Marque Medicos Fullerton, LLC v. Hartford Underwriters Insurance Co.

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Appellate Court Date: 2017.08.17
08:59:48 -05'00'
Marque Medicos Fullerton, LLC v. Zurich American Insurance Co.,
2017 IL App (1st) 160756Appellate Court MARQUE MEDICOS FULLERTON, LLC; MEDICOS PAIN &
Caption SURGICAL SPECIALISTS, S.C.; AMBULATORY SURGICAL
CARE FACILITY, LLC; and MARQUE MEDICOS KEDZIE, LLC,
for Themselves and All Others Similarly Situated, Plaintiffs-
Appellants, v. ZURICH AMERICAN INSURANCE COMPANY,
AMERICAN ZURICH INSURANCE COMPANY, ASSURANCE
COMPANY OF AMERICA, and MARYLAND CASUALTY
COMPANY, Defendants-Appellees.—MARQUE MEDICOS
FULLERTON, LLC; MEDICOS PAIN & SURGICAL
SPECIALISTS, S.C.; and AMBULATORY SURGICAL CARE
FACILITY, LLC, for Themselves and All Others Similarly Situated,
Plaintiffs-Appellants, v. TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA, TRAVELERS INDEMNITY
COMPANY OF AMERICA, TRAVELERS CASUALTY
INSURANCE COMPANY OF AMERICA, TRAVELERS
CASUALTY AND SURETY COMPANY OF AMERICA, THE
PHOENIX INSURANCE COMPANY, FARMINGTON
CASUALTY COMPANY, THE STANDARD FIRE INSURANCE
COMPANY, and THE CHARTER OAK FIRE INSURANCE
COMPANY, Defendants-Appellees.—MARQUE MEDICOS
FULLERTON, LLC; MEDICOS PAIN & SURGICAL
SPECIALISTS, S.C.; and AMBULATORY SURGICAL CARE
FACILITY, LLC, for Themselves and All Others Similarly Situated,
Plaintiffs-Appellants, v. HARTFORD UNDERWRITERS
INSURANCE COMPANY; HARTFORD INSURANCE
COMPANY OF THE MIDWEST; HARTFORD ACCIDENT AND
INDEMNITY COMPANY; HARTFORD INSURANCE COMPANY
OF ILLINOIS; HARTFORD FIRE INSURANCE COMPANY;
HARTFORD CASUALTY INSURANCE COMPANY; TWIN CITY
FIRE INSURANCE COMPANY; TRUMBULL INSURANCE
COMPANY; and SENTINEL INSURANCE COMPANY, LTD.,
Defendants-Appellees.—MARQUE MEDICOS FULLERTON, LLC;
MEDICOS PAIN & SURGICAL SPECIALISTS, S.C.; and
AMBULATORY SURGICAL CARE FACILITY, LLC, for
Themselves and All Others Similarly Situated, Plaintiffs-Appellants,
v. AIG INSURANCE COMPANY, f/k/a Chartis Casualty Company;
NATIONAL UNION FIRE INSURANCE COMPANY OF
PITTSBURGH; ILLINOIS NATIONAL INSURANCE COMPANY;
COMMERCE & INDUSTRY INSURANCE COMPANY; NEW
HAMPSHIRE INSURANCE COMPANY; INSURANCE
COMPANY OF THE STATE OF PENNSYLVANIA; AMERICAN
HOME ASSURANCE COMPANY; and AIG PROPERTY
CASUALTY COMPANY, f/k/a Chartis Property Casualty Company,
Defendants-Appellees.
District & No. First District, Sixth Division
Docket Nos. 1-16-0756, 1-16-0954, 1-16-0955, 1-16-0956 cons.
Filed June 30, 2017
Decision Under Appeal from the Circuit Court of Cook County, Nos. 15-CH-4580,
Review 15-CH-4946, 15-CH-4949, 15-CH-4951; the Hon. Rita M. Novak,
Judge, presiding.
Judgment Affirmed.
Counsel on Sperling & Slater, P.C. (Bruce S. Sperling, Harvey J. Barnett, Mitchell
Appeal H. Macknin, and Daniel A. Shmikler, of counsel), and The Pace Law
Firm, LLC (Randall F. Pace, of counsel), both of Chicago, and Alan J.
Mandel, Ltd., of Skokie (Alan J. Mandel, of counsel), for appellants.
Dentons US LLP (Steven M. Levy and Richard L. Fenton, of Chicago,
Sarah E.S. Carlson, of St. Louis, Missouri, and Laura Geist (pro hoc
vice), of San Francisco, California, of counsel), DLA Piper LLP (US)
(Raja Gaddipati and Joseph A. Roselius, of counsel), Winston &
Strawn, LLP (Timothy J. Rooney, Shane W. Blackstone, and Kathryn
Wendel Bayer, of counsel), both of Chicago, and Alston & Bird LLP,
of New York, New York (Adam Kaiser (pro hoc vice), of counsel), for
appellees.
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Panel JUSTICE ROCHFORD delivered the judgment of the court, with
opinion.
Presiding Justice Hoffman and Justice Delort concurred in the
judgment and opinion.
OPINION
¶1 In these consolidated appeals, plaintiffs-appellants 1 appeal from the dismissal, with
prejudice, of four separate putative class-action lawsuits filed against defendants-appellees.2
For the following reasons, we conclude that the circuit court had subject-matter jurisdiction to
consider plaintiffs’ claims and that those claims were properly dismissed with prejudice.
