What A Difference a Word Makes: Illinois Court Remands Case Because Settlement Agreement Ambiguous

Characterizing the language of a workers’ compensation settlement agreement that included a provision for a Medicare set-aside annuity (MSA) as “sloppy” and “imprecise” and quoting novelist Vladimir Nabokov’s advice to writers, “have the precision of a poet,” an Illinois appellate court reversed a trial court’s determination that an employer was to pay the injured employee the sum of $400,000 in addition to the amount of the MSA [Paluch v. United Parcel Serv., 2014 Ill. App. LEXIS 194 (Mar. 26, 2014). Refusing, however, to read the agreement in the manner suggested by the employer, the court held that the language was patently ambiguous and that the case must be remanded for an evidentiary hearing to determine what the parties had actually intended. 

Terms of the settlement agreement

Under the terms of the settlement agreement, the employer was required to pay the injured employee an amount that the employer set at $400,000 and the employee set at $400,000 in addition to a Medicare set-aside annuity. After the employer refused to read the agreement in the manner that the employee contended it should be read, the employee filed suit, arguing that the employer had not fully satisfied the agreement. The trial court agreed with the employee and the employer appealed.

In the first sentence of the settlement agreement, the employer agreed to pay (and the employee accept) a lump sum payment of $400,000 plus payment of a MSA in annuity form [emphasis added]. That sentence buttressed the employee’s argument. On the other hand, a chart located at another point within the agreement purported to set out the amount owed by the employer and the amount that would be deducted therefrom for attorney’s fees and other costs. That chart indicated the “total amount” of the settlement was $400,000. The parties had also attached a social security rider that appeared to support the employee’s contention that something in addition to the $400,000 was owed. The difficulty, as noted by the appellate court, was that if something more was owed, the agreement didn’t actually specify the amount owed.

“Precision is important in writing”

Reiterating that “[p]recision is important in writing,” the appellate court concluded that the ambiguous wording required an evidentiary hearing. Accordingly, the trial court’s holding was reversed and the case remanded.