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City’s Claims of Being Unable to Pay Benefits Are Held to be Unsupportable

| Jul 6, 2021 | Firm News |

In a case where a municipal respondent claimed that it could not afford to pay an employee’s worker’s compensation benefits, due to alleged arrearages and/or a lack of funds, in the municipality’s various bank accounts and sources of revenue, the Commission held that the aforesaid city’s claims of being unable to pay benefits were unsupported and unproven at arbitration. See City’s failure to pay claimant’s medical bills warrants § 19(l) penalty. Illinois Workers’ Compensation Law Bulletin, Volume 29, Issue 7, June 11, 2021, p.8.[1] In the case discussed in the article, Diaz v. Harvey Police Dept., 29 ILWCLB 77 (Ill. W.C. Comm. 2021), the claimant, a police officer, was injured when another automobile crashed into the rear of her police cruiser. The officer received treatment, which included physical therapy and reduced duty, and was eventually able to return to work without any activity restrictions.[2] The officer then filed a worker’s compensation claim, but the city asserted that it was unable to pay her any benefits, due to a claimed lack of available money and alternative sources of funds. The officer then filed a combined petition for various penalties and attorney’s fees, pursuant to Sections 19(l) and 19(k) (for the penalties), and Section 16 (for the fees), asserting that the city’s refusal to pay benefits was done in bad faith and/or without good cause.[3] The city responded, again claiming that it could not pay the employee’s benefits, and in support thereof, attached a federal court order in which the city was ordered to deplete some of its bank accounts to pay the balance owed on a judgment. The city also attached an auditor’s financial report, in which it was stated that the city had a deficit of tens of millions of dollars in its general fund, which in turn put the city at risk of defaulting on its various obligations.[4] At hearing, the arbitrator was unimpressed, finding that the evidence offered was inadequate to rebut a bad faith finding against the city, and fully granted the officer’s combined motion. On review (after the city predictably appealed), the Commission affirmed the arbitrator’s assessing of $10,000 in Section 19(l) penalties against the city, for its refusal to pay the officer’s benefits, holding that the city’s proffered evidence of its inability to pay was not enough to prove that the city absolutely could not afford to pay any benefits, but the Commission vacated the granting of the other parts of the officer’s combined petition (ie. for Section 19(k) penalties and Section 16 attorney’s fees), apparently holding in its (the Commission’s) discretion, that the imposition of Section 19(l) penalties against the city was adequate by itself.[5]

This case shows the lengths that municipal or public respondents will sometimes go to, to avoid paying worker’s compensation benefit claims. Indeed, while municipal entities can certainly sometimes have financial undercapitalization problems, and often still underwrite their liability from public monies, they are also, more and more, obtaining private insurance coverage, to further aid them in paying on their obligations, like worker’s compensation benefit claims. This is what the city-respondent presumably did, or should have done, in the Diaz case.

[1]See City’s failure to pay claimant’s medical bills warrants § 19(l) penalty. Illinois Workers’ Compensation Law Bulletin, Volume 29, Issue 7, June 11, 2021, p.8.
[1]See Id.
[1]See Id.
[1]See Id.
[1]See Id.

Attorney Matthew Ludwinski