¶2 I. BACKGROUND
¶3 In March 2015, plaintiffs filed four putative class-action lawsuits, one each against the
Zurich, Travelers, Hartford, and AIG defendants (collectively, defendants). On June 16, 2015,
the suits against the Travelers, Hartford, and AIG defendants were reassigned, as related cases,
to the courtroom where the initially filed suit against the Zurich defendants was pending. The
complaints filed in each lawsuit generally seek redress for defendants’ alleged failure to
comply with requirements contained in the Workers’ Compensation Act (Act). 820 ILCS
305/1 et seq. (West 2014).
¶4 More specifically, plaintiffs allege that they—and a class of similarly situated others—had
provided medical services to employees for work-related injuries. Pursuant to the Act, the
employers of those employees had the responsibility to timely pay for those medical services,
with those employers being insured for that responsibility by identical workers’ compensation
1
Plaintiffs-appellants in each appeal include Marque Medicos Fullerton, LLC; Medicos Pain &
Surgical Specialists, S.C.; and Ambulatory Surgical Care Facility, LLC, for themselves and all others
similarly situated. In addition, Marque Medicos Kedzie, LLC is also a plaintiff-appellant in appeal No.
1-16-0756.
2
Defendants-appellees in appeal No. 1-16-0756 (Zurich defendants) are Zurich American
Insurance Company, American Zurich Insurance Company, Assurance Company of America, and
Maryland Casualty Company. The defendants-appellees in appeal No. 1-16-0954 (Travelers
defendants) are Travelers Property Casualty Company of America, Travelers Indemnity Company of
America, Travelers Casualty Insurance Company of America, Travelers Casualty and Surety Company
of America, The Phoenix Insurance Company, Farmington Casualty Company, The Standard Fire
Insurance Company, and The Charter Oak Fire Insurance Company. The defendants-appellees in
appeal No. 1-16-0955 (Hartford defendants) are Hartford Underwriters Insurance Company; Hartford
Insurance Company of the Midwest; Hartford Accident and Indemnity Company; Hartford Insurance
Company of Illinois; Hartford Fire Insurance Company; Hartford Casualty Insurance Company; Twin
City Fire Insurance Company; Trumbull Insurance Company; and Sentinel Insurance Company, LTD.
The defendants-appellees in appeal No. 1-16-0956 (AIG defendants) are AIG Insurance Company,
f/k/a Chartis Casualty Company; National Union Fire Insurance Company of Pittsburgh; Illinois
National Insurance Company; Commerce & Industry Insurance Company; New Hampshire Insurance
Company; Insurance Company of the State of Pennsylvania; American Home Assurance Company;
and AIG Property Casualty Company, f/k/a Chartis Property Casualty Company.
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insurance policies issued by defendants. Noting that the Act requires that late payments to
providers, such as plaintiffs, “shall incur interest at a rate of 1% per month payable to the
provider” (820 ILCS 305/8.2(d)(3) (West 2014)), contending that this statutory provision was
incorporated into the standard policies issued by defendants, and further contending that
defendants had in fact made “many” untimely payments for such services without also paying
interest, plaintiffs’ complaints sought relief in four counts.
¶5 In each complaint, count I contends that plaintiffs were third-party beneficiaries of the
standard policies defendants issued to employers and that plaintiffs were therefore entitled to
recover for defendants’ breach of those policies. Count II alleges that plaintiffs had an implied
private right of action to recover for defendants’ violation of section 8.2(d)(3) of the Act.
Count III asserts that defendants had breached contracts with plaintiffs that were
implied-in-fact. Finally, count IV seeks an award of attorney fees and statutory damages for
defendants’ vexatious and unreasonable refusal to pay accrued interest for late payments,
pursuant to section 155 of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/155
(West 2014)). The complaints seek “the statutory interest that accrued and is payable to them
on bills that were paid by Defendants but after the Due Date, for services covered by the Act,”
attorney fees, prejudgment interest, and injunctive relief mandating that defendants “institute,
maintain and follow” procedures that will ensure that, in the future, defendants will timely
comply with the requirements of section 8.2(d)(3) of the Act.
¶6 Motions to dismiss each suit for failure to state claims were filed by defendants, pursuant to
section 2-615 of the Code of Civil Procedure (Code). 735 ILCS 5/2-615 (West 2014). The
motion to dismiss filed by the Travelers’ defendants asserted, inter alia, that the circuit court
lacked subject-matter jurisdiction over plaintiffs’ claims because the Act vested exclusive
jurisdiction to consider those claims with the Illinois Workers’ Compensation Commission
(Commission). The Hartford defendants had additionally sought to strike the class allegations,
pursuant to section 2-619 of the Code. 735 ILCS 5/2-619 (West 2014).
¶7 On February 19, 2016, following a prior hearing on the motions, the circuit court entered a
memorandum opinion and order in which it dismissed each of the plaintiffs’ lawsuits with
prejudice. In reaching that result, the circuit court concluded (1) plaintiffs were not third-party
beneficiaries of the policies, (2) plaintiffs had no implied private right of action for a violation
of section 8.2(d)(3) of the Act, (3) the facts alleged in plaintiffs’ complaints did not support the
imposition of an implied-in-fact contract, and (4) the remedies contained in section 155 of the
Insurance Code do not extend to purported third parties such as plaintiffs. The circuit court’s
order did not specifically address the Travelers defendants’ challenge to the court’s
subject-matter jurisdiction or the Hartford defendants’ challenge to the class allegations.
¶8 Plaintiffs filed timely notices of appeal from the dismissal of each of the four lawsuits on
March 15, 2016. This court consolidated the appeals in an order entered on May 11, 2016.
¶9 II. ANALYSIS
¶ 10 On appeal, plaintiffs contend that the circuit court improperly dismissed their lawsuits,
with prejudice, for failure to state claims. Before we can address the substantive merits of the
circuit court’s dismissal of plaintiffs’ complaints, however, we must first address defendants’
contention that the circuit court lacked subject-matter jurisdiction to consider plaintiffs’ claims
because the Act “vests exclusive jurisdiction in the Commission to hear and determine direct
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claims under the Act.”
