Gallagher v. Lenart ( 2007 )

Docket No. 103522.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
JAMES GALLAGHER et al., Appellants, v. JAROSLAW ROBERT
LENART et al., Appellants (Rail Terminal Services, LLC, Appellee).
Opinion filed August 9, 2007.
JUSTICE GARMAN delivered the judgment of the court, with
opinion.
Justices Freeman, Fitzgerald, Kilbride and Karmeier concurred in
the judgment and opinion.
Chief Justice Thomas specially concurred, with opinion.
Justice Burke took no part in the decision.
OPINION
Plaintiffs, James Gallagher and his wife, filed suit against
defendants Jaroslaw Robert Lenart and Pacella Trucking Express,
Inc., based on injuries Gallagher sustained when the truck he was
operating for his employer, Rail Terminal Services, LLC, collided
with the truck Lenart was operating for Pacella. After plaintiffs settled
their lawsuit against defendants, Rail Terminal sought to enforce its
workers’ compensation lien against the settlement proceeds allocated
to Gallagher (820 ILCS 305/5(b) (West 2004)). The circuit court of
Cook County found that Rail Terminal had waived its lien when it
settled Gallagher’s workers’ compensation claim. Accordingly, the
court granted defendants’ motion to adjudicate third-party claims and
issue settlement drafts. Rail Terminal appealed, and the appellate
court reversed and remanded, holding that Rail Terminal had not
waived its workers’ compensation lien, and that the circuit court erred
in granting defendants’ motion. 367 Ill. App. 3d 293. For the reasons
that follow, we affirm the judgment of the appellate court.
BACKGROUND
On April 10, 2001, James Gallagher was operating a truck for his
employer, Rail Terminal Services, LLC, when his truck collided with
another truck driven by Jaroslaw Robert Lenart, an employee of
Pacella Trucking Express, Inc. Gallagher injured his spine as a result
of the accident and was required to undergo surgery and take pain
medication.
After the accident, Gallagher filed a workers’ compensation claim
against Rail Terminal. Initially, Rail Terminal paid him $24,903.51
in temporary total disability benefits and $53,392.21 in medical
expenses. Then, on July 28, 2003, the parties settled Gallagher’s
claim for an additional lump-sum payment of $150,000.
The parties executed two documents as part of the settlement. The
first was entitled “Illinois Industrial Commission Settlement Contract
Lump Sum Petition and Order.” The settlement contract provided, in
relevant part:
“Respondent [Rail Terminal] to pay the petitioner [Gallagher]
$150,000.00 in full and final settlement of all claims under
the Workers’ Compensation Act for injuries allegedly
incurred on or about April 10, 2001 and any and all results,
developments or sequale [sic], past, present or future resulting
from this accident. Respondent denies these injuries are
compensable and this settlement is made to settle those issues
as a purchase of the peace against any and all claims of
temporary total compensation, permanent partial disability
and medical, surgical [or] hospital expenses, past, present or
future. Review under Sections 19(h) and 8(a) are waived by
the petitioner. The settlement is made in lieu of any additional
compensation beyond the date of approval of this contract and
includes only payment of temporary total compensation in the
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amount of $58,049.70, unpaid medical bills in the amount of
$388.02, and the aforementioned purchase of the peace.
Respondent is not responsible for any outstanding medical
bills not submitted for payment prior to approval of this
settlement contract.”
The second document the parties executed was entitled
“Resignation Agreement.” It was contingent upon the workers’
compensation arbitrator’s approval of the settlement contract
described above. In its recitals, the resignation agreement
acknowledged that Gallagher had a pending workers’ compensation
claim against Rail Terminal, and that the claim was being settled. It
further acknowledged that, as part of the settlement, Gallagher would
voluntarily resign from his position with Rail Terminal and waive all
claims arising from his employment. The agreement explained that
the basis for the settlement was that Rail Terminal had “no position
available within [Gallagher’s] permanent restrictions.” Thus, “in
consideration of [Rail Terminal’s] agreement to pay [Gallagher] the
sum of $1.00 *** in a lump sum after an Order issued approving the
settlement of [Gallagher’s] workers’ compensation claim,” Gallagher
agreed to be bound by a series of specific provisions.
First, Gallagher agreed to the sufficiency of the stated
consideration. Second, Gallagher agreed that, by signing the
resignation agreement, he was “voluntarily resigning his employment
with [Rail Terminal].” Third, Gallagher agreed to “refrain from suing
[Rail Terminal], or authorizing any complaint or suit against [Rail
Terminal], on his behalf for any action of any kind or character, in
law or equity, suspected or unsuspected, arising out of or related to
his employment with [Rail Terminal].” Fourth, Gallagher agreed not
to “seek reinstatement, future employment or return to active
employment status with [Rail Terminal].” Fifth, Gallagher agreed to
“release[ ] and forever discharge[ ]” Rail Terminal from any and all
claims arising out of his employment with Rail Terminal, including
claims based on a variety of statutes and legal theories specifically
enumerated in the resignation agreement. The latter provision
concluded by stating that it did “not apply to claims, if any, for which
releases are prohibited by applicable law or which arise after the date
that [Gallagher] executes his agreement.”
The resignation agreement also contained the following clause:
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“This Agreement does not constitute an admission by
Employer of any liability or wrongdoing but it is intended to
resolve in good faith any existing or potential disputes or
claims arising out of Employee’s relationship and separation
with Employer.”
While Gallagher’s workers’ compensation claim was still
pending, he filed a personal injury action against defendants Lenart
and Pacella in the Cook County circuit court. Gallagher sought
damages for the injuries he suffered as a result of the accident. In
addition, in an amended complaint, his wife raised a loss of
consortium claim.
On November 20, 2003, defendants filed a third-party action
against Rail Terminal seeking contribution pursuant to the Joint
Tortfeasor Contribution Act (740 ILCS 100/1 et seq. (West 2002)).
Defendants alleged that Rail Terminal failed to properly train and
supervise Gallagher. Rail Terminal filed a motion for summary
judgment arguing that it did not fail to train or supervise Gallagher,
and that no additional training or supervision would have prevented
the accident. The circuit court granted Rail Terminal’s motion.
Subsequently, on September 16, 2005, defendants reached a
settlement with plaintiffs. They agreed to pay Gallagher $125,000 for
his personal injury claim and pay his wife $225,000 for her loss-of-
consortium claim.
Shortly thereafter, Rail Terminal filed a motion to intervene in the
personal injury action. It also filed a motion to set aside the allocation
of the settlement proceeds and reallocate them. Rail Terminal’s
purpose for intervening was to assert its workers’ compensation lien
under section 5(b) of the Workers’ Compensation Act (820 ILCS
305/5(b) (West 2004)). Section 5(b) provides, in relevant 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
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brought by the injured employee *** and judgment is
obtained and paid, or settlement is made with such other
person, *** then from the amount received by such employee
*** there shall be paid to the employer the amount of
compensation paid or to be paid by him to such employee
***. ***
***
*** [T]he employer may have or claim a lien upon any
award, judgment or fund out of which such employee might
be compensated from such third party.
*** The employer may[ ] at any time [after the filing of a
third-party action] join in the action upon his motion so that
all orders of court after hearing and judgment shall be made
for his protection.” 820 ILCS 305/5(b) (West 2004).
