Insurance Co. of North America v. Andrew

• Decision Date: 21 December 1990
• Docket Number: No. 2-90-0148,2-90-0148
• Citation: 564 N.E.2d 939,206 Ill.App.3d 515,151 Ill.Dec. 484
• Parties: , 151 Ill.Dec. 484 INSURANCE COMPANY OF NORTH AMERICA, as Subrogee of Lewis Truck Lines, Inc., Plaintiff-Appellant, v. Timothy R. ANDREW, et al., Defendants-Appellees (Victor Mikenas, Plaintiff).
• Court: United States Appellate Court of Illinois

Page 939

564 N.E.2d 939

206 Ill.App.3d 515, 151 Ill.Dec. 484

INSURANCE COMPANY OF NORTH AMERICA, as Subrogee of Lewis

Truck Lines, Inc., Plaintiff-Appellant, v. Timothy R. ANDREW, et al., Defendants-Appellees (Victor

Mikenas, Plaintiff).

No. 2-90-0148.

Appellate Court of Illinois,

Second District.

Dec. 21, 1990.

Francis William Golden, Modesto, Reynolds & McDermott, Chicago, for Insurance Co. of North America, Lewis Truck Lines and Victor Mikenas.

Dalton Grief, Grief, Bus & Blacklidge, West Chicago, John Salzeider, Magiera & Morrissey, Chicago, for Timothy R. Andrew and Rely Maintenance Seal Coating & Stripping Co.

Justice INGLIS delivered the opinion of the court:

Plaintiff, Insurance Company of North America, filed suit as subrogee of Lewis Truck Lines, Inc., and for Victor Mikenas, individually, an injured employee, seeking, in part, reimbursement of worker's compensation benefits paid to Mikenas. The named defendants in the suit are Timothy Andrew and Rely Maintenance Seal Coating & Stripping Company. Essentially, plaintiff raises only one issue on appeal: whether the trial court erred in dismissing the complaint based on a release signed by an injured employee who has accepted worker's compensation benefits under the provisions of the Workers' Compensation Act (Act) (Ill.Rev.Stat.1989, ch. 48, par. 138.1 et seq.). We reverse and remand.

Plaintiff filed its complaint on September 29, 1989. It alleged that Lewis Truck Lines, Inc. (Lewis), was the named insured on a policy issued by plaintiff to provide coverage for injuries suffered by Lewis' employees within the scope of their employment. On October 6, 1989, Victor Mikenas, an employee of Lewis, was injured when he was struck by a vehicle operated by defendant Timothy Andrew. Both Mikenas and Andrew were allegedly acting within the scope of their employment at the time of the accident. Andrew was operating a vehicle owned by his employer, defendant Rely Maintenance Seal Coating & Stripping Company.

The complaint alleges that Andrew was negligent in striking the vehicle owned by Lewis and that, as a result of Andrew's negligent acts, Mikenas has suffered permanent and crippling injuries. The complaint further alleges that, as a result of the injuries suffered by Mikenas, plaintiff has paid Mikenas worker's compensation benefits for medical bills and temporary total disability. A claim is pending for Mikenas' permanent partial disability. The complaint asked that the court award damages on behalf of plaintiff and Mikenas.

On December 4, 1989, defendant Andrew filed a motion to dismiss plaintiff's complaint pursuant to section 2-619(a)(6) of the Illinois Code of Civil Procedure (Ill.Rev.Stat.1989, ch. 110, par. 2-619(a)(6)). A release signed by Mikenas and dated September 26, 1989, was attached to the motion. The release stated that, in consideration of the payment of $24,000, Mikenas released Timothy Andrew, Binnie Andrew, and Prestige Casualty Company from liability for any and all actions arising out of the accident which occurred on October 6, 1989. The motion thus alleged that plaintiff's cause of action, brought as subrogee, was released and barred by the prior settlement agreement.

Plaintiff filed a response to the motion, arguing that the amount of worker's compensation paid to Mikenas far exceeded the $24,000 settlement. Plaintiff further argued that the release was invalid because, first, there was no consideration for the release and, second, because plaintiff did not negotiate or agree with the settlement as required by the Act. On January 10, 1990, arguments were heard on the motion to dismiss. Plaintiff maintained that, based on the case of Villapiano v. Better Brands of Illinois, Inc. (1975), 26 Ill.App.3d 512, 325 N.E.2d 722, the release should be set aside because the settlement was not approved by the entity liable for worker's compensation. Defendants argued that Villapiano did not apply because neither defendant Andrew nor his insurance carrier had actual or constructive notice of the worker's compensation claim, since Mikenas, according to defendants, was operating his own automobile at the time of the accident. Defendants also maintained that, unlike the plaintiff in Villapiano, plaintiff here was bringing a subrogation action rather than an action to set aside the release. Defendants further argued that the settlement was entered into in good faith and should therefore bar plaintiff's action. Plaintiff responded by arguing that Mikenas was, in fact, a passenger in his employer's truck at the time of the accident.

Following this argument, the trial judge stated that he did not have any option except to grant the motion to dismiss. A written order dismissing the cause was entered the same day. This appeal followed.

