REPORTER OF DECISIONS - ILLINOIS APPELLATE COURT

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AMERICAN AIRLINES,

		Appellee,

						V.

THE INDUSTRIAL COMMISSION, et al.

(ANNE HENNESSY, Appellee.)

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					No. 1-01-1545WC

							Appellate Court of Illinois	

							First District, Industrial Commission Division

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							JUSTICE RARICK delivered the modified opinion of the court upon

denial of rehearing and certification:

		  McCULLOUGH, P.J., and HOFFMAN, O'MALLEY, and

HOLDRIDGE, 

JJ., concur

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							Appeal from the Circuit Court of Cook County

							The Honorable Thomas P. Quinn, Judge Presiding

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For APPELLANT, Peter N. Stein, of Lincolnshire		          

			Goldstein, Fishman, Bender & Romanoff

			Robert J. Smoler, of Chicago

For APPELLEE, Slavin & Slavin of Chicago

		    Mark F. Slavin

              Robert W. Dean 

							NO. 1-01-1545WC

							IN THE APPELLATE COURT OF ILLINOIS

							FIRST JUDICIAL DISTRICT

							Industrial Commission Division

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AMERICAN AIRLINES,						)	Appeal from

	Appellee,							)	Circuit Court

v.									)	Cook County

THE INDUSTRIAL COMMISSION, et al.			)	No. 00L50059

(Anne Hennessy, Appellant.)					)	       00L50229

									)	Honorable

									)	Thomas P. Quinn,

									)	Judge Presiding.

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							MODIFIED UPON DENIAL OF REHEARING

JUSTICE RARICK delivered the opinion of the court:

		Claimant, Anne Hennessy, sought benefits pursuant to the Workers' Compensation Act (Act) (820 ILCS 305/1 et seq. (West 1996)) for injuries sustained while in the employ of American Airlines.  On August 20, 1993, Hennessy filed an application for

adjustment of claim (93WC44523) arising from a back injury she sustained on June 29,

1991.  On August 20, 1996, she filed a claim (96WC44689) arising from a second back

injury she sustained on April 24, 1996.  The arbitrator entered her decisions on May 21,

1998.  In both cases, the arbitrator awarded medical expenses and temporary total disability

(TTD) benefits, but declined to impose penalties or assess attorney fees.  Both parties

appealed.  Hennessy filed her petition for review on June 9, 1998.  The Industrial

Commission (Commission) consolidated the cases for review.

		Prior to the parties filing their petitions for review before the Commission, our  supreme court issued its opinion in McMahon v. Industrial Comm'n, 183 Ill. 2d 499, 702 N.E.2d 545 (1998), wherein it held that section 19(k) and 16 of the Act did not preclude the imposition of penalties and the assessment of attorney fees for unreasonable and vexatious

delay in paying medical expenses.

		Hennessy filed her statement of exceptions and supporting brief on July 30,

1999.  In it Hennessy argued, inter alia, that American Airlines' "failure to pay temporary total disability benefits and the withholding of medical services *** [was] unreasonable and

produced a vexatious delay in [Hennessy's] receipt of compensation***."  Hennessy further

argued that she was "entitled to penalties pursuant to section 19(k) of the Act for 50% of the

amount payable on this award."  She also sought section 19(l) penalties and attorney fees

pursuant to section 16.

		On October 27, 1999, the Commission filed its decision and opinion on

review.  In 93WC44512, the Commission affirmed and adopted the decision of the

arbitrator.  In 96WC44689, the Commission modified the arbitrator's decision, finding that

Hennessy was entitled to additional TTD benefits and medical expenses.  The Commission

further found that American Airlines' conduct was "unreasonable and vexatious" and that

Hennessy was entitled to penalties and fees.  Noting that Hennessy requested penalties only

on the unpaid TTD benefits, however, the Commission calculated the amount of penalties

and fees as follows:

	Section 19(k) - $31,404.54 (unpaid TTD benefits) x .5 = $15,702.27

	Section 16 - $15,702.27 x .2 = $3,140.45

	Section 19(l) - $2,500

		Both parties filed section 19(f) petitions requesting the Commission to recall

its decision and correct a computational error.  American Airlines argued that it had made additional payments after arbitration and that the amount of TTD benefits upon which the

Commission calculated penalties and fees was erroneous.    In her petition, Hennessy argued

that in her statement of exceptions and supporting brief in 96WC44689 she specifically

argued that American Airlines' withholding of medical services was unreasonable and

vexatious and requested section 19(k) penalties on the amount payable on the award.  

		The Commission denied both parties' petitions, finding that no clerical or

computational error had been made.  With respect to Hennessy's argument, the Commission

stated that it had chosen not to apply McMahon retroactively and therefore did not include medical benefits in its calculation of penalties and fees.

		Hennessy filed her petition for judicial review in the circuit court of Cook

County on December 17, 1999.  In her brief, Hennessy argued that the Commission erred

in failing to apply McMahan retroactively.  She again noted that in her statement of exceptions and supporting brief before the Commission, she had requested that penalties be

awarded on both TTD and medical expenses.  The circuit court confirmed the decision of

the Commission, finding that because McMahon expressly overruled Childress v. Industrial Comm'n, 93 Ill. 2d 144, 442 N.E.2d 841 (1982), it represented a change in the law and therefore should be given prospective application only.

		On appeal, Hennessy argues that the Commission erred in refusing to apply McMahon retroactively and therefore failed to consider her medical expenses when it calculated the amount of section 19(k) penalties and section 16 attorney fees.