¶ 11 A. History and Scope of the Act
¶ 12 We first provide some context with respect to the history and scope of the Act, which will
guide both our jurisdictional analysis and our subsequent discussion of the merits of the circuit
court’s dismissal of plaintiffs’ claims.
¶ 13 In general terms, the Act:
“substitutes an entirely new system of rights, remedies, and procedure for all
previously existing common law rights and liabilities between employers and
employees subject to the Act for accidental injuries or death of employees arising out
of and in the course of the employment. [Citation.] Pursuant to the statutory scheme
implemented by the Act, the employee gave up his common law rights to sue his
employer in tort, but recovery for injuries arising out of and in the course of his
employment became automatic without regard to any fault on his part. The employer,
who gave up the right to plead the numerous common law defenses, was compelled to
pay, but his liability became fixed under a strict and comprehensive statutory scheme,
and was not subjected to the sympathies of jurors whose compassion for fellow
employees often led to high recovery. [Citation.] This trade-off between employer and
employee promoted the fundamental purpose of the Act, which was to afford
protection to employees by providing them with prompt and equitable compensation
for their injuries.” Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 180-81 (1978).
¶ 14 These purposes and goals have been effectuated in the various provisions of the Act, which
when taken together represent a “comprehensive statutory administrative scheme.” Bradley v.
City of Marion, Illinois, 2015 IL App (5th) 140267, ¶ 15. Thus, the Act creates a new
administrative agency, the Commission, and provides that the “Commission shall administer
this Act.” 820 ILCS 305/13 (West 2014). “All questions arising under [the] Act, if not settled
by agreement of the parties interested therein, shall, except as otherwise provided, be
determined by the Commission.” 820 ILCS 305/18 (West 2014). This authority includes
resolution of “[a]ny disputed questions of law or fact,” which the Act provides will be initially
decided following an administrative hearing before an arbitrator assigned by the Commission.
820 ILCS 305/19 (West 2014). Any decision entered by such an arbitrator is subject to review,
first by the Commission and then by the circuit court. 820 ILCS 305/19(b), (f)(1) (West 2014).
¶ 15 The “compensation” allowed under the Act for accidental, nonfatal injuries includes both
payment of lost wages (820 ILCS 305/8(b) (West 2014)) and payment for “all the necessary
first aid, medical and surgical services, and all necessary medical, surgical and hospital
services thereafter incurred, limited, however, to that which is reasonably required to cure or
relieve from the effects of the accidental injury” (820 ILCS 305/8(a) (West 2014); Bayer v.
Panduit Corp., 2016 IL 119553, ¶ 30).
¶ 16 In order to protect an injured employee’s ability to recover, an employer must demonstrate
to the Commission sufficient proof of its financial ability to pay the compensation required by
the Act. 820 ILCS 305/4 (West 2014). One way of doing so is for an employer to “[i]nsure his
entire liability to pay such compensation in some insurance carrier authorized, licensed, or
permitted to do such insurance business in this State.” 820 ILCS 305/4(a)(3) (West 2014).
“Every policy of an insurance carrier, insuring the payment of compensation under this Act
shall cover all the employees and the entire compensation liability of the insured ***.” Id.-5-
Furthermore, “[i]n the event the employer does not pay the compensation for which he or she is
liable, then an insurance company, association or insurer which may have insured such
employer against such liability shall become primarily liable to pay to the employee, his or her
personal representative or beneficiary the compensation required by the provisions of this Act
to be paid by such employer. The insurance carrier may be made a party to the proceedings in
which the employer is a party and an award may be entered jointly against the employer and
the insurance carrier.” 820 ILCS 305/4(g) (West 2014).
¶ 17 In addition to generally providing for the payment of compensation to employees, the Act
also contains a number of provisions designed to encourage the “prompt” payment of
compensation by an employer or insurer and to penalize any failure to make such prompt
payment of compensation. See 820 ILCS 305/4(c), 19(k), (l) (West 2014). Additional such
measures were included in amendments to the Act enacted in 2005 and 2011, to be discussed
below.
¶ 18 In turn, the Act also contains the protections for employers discussed above. As such, it
specifically states that “[n]o common law or statutory right to recover damages from the
employer [or] his insurer” is available to “any employee who is covered by the provisions of
this Act, to any one wholly or partially dependent upon him, the legal representatives of his
estate, or any one otherwise entitled to recover damages for such injury.” 820 ILCS 305/5(a)
(West 2014). The Act therefore “provides that the statutory remedies under it shall serve as the
employee’s exclusive remedy if he sustains a compensable injury.” McCormick v. Caterpillar
Tractor Co., 85 Ill. 2d 352, 356 (1981). “Under this comprehensive statutory administrative
scheme, the legislature has vested exclusive original jurisdiction in the Commission over
matters involving an injured worker’s rights to benefits under the Act and an employer’s
defenses to claims under the Act.” Bradley, 2015 IL App (5th) 140267, ¶ 15. “The role of the
circuit court in compensation proceedings is appellate only.” Hartlein v. Illinois Power Co.,
151 Ill. 2d 142, 157 (1992).
¶ 19 In 2005, the Act “was amended, bringing significant changes to the Act which resulted
from an extended negotiation between labor and business.” Brad A. Elward, Survey of Illinois
Law: Workers’ Compensation, 34 S. Ill. U. L.J. 1107, 1110 (2010); Pub. Act 94-277 (eff. July
20, 2005). Of particular relevance here, the 2005 amendments included changes with respect to
the payment for medical services for injured workers, implementing a medical fee schedule
limiting the maximum amount that could be charged by a provider for covered medical
services. Pub. Act 94-277, § 10 (eff. July 20, 2005) (adding 820 ILCS 305/8.2(a)).
