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Impact of the Insured's Contractual Waiver of Subrogation on its Insurance Carrier's Workers' Compensation Lien

March 2017

By Jeffrey F. Clement

We have recently seen an increase in contractual provisions which seek to limit subrogation rights for losses covered by workers' compensation insurance. Most often, these provisions are contained in construction subcontract agreements between a general contractor and subcontractor. A typical provision might require the subcontractor to waive subrogation claims against the general contractor for losses covered by the subcontractor's workers' compensation insurance. The contract may further require the subcontractor to provide a waiver of subrogation endorsement in favor of the general contractor which waives subrogation rights against the general contractor regarding workers' compensation.

Let's assume an employee of the subcontractor is injured on a construction project giving rise to the payment of workers' compensation benefits. Let's further assume the employee files a third-party civil lawsuit against the general contractor on the project for his or her injuries. Ordinarily, pursuant to Section 5(b) of the Illinois Workers' Compensation Act, the subcontractor's workers' compensation carrier has a statutory lien on plaintiff's recovery against the general contractor in an amount of 75% of its workers' compensation payments, less pro rata share of expenses. If the employee does not file a lawsuit, the Act also gives the subcontractor the right to file a direct subrogation lawsuit against the negligent third-party (here, the general contractor) for the employee's injuries. However, does the aforementioned waiver of subrogation provision have any impact on the ability of its workers' compensation carrier to enforce its statutory lien or file a subrogation lawsuit?

Laid-Off Carpenter Fails to Establish Discharge in Retaliation for Workers' Compensation Claim

March 2017

By W. Scott Trench

In Illinois, employers should tread carefully when considering whether to terminate an employee who has exercised his or her rights under the Illinois Workers' Compensation Act. Illinois recognizes a cause of action for retaliatory discharge in which a successful plaintiff may recover not only actual damages but punitive damages as well. An employer with a legitimate business reason to terminate an employee who has claimed or received workers' compensation benefits often faces a difficult decision. Retaliatory discharge actions typically boil down to one issue: the employer's motive for discharging the employee. When the employer establishes a valid nonpretextual reason for termination, the employer can mount a successful defense to retaliatory discharge claims. A recent decision from the Illinois Appellate Court First District,Vulpitta v. Walsh Construction Co., 2016 IL App (1st) 152203, provides a good example of one employer's successful defense.

In Vulpitta, the court affirmed summary judgment in favor of Walsh Construction Company (Walsh) finding the plaintiff failed to establish he was terminated in retaliation for seeking workers' compensation benefits. The plaintiff was a carpenter for Walsh who suffered a work-related injury in March of 2008 for which he filed a workers' compensation claim. The plaintiff had a second work-related injury in August of 2011, but was released to return to work with no restrictions the following day and no workers' compensation claim was filed at that time. In December of 2011, the plaintiff rejected an offer to settle his workers' compensation claim for the March 2008 accident. A Walsh supervisor testified the plaintiff was laid off on May 24, 2012, due to lack of work.

Springfield Report: Reform Lives!

Janurary 2017

By Francis M. Brady

In the closing days of the 2016 Legislative session, negotiations concerning Workers' Compensation have been reanimated. While there is likely not enough time to get agreement before the 2017 General Assembly is seated on Wednesday, January 11, 2017, the Governor's office, Senate, and House Democrats are all staking out positions. They all appear to be jockeying for position so it seems safe to say that Comp will be a topic of immediate concern as the new session opens.

Proposed legislation including changes to the allowable expense of care and credit for back injuries may be forthcoming from the Senate and/or Governor's office in the near future. In the meantime, this past Friday, January 6, 2017, Representative Jay Hoffman filed House Amendment #4 to Senate Bill 2901. The proposed legislation focuses on the alleged failure of the insurance industry to reduce premiums to reflect cost reductions; reclassifies shoulder and hip injuries as arm and leg conditions, respectively; allows for contribution relative to repetitive injuries; defines "arising out of"; and emphasizes the investigation of alleged fraud on the part of employers and their representatives.

