Controlling Risks When an Injured Worker Dies
This article will suggest strategies to control risk in cases where there is risk of premature death either related to and unrelated to the work accident. Does settlement during the injured worker’s lifetime bar a spouse’s claim for death benefits? Is a surviving spouse or dependent entitled to receive permanency benefits if the injured worker dies from causes unrelated to the work accident? Is a surviving spouse or dependent entitled to receive a permanent partial benefit if permanent total benefits were paid to date of death?
I. Settlement with Injured Worker May Bar Death Claim
Section 8(e)(19) provides an opportunity to eliminate risk of a death claim through a lump sum settlement during the injured worker’s lifetime. Consider this scenario. A seriously injured worker survives but is at risk of death from a work-related injury. The work injury prevents the employee from exercising, leading to obesity, diabetes and high blood pressure, causing risk of death from a stroke or heart attack. The employee is permanently and totally disabled, but due to a short life expectancy, the present value of a permanent total claim is $100,000.00. The worker has a young wife and children, and if he dies from the work accident, the ensuing death claim could cost $500,000.00 or 25 years of benefits, whichever is greater.
Section 9 of the Act states, “The payment of compensation in a lump sum to the employee in his or her lifetime upon order of the Commission, shall extinguish and bar all claims for compensation for death if the compensation paid in a lump sum represents a compromise of a dispute on any question other than the extent of disability.”
If the settlement includes a compromise of a dispute other than extent of disability, a settlement for a lump sum of $100,000.00 approved by the Commission should bar the spouse’s claim for death benefits. Disputes such as accident, notice, causation, necessity for medical treatment and even average weekly wage could be sufficient to trigger this provision. There is very little case authority interpreting this section, but the employer has nothing to lose by attempting to arrange a settlement with the injured worker for the value of the permanent disability claim at the earliest opportunity. One caveat is that a close out settlement may need to be approved by Medicare.
In the scenario, trial during the life of the injured worker resulting in a permanent total award would not extinguish the spouse’s death claim. The employer and its insurer could be obligated to pay permanent total disability benefits until the death, and if the widow is able to prove causal relationship between the work accident and the employee’s death, the employer could also be ordered to pay death benefits. On the other hand, a decision denying the claim in its entirety should bar the spouse’s death claim. If there is a solid liability defense, trial is the preferred option.
The opportunity to eliminate the exposure for a death claim by settlement during the injured worker’s lifetime should be explored early in the claim handling process. In most cases it will be necessary for the employee to complete treatment and reach maximum medical improvement before a settlement will be approved by an arbitrator. However, in cases where compensability is very questionable, an arbitrator may approve a settlement prior to the worker reaching MMI. Again, if you have a good defense, there is no reason to offer a settlement. If it is a toss up, consider settlement on a totally disputed basis during the worker’s lifetime. Section 9 may shield the employer from a death claim.
II. Spouse May Have Right to Permanency Benefits after a Non-work Related Death
If an injured worker dies from a condition unrelated to the work injury, the surviving spouse or dependent is entitled to recover any unpaid permanent disability benefit. That right is clearly present if the deceased worker’s condition reached a state of permanent disability prior to death. It goes without saying that accrued TTD and medical benefits are also owed.
Section 8(e)(19) provides that in the case of specific loss, the surviving widow or dependent is to be paid the amount due for the injury. There is no requirement that an award be entered or even that a hearing be held during the employee’s lifetime. The spouse may have difficulty proving accident, causation and the extent of permanent disability, but the claim survives the worker’s death and the right to recover is transferred to the widow or dependent.
Section 8(h) provides that if death occurs before compensation to which the employee would have been entitled has been paid, a surviving spouse or dependent is entitled to receive the compensation.