¶ 20 The 2005 amendments also included relevant new procedures with respect to how and
when medical services provided pursuant to the Act would be paid for and the consequences
for any late payments. Central to the claims at issue here, section 8.2(d) was added to that Act,
which provided:
“When a patient notifies a provider that the treatment, procedure, or service being
sought is for a work-related illness or injury and furnishes the provider the name and
address of the responsible employer, the provider shall bill the employer directly. The
employer shall make payment and providers shall submit bills and records in
accordance with the provisions of this Section. All payments to providers for treatment
provided pursuant to this Act shall be made within 60 days of receipt of the bills as long
as the claim contains substantially all the required data elements necessary to
adjudicate the bills. In the case of nonpayment to a provider within 60 days of receipt of
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the bill which contained substantially all of the required data elements necessary to
adjudicate the bill or nonpayment to a provider of a portion of such a bill up to the
lesser of the actual charge or the payment level set by the Commission in the fee
schedule established in this Section, the bill, or portion of the bill, shall incur interest at
a rate of 1% per month payable to the provider.” Pub. Act 94-277, § 10 (eff. July 20,
2005) (adding 820 ILCS 305/8.2(d)).
¶ 21 Additional procedures were included in a new section 8.2(e) of the Act, which set limits
upon the ability of providers to attempt to collect from injured employees while the
compensability of medical services was being disputed before the Commission while also
protecting providers’ ability to ultimately receive payment by tolling any statute of limitations
during any proceeding pending before the Commission. Pub. Act 94-277, § 10 (eff. July 20,
2005) (adding 820 ILCS 305/8.2(e)). Finally, a new section 8.2(e-20) provided:
“Upon a final award or judgment by an Arbitrator or the Commission, or a settlement
agreed to by the employer and the employee *** the employee shall be responsible for
payment of any outstanding bills for a procedure, treatment, or service rendered by a
provider as well as the interest awarded under subsection (d) of this Section” Pub. Act
94-277, § 10 (eff. July 20, 2005) (adding 820 ILCS 305/8.2(e-20)).
¶ 22 In 2011, “significant statutory amendments were enacted to help reduce the overall cost of
workers’ compensation, which has been identified as a goal by the Illinois General Assembly
to improve the business climate in the state.” Brad A. Elward & Dana J. Hughes, Survey of
Illinois Law: Workers’ Compensation, 38 S. Ill. U. L.J. 775, 776 (2014); Pub. Act 97-18 (eff.
June 28, 2011). Of relevance here, a significant portion of the cost reduction came by way of a
30% reduction in the amounts medical service providers were allowed to charge pursuant to
the medical fee schedule. Pub. Act 97-18, § 15 (eff. June 28, 2011) (amending 820 ILCS
305/8.2); 97th Ill. Gen. Assem., Senate Proceedings, May 28, 2011, at 34 (statements of
Senator Raoul) (noting that changes to medical fee schedule represented “the most significant
savings”).
¶ 23 In order to alleviate concerns about the impact this reduction might have on medical
service providers, the 2011 amendments also “shortened the period of time when interest and
penalties can be assessed to employers that aren’t paying medical bills on time.” 97th Ill. Gen.
Assem., Senate Proceedings, May 28, 2011, at 37 (statements of Senator Raoul). Thus, the Act
was amended to provide that 1% interest would now begin to accrue on medical bills left
unpaid after only 30 days and that “[a]ny required interest payments shall be made within 30
days after payment” of the unpaid bill. Pub. Act 97-18, § 15 (eff. June 28, 2011) (amending
820 ILCS 305/8.2(d)(3)).
¶ 24 B. Subject-Matter Jurisdiction
¶ 25 We now turn to the question of the circuit court’s jurisdiction to consider plaintiffs’ claims.
While only the Travelers defendants raised the issue of the circuit court’s subject-matter
jurisdiction below, and the circuit court did not address this argument in its order granting
defendants’ motions to dismiss, we are obligated to independently analyze the issue of the
circuit court’s subject-matter jurisdiction over plaintiffs’ claims because the issue of
subject-matter jurisdiction “cannot be waived, stipulated to, or consented to by the parties.”
Bradley, 2015 IL App (5th) 140267, ¶ 13.
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¶ 26 1. Standard of Review
¶ 27 “Subject-matter jurisdiction refers to a tribunal’s power to hear and determine cases of the
general class to which the proceeding in question belongs.” J&J Ventures Gaming, LLC v.
Wild, Inc., 2016 IL 119870, ¶ 23. Under the Illinois Constitution of 1970, the circuit courts
have original jurisdiction over all justiciable matters, with the following two general
exceptions: (1) the circuit courts have only such power to review administrative action as is
provided by law, and (2) our supreme court has exclusive and original jurisdiction over
questions relating to the redistricting of the General Assembly and the ability of the Governor
to serve or resume office. Ill. Const. 1970, art. VI, § 9; Crossroads Ford Truck Sales, Inc. v.
Sterling Truck Corp., 2011 IL 111611, ¶ 27.
¶ 28 “The Illinois Constitution does not define the term ‘justiciable matters.’ ” McCormick v.
Robertson, 2015 IL 118230, ¶ 21. Nevertheless, it is generally understood that a “ ‘justiciable
matter’ is a controversy appropriate for review by the court, in that it is definite and concrete,
as opposed to hypothetical or moot, touching upon the legal relations of parties having adverse
legal interests.” Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 335
(2002).
¶ 29 The “legislature may create new justiciable matters by enacting legislation that creates
rights and duties that have no counterpart at common law or in equity.” Id. Conversely, “our
General Assembly may vest original jurisdiction in an administrative agency rather than the
courts when it enacts a comprehensive statutory scheme that creates rights and duties that have
no counterpart in common law or equity.” (Emphases added.) Zahn v. North American Power
& Gas, LLC, 2016 IL 120526, ¶ 14.