Rail Terminal claimed its lien amounted to $228,295.72 based on the
$24,903.51 it paid in temporary total disability benefits, the
$53,392.21 it paid in medical expenses, and the $150,000 lump sum
it paid pursuant to the settlement contract. In both of its motions, Rail
Terminal stated that it did not participate in or approve of the
settlement between defendants and plaintiffs. Furthermore, it claimed
that plaintiffs had structured the settlement to circumvent its workers’
compensation lien by allocating 64.3% of the settlement proceeds to
Gallagher’s wife.
On October 7, 2005, in response to Rail Terminal’s motions,
defendants filed a motion to adjudicate third-party claims and issue
settlement drafts. They argued that language in the settlement contract
between Rail Terminal and Gallagher constituted a waiver of Rail
Terminal’s workers’ compensation lien. In support of this contention,
defendants relied on Borrowman v. Prastein, 356 Ill. App. 3d 546
(2005), where the Fourth District of the appellate court concluded that
an employer that entered into a settlement contract similar to the one
between Rail Terminal and Gallagher had given up its right to assert
its workers’ compensation lien.
Plaintiffs joined defendants’ motion and filed responses of their
own to Rail Terminal’s motion to intervene and its motion to
reallocate the settlement proceeds. In their response to Rail
Terminal’s motion to intervene, plaintiffs, like defendants, relied on
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Borrowman and argued that Rail Terminal had waived its workers’
compensation lien. In addition, they pointed out that Rail Terminal
received Gallagher’s resignation as part of the settlement, suggesting
that Rail Terminal had knowingly contracted away the lien in
exchange for this concession. The response included an affidavit from
plaintiffs’ counsel, Jonathan Kurasch. He averred that Rail Terminal
was aware of plaintiffs’ personal injury action at the time it settled
Gallagher’s workers’ compensation claim, and that, in negotiating the
settlement, “no claim was ever made or reserved for continuation of
[Rail Terminal’s] rights” under section 5 of the Workers’
Compensation Act.
In plaintiffs’ response to Rail Terminal’s motion to reallocate the
settlement proceeds, they argued that their settlement with defendants
was fairly achieved, because all interested parties had the opportunity
to appear and protect their interests. They also argued that Rail
Terminal’s claim that the settlement funds were inappropriately
allocated was speculative.
Rail Terminal, for its part, filed both a reply to plaintiffs’
responses and a response to defendants’ motion to adjudicate third-
party claims and issue settlement drafts. Rail Terminal argued that the
settlement contract contained no specific waiver of its section 5(b)
workers’ compensation lien. It also argued that the Fourth District’s
decision in Borrowman was distinguishable from the instant case. In
addition, Rail Terminal contended that the resignation agreement did
not contain a waiver of its workers’ compensation lien and denied
that such a waiver provided the consideration for Gallagher’s
resignation. With respect to the allocation of the settlement, Rail
Terminal criticized plaintiffs for failing to produce any evidence in
support of allocating the majority of the proceeds to Gallagher’s wife.
Rail Terminal bolstered its reply and its response with affidavits
from William Ryan, its counsel; Patrick Holden, a claims adjuster for
Rail Terminal’s workers’ compensation insurer; and Michael
McCabe, an employee of the third-party administrator that handled
Gallagher’s workers’ compensation claim for Rail Terminal’s
workers’ compensation insurer. Ryan’s affidavit contained a
description of the events leading up to the September 16, 2005,
settlement conference between plaintiffs and defendants. Ryan
averred that at the previous settlement conference on August 19,
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2005, he informed the court, plaintiffs’ counsel, and defendants’
counsel that Rail Terminal was not prepared to waive a portion of its
workers’ compensation lien to facilitate a settlement between
plaintiffs and defendants. Ryan further averred that at no time prior
to or during the August 19, 2005, settlement conference did plaintiffs’
counsel or defendants’ counsel ever take the position that Rail
Terminal had waived its workers’ compensation lien as part of its
workers’ compensation settlement with Gallagher. According to
Ryan, the first time that position was taken was when defendants filed
their motion to adjudicate third-party claims and issue settlement
drafts.
Holden’s affidavit described his involvement with the settlement
of Gallagher’s workers’ compensation claim. He averred that, prior
to the settlement of that claim, he told plaintiffs’ counsel that Rail
Terminal would not waive its workers’ compensation lien as part of
the settlement. He also averred that both during the settlement
negotiations and after the settlement was reached, plaintiffs’ counsel
acknowledged the existence of Rail Terminal’s lien and indicated that
Rail Terminal would recover any amounts paid in settlement of
Gallagher’s workers’ compensation claim from subsequent civil
recovery by Gallagher.
McCabe’s affidavit, like Holden’s, described his involvement
with the settlement of Gallagher’s workers’ compensation claim.
McCabe averred that it was not customary for Rail Terminal’s
workers’ compensation insurer to waive an employer’s right to
recover its workers’ compensation lien as part of negotiations for the
settlement of a workers’ compensation claim without the receipt of
additional consideration. McCabe further stated that if such a waiver
was contemplated, a provision expressly memorializing it would have
been included in the settlement contract. In addition, McCabe stated
that Holden had communicated with plaintiffs’ counsel and indicated
that Rail Terminal’s workers’ compensation insurer did not intend to
waive Rail Terminal’s workers’ compensation lien as part of the
settlement with Gallagher.
On December 13, 2005, the circuit court held a hearing on Rail
Terminal’s motion to intervene, Rail Terminal’s motion to reallocate
the settlement proceeds, and defendants’ motion to adjudicate third-
party claims and issue settlement drafts. At the hearing, the parties
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reiterated the positions set forth in their respective pleadings. After
considering the parties’ arguments, the circuit court granted Rail
Terminal’s motion to intervene. It also granted defendants’ motion to
adjudicate third-party claims and issue settlement drafts, finding that
Rail Terminal had no workers’ compensation lien under Borrowman.
The court noted that, in deciding to grant defendants’ motion, it was
not relying on the resignation agreement. Finally, the court denied
Rail Terminal’s motion to reallocate the settlement. The court
reasoned that it did not need to reach the allocation issue in light of
its determination that Rail Terminal had no lien.
Rail Terminal appealed, and the First District of the appellate
court found in its favor, rejecting the Fourth District’s analysis in
Borrowman. 367 Ill. App. 3d at 298. The court reasoned that
Borrowman is unsupported by case law (367 Ill. App. 3d at 298-99),
contrary to several principles underlying the Workers’ Compensation
Act (367 Ill. App. 3d at 299-301), and at odds with general principles
of contract law (367 Ill. App. 3d at 301-02). It concluded that, in this
case, Rail Terminal had a valid workers’ compensation lien. 367 Ill.
App. 3d at 303. Accordingly, it reversed the circuit court’s decision
to grant defendants’ motion to adjudicate third-party claims and issue
settlement drafts. 367 Ill. App. 3d at 303. With respect to Rail
Terminal’s motion to reallocate settlement proceeds, the appellate
court declined to address the merits of the motion for the first time on
appeal and remanded the cause to the circuit court for consideration
of the allocation issue. 367 Ill. App. 3d at 303.
Plaintiffs filed a petition for leave to appeal (210 Ill. 2d R. 315),
which we allowed to address the conflict between Borrowman and
the appellate court’s decision in the instant case.
ANALYSIS
I
This case requires us to consider the meaning of contract language
that has received conflicting constructions from different districts of
our appellate court. The construction of a contract presents a question
of law. People ex rel. Department of Public Health v. Wiley, 218 Ill.
