What's The Point In Settling

July 2014

For the workers' compensation respondent, settling carries three main goals: termination of past and present litigation, prevention of future litigation, and minimization of exposure. When a settlement agreement occurs, these goals are embodied in the wording of the settlement contract. Respondents must be aware of the advantages and pitfalls that can arise from including various terms or from excluding certain language in the contract. This article provides a brief overview of the pertinent case law, and important points to consider with each settlement.

Workers' compensation settlement contracts are governed by contract law, including the concepts of mutual intent and consideration. Hagene v. Derek Polling Constr., 388 Ill.App.3d 380, 902 N.E.2d 1269 (Ill.App., 5th Dist., 2009). The courts will therefore typically enforce unambiguous terms as written. Countryman v. Industrial Comm'n, 292 Ill.App.3d 738, 686 N.E.2d 61 (Ill.App. 2 Dist., 1997). However, whether a contract is ambiguous or clear is a question of law, and if the contract is ambiguous its interpretation is a question of fact subject to rules of contract construction and parol evidence. Id. One rule of construction commonly cited by the appellate courts is the tenet that the more specific provision controls over the more general provision. Mayhew v. Industrial Comm'n, 304 Ill.App.3d 557, 710 N.E.2d 909 (1999). As with general contract law, courts will also look toward the intent of the parties, which is discerned from the language used as well as the circumstances of the transaction. Hagene.

The courts have nonetheless expressed disfavor toward strictly interpreting contracts to find that a party has relinquished statutory rights. Hagene, supra; Gallagher v. Lenart, 226 Ill.2d 208, 874 N.E.2d 43 (2007). In most circumstances, an explicit statement waiving a specific right is required before the courts will imply such a right has been extinguished. Id. Therefore, if it is the intent of the agreement to terminate litigation of these issues, the contract drafter must carefully tailor the language to accomplish this.

In Countryman, the petitioner settled a claim for hand, wrist and elbow injuries in December 1992. At one place, the contract listed three dates of accident in 1989 and 1991, specifying injuries to the petitioner's upper extremities, but at another, it referred to settlement of "all accidental injuries allegedly incurred as described herein." At a third place, the contract provided that the settlement "specifically includes any other accident...to the date of this settlement." The petitioner subsequently filed an application for back injuries allegedly sustained in 1991 (on a different date from the three listed on the settlement contract.) The Appellate Court found the contract was ambiguous, because the language specifically releasing the three accident dates conflicted with the provision about "any other accident." Applying the principle that the more specific provision overrules the more general provision, the court further held that the contract did not preclude the filing of the subsequent claim for benefits for the back injury.

In Mayhew, petitioner signed a settlement contract with a rider stating he was settling "any and all claims...on account of the accident on or about...1990 or any other claimed specific accidents or allegations of repetitive trauma or exposure to noise or materials during employment at (respondent)...and all known and unknown injuries which allegedly resulted from any (of these)." The Commission approved this contract in 1994. In 1995, the petitioner filed a new application for shortness of breath and weakness due to inhalation of coal dust, and other fumes at work. The Appellate Court considered whether the 1994 contract language was ambiguous. In finding it was not, the court distinguished the case from Countryman noting the Mayhew contract specifically described the additional accidents, including exposure injuries, that included the injury described in the 1995 claim. Therefore, the court held the 1994 contract barred the 1995 claim.

Countryman and Mayhew teach that to extinguish claims or injuries in addition to those originally involved in a particular case, the contract language must be explicit in describing the additional claims, as well as the intent of the parties to release them as consideration for the settlement. Such specific terms will be held to control over general or vague provisions about "any accident," because the specific language is better evidence of the intent of the parties.

Moreover, contract language should always refer to not only the initial accidents, but any conditions, disability or medical treatment resulting from that accident. Equally critical, the contract should explicitly set forth the parties' intent to resolve these later connected occurrences. This will provide a potential res judicata defense if the petitioner files a subsequent claim for such a condition.

Remember, too, that pursuant to their individual statutes, multiple states may have concurrent jurisdiction over the same work accident. In Gulf Interstate Geophysical/Gulf Interstate Piping v. Industrial Comm'n, 198 Ill.App.3d 307, 555 N.E.2d 989 (Ill.App., 5th Dist., 1990). The petitioner settled his case in Indiana, but later filed a claim in Illinois to recover additional compensation. The arbitrator dismissed the case, finding that the Indiana settlement constituted "an accord and satisfaction" and an "estoppel" requiring dismissal of the Illinois case. On appeal, the Commission found that because the Indiana settlement agreement did not contain an explicit waiver of rights in other jurisdictions, it did not prevent the petitioner from pursuing his claim in Illinois. The appellate court agreed, holding that in addition to the lack of any terms in the contract itself, there was no provision in either the Indiana or Illinois statutes precluding the supplemental action. Id., 198 Ill.App.3d at 313-314. The court did agree that the Indiana settlement proceeds would be credited against any recovery in Illinois. Id.

Extinguishing the petitioner's rights to seek further medical care, or even to ask the employer to satisfy costs of past care that might be billed after contract approval, bears special attention. The courts have pronounced that the right to be compensated for medical costs associated with work-related injuries "is at the very heart of the Illinois Workers' Compensation Act." Hagene, supra. As a result, this right can only be waived by explicit language. Locking petitioner into full waiver begins with checking the box on the face of the contract to state that the employer has not paid all medical bills. Hagene. It is also a better practice to specify any disputes regarding liability or responsibility for medical expenses. Rogers, supra; see also Kasper, supra. Furthermore, the contract should make it clear that the worker is completely aware of the full extent of his or her rights to have the employer pay medical bills but that, with the advice of counsel, it is the worker's intent to give them up. Hagene; also see, e.g., Krause v. Illinois Emergency Relief Comm'n, 9 Ill.Ct.Cl. 611 (1937). In order to avoid any argument of ambiguity, the terms on the front of the contract should mirror any terms in the rider or elsewhere. Hagene; Countryman.