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Workers’ Compensation FLASHPOINTS April 2019

April 15, 2019Print This Post Print This Post

Joseph P. Basile | E-mail Joseph Basile

Periodically, there are circumstances in which a question of insurance coverage comes into play with a workers’ compensation claim. Insurers will file an action for declaratory judgment taking the position that there is no duty to defend or indemnify an insured for certain reasons. This process raises issues as to what effect the declaratory judgment action has on the workers’ compensation case pending before the Illinois Workers’ Compensation Commission (IWCC). This month presents a summary of a case in which a trial court stayed proceedings before the IWCC and the appellate court found that to be error based on an incorrect application of the doctrine of primary jurisdiction. This is an important case to know when a declaratory judgment action is filed over a dispute on insurance coverage.

Circuit Court Order Staying Proceedings Before IWCC Erroneously Applied Doctrine of Primary Jurisdiction

The appellate court was presented with a case involving a trial court’s order that stayed proceedings before the IWCC in West Bend Mutual Insurance Co. v. TRRS Corp., 2019 IL App (2d) 180934. Gary Bernardino, an employee of TRRS and Commercial Tire Services, was injured at work in April 2017. The employers covered his lost wages and medical expenses relating to rotator cuff surgery without reporting the injury to West Bend. Mr. Bernardino later learned he required a follow-up surgery, so he filed an application for adjustment of claim on March 29, 2018. On September 12, 2018, he filed a §19(b) petition for immediate hearing and petitions for penalties and attorneys’ fees.

On October 2, 2018, West Bend filed a complaint for declaratory judgment in McHenry County alleging it had written a workers’ compensation policy for the employers that would have covered Mr. Bernardino’s claim if the employers had not violated the policy. West Bend alleged the employers failed to provide proper notice of the injury and by paying for the medical expenses voluntarily decided to forego coverage. West Bend sought a declaratory judgment that it owed no duty to defend or indemnify the employers for the workers’ compensation claim.

The Commission scheduled a hearing on the §19(b) petition and penalty petitions for November 19, 2018. West Bend filed an emergency petition in the circuit court on October 9, 2018, to stay the IWCC proceedings until the declaratory judgment action was resolved. Mr. Bernardino filed a response; however, the circuit court entered an order granting the motion to stay without Mr. Bernardino’s counsel present. On October 25, 2018, Mr. Bernardino filed an emergency motion to vacate the stay order alleging the IWCC was the proper venue for a ruling on the coverage issue. West Bend filed a response arguing that under Employers Mutual Cos. v. Skilling, 163 Ill.2d 284, 644 N.E.2d 1163, 206 Ill.Dec. 110 (1994), and Hastings Mutual Insurance Co. v. Ultimate Backyard, LLC, 2012 IL App (1st) 101751, 965 N.E.2d 656, 358 Ill.Dec. 585, the circuit court had primary jurisdiction to rule on the legal issues raised in the declaratory judgment action and that the appellate court should stay the IWCC proceedings until a ruling was entered.

The circuit court conducted a hearing and vacated the stay order to consider the parties’ arguments. After the hearing, the circuit court entered an order on November 1, 2018, granting the emergency motion to stay the IWCC proceedings and continued the declaratory judgment action for status on discovery to January 7, 2019. Mr. Bernardino filed a motion to vacate the stay order. He also filed a notice of an interlocutory appeal from the stay order. In addition, the circuit court entered an order continuing Mr. Bernardino’s motion to vacate the stay order to January 7, 2019. Mr. Bernardino filed a notice of interlocutory appeal from that order.

The appellate court determined that the trial court’s stay order of November 1, 2018, was reviewable and held that the order continuing the motion to vacate the stay order was not reviewable and dismissed that appeal.

In analyzing the stay order of November 1, 2018, the appellate court determined that the appropriate standard of review was de novobased on the fact that the circuit court made no factual findings in the case and instead determined that the stay was appropriate as a matter of law pursuant to the doctrine of primary jurisdiction. The appellate court agreed with West Bend that, as a matter of law, the circuit court was the proper venue for the declaratory judgment action. However, by staying the IWCC proceedings, the circuit court erroneously applied the doctrine of primary jurisdiction. The circuit court had followed the decision in Ultimate Backyard, which the appellate court declined to follow. The appellate court disagreed with the holding in Ultimate Backyard that the doctrine of primary jurisdiction authorizes a circuit court to stay administrative proceedings. The opinion stated: “[W]e interpret the doctrine to stand only for the proposition that a circuit court may, in certain circumstances, stay its own judicial proceedings pending the referral of a controversy to an administrative agency having specialized expertise over the disputed subject matter.” 2019 IL App (2d) 180934 at ¶19.