2d 207, 223 (2006). Accordingly, our standard of review is de novo.
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Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d
100, 129 (2005).
II
As mentioned, the Fourth District addressed contract language
similar to the language of the settlement contract at issue here in
Borrowman v. Prastein, 356 Ill. App. 3d 546 (2005). In Borrowman,
the plaintiff fractured his heel when the safety rigging he was using
to paint the inside of a water tower collapsed. Borrowman, 356 Ill.
App. 3d at 547. After an orthopedic surgeon performed surgery on the
fracture, the plaintiff developed an infection in his bone, which the
surgeon subsequently treated with antibiotics. Borrowman, 356 Ill.
App. 3d at 547. Although the infection cleared, the plaintiff suffered
a variety of negative side effects from the antibiotics. Borrowman,
356 Ill. App. 3d at 547
The plaintiff filed a workers’ compensation claim against his
employer. Borrowman, 356 Ill. App. 3d at 547. He also filed a
medical malpractice lawsuit against the surgeon and a nursing
association. Borrowman, 356 Ill. App. 3d at 547. The plaintiff settled
the workers’ compensation claim for $230,000 and subsequently
settled the medical malpractice lawsuit for $750,000. Borrowman,
356 Ill. App. 3d at 547. Shortly after settling the medical malpractice
lawsuit, the plaintiff moved to adjudicate the employer’s claim that
it was entitled to a workers’ compensation lien against the plaintiff’s
recovery in the malpractice case. Borrowman, 356 Ill. App. 3d at 547.
The circuit court determined that the employer was entitled to a lien
of $175,973.71. Borrowman, 356 Ill. App. 3d at 547-48.
Both the plaintiff and the employer appealed. Borrowman, 356 Ill.
App. 3d at 548. The plaintiff argued that the employer was not
entitled to a lien at all or, alternatively, that the employer was entitled
to less than the amount awarded. Borrowman, 356 Ill. App. 3d at 548.
The employer argued that the circuit court miscalculated the lien and
that it was entitled to more than the amount awarded, relying on
Robinson v. Liberty Mutual Insurance Co., 222 Ill. App. 3d 443
(1991), and Kozak v. Moiduddin, 294 Ill. App. 3d 365 (1997).
Borrowman, 356 Ill. App. 3d at 548.
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The appellate court defined the issue in the case as “whether [the
employer] is entitled to a lien pursuant to section 5(b) of the
[Workers’ Compensation] Act [citation] when it agreed to settle its
claims with [the plaintiff] knowing a medical malpractice case was
pending.” Borrowman, 356 Ill. App. 3d at 548. After discussing
Robinson and Kozak, the court distinguished those cases on the
grounds that, in Robinson, the plaintiff’s workers’ compensation
claim was not settled, and in Kozak, the employer settled the
plaintiff’s workers’ compensation claim before it knew of the
plaintiff’s medical malpractice lawsuit. Borrowman, 356 Ill. App. 3d
at 550.
The court next quoted language from the settlement contract the
plaintiff and the employer entered into while the plaintiff’s medical
malpractice lawsuit was pending:
“ ‘The above constitutes a full, final[,] and complete
settlement of any and all claims for temporary total disability,
permanent partial and/or permanent total disability incurred
or to be incurred by said [p]etitioner by reason of an industrial
injury occurring on or about April 7, 1995, or by reasons of
any claim or cause of action by [p]etitioner against
[r]espondent of any nature whatsoever. Rights under
[s]ections 8(a) and 19(h) of the *** Act are hereby waived by
both parties.’ ” Borrowman, 356 Ill. App. 3d at 550.
The court observed that the settlement contract did not contain any
reservation of rights or waiver of rights with regard to the plaintiff’s
pending medical malpractice lawsuit. Borrowman, 356 Ill. App. 3d
at 550. The court then concluded that because the employer was
aware of the medical malpractice lawsuit and made no reference to it
in its “full, final[,] and complete settlement” with the plaintiff, the
employer forfeited its workers’ compensation lien rights. Borrowman,
356 Ill. App. 3d at 551. In addition, the court surmised that because
the employer did not mention its claim of a potential lien in the
settlement contract, the lien was not an issue in the negotiations that
led to the settlement. Borrowman, 356 Ill. App. 3d at 551.
Accordingly, the court reasoned that to hold that the employer was
entitled to a lien would “completely nullify both parties’ good-faith
dealings.” Borrowman, 356 Ill. App. 3d at 551. In light of these
considerations, the appellate court held that the employer “should be
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bound by the terms of its agreement and is not entitled to a section
5(b) lien on the malpractice case.” Borrowman, 356 Ill. App. 3d at
551. Thus, the appellate court reversed the judgment of the circuit
court. Borrowman, 356 Ill. App. 3d at 552.
Since Borrowman was decided, both the First District and the
Second District of the appellate court have declined to follow it. The
First District rejected Borrowman in the instant case. The court
characterized Borrowman as holding that “an employer forfeits or
waives its workers’ compensation lien by not specifically reserving
it in a settlement of the employee’s workers’ compensation claim
when the employer knew of the employee’s pending claim against a
third-party tortfeasor.” 367 Ill. App. 3d at 298. It then offered three
criticisms of this holding. 367 Ill. App. 3d at 298-302.
First, the court concluded that Borrowman is unsupported by case
law. 367 Ill. App. 3d at 298. The court pointed out that Borrowman
did not rely on the Robinson and Kozak cases in support of its
holding, but rather distinguished those cases after the intervenor-
employer cited them in support of its argument for a greater lien
award. 367 Ill. App. 3d at 298. According to the court, the plaintiffs
in Robinson and Kozak did not argue that the employers were not
entitled to workers’ compensation liens at all. 367 Ill. App. 3d at 298.
Rather, in Robinson, the plaintiff merely disputed the amount of the
lien the employer would receive, and in Kozak, the plaintiffs argued
that the employer was judicially estopped from asserting its otherwise
valid lien because it took an inconsistent position in a third-party
lawsuit. 367 Ill. App. 3d at 298 (citing Robinson, 222 Ill. App. 3d at
446, and Kozak, 294 Ill. App. 3d at 367). Moreover, neither of those
cases discussed a workers’ compensation settlement agreement. 367
Ill. App. 3d at 298.
Second, the appellate court determined that Borrowman is
contrary to several principles underlying the Workers’ Compensation
Act. 367 Ill. App. 3d at 299. The court emphasized that section 5(b)
of the Act is designed to allow employers and employees to reach the
true tortfeasor responsible for an employee’s injuries while
preventing employees from obtaining a double recovery. 367 Ill. App.
3d at 299-300. The court also noted that, under section 5(b), courts
have a duty to protect an employer’s workers’ compensation lien. 367
Ill. App. 3d at 300. The court concluded that Borrowman’s holding,
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which acknowledges the waiver or forfeiture of an employer’s
workers’ compensation lien, conflicts with this scheme. 367 Ill. App.
3d at 301.
Finally, the court concluded that Borrowman contradicts general
principles of contract law. 367 Ill. App. 3d at 301. The court noted
that the agreement at issue in Borrowman was a settlement contract
between an employer and employee that settled the employee’s
workers’ compensation claim. 367 Ill. App. 3d at 301. The court
further observed that the settlement contract did not contain any
reference to the employer’s workers’ compensation lien and,
specifically, did not include a waiver of that lien. 367 Ill. App. 3d at
302. According to the court, it was consistent with general contract
principles to presume that if the employer meant to waive its
statutorily created lien as part of the settlement of the employee’s
workers’ compensation claim, it would have specifically included
such a waiver in the settlement contract. 367 Ill. App. 3d at 302.