¶ 30 In the past, our supreme court has indicated that “if the legislative enactment does divest
the circuit courts of their original jurisdiction through a comprehensive statutory
administrative scheme, it must do so explicitly.” (Emphasis added.) Employers Mutual Cos. v.
Skilling, 163 Ill. 2d 284, 287 (1994). More recently, however, our supreme court has
recognized that “legislative intent to divest circuit courts of jurisdiction and to place exclusive
original jurisdiction in an administrative agency may be discerned by considering the statute as
a whole, with the relevant provisions construed together and not in isolation and with an eye
toward the reason for the law, the problems sought to be remedied, and the purposes to be
achieved.” Zahn, 2016 IL 120526, ¶ 16 (citing J&J Ventures Gaming, LLC, 2016 IL 119870,
¶¶ 24-25). We therefore apply the more current, broader analysis described above in
considering whether defendants correctly contend that the Act “vests exclusive jurisdiction in
the Commission” to consider plaintiffs’ claims. “This determination is a matter of statutory
interpretation.” J&J Ventures Gaming, LLC, 2016 IL 119870, ¶ 25.
¶ 31 Questions relating to the circuit court’s jurisdiction and the interpretation of a statute both
present issues of law, and we therefore review such questions de novo. Id.¶ 32 2. Discussion
¶ 33 First, there is no question that the four lawsuits at issue here generally present “justiciable
matters.” The question of the right and ability of plaintiffs to collect for “the statutory interest
that accrued and is payable to them on bills that were paid by Defendants but after the Due
Date, for services covered by the Act” is clearly “a controversy appropriate for review by the
court, in that it is definite and concrete, as opposed to hypothetical or moot, touching upon the
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legal relations of parties having adverse legal interests.” Belleville Toyota, Inc., 199 Ill. 2d at
335.
¶ 34 The question thus becomes whether the legislature intended to divest circuit courts of
jurisdiction and to place exclusive original jurisdiction in the Commission with respect to
plaintiffs’ claims. We discern no such intent.
¶ 35 It is abundantly clear that the Act represents a “comprehensive statutory administrative
scheme.” Bradley, 2015 IL App (5th) 140267, ¶ 15. It is also clear that “the legislature has
vested exclusive original jurisdiction in the Commission over matters involving an injured
worker's rights to benefits under the Act.” Id. However, this scheme is comprehensive and
exclusive only with respect to the legal relationship between an injured employee and an
employer. Id. (“Under this comprehensive statutory administrative scheme, the legislature has
vested exclusive original jurisdiction in the Commission over matters involving an injured
worker's rights to benefits under the Act and an employer's defenses to claims under the Act.”).
¶ 36 Here, plaintiffs are medical service providers and defendants are workers’ compensation
insurers. Nothing in the Act, reading it as a whole and also considering the reasons for its
enactment and amendment, indicates an intent that resolution of the type of claims brought by
plaintiffs here was a task to be exclusively vested with the Commission. Plaintiffs’ claims do
not purport to seek any rights or benefits owed to an employee by an employer; rather,
plaintiffs’ claims purport to seek redress for the failure of defendants to fully and completely
pay for services rendered by plaintiffs. See, e.g., Roche v. Travelers Property Casualty
Insurance Co., No. 07-CV-302-JPG, 2008 WL 2875250, at *3 (S.D. Ill. July 24, 2008) (finding
that the Act did not bar a lawsuit brought by a medical provider against workers’ compensation
insurers, because the provider was not asserting patient's right to insurance coverage under the
Act; rather, lawsuit was based on providers purported right to compensation for the covered
services provider had rendered).
¶ 37 In addition, “[t]he Commission is an administrative agency, and therefore, it has no general
or common law powers. [Citation.] The Commission’s powers are limited to those granted by
the legislature, so that any action taken by the Commission must be specifically authorized by
statute.” Alvarado v. Industrial Comm’n, 216 Ill. 2d 547, 553 (2005). Moreover, “even a
defectively stated claim is sufficient to invoke the court’s subject-matter jurisdiction, as
‘[s]ubject matter jurisdiction does not depend upon the legal sufficiency of the pleadings.’
[Citation.] In other words, the only consideration is whether the alleged claim falls within the
general class of cases that the court has the inherent power to hear and determine.” (Emphasis
in original.) In re Luis R., 239 Ill. 2d 295, 301 (2010).
¶ 38 While we recognize that plaintiffs’ claims all generally relate to and involve the interest
provision contained in section 8.2(d) of the Act, we also note that—as pleaded and without any
comment on the substantive merits of the claims—plaintiffs’ complaint purports to assert three
common law claims, as well as a statutory award of attorney fees and statutory damages
pursuant to section 155 of the Illinois Insurance Code. Because those alleged claims fall within
the general class of cases that the circuit court has the inherent power to hear and determine,
while in contrast the Commission is not authorized to resolve such common law or statutory
claims, and because we therefore discern no intent on the part of the legislature to divest the
circuit court of its original jurisdiction with respect to such claims, subject-matter jurisdiction
is present. Id.-9-
¶ 39 C. Dismissal of Plaintiffs’ Claims
¶ 40 With the jurisdictional question answered, we may now address the substantive merits of
the circuit court’s dismissal of plaintiffs’ claims with prejudice.
