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Melinda Jacobo v. The Illinois Workers' Compensation, et al., 2011 IL App 3d 100807WC (3d Dist. 2011)  

By: Sean M. Abernathy - Associate - Nyhan, Bambrick, Kinzie & Lowry

Updated: January 15, 2012


The Petitioner injured her back in a work related accident when a forklift backed into her. Petitioner file an Application for Adjustment of Claim, as well as a petition for penalties and attorney's fees pursuant to Sections 19(I), 19(k) and 16 of the Act. This initial penalties petition was not at issue in the above captioned appeal.

At trial, the arbitrator found that Petitioner’s back condition was causally related to the work accident and that Petitioner had become permanently and totally disabled as a result of the forklift accident. The arbitrator awarded TTD benefits for 203 2/7 weeks, permanent total disability benfits and reasonable and necessary medical expenses. The arbitrator also granted the petition for penalties and fees, finding unreasonable delay in the payment of TTD and necessary medical benefits.
The employer, New Breed Leasing of Illinois, Inc., appealed the decision to the Commission. Petitioner did not seek a review of the Arbitration award. The Commission affirmed the TTD and PTD awards, but reversed the award of penalties and fees. The Commission found that the employer’s denial of benefits after an initial Independent Medical Examination was not unreasonable. Following this decision, the employer’s attorney sent correspondence to Petitioner’s counsel stating that the employer had decided not to appeal the Commission’s decision and award. Respondent’s counsel requested submission of proposed calculations for the amount of the award in order reach agreement on payment.

Following this, Petitioner appealed the Commission’s decision to deny her initial penalties petition. The employer did not seek any additional review of the Commission’s awards for medical expenses, TTD or PTD benefits. Despite the lack of review, the employer did not make any payments to the Petitioner for the undisputed TTD, PTD and medical awards. Petitioner’s attorney made several requests via email and correspondence for payment of these benefits over several months. Ultimately, the circuit court entered a judgment reversing the Commission and reinstating the arbitrator’s penalties award.
As Petitioner had not received payment for the TTD, PTD or medical expense benefits, she filed a second petition for penalties and attorney’s fees pursuant to Sections 19(l), 19(k) and 16 of the Act, alleging an unreasonable and vexatious delay. This second petition for penalties became the subject matter of the above captioned case.

Meanwhile, the employer appealed the circuit court’s judgment, only on the issue of penalties. Following this appeal, the appellate court reversed the circuit court and reinstated the Commission decision on the issue of penalties. The appellate court held that the evidence presented at arbitration featured conflicting medical opinions, and thus the employer’s reliance on its IME opinion was not unreasonable or vexatious. Following this judgment, the employer paid the Petitioner for the undisputed portions of the award for medical expenses, TTD and PTD. At that time, Petitioner’s second petition for penalties was still pending.

Following this, the Commission conducted a hearing on Petitioner’s second petition for penalties and ultimately denied the petition. The Commission found that, because the employer paid the award following the appellate decision as to the initial Commission decision, Petitioner was not entitled to penalties. Petitioner then appealed the denial of penalties to the circuit court, which confirmed the Commission’s denial. The circuit court reasoned that, because Petitioner failed to seek a judgment from the court while her initial appeal was pending and would have been barred from doing so by 19(g), employer was not required to pay the undisputed amount. The circuit court stated, “[t]here is no case law or statutory authority requiring the [employer] to pay undisputed amounts. Thus, the [employer’s] failure to do so should not be considered the basis for a penalty.” Following this decision, Petitioner filed an appeal with the appellate
court arguing that the Commission’s denial of penalties for employer’s failure to pay on undisputed awards was against the manifest weight of the evidence.

In holding that Petitioner was entitled to penalties under Sections 19(l), 19(k) and 16, the appellate court stated that the standard for penalties differed between 19(l) and those found in 19(k) and 16.