Borrowman’s holding, concluded the court, rewrote the settlement
contract by adding a provision the parties did not include. 367 Ill.
App. 3d at 302. The court reasoned that the plain language of the
settlement contract in Borrowman indicated that the parties did not
intend to resolve the issue of the employer’s workers’ compensation
lien within that settlement. 367 Ill. App. 3d at 302. Accordingly, the
court criticized the Borrowman court for assuming, without any basis,
that the contract’s silence on the issue of the workers’ compensation
lien meant that the employer chose to waive that lien. 367 Ill. App. 3d
at 302. The court added that waiver involves the voluntary and
intentional relinquishment of a known right, and the absence of any
reference to an employer’s lien in a settlement contract, without more,
cannot constitute a voluntary and intentional relinquishment of that
right. 367 Ill. App. 3d at 302.
The court went on to acknowledge that employers can, and
sometimes do, choose to waive their workers’ compensation liens.
367 Ill. App. 3d at 302. It concluded, however, that “based upon the
protections of the Act and general contract principles, such a waiver
of a workers’ compensation lien must be more explicitly and
affirmatively stated in a settlement agreement and cannot simply be
implied by a lack of any reference to that lien.” 367 Ill. App. 3d at
302-03.
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Based on this analysis, the court declined to follow Borrowman.
367 Ill. App. 3d at 303. The court noted that, in the instant case, “Rail
Terminal’s settlement of [Gallagher’s] workers’ compensation claim
did not include any mention or waiver of Rail Terminal’s workers’
compensation lien.” 367 Ill. App. 3d at 303. Thus, the court held that
“Rail Terminal had a valid workers’ compensation lien and *** did
not waive or forfeit this lien by failing to specifically reserve it in its
settlement.” 367 Ill. App. 3d at 303. Accordingly, the court reversed
the circuit court’s decision to grant defendants’ motion to adjudicate
third-party claims and issue settlement drafts. 367 Ill. App. 3d at 303.
After this court granted leave to appeal in the instant case, the
Second District handed down its decision in Harder v. Kelly, 369 Ill.
App. 3d 937 (2007), which followed the approach taken by the First
District in the instant case. In Harder, the plaintiff alleged that he was
injured when his vehicle was struck from behind by a vehicle
operated by an employee of the Canadian National Railroad Company
(CNRC). Harder, 369 Ill. App. 3d at 939. The plaintiff filed a
workers’ compensation claim against his employer and filed a
personal injury action against CNRC and its employee. Harder, 369
Ill. App. 3d at 939. Subsequently, he settled the workers’
compensation claim. Harder, 369 Ill. App. 3d at 939. The settlement
contract provided, in pertinent part:
“[Employer] agrees to pay and [plaintiff] agrees to accept
$16,634.25 in a lump sum in full and final settlement of all
claims for compensation, medical, hospital and other
expenses, past, present or future, arising out of the accident
described and under the terms of the [Act]. *** Review under
section 19(h) and all rights under Sections 4, 8, 16, and 19 of
the Act are expressly waived by the parties hereto. It is the
responsibility of [plaintiff] to satisfy the outstanding medical
charges out of the proceeds of this settlement. It is not the
responsibility of [employer] to satisfy any outstanding
medical charges, known or unknown.” Harder, 369 Ill. App.
3d at 939.
The plaintiff also settled his personal injury action. Harder, 369 Ill.
App. 3d at 939.
In the wake of the plaintiff’s personal injury settlement, his
employer’s workers’ compensation insurer moved to intervene as the
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employer’s subrogee to enforce the employer’s workers’
compensation lien. Harder, 369 Ill. App. 3d at 939. The circuit court
granted the insurer’s motion to intervene. Harder, 369 Ill. App. 3d at
939. However, the court ruled that, pursuant to Borrowman, the
employer had forfeited its workers’ compensation lien. Harder, 369
Ill. App. 3d at 939. Although the circuit court expressed serious
doubts about Borrowman’s reasoning, it concluded that, in the
absence of contrary authority, it was bound by Borrowman. Harder,
369 Ill. App. 3d at 939. Therefore, the court entered an order denying
the insurer’s claim of a lien under section 5(b). Harder, 369 Ill. App.
3d at 939.
The insurer appealed, and the appellate court reversed and
remanded. Harder, 369 Ill. App. 3d at 943. After discussing both
Borrowman and the instant case in detail (Harder, 369 Ill. App. 3d at
940-43), the appellate court stated:
“We find the reasoning in Gallagher persuasive and we
choose to follow that decision rather than Borrowman. Like
the court in Gallagher, we see no reason under the Act or
general contract principles why an employer should be
required to include an affirmative reservation of rights in a
settlement agreement when there is nothing in the agreement
otherwise suggestive of an intent to waive the right ***.”
Harder, 369 Ill. App. 3d at 943.
III
Before this court, plaintiffs urge that we construe the language of
the settlement contract and the resignation agreement that the parties
executed in a manner consistent with Borrowman. They claim that
Borrowman correctly “accepted the general principle that general
releases are intended to surrender all claims between the parties.”
Plaintiffs argue that the settlement contract and the resignation
agreement both contain general releases by which Rail Terminal
waived the right to assert its section 5(b) workers’ compensation lien
against Gallagher’s proceeds from the personal injury settlement.
According to plaintiffs, the language of the settlement contract alone
constitutes a waiver of Rail Terminal’s section 5(b) lien, and if there
is any doubt regarding the meaning of that language, the “even more
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encompassing” language of the resignation agreement clearly
expresses the parties’ intent to extinguish all claims between them,
including Rail Terminal’s claim to enforce its lien.
Plaintiffs further claim there is no need for this court to consider
the affidavits presented by Rail Terminal in construing the settlement
contract and the resignation agreement. They maintain that this case
can be resolved based solely on the language of these documents and
emphasize that neither the circuit court nor the appellate court relied
on Rail Terminal’s extrinsic evidence.
Finally, plaintiffs argue that construing the settlement contract and
the resignation agreement as waiving Rail Terminal’s right to assert
its section 5(b) lien is consistent with the public policy of preventing
employees who file workers’ compensation claims and personal
injury actions from obtaining double recovery for their injuries.
Plaintiffs contend that they settled their personal injury action for less
than they otherwise would have in reliance on Rail Terminal’s waiver
of its lien. Thus, they reason that a finding by this court that Rail
Terminal waived its lien will not result in a windfall for Gallagher.
Conversely, they argue that a finding that Rail Terminal did not waive
its lien will actually result in a double recovery for Rail Terminal by
allowing it both to recover its workers’ compensation payments and
retain the benefit of Gallagher’s resignation.