¶ 41 1. Standard of Review
¶ 42 “A section 2-615 motion to dismiss challenges the legal sufficiency of a complaint based
on defects apparent on its face. [Citation.] In ruling on a section 2-615 motion, only those facts
apparent from the face of the pleadings, matters of which the court can take judicial notice, and
judicial admissions in the record may be considered.” K. Miller Construction Co. v. McGinnis,
238 Ill. 2d 284, 291 (2010). All well-pleaded facts must be taken as true. Unterschuetz v. City
of Chicago, 346 Ill. App. 3d 65, 68-69 (2004). Exhibits attached to the complaint are
considered part of the pleadings. Bajwa v. Metropolitan Life Insurance Co., 208 Ill. 2d 414,
431 (2004). We review an order granting a section 2-615 dismissal de novo. McGinnis, 238 Ill.
2d at 291.
¶ 43 This appeal also requires us to construe the meaning of certain provisions of the Act. The
rules applicable to this task are well-established and were outlined in Hendricks v. Board of
Trustees of the Police Pension Fund, 2015 IL App (3d) 140858, ¶ 14:
“The fundamental rule of statutory interpretation is to ascertain and give effect to the
intent of the legislature. [Citation.] The most reliable indicator of that intent is the
language of the statute itself. [Citation.] In determining the plain meaning of statutory
language, a court will consider the statute in its entirety, the subject the statute
addresses, and the apparent intent of the legislature in enacting the statute. [Citations.]
If the statutory language is clear and unambiguous, it must be applied as written,
without resorting to further aids of statutory interpretation. [Citation.] A court may not
depart from the plain language of the statute and read into it exceptions, limitations, or
conditions that are not consistent with the express legislative intent.”
However, “[w]hen a statute is ambiguous, we look to aids of statutory construction, including
legislative history.” BAC Home Loans Servicing, LP v. Mitchell, 2014 IL 116311, ¶ 38. We
review questions of statutory construction de novo. Feltmeier v. Feltmeier, 207 Ill. 2d 263, 267
(2003).
¶ 44 2. Count I—Third-Party Beneficiary
¶ 45 Plaintiffs first contend that the circuit court improperly dismissed their contention that
defendants breached contracts to which plaintiffs were intended third-party beneficiaries.
¶ 46 The legal framework guiding our analysis of this issue has been summarized as follows:
“The construction, interpretation, or legal effect of a contract is a matter to be
determined by the court as a question of law. [Citation.] Our review is de novo.
[Citation.] An individual not a party to a contract may only enforce the contract's rights
when the contract's original parties intentionally entered into the contract for the direct
benefit of the individual. [Citation.] There is a strong presumption that the parties to a
contract intend that the contract's provisions apply only to them, and not to third
parties. [Citation.] That the contracting parties know, expect, or even intend that others
will benefit from their agreement is not enough to overcome the presumption that the
contract was intended for the direct benefit of the parties. [Citation.]
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Whether someone is a third-party beneficiary depends on the intent of the
contracting parties, as evidenced by the contract language. [Citation.] It must appear
from the language of the contract that the contract was made for the direct, not merely
incidental, benefit of the third person. [Citation.] Such an intention must be shown by
an express provision in the contract identifying the third-party beneficiary by name or
by description of a class to which the third party belongs. [Citation.] If a contract makes
no mention of the plaintiff or the class to which he belongs, he is not a third-party
beneficiary of the contract. [Citations.] The plaintiff bears the burden of showing that
the parties to the contract intended to confer a direct benefit on him.” Martis v. Grinnell
Mutual Reinsurance Co., 388 Ill. App. 3d 1017, 1020 (2009).
¶ 47 After considering these legal principles, it is clear that plaintiffs are not intended
third-party beneficiaries of the workers’ compensation policies issued by defendants. Plaintiffs
are, at best, incidental and not direct beneficiaries of those policies.
¶ 48 First, plaintiffs are not mentioned explicitly by name in the “standard policy” attached to
the complaint, which plaintiffs contend is representative of all of the workers’ compensation
insurance policies issued by defendants. Conceding as much, plaintiffs rely upon language in
the standard contract providing that defendants “will pay promptly when due the benefits
required by you [employer] by the workers compensation law” and that defendants “are
directly and primarily liable to any person entitled to benefits payable by this insurance.”
¶ 49 However, this exact policy language was rejected as supporting a claim for third-party
beneficiary status made by a medical provider against a workers’ compensation insurer in
Martis, 388 Ill. App. 3d 1017. After noting that “medical providers are generally not third party
beneficiaries of insurance policies, particularly workers' compensation policies,” the court
rejected a contention that this exact policy language mandated a different result. Id. at 1022. In
part, the court came to this conclusion after noting that the plaintiff-provider was not named in
the policy and concluding that medical providers were not entitled to “benefits” under the Act.
¶ 50 Plaintiffs insist that Martis should not be followed here because it did not expressly
consider the interaction of the standard policy language with the new direct payment
obligations created by the 2005 and 2011 amendments to the Act, which plaintiffs contend
establish providers such as plaintiffs as being among those entitled to “benefits” under the Act.
We disagree.
¶ 51 The “fundamental purpose of the Act [is] to afford protection to employees by providing
them with prompt and equitable compensation for their injuries.” (Emphasis added.) Kelsay,
74 Ill. 2d at 180-81; Board of Education of the City of Chicago v. Industrial Comm’n, 93 Ill. 2d
1, 14 (1982). The payment of necessary medical services is included among the total
“compensation” or “benefits” owed by an employer to an employee suffering injuries arising
out of and in the course of his employment. Bayer, 2016 IL 119553, ¶ 30. In turn, the direct
payment obligations created by the 2005 and 2011 amendments to the Act, including the
interest required to be paid by section 8.2(d)(3), are among the many other provisions in the
Act designed to encourage the “prompt” payment of compensation by an employer or insurer
and to penalize any failure to make such prompt payment of compensation. Supra ¶ 17. As
such, all of the provisions regarding the payment of medical care for injured employees
discussed above—from the requirement that providers bill employers directly and employers
pay providers directly, to the imposition of a medical fee schedule limiting the amount
providers can charge for covered services, to the provisions seeking to ensure timely
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payment—are designed to ensure prompt and equitable payment of an injured employee’s
medical bills; i.e., prompt and equitable payment of “benefits” owed to injured employees. As
the legislature specifically indicated, the fee schedule and the interest provision contained in
section 8.2(d) of the Act were designed to “hold down the cost of *** medical costs to injured
workers” while doing so “in a way that does not harm the injured workers’ ability to access
quality health care.” 94th Ill. Gen. Assem., Senate Proceedings, May 26, 2005, at 85
(statements of Senator Cronin).
