Court Opinion

ID: 3135450
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:37:31.351122+00
Date Added: 2024-06-11T11:54:09.728040
License: Public Domain

Docket No. 105158.

                       IN THE
                  SUPREME COURT
                         OF
                THE STATE OF ILLINOIS

BILLY TAYLOR, Appellee, v. PEKIN INSURANCE COMPANY,
                       Appellant.

                 Opinion filed November 20, 2008.

   JUSTICE BURKE delivered the judgment of the court, with
opinion.
   Chief Justice Fitzgerald and Justices Freeman, Thomas, Kilbride,
Garman, and Karmeier concurred in the judgment and opinion.

                             OPINION

    This case involves the application of section 5(b) of the Workers’
Compensation Act (820 ILCS 305/5(b) (West 2006)), which grants
an employer a lien on an employee’s recovery against a third-party
tortfeasor, up to the amount of the workers’ compensation benefits
paid to the employee. The second paragraph of section 5(b) requires
the employer to pay the employee’s attorney an attorney fee totaling
25% of the amount of the lien recovered by the employer. At issue
here is whether the 25% fee provision applies where the employee has
received benefits under the uninsured-motorist provision of his
employer’s automobile liability policy. We hold section 5(b) does not
apply to the factual circumstances in the instant case.
                            BACKGROUND
     On August 4, 1999, plaintiff Billy Taylor was driving a vehicle in
the course of his employment with Herr Funeral Home (Herr) when
he was struck by James Gentry, an uninsured motorist. Herr insured
its vehicles under an automobile liability policy issued by defendant
Pekin Insurance Company (Pekin). Pekin also acted as Herr’s
workers’ compensation insurance carrier.
     Plaintiff filed a claim under the Workers’ Compensation Act
(Act) and received $162,588.33 in workers’ compensation benefits.
Plaintiff then filed a claim under the uninsured-motorist provision of
Herr’s automobile policy. The parties chose arbitrators, who entered
an award in favor of plaintiff in the amount of $250,000. Pekin
delivered a check to plaintiff for $87,411.67–the difference between
the $250,000 arbitration award and the $162,588.33 workers’
compensation award. The setoff was based on the following provision
in the auto policy:
             “PART VI–UNINSURED MOTORISTS INSURANCE
             (INCLUDING UNDERINSURED MOTORIST)
             ***
             E. OUR LIMIT OF LIABILITY
             ***
             Any Amounts otherwise payable for damages under this
         coverage shall be reduced by all sums paid or payable for the
         bodily injury under any workers’ or workmen’s compensation
         law, disability benefits law or any similar law. Any payment
         under this coverage to or for a covered person will reduce any
         amount that person is entitled to recover under the Liability
         Coverage of this policy.”
     The uninsured-motorist section of the auto policy contains no
provision for attorney fees.
     Plaintiff filed a complaint in the circuit court of Madison County
seeking a declaration that he was entitled to $40,4671 from Pekin, for

     1
      Section 5(b) would permit plaintiff’s attorney to receive 25% of
plaintiff’s workers’ compensation benefit, which in this case would be 25%
of $162,588.33, or $40,647. Whether due to miscalculation or

                                   -2-
attorney fees which he claimed pursuant to section 5(b) of the Act
(820 ILCS 305/5(b) (West 2006)). Section 5(b) provides in pertinent
part:
            “Where the injury or death for which compensation is
       payable under this Act was caused under circumstances
       creating a legal liability for damages on the part of some
       person other than his employer to pay damages, then legal
       proceedings may be taken against such other person to
       recover damages notwithstanding such employer’s payment
       of or liability to pay compensation under this Act. In such
       case, however, if the action against such other person is
       brought by the injured employee or his personal
       representative and judgment is obtained and paid, or
       settlement is made with such other person, either with or
       without suit, then from the amount received by such employee
       or personal representative there shall be paid to the employer
       the amount of compensation paid or to be paid by him to such
       employee or personal representative including amounts paid
       or to be paid pursuant to paragraph (a) of Section 8 of this
       Act. ***
            Out of any reimbursement received by the employer
       pursuant to this Section the employer shall pay his pro rata
       share of all costs and reasonably necessary expenses in
       connection with such third-party claim, action or suit and
       where the services of an attorney at law of the employee or
       dependents have resulted in or substantially contributed to
       the procurement by suit, settlement or otherwise of the
       proceeds out of which the employer is reimbursed, then, in the
       absence of other agreement, the employer shall pay such
       attorney 25% of the gross amount of such reimbursement.”
       (Emphases added.) 820 ILCS 305/5(b) (West 2006).
    Pekin filed a motion to dismiss, arguing plaintiff was not entitled
to the $40,467 because neither the auto policy nor any statute
authorizes plaintiff to collect attorney fees. The trial court granted the
motion and dismissed plaintiff’s complaint.

typographical error, plaintiff requested $40,467.

