School district's actions warrant $80,094 in penalties

An employer's failure to make any payment of benefits, provide a good-faith challenge or reasonable explanation, or authorize medical treatment constitutes unreasonable and vexatious conduct thus warranting penalties under Illinois law.

Case name: Hardy v. Community High School District No. 155, 17 ILWCLB 23 (Ill. W.C. Comm. 2008).

Ruling: A majority of the Illinois Industrial Commission assessed $80,094 in penalties and $32,037 in attorney's fees against a school district for refusing to pay a claimant's medical bills or authorize any further treatment.

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What it means: An employer's failure to make any payment of benefits for several years or provide a good-faith challenge or reasonable explanation why it did not make such payments or authorize medical treatment constitutes unreasonable and vexatious conduct thus warranting penalties under Illinois law.

Summary: The claimant, a school custodian, injured his back at work while operating a cannister-type backpack vacuum cleaner. He was diagnosed with a disc herniation and underwent four surgeries. Soon after the fourth surgery, the school district's insurer became insolvent and the claimant's doctor was not paid. Because the district's net worth exceeded $25 million, the Guaranty Fund would not take responsibility for the claim.

Over several years, the claimant made numerous requests to the get the district to pay his medical bills. Also, the claimant made multiple requests to the district for authorization of medical treatment and surgery recommended by the treating doctor. The school district refused to pay any benefits during the three years in which it had the opportunity to review and investigate the claim. The arbitrator found the claimant's condition compensable and awarded penalties of $102,864. The arbitrator also awarded attorney's fees of $18,571.

While giving every consideration to the insurance difficulties of a local school district, the arbitrator noted that no expert medical witnesses or any person in charge of making management decisions from the school board made a good-faith challenge to the payment of benefits or provided a reasonable explanation why no payments were made to advance their former employee's medical care. Accordingly, the arbitrator found the district engaged in unreasonable and vexatious conduct. Furthermore, the district's refusal to pay any benefits was unconscionable, as it did not obtain an independent medical evaluation or proffer any rationale basis for refusing to pay benefits.

Upon review, the commission modified the penalties to $80,094 and attorney's fees to $32,037.

In a separate opinion, one commissioner stated that he would not have awarded penalties or attorney's fees. In light of the carrier's financial problems, the Guaranty Fund's involvement, medical issues requiring depositions, and procedural maneuvering attendant to the claim, the imposition of penalties and attorney's fees were inappropriate, the dissent argued.

April 13, 2009

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