Note that Section 8(e)(19) specifically applies only to cases of specific loss such as loss of use of an arm or loss of an eye. It does not apply to claims for loss of the body as a whole or disfigurement. As to claims for loss of the body as a whole, the case law is not well developed but in Electro-Motive Division v. Industrial Commission, 250 Ill.App.3d 432, 621 N.E.2d 145, 190 Ill.Dec. 276, the Appellate Court ordered an employer to pay the full 150 weeks awarded for 30% MAW even though the employee died less than 150 weeks after the end of the TTD period. An argument can be made that the case was decided on a procedural issue in that the employer did not file a Petition for Review of the award or arrange for a hearing on a 19(h) petition. The case may have been decided on a procedural technicality rather than on the substantive issue of whether the portion of a man as a whole award which had not accrued as of the date of death was owed to the surviving widow or next of kin.
In the case of Nationwide Bank & Office Management v. Industrial Commission, 361 Ill.App.207, 836 N.E.2d 120, 296 Ill.Dec. 705, the Appellate Court was confronted with the interesting situation where at the time of the entry of a final award by the Commission, there was no surviving widow or next of kin. The employer tried to use Section 8(h) to avoid paying medical expenses and temporary compensation to the injured employee’s estate. The court held that Section 8(h) was intended to apply to unaccrued benefits and that the death of the employee’s widow did not abate the right to recover the benefits owed. Note that in the Nationwide case, there was no claim for permanent disability benefits or other benefits which may have accrued after the death of the injured worker. The Nationwide court relied on Republic Steel Corporation v. Industrial Commission, 26 Ill.2d 32, 185 N.E.2d 877.
Is the surviving spouse entitled to claim a permanent disability benefit if the worker has not reached a state of permanent disability? Case law has not definitively resolved this issue. There is a basis to contend that if at the time of death the injured worker was still on TTD and had not reached MMI, the injured worker was not entitled to permanent disability benefits and there is no right to benefits to be passed on to the surviving spouse or dependent. This interpretation can lead to a harsh result and one should anticipate that the Commission will look for any available opportunity to compensate the worker’s family for benefits the worker would probably have received had he or she survived. Whether the Appellate Court will stretch the language of the statute and affirm such an award is unclear. If you have a case with favorable facts, I suggest that permanent disability benefits not be paid which may force the case to trial giving the industry an opportunity to develop favorable case law on this narrow issue.
If the injured employee has reached a state of permanent disability, the best strategy is to arrange a close out settlement during the employee’s lifetime so that the surviving spouse cannot claim permanent disability benefits after the worker’s death. There is no reason to overpay the claim since the widow will not be entitled to receive more than the employee would have received but a settlement gives the employer and the insurer control over the amount to be paid and minimizes litigation expenses.
III. Risk of Additional Permanent Disability Liability After Death of a Permanently and Totally Disabled Worker
Another issue is whether a surviving spouse or dependent is entitled to claim permanent partial disability benefits after death of a permanently and totally disabled worker from a non work- related condition. Consider the scenario where an injured worker suffers a severe low back injury requiring multiple surgeries. The worker is in poor health, does not return to work, reaches MMI and begins drawing permanent total disability benefits. The employer pays weekly benefits for years even though there is no permanent total award. The employee dies from cancer unrelated to the work accident. The surviving spouse claims she should receive permanency benefits (50% MAW or 50% of each leg) in addition to the weekly benefits paid to the date of death.
If there had been a prove up of a permanent total prior to the employee’s death, payment of permanent total benefits to the date of death would bar the spouse’s claim for PPD. However, in this scenario, there is no award and the surviving spouse or dependent could make a rational argument that the benefits paid during the worker’s life were for TTD or maintenance and the injured worker would have been entitled to permanency benefits had he or she survived. In this situation, the employer could have avoided this risk by facilitating entry of a permanent total award.
The practice tips is that if the injured worker is clearly a permanent total and has a less than normal life expectancy due to a non work health condition, the best strategy is to either work out a reasonable settlement based on a rated age or have a prove up so that a permanent total award is entered. This strategy gives you the opportunity to take advantage of the worker’s short life expectancy to minimize the payout for permanency.
Originally published in the Fall 2008 edition of Quinn Quarterly.