		Initially, we note that in reviewing Hennessy's statement of exceptions and

supporting brief filed before the Commission, it appears that Hennessy did request penalties

and fees be assessed on the medical expense award as well as the TTD award.  She argued

that American Airlines' "failure to pay temporary total disability benefits and the withholding of medical services" was unreasonable and had resulted in a vexatious delay in her receipt

of "compensation."  She requested section 19(k) penalties equal to 50% "of the amount

payable of this award."  The Commission's finding that Hennessy requested penalties

calculated only on the unpaid TTD is incorrect.  

		American Airlines argues that the Commission made a factual determination

that penalties were not warranted, and that such determination was not contrary to the

manifest weight of the evidence.  The language the Commission used in its original decision

and in its denial of Hennessy's section 19(f) petition clearly refutes this argument.  Although

the arbitrator, in 96WC44689, found as a matter of fact that American Airlines' conduct was

not unreasonable or vexatious and that penalties and fees were therefore not warranted, the

Commission, in 96WC44689, did not adopt these findings.  In this case the Commission

made a factual finding that American Airlines' conduct was unreasonable and vexatious. 

The Commission declined to include medical expenses in its calculation because it

erroneously thought that Hennessy was not seeking penalties on that part of the award.  In

its denial of Hennessy's section 19(f) petition, the Commission stated that they "chose not to apply McMahon[] retroactively and therefore did not include medical benefits in its calculation of penalties."  In its original decision, the Commission made no mention of

McMahon or the issue of whether the rule announced therein applies retroactively.  The Commission's rationale in its denial of Hennessy's section 19(f) petition is different than in

its original order.  Regardless of whether the Commission declined to include the medical

expense award in its penalties and fees calculation because it misunderstood Hennessy's

argument or because it chose not to apply McMahon retroactively, the Commission's mistake was one of law, not fact.

		Generally, when a court issues an opinion, the decision is presumed to apply both retroactively and prospectively.  Deichmueller Construction Co. v. Industrial Comm'n, 151 Ill. 2d 413, 603 N.E.2d 516 (1992). This presumption can be overcome in one of two

ways.  First, the issuing court itself may expressly state that its decision will be applied

prospectively only.  See, e.g., Molitor v. Kaneland Community Unit District No. 302, 18 Ill. 2d 11, 163 N.E.2d 89 (1959).  Second, a later court may, under some circumstances,

override the presumption by declining to give the previous opinion retroactive effect, at least

with respect to the parties appearing before the later court.  Aleckson v. Village of Round Lane Park, 176 Ill. 2d 82, 679 N.E.2d 1224 (1997).  Nowhere in McMahon does our supreme court state that its decision is to be given prospective application only. 

Accordingly, our analysis will focus on whether the Commission and circuit court acted

properly in overriding the presumption by declining to give McMahon retroactive effect.

		 In Elg v. Whittington, 119 Ill. 2d 344, 518 N.E.2d 1232 (1987), our supreme court articulated the test for determining whether a holding should be applied prospectively

only:

		Whether the rule will be applied prospectively will depend upon

whether: 'the decisions to be applied nonretroactively * * *

establish[es] a new principle of law, either by overruling clear 

past precedent on which litigants may have relied [citation], or

by deciding an issue of first impression whose resolution was

not clearly foreshadowed.' [Citation.] If this criteria is met, the

question of prospective or retroactive application will be

answered by considering: (1) whether, given the purpose and

prior history of the rule, its operation will be retarded or

promoted by prospective or retroactive application and (2) whether prospective application is mandated by the balance of

equities.  Elg 119 Ill. 2d at 357, 518 N.E.2d at 1238.

This test was first promulgated by the United States Supreme Court in Chevron Oil v. Huson, 404 U.S. 97, 30 L. Ed. 2d 296, 92 S. Ct. 349 (1971), and adopted by our supreme court in Board of Commissioners of Wood Dale Public Library District v. County of DuPage, 103 Ill. 2d 422, 469 N.E.2d 1370 (1984).

		The circuit court specifically found that because McMahon expressly overruled Childress, it represented a change in the law, and that under such circumstances, the decision should be given prospective application only.  We find that the circuit court misapplied the Chevron test.  Although McMahon overruled clear past precedent, there is no indication that the parties relied on Childress.  Before the Commission, neither party cited Childress or made any argument with respect to whether the amount of medical expenses awarded should

be included in the determination of the amount of penalties and fees.  Thus, the first criteria of the Chevron test was not met.  Because our supreme court did not state in McMahon that it was to be given prospective application only, and because the parties did not rely on

Childress, the precedent overruled by McMahon, the presumption of retroactive application is not overcome.  

		Our conclusion is supported by our supreme court's decision in Scott v. Industrial Comm'n, 184 Ill. 2d 202, 703 N.E.2d 81 (1999).  In Scott, this court rejected the claimant's argument that the Commission should have included medical expenses in

calculating the amount of penalties and fees.  Scott v. Industrial Comm'n, 292 Ill. App. 3d 290, 686 N.E.2d 609 (1997).  Relying on Childress, we held that medical expenses were not "compensation" as the term is used in the Act.  Subsequent to our decision in Scott, our supreme court issued its decision in McMahon.  This court's decision in Scot was affirmed in part and reversed in part.  Our supreme court held, inter alia, that on remand, the calculation of penalties should be guided by its decision in McMahon.

		We hold that McMahon should have been applied retroactively, and remand the cause to the Commission for a determination of whether American Airlines' delay in

paying medical expenses was vexations and unreasonable and, if so, whether penalties and

attorney fees should be assessed thereon.

		For the foregoing reasons, the judgment of the circuit court of Cook County is reversed and the cause remanded to the Commission for further proceedings.

		Circuit court reversed; remanded to Commission.

		McCULLOUGH, P.J., and HOFFMAN, O'MALLEY, and HOLDRIDGE, JJ., concur.