IL Supreme Court: Workers’ Compensation Settlement Proceeds Are Beyond Reach of Health Care Providers Who Treated the Worker
Last Friday, answering a question certified to it by the U.S. Court of Appeals for the Seventh Circuit, the Supreme Court of Illinois held that under section 21 of the Illinois Workers’ Compensation Act [820 ILCS 305/21], the proceeds of a workers’ compensation settlement remain exempt from the claims of medical-care providers who treated the illness or injury associated with the settlement in spite of the 2005 amendments to section 8 of the Act [820 ILCS 305/8] and the enactment of section 8.2 of the Act [In re Hernandez, 918 F.3d 563 (2020)]. The decision is an important one in that earlier, a federal district court had affirmed a federal bankruptcy judge’s ruling that held the settlement was not exempt from the worker’s bankruptcy estate due to the effect of the 2005 amendments which, contended the health care providers, gave them at least a limited right to continue collection efforts against an injured worker after he or she had resolved a workers’ compensation claim.
Background
Between 2009 and 2011, Hernandez sustained work-related injuries and received extensive medical treatment from three health care providers. In December 2016, she filed a voluntary Chapter 7 bankruptcy petition in the North District of Illinois, listing those unpaid medical bills among her debts. She reported minimal assets: primarily $1300 in bank accounts, some inexpensive jewelry, and her pending workers’ compensation claim, which she valued at $31,000.
Two days after filing her bankruptcy petition, Hernandez settled her workers’ compensation claim with her employer for $30,566.33. She entered into the settlement without consulting the bankruptcy trustee, contending the full amount of the settlement was exempt under section 21 of the Act, which provides in relevant part:
No payment, claim, award or decision under this Act shall be assignable or subject to any lien, attachment or garnishment, or be held liable in any way for any lien, debt, penalty or damages, except the beneficiary or beneficiaries of a deceased employee who was a member or annuitant under Article 14 of the “Illinois Pension Code” may assign any benefits payable under this Act to the State Employees’ Retirement System [Id.]
The health care providers objected to the claimed exception on the grounds that the 2005 amendments empowered them to reach her settlement. They also urged the court to disallow the exemption on grounds that the settlement was the product of fraud.
Bankruptcy Court and U.S. District Court
The bankruptcy judge summarily denied the exemption without a written opinion. The federal district court affirmed. Relying on In re McClure, 175 B.R. 21 (Bankr. N.D. Ill. 1994), the district court held that, under section 21, workers’ compensation claims are exempt from a debtor’s bankruptcy estate against general creditors. The court concluded, however, that the 2005 amendments “significantly altered” the Act as it pertained to health care providers. According to the district court, the amendments struck a balance by limiting what providers could charge while allowing them to resume collection efforts following a workers’ compensation settlement. Hernandez appealed to the Seventh Circuit, which certified the question to the Illinois Supreme Court.
Supreme Court Analysis
Noting that some version of Section 21 had been in effect for more than 100 years, the Illinois Supreme Court indicated there was no question but that under the terms of Section 21, the workers’ compensation settlement was exempt. The issue, of course, was whether the 2005 amendments had altered this exception with regard to health care providers. The Court noted that the health care providers had not been able to point to any explicit language in the amendments that would confer special rights to them. The health care providers had argued that an exception for claims by health care providers was implicit in the 2005 statutory changes.
No “Repeal by Implication”
The Court continued that the repeal or amendment of statutes was not favored, that had the legislature intended to alter the clear and unambiguous language of section 21 of the Act by conferring on health care providers a new exception to the exemption, it would have had to indicate a clear intent to do so. It had not. Moreover, contrary to the contents of the health care providers, the Court found no merit in the argument that carving out such an exception to section 21’s exemption was necessary to effectuate the purposes of the 2005 amendments.