In response, Rail Terminal asks this court to follow the approach
taken by the First District in the instant case and endorsed by the
Second District in Harder. Rail Terminal argues that the First and
Second Districts correctly rejected the rationale of Borrowman. It
criticizes Borrowman for ignoring the principles of contract
construction and argues that, under those principles, an employer
cannot waive its workers’ compensation lien unless it does so
explicitly. According to Rail Terminal, Borrowman is based on the
incorrect premise that if an employer intends to preserve its lien, it
must include a specific reservation of the lien in the settlement
agreement. Rail Terminal points out that the settlement contract and
the resignation agreement at issue in this case contain no references
to a section 5(b) workers’ compensation lien. It contends that,
construed as a whole, it is clear the settlement contract was intended
to apply to Gallagher’s rights to compensation under the Workers’
Compensation Act, not to Rail Terminal’s lien rights. With respect to
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the resignation agreement, it argues that the agreement’s specific
identification of claims Gallagher agreed to waive provides evidence
that when Gallagher and Rail Terminal intended for there to be a
waiver of a right, they clearly identified the right being waived and
the party waiving it.
As further support for its position, Rail Terminal directs our
attention to the affidavits of Holden and McCabe as evidence of the
intent of the parties at the time they settled Gallagher’s workers’
compensation claim. Rail Terminal argues that these affidavits
provide direct and unrefuted evidence that the parties did not intend
to incorporate the waiver of Rail Terminal’s workers’ compensation
lien into the settlement.
Lastly, Rail Terminal responds to plaintiffs’ arguments regarding
double recovery. It argues that if this court adopts plaintiffs’ position,
employees who settled workers’ compensation claims with their
employers under terms similar to those at issue here “will gain an
unintended and unauthorized windfall” through the employers’ loss
of their lien rights. Rail Terminal also contends that plaintiffs have
failed to cite anything in the record that supports their contentions
that they accepted less favorable terms in the workers’ compensation
settlement and the personal injury settlement in reliance on Rail
Terminal’s waiver of its lien.
IV
Turning to the merits, we begin by clarifying precisely what is at
issue. As mentioned, the Fourth District held in Borrowman that
because the employer was aware of the plaintiff’s medical
malpractice lawsuit against the defendants at the time the employer
and the plaintiff settled the plaintiff’s workers’ compensation claim,
the employer “forfeited its lien rights” by failing to refer to them in its
“ ‘full, final[,] and complete settlement’ with [the plaintiff].’ ”
(Emphases added.) Borrowman, 356 Ill. App. 3d at 551. In this case,
the First District summarized Borrowman as holding that “an
employer forfeits or waives its workers’ compensation lien by not
specifically reserving it in a settlement of the employee’s workers’
compensation claim when the employer knew of the employee’s
pending claim against a third-party tortfeasor.” (Emphasis added.)
-16-
367 Ill. App. 3d at 298. It then phrased its own holding in opposition
to its summary of Borrowman’s holding: “Rail Terminal had a valid
workers’ compensation lien and *** did not waive or forfeit this lien
by failing to specifically reserve it in its settlement.” (Emphasis
added.) 367 Ill. App. 3d at 303.
In this case, the First District used the terms “waive” and “forfeit”
interchangeably, due in part to the fact that, in Borrowman, the Fourth
District concluded that the employer forfeited its workers’
compensation lien, but then referred to an affirmative statement in the
settlement contract as evidence of that forfeiture. As this court has
stated, “[w]aiver arises from an affirmative act, is consensual, and
consists of an intentional relinquishment of a known right.” Home
Insurance Co. v. Cincinnati Insurance Co., 213 Ill. 2d 307, 326
(2004). Forfeiture, strictly defined, is different from waiver, as we
have noted in the criminal context. See People v. Blair, 215 Ill. 2d
427, 444 n.2 (2005). Rather than an intentional relinquishment of a
known right, forfeiture is the “ ‘failure to make the timely assertion
of the right.’ ” Blair, 215 Ill. 2d at 444 n.2, quoting United States v.
Olano, 507 U.S. 725, 733, 123 L. Ed. 2d 508, 519, 113 S. Ct. 1770,
1777 (1993).
We find this distinction instructive in the present case. Here,
when plaintiffs argue that the relevant question is “whether the
settlement (comprising the Commission contract and the resignation)
constituted a general release of all claims related to the on-the-job
incident,” they are, in fact, asserting that Rail Terminal waived its
workers’ compensation lien through the language of the settlement
contract and the resignation agreement. They are not arguing that Rail
Terminal failed to assert its lien in a timely fashion and thereby lost
its right to do so.
Indeed, for plaintiffs to argue that Rail Terminal forfeited its lien
under the circumstances of this case would run contrary to the plain
language of section 5(b). The third paragraph of section 5(b) provides
that an employer may claim a lien on the proceeds of a third-party
action, and the fourth paragraph provides that “[t]he employer may[ ]
at any time [after the filing of a third-party action] join in the action
upon his motion so that all orders of court after hearing and judgment
shall be made for his protection.” 820 ILCS 305/5(b) (West 2004).
Here, Rail Terminal filed a motion to intervene in plaintiffs’ action
-17-
against defendants, and the circuit court granted that motion. Thus,
Rail Terminal properly asserted its lien. Cf. Scott v. Industrial
Comm’n, 184 Ill. 2d 202, 216-17 (1998) (even where employer
forfeits lien by failing to obtain lien in third-party proceeding,
employer or its insurer may still make claim for credits under section
5(b) following conclusion of third-party proceeding, as lien is merely
means of enforcing statutory right). Accordingly, the issue before us
is not whether Rail Terminal forfeited its workers’ compensation lien.
Nor is the issue before us whether it is possible for an employer
to waive its workers’ compensation lien. Rail Terminal does not call
into question that an employer can do so. As this court has previously
observed, “an employer can choose not to seek reimbursement of its
workers’ compensation obligation. An employer can waive the lien
it holds on the worker’s recovery in his personal injury action.”
LaFever v. Kemlite Co., 185 Ill. 2d 380, 399 (1998). An employer
might, for instance, waive its lien to avoid liability for contribution to
the other tortfeasors allegedly responsible for an employee’s injury.
LaFever, 185 Ill. 2d at 399, citing Lannom v. Kosco, 158 Ill. 2d 535
(1994). It might also waive its lien to avoid paying its share of
attorney fees and costs under section 5(b). LaFever, 185 Ill. 2d at 400.
The issue we must consider is whether, based on the language of
the settlement contract and the resignation agreement, Rail Terminal
waived its workers’ compensation lien.
Preliminarily, we address Rail Terminal’s argument that, as a
procedural matter, plaintiffs have forfeited their reliance on the
resignation agreement for purposes of this appeal. It is true that
plaintiffs did not specifically quote the resignation agreement
language on which they now rely before the circuit court or the
appellate court, or in their petition for leave to appeal. In spite of this,
plaintiffs have not forfeited their argument that the language in
question constitutes a waiver of Rail Terminal’s workers’
compensation lien. Before the circuit court, plaintiffs relied primarily
on the language of the settlement contract to support their position,
but they also attached a copy of the resignation agreement to their
response to Rail Terminal’s motion to intervene and suggested that
Rail Terminal knowingly contracted away its workers’ compensation
lien in exchange for Gallagher’s resignation. Moreover, Rail Terminal
specifically addressed this point in replying to plaintiffs’ response to
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its motion to intervene and did so again at the December 13, 2005,
hearing before the circuit court. As for plaintiffs’ argument before the
appellate court, we note that plaintiffs were the appellees and were
urging the appellate court to affirm a judgment the circuit court chose
to base on its consideration of Borrowman and the settlement
contract. It is well established that where the appellate court reverses
the judgment of the circuit court, and the appellee in that court brings
the case before this court as an appellant, that party may raise any
issues properly presented by the record to sustain the judgment of the
circuit court, even if the issues were not raised before the appellate
court. Marshall v. Burger King Corp., 222 Ill. 2d 422, 430-31 (2006).