Here the circuit court turned the doctrine of primary jurisdiction on its head by staying administrative proceedings pending the resolution of a legal issue in the circuit court. The opinion comments that primary jurisdiction is a judicially created doctrine that is not technically a question of jurisdiction, but a matter of self-restraint between the courts and administrative agencies. In determining whether the doctrine applies, the first determination is whether the legislature vested “exclusive original jurisdiction” over the disputed matter in an administrative agency. 2019 IL App (2d) 180934 at ¶20. If it cannot be shown that the legislature intended to deprive the circuit court of its jurisdiction over the disputed subject matter, then the court shares concurrent jurisdiction with the administrative agency. The next question is whether the circuit court should “stay the judicial proceedings pending referral of a controversy, or some portion of it, to an administrative agency having expertise in the area.” Id., quoting Skilling, supra, 644 N.E.2d at 1165.

In Skilling, the Supreme Court determined that although the IWCC had concurrent jurisdiction to hear the dispute over the interpretation of the workers’ compensation insurance policy, “when the question of law was presented to the circuit court in the declaratory judgment suit, the jurisdiction of the circuit court became paramount.” 644 N.E.2d at 1166. This was because the coverage dispute in Skilling involved a question of law precisely within the scope of the declaratory judgment statute. The Skilling decision said nothing about staying the proceedings before the IWCC pending the resolution of the declaratory judgment action in the circuit court.

In West Bend, the appellate court held that the circuit court was correct in determining that it had both concurrent and primary jurisdiction over the subject matter of West Bend’s declaratory judgment action. The question was the validity of the stay order. The appellate court commented that it could not fault the circuit court for following Ultimate Backyard because it is the only Illinois case that has considered whether, under the doctrine of primary jurisdiction, a circuit court may stay administrative proceedings pending the resolution of a legal dispute in the circuit court. Because the appellate court in this case determined not to follow Ultimate Backyard, it held the circuit court erred as a matter of law in staying the IWCC proceedings.

The appellate court’s opinion points out that Ultimate Backyard is procedurally analogous to this case in that the insurance provider sought to stay the IWCC proceedings pending the resolution of the declaratory judgment action. However, to the extent that Ultimate Backyard relied on the doctrine of primary jurisdiction to stay the administrative proceedings, the case stands out as an anomaly. The court in Ultimate Backyard directed the circuit court to enter the stay without recognizing that it was doing so based on the inverse application of the doctrine.

The opinion also went further to point out that while Mr. Bernardino did not challenge Ultimate Backyard on the grounds the appellate court identified as its basis for reversal, it was not searching the record for unargued and unbriefed reasons to reverse the judgment, especially when it would have the effect of transferring the court’s role from jurist to advocate. A reviewing court does not lack authority to address unbriefed issues and may do so when a clear and obvious error exists in the trial court proceedings. The appellate court was correcting a clear and obvious error in the circuit court proceedings that would otherwise produce a result contrary to well-established legal principles. The doctrine of primary jurisdiction establishes that, in cases raising issues of fact that are within an agency’s expert and specialized knowledge, the judiciary’s role is best exercised by deferring to the agency charged with regulating the subject matter.

The opinion comments that the ruling in Ultimate Backyard paves the way for insurance providers to rely on the doctrine of primary jurisdiction to create procedural advantages. The doctrine was not created for litigants to game the system. West Bend could have argued the late notice issue before the IWCC and appealed to the circuit court upon entry of an adverse ruling. It chose instead to bring the issue straight to the circuit court. While the doctrine of primary jurisdiction requires the circuit court to consider the issue, it does not provide that the administrative proceedings be stayed pending resolution.

The appellate court took no position on what procedure, if any, would be available to West Bend if it sought to renew its motion in the circuit court to stay the IWCC proceedings on remand. It did agree with Mr. Bernardino’s argument that his §19(b) petition, which requested a determination only whether he was entitled to receive medical services, militated against staying the IWCC proceedings. “[I]t would contradict our legislature’s clear intent to provide an expedited process for employees awaiting medical services if the process could be suspended while the employer and insurance provider dispute the issue of coverage in the Circuit Court.” 2019 IL App (2d) 180934 at ¶34.

For more information about workers’ compensation, see WORKERS’ COMPENSATION PRACTICE (ILLINOIS) — 2015 EDITION. Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.

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