October 2018 Case Notes & Comments

"A single arrow is easily broken, but not ten in a bundle." ~ Japanese Proverb

MONTHLY QUIZ: Manager of Employer's fast-food restaurant, falls on a wet floor at work and subsequently undergoes medical treatment, PT and surgery. At arbitration, Manager testifies that her medical expenses were paid by her Husband's medical insurer and/or out-of-pocket. Employer submits a fee schedule, which lists the $17,597.96 in medical bills paid by Husband's medical insurer and $260 in co-payments, paid by Manager. Manager and Employer enter a stipulation that the fee schedule amount of medical bills submitted by Manager were $37,767.32. Employer disputes that the fee schedule is the only appropriate basis for calculating the amount of the compensable medical. Section 8(a) of the Workers Compensation Act (820 ILCS 305/8(a)) provides that "[t]he employer shall provide and pay the negotiated rate, if applicable, or the lesser of the health care provider's actual charges or according to a fee schedule." Employer was ordered to pay $17,857.96, representing the $17,597.96 paid by husband's insurer and Manager's out-of-pocket expenses of $260. On appeal, Manager argues that she is entitled to $37,767.32 as the fee scheduled amount of the bills; and, that it was an error to order Employer to pay medical expenses in a lower amount negotiated and paid by a third party insurance carrier and not the stipulated fee schedule amounts. Employer argues that under Section 8(a), it is only liable for the amount of medical expenses actually paid pursuant to the negotiated rate." Who is correct? You be the Judge. (Answer below). 

INSURANCE COVERAGE - LEF SUCCESSFULLY WINS ON SUMMARY JUDGMENT IN WATER DAMAGE CASE: Leahy, Eisenberg & Fraenkel recently obtained summary judgment in the United States District Court for the Central District of Illinois on application of the "Continuous or Repeated Seepage or Leakage of Water" exclusion in a commercial property policy. Insured, a hotel, brought a claim against its property insurer for water damage discovered behind the drywall of over 30 of its rooms which resulted in approximately $1M in property damage and business income damages. The insurer disclaimed coverage based on a faulty workmanship/faulty construction exclusion in the policy, and reserved its right to rely on additional policy provisions to further deny coverage. Expert testimony in the case established that the water infiltration was the result of faulty workmanship/faulty construction of the hotel. The insured attempted to rely on the ensuing loss provision of the exclusion to argue that the ensuing water damage should still be covered. However, under Illinois law, there is no coverage for an ensuing loss where the ensuing loss is, itself, excluded from coverage. Relying on the "Continuous or Repeated Seepage or Leakage of Water" exclusion, the insurer took the litigation position that the ensuing water damage was also excluded based on evidence in the record demonstrating the water infiltration occurred over a long period of time. The insured challenged the position as barred by Illinois' "mend the hold" doctrine which prevents an insurer from taking a litigation position not previously raised in its denial of coverage. The Central District of Illinois agreed with the insurer that its reservation on other potential provisions in the policy, and its affirmative defense based on the "Continuous or Repeated Seepage or Leakage of Water" exclusion at the onset of litigation, properly raised the coverage issue and did not implicate the "mend the hold" doctrine. The Court also agreed with the insurer that the ensuing loss language in the policy only applied to the faulty workmanship/faulty construction exclusion and did not impact the application of the "Continuous or Repeated Seepage or Leakage of Water" exclusion. Summary judgment in favor of the insurer was granted and the case was dismissed. Tracy Holdings LLC v. West Bend Mutual Ins. Co., 2018 U.S. Dist. LEXIS 162363, 2018 WL 4571859, __ F. Supp. 3d __ (C.D. Ill. Sept. 24, 2018). 