Plaintiff argues on appeal that the trial court erred in dismissing its complaint. It contends that the dismissal was in error because the Workers' Compensation Act imposes a duty upon the trial court to protect the employer's right to reimbursement for workers' compensation benefits paid, and a release, signed by an injured employee who has accepted worker's compensation benefits, does not bar the employer's right to reimbursement.

Defendants have not filed an appellees' brief in response. We will, however, consider the appeal under the standard set forth in First Capitol Mortgage Corp. v. Talandis Construction Corp. (1976), 63 Ill.2d 128, 345 N.E.2d 493.

Section 5(b) of the Act deals with the situation "[w]here the injury or death for which compensation is payable under this Act was caused under circumstances creating a legal liability for damages on the part of some person other than his employer to pay damages." (Ill.Rev.Stat.1989, ch. 48, par. 138.5(b).) The portions of the section relevant to this appeal provide the following.

First, an employer has a right to reimbursement for any worker's compensation benefits paid, or to be paid, from any compensation the employee receives from a third party, with or without suit. (Ill.Rev.Stat.1989, ch. 48, par. 138.5(b).) An employer may claim a lien upon any award, judgment, or fund that the employee recovers from the third party. (Blagg v. Illinois F.W.D. Truck & Equipment Co. (1989), 186 Ill.App.3d 955, 959, 134 Ill.Dec. 787, 542 N.E.2d 1294, appeal allowed (1989), 128 Ill.2d 661, 139 Ill.Dec. 510, 548 N.E.2d 1066.) Therefore, an employee is entitled to retain only that portion of a recovery from the third party which exceeds the benefits received under the Act from the employer. Ullman v. Wolverine Insurance Co. (1970), 48 Ill.2d 1, 7, 269 N.E.2d 295.

Second, the employer has the right to intervene in any suit filed by the employee against the third party at any stage prior to the satisfaction of judgment (Jackson v. Polar-Mohr (1983), 115 Ill.App.3d 571, 574, 71 Ill.Dec. 384, 450 N.E.2d 1263), so that all orders of the court after hearing and judgment shall be made for the employer's protection (Ill.Rev.Stat.1989, ch. 48, par. 138.5(b)).

Third, no release or settlement of claim for damages between the employee and third-party tort-feasor is valid without the written consent of the employer; however, the employer's consent is not required where the employer has been fully indemnified or is protected by court order. (Ill.Rev.Stat.1989, ch. 48, par. 138.5(b); Freer v. Hysan Corp. (1985), 108 Ill.2d 421, 426, 92 Ill.Dec. 221, 484 N.E.2d 1076; Mounce v. Tri-State Motor Transit Co. (1986), 150 Ill.App.3d 806, 810, 103 Ill.Dec. 906, 502 N.E.2d 53.) Thus, what is protected by the Act is the employer's right to reimbursement of the amount of worker's compensation paid, or to be paid, by him to the employee. Freer, 108 Ill.2d at 426, 92 Ill.Dec. 221, 484 N.E.2d 1076.

Finally, the employer has the right under the statute to bring a suit during the three months prior to the expiration of the statute of limitations if the employee has not filed a suit. (Ill.Rev.Stat.1989, ch. 48, par. 138.5(b).) "This language creates in the employer a right akin to the common law right of subrogation." Chicago Transit Authority v. Yellow Cab Co. (1982), 110 Ill.App.3d 379, 381, 66 Ill.Dec. 120, 442 N.E.2d 546; see also Beiermann v. Edwards (1990), 193 Ill.App.3d 968, 980-81, 140 Ill.Dec. 702, 550 N.E.2d 587.

It is clear that the statute provides numerous protections for the interests of an employer who has made workers' compensation payments. "The statutory purpose of section 5(b) is clear. The employer's right to reimbursement is to be protected by the court." (Blagg, 186 Ill.App.3d at 962, 134 Ill.Dec. 787, 542 N.E.2d 1294; see also Langley v. H.K. Ferguson Co. (1989), 186 Ill.App.3d 1036, 1042, 134 Ill.Dec. 693, 542 N.E.2d 1200.) Plaintiff, as subrogee of the employer, is entitled to the protections of the statute.

In the case relied on by plaintiff, Villapiano v. Better Brands of Illinois, Inc. (1975), 26 Ill.App.3d 512, 325 N.E.2d 722, the employee, while driving his employer's truck, was involved in an accident with another truck driver. Within one month after the accident, the employee, in return for $1,500, executed a full release discharging the defendants from liability. His employer was not informed of the release. When the employer learned of the release, it filed suit to set the release aside. (Villapiano, 26 Ill.App.3d at 513, 325 N.E.2d 722.) The complaint was dismissed by the trial court based on the release. Villapiano, 26 Ill.App.3d at 514, 325 N.E.2d 722.

The appellate court determined that the employer's suit should not have been dismissed. The court noted that notice of the employer's claim was served six weeks after the accident and that the defendants had constructive notice of the employer's interest prior to the execution of the release, because the employee was operating his employer's vehicle at the time of the accident. The court indicated, however, that the outcome would not have been different even if constructive notice were lacking. Villapia...