¶ 52 In reaching this conclusion, we necessarily reject plaintiffs’ contention that it is somehow
significant that medical bills are paid directly to providers and any interest owed under section
8.2(d)(3) is also specifically “payable to the provider.” 820 ILCS 305/8.2(d)(3) (West 2014).
We find that what the Oklahoma Supreme Court said with respect to that state’s workers’
compensation statute applies equally here: “Not every valuable right under the Workers’
Compensation Act is a ‘benefit.’ ” Holley v. Ace American Insurance Co., 2013 OK 88, ¶ 7,
313 P.3d 917. The direct payment obligations do not alter the fact that payment for such
medical services and the payment of section 8.2(d)(3) interest to providers represent nothing
more than the legislature’s efforts to ensure that the “compensation” or “benefits” owed to an
injured employee under the Act are paid promptly.
¶ 53 Moreover, even if we accepted plaintiffs’ contention that the direct payment obligations
created by the 2005 and 2011 amendments to the Act entitled them to “benefits” under the Act,
we would still reject their contention that they were intended third-party beneficiaries of the
insurance policies issued by defendants. Again, it is not enough that “the contracting parties
know, expect, or even intend that others will benefit from their agreement ***. *** It must
appear from the language of the contract that the contract was made for the direct, not merely
incidental, benefit of the third person.” (Emphases added.) Martis, 388 Ill. App. 3d at 1020.
From the above discussion, it is clear that any benefit granted to providers such as plaintiffs by
the Act and/or the standard workers’ compensation insurance policies issued by defendants
was merely incidental.
¶ 54 In sum, plaintiffs had the burden of sufficiently pleading that defendants and the employers
they insured intentionally entered into the standard contract for the direct, and not merely
incidental, benefit of plaintiffs. Because they failed to do so, their claims that they were
intended third-party beneficiaries were properly dismissed.
¶ 55 3. Count II—Implied Private Right of Action
¶ 56 Next, plaintiffs contend the circuit court improperly dismissed the contention that they had
an implied private right of action for defendants’ purported failure to comply with the interest
provision of section 8.2(d)(3) of the Act.
¶ 57 “[A] court may determine that a private right of action is implied in a statute.” Metzger v.
DaRosa, 209 Ill. 2d 30, 35 (2004). “Implication of a private right of action is appropriate if: (1)
the plaintiff is a member of the class for whose benefit the statute was enacted; (2) the
plaintiff's injury is one the statute was designed to prevent; (3) a private right of action is
consistent with the underlying purpose of the statute; and (4) implying a private right of action
is necessary to provide an adequate remedy for violations of the statute.” Fisher v. Lexington
Health Care, Inc., 188 Ill. 2d 455, 460 (1999). All four factors must be met before a private
right of action will be implied. Abbasi v. Paraskevoulakos, 187 Ill. 2d 386, 393 (1999);
McCarthy v. Kunicki, 355 Ill. App. 3d 957, 969 (2005). Whether a private right of action is
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implied in a statute presents a question of law that we review de novo. Metzger, 209 Ill. 2d at
34.
¶ 58 With respect to the first factor, plaintiffs contend that because the payment obligations of
section 8.2(d) of the Act are to medical providers such as themselves and to no one else,
plaintiffs are members of the class benefited by the Act. We disagree.
¶ 59 In making this argument, plaintiffs focus solely and specifically upon the language of
section 8.2(d) of the Act. However, our supreme court has made it clear that in conducting an
analysis of this factor, “we must read the statute as a whole and not as isolated provisions.” Id.
at 37; Fisher, 188 Ill. 2d at 462-63. Where a particular provision of a statute provides
incidental benefits to one class, but does so in order to benefit the “primary class” for whose
benefit the statute was enacted, no private right of action will be implied in favor of the class
provided such incidental benefits. Id.¶ 60 This is exactly the situation presented here. As we noted above, the fundamental purpose of
the Act is to afford protection to employees by providing them with prompt and equitable
compensation for their injuries. Supra ¶ 13. And again, the interest required to be paid by
section 8.2(d)(3) of the Act is but one of the many provisions in the Act designed to encourage
the “prompt” payment of compensation by an employer or insurer and to penalize any failure
to make such prompt payment of compensation. Supra ¶ 17. While providers might receive
some benefit from the specific interest provision contained in section 8.2(d)(3) of the Act, that
benefit is at most incidental and was provided solely in an effort to serve the legislature’s
primary goal of compensating employees completely and promptly.
¶ 61 Because we conclude that plaintiffs are not members of the class for whose benefit the Act
was enacted, their claim of an implied private right of action must fail due to the failure to
satisfy the first factor of the analysis. Abbasi, 187 Ill. 2d at 393; McCarthy, 355 Ill. App. 3d at
969.
¶ 62 4. Count III—Implied-in-Fact Contract
¶ 63 Plaintiffs next challenge the circuit court’s dismissal of their contention that defendants
breached an implied-in-fact contract to comply with the interest provision of section 8.2(d)(3)
of the Act.