More specifically, the legislation:

Illinois Supreme Court Weighs in on General Contractor Liability for Construction Negligence Claims

December 2016

By W. Scott Trench

The Illinois Supreme Court recently weighed in on three separate theories of liability frequently invoked in construction-related personal injury cases. In Carney v. Union Pacific Railroad Company, 2016 IL 118984, Happ's, a scrap contractor, entered into a contract with Union Pacific to purchase and remove three abandoned railroad bridges. The plaintiff was severely injured when a steel girder fell during the dismantling of one of the bridges. The plaintiff, an employee of Chicago Explosive Services, filed suit against Union Pacific alleging Union Pacific: 1) retained control over the work of Happ's and failed to properly supervise the work; 2) was negligent in hiring Happ's; and 3) failed to warn plaintiff of a dangerous condition on its land.

The opinion includes an important discussion of liability under Restatement (Second) of Torts §414, under which a hiring entity - such as a general contractor - may be subject to liability for work entrusted to an independent contractor where it retains control over the independent contractor's work. Illinois courts analyzing §414 have described both "direct liability" and "vicarious liability." Direct liability relates to the retention of general supervisory control and the failure to exercise that control with reasonable care to prevent work from causing injury to others. The hiring entity could also be subject to vicarious liability for the negligence of the independent contractor if it controlled the operative details of the work.

Illinois Supreme Court Finds Law Reducing Size of Civil Juries From 12 to 6 Unconstitutional

October 2016

By Jeffrey F. Clement

In an opinion filed on September 22, 2016 in the case of Kakos v. Butler, 2016 IL 120377, the Supreme Court of Illinois (the "court") held Public Act 98-1132 was facially unconstitutional.

Public Act 98-1132 (the "Act") was enacted in December 2014 and took effect on June 1, 2015. The Act limited the size of a civil jury to 6 persons and increased the amount paid per day to jurors across the state. The Act was generally believed to be favorable to the plaintiffs' bar because smaller juries may tend to award more money damages.

In the trial court, defendants in a medical malpractice suit sought leave to file a 12-person jury demand and to have the Act declared unconstitutional. Cook County Judge Gomolinski ruled the provision reducing the jury size from 12 to 6 was facially unconstitutional based on article I, section 13, of the Illinois Constitution, which protects the right of trial by jury.

New Regulation on Employee Overtime Exemption

September 2016

By W. Scott Trench

On May 18, 2016, the U.S. Department of Labor - Wage and Hour Division announced the much anticipated Final Rule revising the overtime exemption for "white collar" employees under the Fair Labor Standards Act (FLSA). Under the FLSA, non-exempt employees are entitled to overtime pay (time and one-half) for working over 40 hours in one week. The "white collar" overtime exemption generally applies to executive, administrative, and professional employees: 1) paid on a salary basis, not less than the amount specified in the regulations; and 2) whose primary job duties satisfy certain minimum requirements set for the regulations. See 29 C.F.R. §541. The Final Rule did not amend the regulations concerning the job duties prong of the exemption, but significantly increased the minimum salary requirements.

The new regulations, which take effect December 1, 2016, increase the minimum salary basis to $913 a week or $47,476 annually. Since 2004, the salary basis for the "white collar" overtime exemption was $455 a week or $23,660 annually. This significant increase is in part due to the passage of time with no adjustment to the minimum salary. Under the new law, the salary basis will be adjusted every three years starting on January 1, 2020. The new regulations will also, for the first time, allow employers to use up to 10% of non-discretionary bonuses, incentive payments and commissions (if paid at least every quarter) to satisfy the minimum salary required for the exemption.

  • Chicago Bar Association
  • Workers' Compensation Lawyers Association
  • DRI - The Voice of the Defense Bar
  • The Illinois Association of Defense Trial Counsel
  • Chicago Bar Association
  • Workers' Compensation Lawyers Association
  • DRI - The Voice of the Defense Bar
  • The Illinois Association of Defense Trial Counsel
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Normal, IL 61761
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