Wilson v. Hoffman Group, Inc.

• Decision Date: 25 October 1989
• Docket Number: No. 66918,66918
• Parties: , 137 Ill.Dec. 579 Scott WILSON, Appellee, v. The HOFFMAN GROUP, INC., Appellee (Ideal Roofing, Inc., et al., Appellants).
• Court: Illinois Supreme Court

Page 524

546 N.E.2d 524

131 Ill.2d 308, 137 Ill.Dec. 579

Scott WILSON, Appellee, v. The HOFFMAN GROUP, INC., Appellee (Ideal Roofing, Inc., et al., Appellants).

No. 66918.

Supreme Court of Illinois.

Oct. 25, 1989.

Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago (Thomas A. Brabec, Stephen R. Swofford and Bruce L. Carmen, of counsel), for appellant.

Robert J. Mangan, Wheaton, for appellee Scott Wilson.

McKenna, Storer, Rowe, White & Farrug, Chicago (James P. DeNardo, Patricia A. Morton and Christine L. Olson, of counsel), for appellee The Hoffman Group, Inc.

Justice CLARK delivered the opinion of the court:

Plaintiff, Scott Wilson, was injured in a roofing accident. He filed a two-count complaint, in the circuit court of Du Page County, against the general contractor of the project, The Hoffman Group, Inc. (Hoffman), alleging violations of the Structural Work Act (Ill.Rev.Stat.1983, ch. 48, par. 60 et seq.) and negligence. Thereafter, Hoffman filed a six-count third-party complaint against Wilson's employer, Ideal Roofing, Inc., Popko Management, Inc., and Popko Roofing and Insulation, Inc. (Ideal-Popko), seeking contribution for Ideal-Popko's negligence and their violation of the Structural Work Act under "An Act in relation to contribution among joint tortfeasors" (Ill.Rev.Stat.1983, ch. 70, par. 301 et seq.) (the Contribution Act) and indemnity for Ideal-Popko's breach of a contract to obtain insurance.

Wilson and Ideal-Popko entered into a settlement agreement whereby Ideal-Popko agreed to pay $24,000 in cash and waive their $149,737 statutory workers' compensation lien in exchange for a release from liability from Wilson. The lien in question is statutorily imposed by section 5(b) of the Workers' Compensation Act (Ill.Rev.Stat.1983, ch. 48, par. 138.5(b) ). Under section 5(b), an employee who has received workers' compensation benefits is required to reimburse the employer for the full amount of benefits paid or payable by the employer from any recovery the employee receives from a third party legally responsible for the employee's injuries. Ullman v. Wolverine Insurance Co. (1970), 48 Ill.2d 1, 7, 269 N.E.2d 295.

The settlement agreement and release were conditioned upon a finding by the trial court that the settlement was in good faith within the meaning of section 2(c) of the Contribution Act. Hoffman objected to the settlement, arguing that (1) a plaintiff/employee could not settle directly with a third-party defendant/employer, (2) the consideration was inadequate for the release, and (3) if the settlement was valid, Hoffman is entitled to a setoff for both the $24,000 cash and the amount of the workers' compensation lien against any judgment obtained against it by Wilson.

Wilson maintained the position that while the value of the workers' compensation lien was sufficient consideration for purposes of the settlement agreement, it should not be considered as a setoff under section 2(c) of the Contribution Act. The trial court found that the plaintiff's position was contrary to law and evidenced a lack of good faith on the part of the plaintiff, and refused to certify the settlement as being in good faith.

Subsequently, Wilson and Ideal-Popko waived the condition that a good-faith finding be entered, and consummated the settlement. The trial court refused to dismiss the third-party complaint pursuant to section 2(d) of the Contribution Act. However, the court found that the order involved a question of law as to which there was a substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation (107 Ill.2d R. 308(a) ) and entered an order identifying and certifying the following questions of law for interlocutory review pursuant to Supreme Court Rule 308 (107 Ill.2d R. 308):

"1. Whether the settlement agreement entered into between the plaintiff and the third party defendant, the terms of which were specified in the release documents considered by this court, was in good faith?

2. Whether, when the plaintiff contends the amount of the workmen's compensation lien release should be considered by the court as consideration under the Contribution Act; should not the amount of said workmen's compensation lien release have to also be considered under 2--C of the Contribution Act as a set-off against any judgment entered in favor of plaintiff?