¶ 64 As this court has explained, contracts implied-in-fact “arise from a promissory expression
that may be inferred from the facts and circumstances that demonstrate the parties’ intent to be
bound. *** A contract implied in fact *** is a true contract. [Citation.] The elements of a
contract are an offer, acceptance, and consideration. [Citation.] Thus, a contract implied in fact
contains all of the elements of a contract, including a meeting of the minds.” Trapani
Construction Co. v. The Elliot Group, Inc., 2016 IL App (1st) 143734, ¶¶ 41-42.
¶ 65 “Consideration is defined as the bargained-for exchange of promises or performances and
may consist of a promise, an act or a forbearance.” Bishop v. We Care Hair Development
Corp., 316 Ill. App. 3d 1182, 1198 (2000) (citing Restatement (Second) of Contracts § 71
(1981)). “Valid consideration, on the part of both parties, is one of the essential requirements
for the formation of a contract.” (Emphasis added.) Agrimerica, Inc. v. Mathes, 199 Ill. App.
3d 435, 441-42 (1990); Moehling v. W.E. O’Neil Construction Co., 20 Ill. 2d 255, 265 (1960).
“The preexisting duty rule provides that where a party does what it is already legally obligated
to do, there is no consideration as there is no detriment.” White v. Village of Homewood, 256
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Ill. App. 3d 354, 357 (1993). “Consideration cannot flow from an act performed pursuant to a
preexisting legal duty.” Id.; Mulvey v. Carl Sandburg High School, 2016 IL App (1st) 151615,
¶ 35.
¶ 66 In their complaints, plaintiffs allege that implied-in-fact contracts were formed whereby
defendants “agreed to pay directly to Plaintiffs the benefits to which they were entitled from
employers under the Act, including the accrued interest on Late Payments mandated by
Section 8.2(d) of the Act” in exchange for plaintiffs’ agreement to directly bill and
communicate with defendants, as opposed to billing and communicating with the employers
insured by defendants.
¶ 67 However, defendants also specifically acknowledge and assert in their complaints that
under both “their insurance contracts and the Act, Defendants are obligated to comply with the
prompt-pay provision and pay Providers the accrued interest to which they are entitled on late
paid bills.” See also supra ¶ 16 (discussing provisions of the Act requiring insurers such as
defendants to insure the “ ‘entire compensation liability’ ” of insured employers). Plaintiffs’
own complaints therefore concede that defendants’ purported consideration for any asserted
implied-in-fact contracts was to be performed pursuant to preexisting legal duties. Because
valid consideration, on the part of both parties, is one of the essential requirements for the
formation of a contract (Mathes, 199 Ill. App. 3d at 441-42), and because consideration cannot
flow from an act performed pursuant to preexisting legal duty (Mulvey, 2016 IL App (1st)
151615, ¶ 35), the circuit court properly dismissed plaintiffs’ claims that defendants breached
an implied-in-fact contract to comply with the interest provision of section 8.2(d)(3) of the Act.
¶ 68 5. Count IV—Section 155 of the Insurance Code
¶ 69 Finally, we consider plaintiffs’ challenge to the circuit court’s dismissal of their claims
seeking an award of attorney fees and statutory damages under section 155 of the Insurance
Code.
¶ 70 Section 155 states:
“In any action by or against a company wherein there is in issue the liability of a
company on a policy or policies of insurance or the amount of the loss payable
thereunder, or for an unreasonable delay in settling a claim, and it appears to the court
that such action or delay is vexatious and unreasonable, the court may allow as part of
the taxable costs in the action reasonable attorney fees, other costs, plus [certain
penalties].” 215 ILCS 5/155(1) (West 2014).
¶ 71 However, our supreme court has recognized that “[a]s a general rule, the remedy embodied
in section 155 of the Insurance Code extends only to the party insured [citation] and policy
assignees [citations]. Therefore, the remedy embodied in section 155 of the Insurance Code
does not extend to third parties.” Yassin v. Certified Grocers of Illinois, Inc., 133 Ill. 2d 458,
466 (1990); Statewide Insurance Co. v. Houston General Insurance Co., 397 Ill. App. 3d 410,
426 (2009). Plaintiffs, being third-parties to the contracts between defendants and insured
employers and not named insureds or assignees, are not entitled to any recovery under section
155 of the Illinois Insurance Code.
¶ 72 In reaching this conclusion, we reject plaintiffs’ reliance upon the decision in Garcia v.
Lovellette, 265 Ill. App. 3d 724 (1994). In that case, the plaintiff argued she was a passenger in
a car involved in an accident and, as a passenger, was thus an “insured” as defined in the
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medical payments section of an automobile insurance policy. Id. at 726. According to the
plaintiff, she therefore had standing to sue the insurer under section 155 of the Insurance Code
for its unreasonable and vexatious delay in making such medical payments. Id. The court
agreed, but only after concluding that (1) plaintiff was in fact an “insured” under the applicable
policy language, (2) “the insurer undertook an obligation to pay directly to those defined
there[in] as insureds,” (3) “the contract [there] was intended to benefit plaintiff directly as an
insured and not merely incidentally,” and (4) therefore, “plaintiff, as the intended beneficiary
of the insurance contract, has a sufficient legal and contractual relationship to the insurer to
litigate the question whether she is entitled to the remedy provided by the statute.” Id. at
728-29, 732.
¶ 73 The Garcia decision is inapposite here, where plaintiffs are not insureds or assignees under
defendants’ policies and, for all the reasons discussed above, they were no more than
incidental beneficiaries of those policies and not intended third-party beneficiaries.
¶ 74 III. CONCLUSION
¶ 75 For the foregoing reasons, we affirm the circuit court’s dismissal of plaintiffs’ claims with
prejudice.
¶ 76 Affirmed.
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