                                   -3-
    The appellate court reversed, finding plaintiff was entitled to the
$40,467. 376 Ill. App. 3d 834, 841. The court held section 5(b)
applied to the parties because the auto policy identifies “workers’
compensation law” as the basis for calculating the setoff, and section
5(b) is included within “workers’ compensation law.” 376 Ill. App.
3d at 841. Justice Donovan dissented, arguing plaintiff was not
entitled to the attorney fee because section 5(b), by its terms, is
inapplicable to the facts of this case. 376 Ill. App. 3d at 841-42
(Donovan, J., dissenting).
    We allowed Pekin’s petition for leave to appeal (210 Ill. 2d R.
315(a)) and now reverse the judgment of the appellate court.

                                ANALYSIS
    At the outset, we note that Pekin briefly suggests section 5(b)
does not apply because it was not made part of the auto policy, and
the uninsured-motorist provision does not authorize attorney fees.
Plaintiff disagrees, contending that section 5(b) is incorporated into
the auto policy based on the reference to workers’ compensation law
in the uninsured-motorist provision. He argues that if Pekin is
allowed to set off against the uninsured-motorist payment any amount
paid under workers’ compensation law, that “law” should include all
provisions, including section 5(b). We agree with plaintiff that,
because the auto policy broadly references workers’ compensation
law, it is appropriate to examine the language of section 5(b) to
determine its applicability to the parties.
    The issue we must decide is whether section 5(b) requires Pekin
to pay the 25% fee where plaintiff has been compensated for his
injuries through his employer’s uninsured-motorist insurance rather
than through a claim against a liable third party. As such, this case
involves an issue of statutory interpretation, a question of law we
review de novo. See Kankakee County Board of Review v. Property
Tax Appeal Board, 226 Ill. 2d 36, 51 (2007). The primary objective
in interpreting a statute is to give effect to the intent of the legislature.
Harshman v. DePhillips, 218 Ill. 2d 482, 493 (2006). The most
reliable indicator of the legislature’s intent is the language of the
statute, which must be given its plain and ordinary meaning.
Harshman, 218 Ill. 2d at 493. Statutory language that is unambiguous

                                    -4-
must be applied as written, without resorting to other aids of
construction. People v. Bywater, 223 Ill. 2d 477, 485 (2006). We may
not depart from the plain language of an unambiguous statute by
reading into it exceptions, limitations, or conditions not expressed by
the legislature. People v. Wright, 194 Ill. 2d 1, 29 (2000).
     Pekin contends that section 5(b) by its terms does not apply
because there was no recovery from a third-party tortfeasor. We agree
with Pekin. Section 5(b) clearly specifies that where legal
proceedings are instituted against a person, other than the employer,
who is liable for damages, “and judgment is obtained and paid, or
settlement is made with such other person,” the employer is to be
reimbursed the amount of workers’ compensation benefits paid or to
be paid to the employee. 820 ILCS 305/5(b) (West 2006). This court
has held that section 5(b) grants the employer a lien on the recovery
from a third party equal to the amount of workers’ compensation
benefits paid or owed to the employee. In re Estate of Dierkes, 191
Ill. 2d 326, 328 (2000). The second paragraph of section 5(b)
provides that “where the services of an attorney at law of the
employee or dependents have resulted in or substantially contributed
to the procurement by suit, settlement or otherwise of the proceeds
out of which the employer is reimbursed, *** the employer shall pay
such attorney 25% of the gross amount of such reimbursement.” 820
ILCS 305/5(b) (West 2006).
     In the case at bar, the employee obtained recovery for his injuries
through his employer’s uninsured-motorist coverage. No legal
proceedings were undertaken against a third party responsible for the
injuries. There was no “third-party claim, action or suit” under the
express language of section 5(b) (820 ILCS 305/5(b) (West 2006)).
Pekin’s setoff was pursuant to the contract between the parties, not
pursuant to section 5(b). As Justice Donovan correctly noted in his
dissent: “No monies were paid back to the workers’ compensation
carrier or employer. There simply was no recovery or reimbursement
triggering the reduction for 25% attorney fees under section 5(b) of
the Act.” 376 Ill. App. 3d at 842 (Donovan, J., dissenting). See also
Terry v. State Farm Mutual Automobile Insurance Co., 287 Ill. App.
3d 8, 12-13 (1997) (“the language of section 5(b) of the Act that
refers to a legal liability to pay damages refers to liability in tort, not
contractual liability under an underinsured motorist policy”);