INSURANCE - ILLINOIS SUPREME COURT HOLDS THAT STATUTE OF LIMITATIONS FOR CLAIMS AGAINST AGENTS ACCRUES UPON DELIVERY OF THE POLICY: In early 2012 Homeowners asked Agent to provide them with a new homeowner's policy. Homeowners claim that they gave Agent a copy of their old policy and requested a new policy that was "equal to the coverages" provided by the former insurer. Insurer issued the policy in 2012, which was renewed for the next three years. Homeowners were sued for defamation, invasion of privacy, and intentional infliction of emotional distress. In August 2014, Insurer denied coverage and filed a declaratory action. In September 2015, the Homeowners filed a claim against Insurer and Agent, contending that because their old policy would have potentially covered such claims, Agent was negligent. Section 13-214.4 of the Code of Civil Procedure (Code) provides customers a two-year deadline to file any lawsuits against insurance producers. 735 ILCS 5/13-214.4 (West 2014). On motions to dismiss, Agent and Insurer argued that the two-year period began when Homeowners first received their policy in March 2012, so their claims were untimely after March 2014. The trial court granted the motions, reasoning that insureds have an obligation to read their policies. The appellate court reversed, reasoning that the "discovery rule" delayed the start of the limitations period until Homeowners knew or should have known of the injury (i.e. when Insurer denied the claim). The Illinois Supreme Court reversed and held that a failure to procure insurance is a tort arising out of a contract which accrues at the time of the breach. The insureds had the obligation to read their contract and could have learned of the alleged breach when provided with the policy in 2012. The cause of action thus accrued at that time. Patti Deuel of Leahy, Eisenberg & Fraenkel represented American Family Mutual Insurance Company. American Family Mutual Insurance Company v. Walter Krop, et al. 2018 IL 122556 (Oct. 18, 2018). 

INSURED'S INTENTIONAL ACTS DO NOT PRECLUDE COVERAGE TO CO-INSUREDS FOR NEGLIGENT FAILURE TO PREVENT THE SEXUAL ABUSE UNDER HOMEOWNERS "EXPECTED INJURY" EXCLUSION: Insurer issued a homeowner's insurance policy to Wife and Husband, which excluded coverage for "any bodily injury or property damage intended by, or which may reasonably be expected to result from the intentional or criminal acts or omissions of, any insured person." Wife and her home-run Daycare were sued by a Mother, wherein Mother alleging that Husband assaulted her two minor Children, both of who attended Daycare. Insurer filed a declaratory action contending that it owed no duty to defend or indemnify Wife or Daycare. The trial court granted Insurer judgment on the pleadings based upon the "expected injury" exclusion and Mother appealed. On appeal, Mother argued that in reviewing a duty to defend, it was necessary to distinguish between Husband's intentional acts and the "independent" negligent acts of Daycare and Wife. Despite the fact that the "expected injury" clause used the words "any insured" and although the policy definitions contained a "joint obligations" clause (i.e. imposing joint obligations on the named insured and that person's "resident spouse."), the appellate court examined the specific factual allegations asserted against Daycare and Wife to determine whether the "expected injury" exclusion applied to their particular conduct. Since none of the allegations contended that Daycare or Wife acted intentionally, participated in the abuse, or knew or should have known of such acts, the "expected injury" exclusion was not triggered. Allstate Indemnity Co. v. Contreras, 2018 IL App (2d) 170964 (Oct. 19, 2018). NOTE: Decision also discusses Illinois 'inferred-intent' rule," whereby it is presumed that a person who sexually abuses a minor intends to injure the minor. COMPARE/CONTRAST: Westfield National Insurance Co. v. Continental Community Bank & Trust Co., 346 Ill. App. 3d 113 (2nd Dist. 2003).  

ANSWER TO QUIZ: Here, under the plain language of section 8(a) of the Act, the employer is required to pay (1) the negotiated rate, if applicable, (2) the lesser of the health care provider's actual charges, or (3) according to a fee schedule. 820 ILCS 305/8(a). Contrary to Manager's assertion, there is no limiting language that requires Employer to pay the negotiated rate only when it is negotiated by Employer or Employer's own insurance carrier. The statute clearly requires the Employer to pay "the negotiated rate." Had the legislature intended to limit negotiated rates and agreements to those between Employer or Employer's own insurance carrier, it could have included this restriction; however, the legislature declined to do so. Perez v. Illinois Workers' Compensation Comm'n, 2018 IL App (2d) 170086WC (Jul 31, 2018).  


Past Publications

2022

August 2022
July 2022
April 2022
March 2022
January 2022

2021

December 2021
October 2021
August 2021
July 2021
May 2021
April 2021
March 2021
January 2021

2020

December 2020
November 2020
October 2020
September 2020
August 2020
February 2020
January 2020

2019

December 2019
October 2019
September 2019
July 2019
May 2019
March 2019
February 2019
January 2019

2018

December 2018
October 2018
August 2018
June 2018
May 2018
April 2018
March 2018
February 2018

2017

December 2017
November 2017
October 2017
September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017

2016

December 2016
October 2016
September 2016
August 2016
July 2016
June 2016
March 2016
January 2016

2015

December 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015

2014

December 2014
October 2014
September 2014
July 2014
June 2014
April 2014
April 2014
March 2014
February 2014
January 2014

2013

December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
January 2013

2012

December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012

2011

December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011

2010

December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010

2009

December 2009