Even though the circuit court relied on its consideration of
Borrowman and the settlement contract in granting the motion to
adjudicate third-party claims and issue settlement drafts, plaintiffs
properly raised the resignation agreement before the circuit court.
Thus, it is inconsequential whether they made the precise argument
they now ask us to consider when they were before the appellate
court. Finally, with respect to plaintiffs’ petition for leave to appeal,
we observe that while the briefs plaintiffs submitted to this court
develop their argument regarding the resignation agreement in
considerably more detail than their petition, the petition did refer to
the resignation agreement and argue that it placed Rail Terminal on
further notice that its settlement with Gallagher was intended to be a
general settlement of all claims. Thus, plaintiffs’ argument regarding
the resignation agreement is properly before us.
The principles that guide our analysis are familiar. The primary
objective in construing a contract is to give effect to the intent of the
parties. Virginia Surety Co. v. Northern Insurance Co. of New York,
224 Ill. 2d 550 (2007); Schek v. Chicago Transit Authority, 42 Ill. 2d
362, 364 (1969); see also Farm Credit Bank of St. Louis v. Whitlock,
144 Ill. 2d 440, 447 (1991) (“A release is a contract, and therefore is
governed by contract law”). A court must initially look to the
language of a contract alone, as the language, given its plain and
ordinary meaning, is the best indication of the parties’ intent. Virginia
Surety, 224 Ill. 2d at 556; Air Safety, Inc. v. Teachers Realty Corp.,
185 Ill. 2d 457, 462 (1999). Moreover, because words derive their
meaning from the context in which they are used, a contract must be
construed as a whole, viewing each part in light of the others. Board
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of Trade of the City of Chicago v. Dow Jones & Co., 98 Ill. 2d 109,
122-23 (1983). The intent of the parties is not to be gathered from
detached portions of a contract or from any clause or provision
standing by itself. Martindell v. Lake Shore National Bank, 15 Ill. 2d
272, 283 (1958). If the language of the contract is susceptible to more
than one meaning, it is ambiguous. Farm Credit, 144 Ill. 2d at 447.
In that case, a court may consider extrinsic evidence to ascertain the
parties’ intent. Quake Construction, Inc. v. American Airlines, Inc.,
141 Ill. 2d 281, 288 (1990).
We further note the long-standing principle that instruments
executed at the same time, by the same parties, for the same purpose,
and in the course of the same transaction are regarded as one contract
and will be construed together. Sandra Frocks, Inc. v. Ziff, 397 Ill.
497, 504 (1947); see also In re Estate of Mayfield, 288 Ill. App. 3d
534, 541 (1997). Here, the settlement contract and the resignation
agreement were executed in conjunction with one another. Indeed, the
resignation agreement provides:
“This Agreement will become effective after it is signed and
the settlement contracts in the aforementioned workers’
compensation claim have been approved by the Arbitrator.
This Agreement is contingent upon approval of said
contracts.”
Accordingly, we shall consider the settlement contract and the
resignation agreement with reference to one another.
Turning to the settlement contract, plaintiffs argue that the
following language constitutes a waiver of Rail Terminal’s section
5(b) workers’ compensation lien:
“Respondent [Rail Terminal] to pay the petitioner [Gallagher]
$150,000 in full and final settlement of all claims under the
Workers’ Compensation Act for injuries allegedly incurred on
or about August 10, 2001 and any and all results,
developments or sequale [sic], past, present, or future
resulting from this accident.” (Emphasis added.)
Plaintiffs emphasize that the settlement contract disposes of “all
claims” without restriction, in that it constitutes a “full and final
settlement.” Furthermore, according to plaintiffs, Rail Terminal’s lien
-20-
is a “claim[ ] under the Workers’ Compensation Act,” and it resulted
from Gallagher’s “accident.”
We agree that a claim to enforce a workers’ compensation lien
qualifies as a “claim under the Workers’ Compensation Act” in the
abstract. As defined by Black’s Law Dictionary, “claim” can refer to
any of the following:
“1. The aggregate of operative facts giving rise to a right
enforceable by a court ***. 2. The assertion of an existing
right; any right to payment or to an equitable remedy, even if
contingent or provisional ***. 3. A demand for money,
property, or a legal remedy to which one asserts a right ***.
4. An interest or remedy recognized at law; the means by
which a person can obtain a privilege, possession, or
enjoyment of a right or thing ***.” Black’s Law Dictionary
264 (8th ed. 2004).
Thus, “claim” is decidedly a broad term.
A careful reading of the settlement contract, however, reveals that
it specifies the claims under the Act to which it refers, and a claim to
enforce a workers’ compensation lien is not one of them. Plaintiffs’
reading of the settlement contract ignores the sentence immediately
following the sentence quoted above, to wit:
“Respondent denies these injuries are compensable and this
settlement is made to settle those issues as a purchase of the
peace against any and all claims for additional temporary total
compensation, permanent partial disability and medical,
surgical [or] hospital expenses, past, present or future.”
Construing the terms of the settlement contract as a whole, as we
must (Martindell, 15 Ill. 2d at 283), it is readily apparent that the
second sentence of the contract informs the meaning of the first. In
denying that “these injuries are compensable,” Rail Terminal is
denying the compensability of “injuries allegedly incurred on or about
August 10, 2001,” the same “injuries” giving rise to the “claims under
the Workers’ Compensation Act” to which the settlement contract
applies. The settlement contract goes on to state that “this settlement
is made to settle those issues,” which clearly refers to issues related
to Rail Terminal’s denial that the injuries are compensable.
Subsequently, the contract specifies that, in settling the issues
-21-
regarding the compensability of the injuries, Rail Terminal is
purchasing the peace “against any and all claims for additional
temporary total compensation, permanent partial disability and
medical, surgical [or] hospital expenses, past, present or future.” In
referring to claims for “additional” benefits, it is obvious the contract
is referring to claims beyond those already made by Gallagher at the
time of the settlement. Thus, the settlement contract applies to all
claims by Gallagher for “temporary total compensation, permanent
partial disability and medical, surgical [or] hospital expenses” based
on “injuries allegedly incurred on or about August 10, 2001.” It does
not apply to a claim by Rail Terminal to enforce its workers’
compensation lien.
Plaintiffs’ argument that the “full and final settlement of all
claims” language creates a general release to which we must give
broad effect is similarly unavailing. Plaintiffs contend that general
releases are intended to surrender all claims between the parties and
terminate their relationship. They suggest that where, as here, there
is no dispute that Rail Terminal, the alleged releasor, was aware of
the claim it was releasing, the general release should be given effect
as to that claim. In support of their argument, plaintiffs rely on this
court’s observation in Farm Credit Bank of St. Louis v. Whitlock that
“where both parties were aware of an additional claim at the time of
signing the release, courts have given effect to the general release
language of the agreement to release that claim as well.” Farm Credit,
144 Ill. 2d at 447, citing Frank Rosenberg, Inc. v. Carson Pirie Scott
& Co., 28 Ill. 2d 573, 578 (1963). See Perschke v. Westinghouse
Electric Corp., 111 Ill. App. 2d 23, 31 (1969); Cwik v. Condre, 4 Ill.
App. 2d 380, 383 (1954).
