________________________________________________________________________

JUSTICE CHAPMAN delivered the opinion of the court:

The petitioner appeals an order of the trial court dismissing his petition to enter a

judgment in accordance with a final decision of the Industrial Commission pursuant to

section 19(g) of the Illinois Workers' Compensation Act (820 ILCS 305/19(g) (West 2006)).

He filed this petition after agreeing to a lump-sum settlement with the respondent. The

settlement indicated that the respondent had paid all the petitioner's medical bills; however,

three past medical bills remained unpaid. The petitioner argues on appeal that the court

erroneously found that the lump-sum settlement relieved the respondent of its obligation to

pay his outstanding past medical bills. We reverse.

On June 16, 2003, the petitioner, Thomas Hagene, was injured in a work-related

accident when he fell from the scaffolding at a construction site. As a result of the accident,

he suffered injuries affecting his left arm and shoulder (requiring surgery), right leg, and

lumbar spine. He received temporary total disability benefits for a period of 39 weeks, and

then he returned to work.

On July 5, 2005, arbitrator John Dibble approved a workers' compensation lump-sum

1 settlement between the petitioner and his employer, respondent Derek Polling Construction.

The settlement is on a form agreement prepared by the respondent. The first page contains

a section called "Medical Expenses." In that section, there is a space to place a check on a

line indicating whether the employer has or has not paid all the medical bills. Here, the

employer checked that it had paid all the medical bills. Following that, there is an instruction

to "[l]ist unpaid bills in the space below." That space is empty. The first page also contains

a section entitled "Temporary Total Disability Benefits." That section provides spaces on

which the parties can indicate the beginning and ending dates of the period that an employee

was totally temporarily disabled. Both spaces are filled in with "Disputed–See terms of

settlement."

On the second page, a section entitled "Terms of Settlement" provides, in relevant

part, as follows:

"The Respondent offers and the Petitioner accepts the lump sum of $20,036.10

in full, final, and complete settlement of any and all claims whatsoever under the

Illinois Workers' Compensation Act ('Act') [(820 ILCS 305/1 et seq. (West 2002))]

*** resulting from *** the alleged accidental occurrence on or about June 16, 2003.

*** This lump sum is in full and final settlement of any and all claims, including, but

not limited to, temporary total disability compensation, past, present, and/or future

medical and hospital bills, death, vocational rehabilitation, permanent partial disability

to Petitioner's left arm and right leg under Section 8(e) of the Act [(820 ILCS 305/8(e)

(West 2002))], and permanent partial disability to petitioner's person as a whole under

Section 8(d)(2) of the Act [820 ILCS 305/8(d)(2) (West 2002))]. *** The Petitioner

expressly represents and agrees that prior to the approval date of this contract, the

Petitioner submitted to the Respondent all reasonable, necessary, and causally related

medical and hospital bills[] and that the Respondent has fully satisfied the same prior

2 to the approval date of this contract. At the applicable permanency rate of $284.20,

this settlement includes 30% (70.5 weeks) loss of use of petitioner's left arm, under

Section 8(e) of the Act."

On January 11, 2007, the petitioner filed an application for the entry of a judgment in

accordance with a final decision of the Industrial Commission pursuant to section 19(g) of

the Workers' Compensation Act (820 ILCS 305/19(g) (W est 2006)). The petitioner alleged

that the settlement required the respondent to pay all the petitioner's medical bills to the date

of the settlement and that the following bills remained unpaid: $2,326.25 to Dr. Mark Miller,

$17,311 to Timberlake Surgery Center, and $340 to I-Flow, totaling $19,977.25.

On February 16, 2007, the respondent filed a motion to dismiss the petitioner's

petition. The respondent argued that the "Terms of Settlement" paragraph prohibited the

petitioner from requesting the payment of these bills.

On February 27, 2007, the court held a hearing in the matter and entered an order

granting the respondent's motion to dismiss on March 6. The court found that the

respondent's obligation had been "satisfied of record." This appeal followed the denial of the

petitioner's motion to vacate and reconsider.

The petitioner argues that the trial court erred in its interpretation of the lump-sum

settlement agreement. He contends that (1) the contract did not prohibit him from seeking

reimbursement for the medical bills at issue, (2) the "Terms of Settlement" section did not

relieve the respondent of its obligation to pay all causally related medical expenses, and (3)

assuming that the contract is ambiguous, it was drafted by the respondent and must therefore

be construed against the respondent. The respondent argues that (1) the settlement

unambiguously provides that it had fulfilled its obligation to pay all the petitioner's medical

bills and (2) because the parties agree, and the court found, that the settlement is

unambiguous, there is no need to resort to a rule of construction such as that found in the

3 petitioner's final argument.

"A release is a contract wherein a party relinquishes a claim to a person against whom

the claim exists, and a release is subject to the rules governing the construction of contracts."