                                   -5-
Hartford Accident & Indemnity Co. v. Cummings, 66 Ill. App. 3d 704,
708 (1978) (uninsured-motorist payments are based on the insured’s
contractual claim against his insurer, not on a tort by the uninsured
motorist).
    Nowhere in its opinion did the appellate court majority address
the language of section 5(b) and its applicability to the parties.
Instead, the court focused on the public policy underlying the
uninsured-motorist statute. The appellate court majority held that
requiring Pekin to pay the 25% fee was consistent with the legislative
intent that a claimant seeking uninsured-motorist benefits shall be
placed in the same position he would have been in had he filed a
successful action against a fully insured tortfeasor. See Hoglund v.
State Farm Mutual Automobile Insurance Co., 148 Ill. 2d 272, 279
(1992); Ullman v. Wolverine Insurance Co., 48 Ill. 2d 1, 4 (1970).
But in so holding, the majority ignored what this court has held is the
legislative purpose of section 5(b).
    Section 5(b) was enacted in order to allow both the employer and
employee “ ‘an opportunity to reach the true offender while
preventing the employee from obtaining a double recovery.’ ”
Dierkes, 191 Ill. 2d at 331-32, quoting J.L. Simmons Co. ex rel.
Hartford Insurance Group v. Firestone Tire & Rubber Co., 108 Ill.
2d 106, 112 (1985). The 25% fee provision in the second paragraph
of section 5(b) was added “to require an employer to contribute to the
necessary costs of the employee’s recovery against a negligent third
party.” Reno v. Maryland Casualty Co., 27 Ill. 2d 245, 247 (1962).
“The provision ‘is premised on the assumption that an employer
should share in the fees and costs associated with the employee’s
lawsuit because the litigation benefits the employer by providing a
fund from which the employer can obtain reimbursement of its
workers’ compensation payments’ (Silva v. Electrical Systems, Inc.,
183 Ill. 2d 356, 361 (1998)), and operates ‘to prevent an unjust
enrichment on the part of the employer’ (Reno, 27 Ill. 2d at 248).”
Dierkes, 191 Ill. 2d at 333. The stated purpose behind section 5(b) is
not advanced in this case, where Pekin has received no benefit or
reimbursement from a third party.
    Moreover, the appellate court misconstrued the way the section
5(b) attorney fee operates. Under the court’s holding, the plaintiff
would receive “the additional sum of $40,467, reflecting the 25%

                                 -6-
paid to plaintiff’s attorney in the workers’ compensation case.” 376
Ill. App. 3d at 841. This result distorts the statute, for two reasons.
First, plaintiff is not entitled to reimbursement for any attorney fees
he may have incurred in his workers’ compensation case. The 25%
fee in section 5(b) is payable to plaintiff’s attorney based on the
attorney’s services in obtaining a recovery against a third-party
tortfeasor in his tort claim. The fee has nothing to do with the fees
owed to plaintiff’s attorney in the workers’ compensation case.
     Second, under the plain language of the statute, the 25% fee is
payable to the attorney, not to the plaintiff. 820 ILCS 305/5(b) (West
2006); see Dierkes, 191 Ill. 2d at 329-30. “The second paragraph of
section 5(b) contemplates a single recovery against a third party with
the employee’s share of the attorney’s fee to be based on the part he
recovers and the employer’s share of the fee to be based on the part
he recovers. While the employee’s counsel is entitled to a part of his
fee from the employee and a part from the employer, the total fee is
in essence a single fee based on the single recovery from the third
party.” Reno, 27 Ill. 2d at 248-49.
     Had plaintiff recovered $250,000 from a fully insured third-party
motorist, he would have received the same $87,411.67 after deducting
the employer’s workers’ compensation lien. Both plaintiff and his
employer would have had to pay a fee to plaintiff’s attorney based on
the amount recovered by each of them. Plaintiff is in no better or
worse position than he would have been in had he received a recovery
from a responsible third party.
     There is no statutory or contractual basis to compel Pekin to pay
an attorney fee in the amount of 25% of its contractual setoff where
no third-party claim has been filed. Our holding is consistent with
Illinois’ long-standing adherence to the “American Rule” whereby a
successful party generally is responsible for his or her own attorney
fees in the absence of a statute or contractual agreement allowing the
recovery of fees. Duignan v. Lincoln Towers Insurance Agency, Inc.,
282 Ill. App. 3d 262, 268 (1996).
     Under the auto policy, Pekin is entitled to a setoff of the full
amount of workers’ compensation benefits paid to plaintiff, without
deducting 25% for attorney fees.

                                 -7-
                           CONCLUSION
    For the foregoing reasons, we reverse the judgment of the
appellate court and affirm the judgment of the circuit court dismissing
plaintiff’s complaint for declaratory judgment.

                                 Appellate court judgment reversed;
                                   circuit court judgment affirmed.

                                 -8-