We have no quarrel with the statement from Farm Credit on
which plaintiffs rely. It is, however, inapposite here. As described
above, the settlement contract is explicitly limited to the settlement
of claims by Gallagher against Rail Terminal for temporary total
disability benefits, permanent partial disability benefits, and medical
expenses. It therefore does not contain a “general release” of the type
to which this court was referring in Farm Credit. Indeed, “general
release” is a conclusory term, and determining whether particular
language constitutes a general release is entirely a matter of
construing that language. See Farm Credit, 144 Ill. 2d at 447 (release
-22-
is contract and therefore governed by contract law, and intention of
parties to contract must be determined from instrument itself).
In Farm Credit, for instance, the plaintiff, a bank, filed a
foreclosure action against the defendants after they defaulted on the
second of two loans. Farm Credit, 144 Ill. 2d at 444-45. The
defendants raised the affirmative defense that a release agreement
they entered into after the default barred the foreclosure action, which
was directed at the property used to secure the first loan. Farm Credit,
144 Ill. 2d at 445. The circuit court granted summary judgment in
favor of the defendants, and the appellate court affirmed. Farm
Credit, 144 Ill. 2d at 445. This court reversed, holding that the release
agreement was ambiguous because it was unclear, based on the
language of the agreement, whether the parties intended the
agreement to release the defendants from all claims or merely claims
related to the second loan, in which case the plaintiff could proceed
with its foreclosure action. Farm Credit, 144 Ill. 2d at 448. The
plaintiff and the defendants were aware of claims that could arise in
relation to the first loan at the time they executed the release
agreement (Farm Credit, 144 Ill. 2d at 448), a fact that would have
placed the defendant’s foreclosure action within the purview of the
release, and thus barred it, if the language of the agreement had
unambiguously created a general release (see Farm Credit, 144 Ill. 2d
at 447 (“where both parties were aware of an additional claim at the
time of signing the release, courts have given effect to the general
release language of the agreement to release that claim as well”)).
However, because it was unclear whether the release constituted a
general release, this court concluded it was necessary to refer to
extrinsic evidence to determine the parties’ intent and remanded the
cause for further proceedings. Farm Credit, 144 Ill. 2d at 448. The
approach we have taken in this case to analyzing the settlement
contract accords with the approach we took to analyzing the language
of the agreement at issue in Farm Credit, only here the contract
language unambiguously does not constitute a general release. Cf.
Rakowski v. Lucente, 104 Ill. 2d 317, 323-24 (1984) (where release
was “comprehensive, precise and unambiguous” and defendant knew
at time he executed release that he might have basis for contribution
claim, contribution claim fell within scope of release).
-23-
We further hold that, even if the language of the settlement
contract did constitute a general release, it would not be sufficiently
explicit to waive Rail Terminal’s workers’ compensation lien.
Considering the integral role the workers’ compensation lien plays in
the workers’ compensation scheme, we do not believe general
language is sufficient to effect such a waiver. On the contrary, the
waiver of a workers’ compensation lien must be explicitly stated.
Accord 367 Ill. App. 3d at 302-03 (concluding “waiver of a workers’
compensation lien must be more explicitly and affirmatively stated in
a settlement agreement and cannot simply be implied by a lack of any
reference to that lien”). Here, the language of the settlement contract
contains no mention of Rail Terminal’s workers’ compensation lien
and therefore is not sufficiently explicit to waive the lien.
The adoption of an explicit-waiver rule in this context is
consistent with this court’s previous recognition in In re Estate of
Dierkes, 191 Ill. 2d 326 (2000), that “[t]he plain language of section
5(b) shows that an employer’s reimbursement of workers’
compensation payments from an employee’s third-party recovery is
crucial to the workers’ compensation scheme.” (Emphasis added.)
Dierkes, 191 Ill. 2d at 331. As this court explained in Dierkes,
because an employer may be required to pay compensation to an
injured employee under the Act even though the employer was
without fault, section 5(b) serves the important purpose of allowing
“ ‘both the employer and the 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). In the end, “ ‘[t]his is fair to everyone
concerned: the employer, who, in a fault sense, is neutral, comes out
even; the third person pays exactly the damages he or she would
normally pay ***; and the employee gets a fuller reimbursement for
actual damages sustained than is possible under the compensation
system alone.’ ” Dierkes, 191 Ill. 2d at 332, quoting 6 A. Larson & L.
Larson, Larson’s Workers’ Compensation Laws §110.02, at 110–3 to
110–4 (1999). This court underscored its discussion of the
significance of the workers’ compensation lien by reiterating that
“ ‘[i]t is of utmost importance that the trial court protect an
employer’s [workers’ compensation] lien.’ ” (Emphasis added.)
-24-
Dierkes, 191 Ill. 2d at 333, quoting Blagg v. Illinois F.W.D. Truck &
Equipment Co., 143 Ill. 2d 188, 195 (1991).
As Dierkes confirms, the workers’ compensation lien is deeply
rooted in the overall scheme of the Workers’ Compensation Act.
Consequently, there must be something more than general waiver
language before the lien can be considered waived. Requiring explicit
waiver will ensure that a lien that is “crucial to the workers’
compensation scheme” (Dierkes, 191 Ill. 2d at 331) and of “utmost
importance” (Dierkes, 191 Ill. 2d at 333) will not be considered
waived absent unmistakable settlement language to that effect. Such
a rule will have the salutary effect of placing both the parties and the
courts in workers’ compensation cases on notice that a specific
reference to the lien in a waiver provision is required before the lien
can be deemed waived. As a result, settling parties will be less likely
to expend time and money arguing over the interpretation of
settlement provisions, and valuable judicial resources will be
conserved.
We note it is not uncommon to require the explicit waiver of
certain rights. In various other contexts, where an important statutory
right is at issue, an explicit manifestation of intent is required before
the right in question can be deemed waived. See, e.g., Wright v.
Universal Maritime Service Corp., 525 U.S. 70, 80-81, 142 L. Ed. 2d
361, 371, 119 S. Ct. 391, 397 (1998) (union-negotiated waiver of
employees’ statutory right to judicial forum for claims of employment
discrimination must be “clear and unmistakable”); Eastern Associated
Coal Corp. v. Massey, 373 F.3d 530, 533, 536-37 (4th Cir. 2004)
(applying “clear and unmistakable” waiver rule set forth in Wright);
Forest Preserve District v. Illinois Labor Relations Board, 369 Ill.
App. 3d 733, 754 (2006) (“A party to a collective bargaining
agreement may waive its rights to bargain under the [Illinois Public
Labor Relations] Act where the contractual language evinces an
unequivocal intent to relinquish such rights. [Citation.] However,
evidence that a party to a labor agreement intended to waive a
statutory right must be clear and unmistakable. The language
sustaining the waiver must be specific and waiver is never
presumed”); Fowler v. Boise Cascade Corp., 948 F.2d 49, 55 (1st
Cir. 1991) (recognizing that, under Maine law, employer cannot
waive statutory right to immunity from suits arising out of employees’
-25-
injuries “unless the employer explicitly makes such a waiver”);
Kendall v. U.S. Dismantling Co., 20 Ohio St. 3d 61, 65, 485 N.E.2d
1047, 1051 (1985) (“The statutory and constitutional immunity
granted to complying employers is crucial to workers’ compensation
law. *** [B]efore this immunity may be considered to have been
waived, the waiver must be express, and must refer specifically to this
particular immunity. Although express indemnity agreements worded
in general terms may suffice for other purposes, we are not inclined
to construe them as effective waivers of this immunity absent a clear
evocation of the parties’ intent to that effect”); Bester v. Essex Crane
Rental Corp., 422 Pa. Super. 178, 187, 619 A.2d 304, 308 (1993)
(holding that indemnification clause in contract between employer
and equipment lessor did not meet statutory requirement that
employer “expressly provide[ ] for” indemnification to effectuate
waiver of immunity from suits by third parties). We find additional
support in these decisions for requiring the explicit waiver of a
workers’ compensation lien.