Carona v. Illinois Central Gulf R.R. Co., 203 Ill. App. 3d 947, 951, 561 N.E.2d 239, 242

(1990). However, when interpreting settlement contracts, Illinois courts routinely look to the

intent of the parties in order to ascertain the scope and extent of the claims released.

Ainsworth Corp. v. Cenco, Inc., 107 Ill. App. 3d 435, 440-41, 437 N.E.2d 817, 822 (1982).

"Particularly with a release, this intent ' "is discerned from the language used and the

circumstances of the transaction." ' " (Emphasis in original.) Farmers Automobile Insurance

Ass'n v. Kraemer, 367 Ill. App. 3d 1071, 1074, 857 N.E.2d 691, 694 (2006) (quoting Carlile

v. Snap-on Tools, 271 Ill. App. 3d 833, 838, 648 N.E.2d 317, 321 (1995) (quoting Carona,

203 Ill. App. 3d at 951, 561 N.E.2d at 242)). We are able to examine the circumstances

surrounding the transaction without changing the terms or creating an ambiguity. First Bank

& Trust Co. of Illinois v. Village of Orland Hills, 338 Ill. App. 3d 35, 46, 787 N.E.2d 300,

310 (2003).

We thus begin our analysis by examining the fact that the settlement arose in the

context of a workers' compensation claim. The purpose and policy embedded in the Workers'

Compensation Act is to promote the general welfare of the citizens of the state. Kelsay v.

Motorola, Inc., 74 Ill. 2d 172, 181, 384 N.E.2d 353, 357 (1978). The Workers'

Compensation Act affords protection to workers by providing prompt and equitable

compensation for workplace injuries. Kelsay, 74 Ill. 2d at 180-81, 384 N.E.2d at 356. It is

a humane law of a remedial nature that should be liberally construed to achieve its purpose.

Shell Oil Co. v. Industrial Comm'n, 2 Ill. 2d 590, 596, 119 N.E.2d 224, 228 (1954). The right

to be compensated for medical costs associated with work-related injuries is at the very heart

of the Workers' Compensation Act. Martin v. Kralis Poultry Co., 12 Ill. App. 3d 453, 460,

4 297 N.E.2d 610, 615 (1973).

It is important here to emphasize that the employer's obligation to pay all the medical

bills related to the petitioner's work injury flows not from the settlement contract, but from

the Workers' Compensation Act. See 820 ILCS 305/8(a) (West 2002) (requiring an employer

to pay for all the necessary medical care and first aid causally related to an on-the-job injury).

The employer is, of course, only required to pay for care that is reasonably required to treat

injuries that are actually caused by the work-related accident. Ingalls Memorial Hospital v.

Industrial Comm'n, 241 Ill. App. 3d 710, 717, 609 N.E.2d 775, 781 (1993) (citing Quality

Wood Products Corp. v. Industrial Comm'n, 97 Ill. 2d 417, 423, 454 N.E.2d 668, 671

(1983)). If there is a dispute over whether any of the petitioner's injuries are, in fact, causally

connected to his or her on-the-job accident, the parties may choose to resolve this dispute as

a part of a settlement. If the parties agree that only some of the medical bills are causally

related, there may well be disputed unpaid medical bills for which the employer is, by

agreement, not obligated to pay. However, unlike the indicated dispute over the length of

total temporary disability here, the settlement agreement does not indicate a dispute regarding

whether any of the bills were causally related. Instead, in the medical-expenses section it

indicates that the employer has paid all the medical bills. Paradoxically, the respondent

conceded at oral argument that the bills at issue were in fact causally connected to the

petitioner's accident. Nevertheless, the respondent argues that, because the settlement

contract is unambiguous, the actual facts surrounding the execution of the settlement are

immaterial because we are foreclosed from any extraneous consideration under contract law.

Essentially, the respondent wants us to decide this case in a vacuum, looking only to the four

corners of the document.

Fortunately, we do not find ourselves to be so constrained under Illinois law. "No

form of words, no matter how all-encompassing, will foreclose a court's scrutiny of a release

5 or prevent a reviewing court from inquiring into the surrounding circumstances to ascertain

whether it accurately reflected the parties' intention." Kraemer, 367 Ill. App. 3d at 1074, 857

N.E.2d at 694.

Here, the amount of the settlement–$20,036.10–does not include any amount for the

payment of medical bills. The settlement amount was calculated following the statutory

guidelines for permanent partial disability. Section 8(e) of the Workers' Compensation Act

(820 ILCS 305/8(e) (West 2002)) provides that an injured employee who permanently loses

the use of any body part is to be compensated for that loss. The amount of that compensation

is determined, in part, by the amount of weekly compensation the employee receives for total

temporary disability under section 8(b)(1) of the Workers' Compensation Act (820 ILCS

305/8(b)(1) (West 2002) (providing that an employee is to receive 66 b% of his or her

normal weekly salary while totally temporarily disabled)). 820 ILCS 305/8(e) (West 2002).