3. Whether plaintiff should be allowed a double recovery in that the third party defendant employers' reimbursement will not diminish the sums to be collected under the judgment and plaintiff will enjoy collection of the judgment without giving the objecting non-settling defendants the right to any set-off as to said third party defendant employer's reimbursement?

4. Should the waiver of the Workmen's Compensation lien be considered in addition to the $24,000 new money as a set-off, if there should be a judgment against the remaining defendants?

5. Is the plaintiff's position correct that only the 'new money' should be determinative as to what the amount of the set-off should be?"

Ideal-Popko's Rule 308 application for interlocutory appeal was denied by the appellate court. We granted review pursuant to Supreme Court Rule 315(a) (107 Ill.2d R. 315(a) ).

We believe the five questions certified for appeal can be consolidated into two basic questions: (1) whether the settlement between the plaintiff and Ideal-Popko was in good faith pursuant to section 2(c) of the Contribution Act, and (2) whether the amount of the workers' compensation lien should be set off against any subsequent judgment obtained by the plaintiff in accordance with section 2(c) of the Contribution Act. We answer both questions in the affirmative.

We begin by examining the relevant provisions of the Contribution Act. Section 2 of the Act provides in part:

"Right of Contribution. (a) Except as otherwise provided in this Act, where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them.

(b) The right of contribution exists only in favor of a tortfeasor who has paid more than his pro rata share of the common liability, and his total recovery is limited to the amount paid by him in excess of his pro rata share. No tortfeasor is liable to make contribution beyond his own pro rata share of the common liability.

(c) When a release or covenant not to sue or not to enforce judgment is given in good faith to one or more persons liable in tort arising out of the same injury or the same wrongful death, it does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms so provide but it reduces the recovery on any claim against the others to the extent of any amount stated in the release or the covenant, or in the amount of the consideration actually paid for it, whichever is greater.

(d) The tortfeasor who settles with a claimant pursuant to paragraph (c) is discharged from all liability for any contribution to any other tortfeasor." Ill.Rev.Stat.1987, ch. 70, pars. 302(a) through (d).

Ideal-Popko contends that in accordance with these sections, the trial court should have found the settlement between the plaintiff and Ideal-Popko to have been in good faith and dismissed Hoffman's third-party action for contribution against Ideal-Popko. In considering this argument, the first question we must answer is whether the settlement was made in good faith.

While this court has never specifically considered when a settlement between a plaintiff/employee and a third-party defendant/employer is made in good faith, several appellate court decisions have dealt with this issue. In LeMaster v. Amsted Industries, Inc. (1982), 110 Ill.App.3d 729, 66 Ill.Dec. 454, 442 N.E.2d 1367, the appellate court held that a third-party defendant/employer who settles with a plaintiff/employee has not entered into a "good faith" settlement because the employee had no rights to relinquish as consideration for the settlement. In LeMaster, the plaintiff was injured when he fell from a roof at Amsted Industries' plant, and sued Amsted pursuant to the Structural Work Act (Ill.Rev.Stat.1981, ch. 48, par. 60 et seq.). Amsted filed a third-party complaint seeking indemnity and contribution from plaintiff's employer, William R. Montgomery & Associates. Montgomery and plaintiff entered into a settlement conditioned upon dismissal of the third-party action. In the settlement, plaintiff released Montgomery from all liability in tort in exchange for a waiver of the workers' compensation lien and an additional payment. The trial court dismissed the third-party action against the employer pursuant to section 2(d) of the Contribution Act. (LeMaster, 110 Ill.App.3d at 730-31, 66 Ill.Dec. 454, 422 N.E.2d 1367.) The appellate court reversed, holding that since the employee's exclusive remedy against the employer lay within the Workers' Compensation Act, the employee had no rights which he could relinquish in exchange for the lien waiver and cash payment. Consequently, the settlement lacked consideration and was not executed in good faith. LeMaster, 110 Ill.App.3d at 736, 66 Ill.Dec. 454, 422 N.E.2d 1367.

LeMaster was decided before this court's decision in Doyle v. Rhodes (1984), 101 Ill.2d 1, 77 Ill.Dec. 759, 461 N.E.2d 382. In Doyle, this court considered the question of whether an action for contribution may be brought against the employer of an injured party. Doyle rejected the argument that the employer's immunity from suit by the injured employee precluded a third-party action against the employer for contribution. Rather, this court noted that an employer's statutory immunity from an employee's tort action is an affirmative defense which must be raised or is waived. Until and unless the...