Based on the foregoing analysis, the decision in Borrowman is
overruled. Initially, we note the court in Borrowman made no attempt
to apply the fundamental principles of contract construction to the
settlement contract at issue in that case. Instead of giving effect to all
the relevant contract language, the court focused narrowly on the
declaration that the contract constituted a “full, final[,] and complete
settlement.” In doing so, the court overlooked that the contract
straightforwardly provided for a “full, final[,] and complete
settlement of any and all claims for temporary total disability,
permanent partial and/or permanent total disability” incurred by the
plaintiff by reason of his accident. (Emphasis added.) Borrowman,
356 Ill. App. 3d at 550. Just as the settlement contract at issue here
applies only to Gallagher’s claims against Rail Terminal for
“additional temporary total compensation, permanent partial disability
and medical, surgical [or] hospital expenses,” so too was the
settlement contract in Borrowman restricted to claims by the
employee against the employer. Accord Harder, 369 Ill. App. 3d at
939, 943 (reversing judgment of circuit court that employer waived
workers’ compensation lien where settlement contract provided for
“full and final settlement of all claims for compensation, medical,
hospital and other expenses” arising out of the plaintiff’s accident).
-26-
In addition, because the language of the settlement contract in
Borrowman contained no mention of the employer’s workers’
compensation lien, that language obviously was not sufficiently
explicit to waive the lien.
Our analysis cannot end here. We must also consider the effect of
the language contained in the resignation agreement. Turning to that
agreement, plaintiffs argue that the sixth paragraph effectuates a
waiver of Rail Terminal’s workers’ compensation lien. Paragraph six
provides:
“This Agreement does not constitute an admission by
Employer of any liability or wrongdoing but it is intended to
resolve in good faith any existing or potential disputes or
claims arising out of Employee’s relationship and separation
with employer.” (Emphasis added.)
Plaintiffs assert that Rail Terminal’s lien qualifies as a “dispute[ ] or
claim[ ]” arising out of Gallagher’s relationship with Rail Terminal.
Unlike the language of the settlement contract, paragraph six of
the resignation agreement expresses no limitations on the types of
“disputes” and “claims” to which it refers. However, like the
language of the settlement contract, it contains no specific reference
to Rail Terminal’s workers’ compensation lien. As a result, it is not
sufficiently explicit to effectuate the waiver of the lien.
In light of the foregoing, there is no need for us to refer to the
extrinsic evidence presented by the parties. A court may consider
extrinsic evidence to ascertain the intent of the parties to a contract if
the language of the contract is ambiguous. Quake, 141 Ill. 2d at 288.
Here, there is no ambiguity to resolve. As discussed, the settlement
contract, by its own terms, waives only Gallagher’s claims against
Rail Terminal, and neither the settlement contract nor the resignation
agreement explicitly refers to Rail Terminal’s workers’ compensation
lien, as would be required to waive the lien.
This leaves only plaintiffs’ arguments regarding the policy of
preventing double recovery in workers’ compensation cases.
Plaintiffs first contend that they settled their personal injury action for
less than they otherwise would have in reliance on Rail Terminal’s
waiver of its lien, so a finding that Rail Terminal waived its lien will
not result in a double recovery for Gallagher. This argument rests on
-27-
a factual assertion regarding plaintiffs’ basis for settling the personal
injury action that is not borne out by the record. Plaintiffs’ second
argument regarding double recovery is that finding, as we have, that
Rail Terminal did not waive its lien will result in a double recovery
for Rail Terminal by allowing it both to recover its workers’
compensation payments and retain the benefit of Gallagher’s
resignation. We note that plaintiffs’ attempt to relate this argument to
the policy of preventing double recovery is purely rhetorical, as that
policy involves “the general principle that an employee is not entitled
to a double recovery.” (Emphasis added.) Scott, 184 Ill. 2d at 217. In
reality, plaintiffs are merely asking us to conduct a generalized
inquiry into the fairness of Gallagher’s bargain with Rail Terminal,
which we decline to do. Courts generally will not inquire into the
adequacy of consideration for a contract. Sta-Ru Corp. v. Mahin, 64
Ill. 2d 330, 338 (1976). Moreover, Gallagher specifically
acknowledged in the resignation agreement that a $1 payment and the
approval of the settlement contract, which unambiguously did not
waive Rail Terminal’s workers’ compensation lien, would constitute
sufficient consideration for his resignation.
CONCLUSION
For the reasons expressed above, we hold that Rail Terminal did
not waive its section 5(b) workers’ compensation lien when it settled
Gallagher’s workers’ compensation claim. Accordingly, we affirm the
judgment of the appellate court, which reversed the circuit court’s
decision to grant defendants’ motion to adjudicate third-party claims
and issue settlement drafts and remanded the cause to the circuit court
for consideration of Rail Terminal’s motion to set aside and reallocate
the settlement.
Affirmed.
JUSTICE BURKE took no part in the consideration or decision
of this case.
CHIEF JUSTICE THOMAS, specially concurring:
-28-
I agree with the result reached by my colleagues in affirming the
appellate court’s decision in the instant case and in overruling
Borrowman v. Prastein, 356 Ill. App. 3d 546 (2005). I also agree with
the conclusion that a bright-line rule should be adopted so as to
require an explicit and affirmative reference to the workers’
compensation lien before it can be waived by settlement language.
I would only add that even in the absence of such a bright-line
rule, I do not believe that the general language of paragraph six of the
parties’ resignation agreement was intended to encompass Rail
Terminal’s workers’ compensation lien. Paragraph six provides that
“[t]his Agreement does not constitute an admission by Employer of
any liability or wrongdoing but it is intended to resolve in good faith
any existing or potential disputes or claims arising out of Employee’s
relationship and separation with Employer.” (Emphasis added.) The
first clause of the above-quoted sentence suggests–like all of the other
language of both agreements–that it is only concerned with claims
that Gallagher may have against Rail Terminal. Although the second
clause uses some broad language about “any existing or potential
disputes or claims,” I believe that this second clause must be read in
relation to the first clause. Reading paragraph six in this way leads to
the conclusion that the second clause is simply referring to claims that
the employee (Gallagher) may have against the employer (Rail
Terminal) and not claims that Rail Terminal may have against
Gallagher, such as a workers’ compensation lien. This becomes even
clearer when all of the language of both documents are read together
as a whole, as they must be. See In re Estate of Mayfield, 288 Ill.
App. 3d 534, 541 (1997). All of the rights that are specifically
mentioned as being waived in both documents are claims that
Gallagher may have against Rail Terminal. Paragraph six reinforces
this theme by stating that the agreement does not constitute an
admission by the employer of any liability or wrongdoing even
though it is resolving in good faith existing or potential disputes and
claims. In essence, the parties intended that Gallagher receive
$150,000 in immediate compensation for permanent partial disability,
plus an additional $1 in consideration, in exchange for his resignation
and his waiver of any claims against Rail Terminal.
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