- Penalties Under 19(l)
The court outlined that penalties under 19(l) are mandatory if the payment is late, for whatever reason, and the employer cannot show adequate justification, viewed in terms of reasonableness, for the delay. In other words, 19(l) penalties are a late fee and the employer has the burden of justifying a delay. The justification is sufficient only if a reasonable person in the employer’s position would believe the delay was justified. The court stated it would not disturb the Commission’s evaluation of reasonableness, a question of fact, unless the evaluation was found to be contrary to the manifest weight of the evidence.
The appellate court reviewed the Commissions findings and held that its denial of penalties under 19(l) was against the manifest weight of the evidence. The court found that, since the only issue contested on appeal was the Commission’s denial of penalties and that the employer had not appealed the decision with regards to the substantive awards, the Commission’s ultimate denial of Petitioner’s second penalties petition was against the manifest weight of the evidence. They held that the issue of penalties was entirely unrelated to the substantive awards of benefits and that all proceedings after the substantive benefits award decision concerned the separate issue of penalties. The court found the Commission’s reliance on the appellate court’s prior decision regarding Petitioner’s initial penalties petition as a continuation of the prior proceeding was unfounded. The explicitly held; “Our previous decision does not establish justification for the employer’s delay under an objective reasonableness standard.”

The court went on to outline the circuit court decision, Zitzka v. Industrial Commission, 328 Ill. App. 3d 844, 767 N.E.2d 405 (2002), was having similar circumstances to the instant case. The appellate court read Zitzka to “plainly [establish] that the claimant’s appeal of an issue unrelated to the substantive award is not a legitimate reason to withhold payment of the undisputed award.” Id at 850. They looked to Zitzka to determine that the Petitioner’s appeal did not establish a reasonable justification of the employer’s delay.
To drive the point home, the court noted, “it is a well-settled rule that the failure to raise an issue before the Commission results in its waiver.” Thus, since the employer knew that the Petitioner could not seek a review of the substantive awards and that the only issue she could appeal was the issue of penalties, their “feigned ignorance of what issues were contested in the claimant’s appeal [was] not a reasonable justification to delay the payment of the uncontested portion of the award.”

The court found the Commission’s determination that the employer’s delay in payment of the uncontested awards was justified was against the manifest weight of the evidence. Accordingly they reversed the Commission’s denial and remanded the issue for a determination of penalties under 19(l).

- Penalties Under 19(k) and Fees Under 16
The court then considered penalties under Sections 19(k) and 16. They outlined that Sections 19(k) and 16 address situations where there is not only delay, but delay that is deliberate or the result of bad faith or improper purpose. They noted that the decision to award penalties and fees under 19(k) and 16 is left to the discretion of the Commission and is only reviewable upon an abuse of that discretion. Thus, for the appellate court to overturn a decision on penalties, the ruling must have been “arbitrary, fanciful, [or] unreasonable.”

The appellate court held that the employer had no legitimate reason to delay payment of the undisputed awards for TTD, PTD and medical expenses. They found that the employer simply refused to pay the undisputed portions of the award until all appeals on contested issues were exhausted. The court held that this non payment of an undisputed obligation was intentional and amounted to more than simply a lack of good cause. Thus, they went on to rule that the Commission’s determinations were against the manifest weight of the evidence and constituted an abuse of discretion.
Pointedly, the court concluded, “[t]he employer’s delay in paying the uncontested award…served no purpose except to delay compensation to an injured worker, a result penalties are designed to prevent. We want to be clear on this point. Any portion of a claimant’s benefits which are undisputed must be promptly paid or the employer will be subject to penalties and attorney’s fees under the Act.”

The court further warned against the non-payment of undisputed benefits, noting that non-payment puts claimants into the situation where they must chose between foregoing appeal rights on certain issues or risking the employer withholding the stream of income benefits at a time when a claimant is without income.
The appellate court reversed the Commission’s denial of penalties and fees and remanded the case to the Commission for the determination of penalties and fee amounts to be assessed against the employer.