The petitioner was entitled to $284.20 per week while totally temporarily disabled using this

formula. For a total permanent loss of the use of an arm, an employee is entitled to the

equivalent of 235 weeks of total temporary disability. 820 ILCS 305/8(e)(10) (West 2002).

The parties here agreed that the petitioner's loss of the use of his arm was 30%, and he was

therefore entitled to 30% of 235 weeks, or 70.5 weeks. Multiplying 70.5 weeks by his

weekly total temporary disability amount ($284.20) yields a total of $20,036.10. That was

the full extent of the settlement, thus making it clear that no part of the settlement amount

was compensation for past unpaid medical bills related to the accident.

Nonetheless, the respondent argues that by entering into the settlement contract, the

petitioner waived his right under the Workers' Compensation Act to obligate the respondent

to pay for unpaid related medical bills. Unquestionably, employees can and do contract away

their right to have past and future related medical expenses paid for by their employers.

However, a waiver of important statutory rights must be explicit. See Gallagher v. Lenart,

6 226 Ill. 2d 208, 237-38, 874 N.E.2d 43, 61 (2007) (finding that general release language was

insufficient to waive an employer's statutory right to a workers' compensation lien in a related

suit against a third party on the basis that statutory rights must be explicitly waived). The

supreme court in Gallagher went on to cite a number of other cases requiring an explicit

waiver, stating: "We note it is not uncommon to require the explicit waiver of certain rights.

In various other contexts, where an important statutory right is at issue, an explicit

manifestation of intent is required before the right in question can be deemed waived."

Gallagher, 226 Ill. 2d at 239, 874 N.E.2d at 62.

The respondent points to the "Terms of Settlement" section in support of its argument

that the payment of the petitioner's past medical bills was specifically waived. Were we to

read these terms in isolation, we would be inclined to agree with this interpretation.

However, we are instructed to give effect to all the relevant contractual language to resolve

the question of the parties' intent. Gallagher, 226 Ill. 2d at 241, 874 N.E.2d at 63. This

includes the contract recitals in which the respondent indicated that it had paid all the medical

bills, when in truth and in fact it had not. "[W]hile recitals are not [an] operational part of

[a] contract between the parties, they reflect the intent of the parties and influence the way

the parties constructed the contract." First Bank & Trust Co. of Illinois, 338 Ill. App. 3d at

48, 787 N.E.2d at 311 (citing Yoemans v. Brown, 239 Ill. App. 117, 124 (1925), and 5 M.

Kniffin, Corbin on Contracts §24.7, at 37 (rev. ed. 1998)). The contract recitals create a

context through which the operational portion of the contract can be better understood,

because they indicate the relevant circumstances to its execution. First Bank & Trust Co. of

Illinois, 338 Ill. App. 3d at 48, 787 N.E.2d at 311.

When we consider the entire contract in the context of all the surrounding

circumstances, we conclude that the parties did not intend to discharge the respondent's

statutory obligation to pay the petitioner's past related medical bills. What is clear from the

7 surrounding circumstances is that the settlement was premised on the understanding that the

respondent had in fact paid all the outstanding medical bills to the date of the settlement as

indicated in the contract recital. To find otherwise would result in a windfall to the

respondent, because it would be absolved from paying bills as required by statute without

paying the petitioner any real consideration (the settlement amount almost equals the unpaid

medical bills) as well as a loss to the petitioner (after the payment of the medical bills in

question and attorney fees). This is a result the parties never could have intended. W e will

not interpret the settlement contract in such a way to defeat a claim not then in the minds of

the parties. Gladinus v. Laughlin, 51 Ill. App. 3d 694, 696, 366 N.E.2d 430, 432 (1977). To

do so would not only lead to an absurd and unjust result but also seriously undermine the

remedial purpose of the Workers' Compensation Act.

For the reasons stated, we reverse the order of the trial court dismissing the petitioner's

application for a judgment in accordance with section 19(g) of the Workers' Compensation

Act. We remand.

Reversed; cause remanded.

STEWART and WELCH, JJ., concur.

8 NO. 5-07-0225

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT ___________________________________________________________________________________

THOMAS HAGENE, ) Appeal from the ) Circuit Court of Petitioner-Appellant, ) Perry County. ) v. ) No. 07-MR-2 ) DEREK POLLING CONSTRUCTION, ) Honorable ) James W. Campanella, Respondent-Appellee. ) Judge, presiding ___________________________________________________________________________________

Opinion Filed: February 24, 2009 ___________________________________________________________________________________

Justices: Honorable Melissa A. Chapman, J.

Honorable Bruce D. Stewart, J., and Honorable Thomas M. Welch, J., Concur ___________________________________________________________________________________

Attorneys Thomas C. Rich, Jennifer L. Barbieri, Thomas C. Rich, P.C., 6 Executive Drive, for Suite 3, Fairview Heights, IL 62208 Appellant ___________________________________________________________________________________

Attorney Andrew S. De Blank, Knell & Kelly, L.L.C., 504 Fayette Street, Peoria, IL 61603 for Appellee ___________________________________________________________________________________