Employers Tort Liability for Employees Injuries:

By Jennifer E. Simms Employers Tort Liability for Employees Injuries: A Primer Here s a basic overview of the interplay between the Illinois Workers Compensation Act and the Illinois Contribution Among Joint Tortfeasors Act, with a look at recent cases that explain how to determine the percentage of fault attributable to the plaintiff s employer under the Illinois Code of Civil Procedure s joint liability provision (section 2-1117). 1

enerally speaking, an employee s exclusive remedy against his or her employer for injuries occurring while in the scope of employment is the Illinois Workers Compensation Act, but employees are not precluded from suing a third party for those injuries. If the employee receives a judgment or settlement from a third party, the employer may have Ga lien in the amount paid to the employee in workers compensation payments. Employers can be sued by a third party under the Illinois Contribution Among Joint Tortfeasors Act, but under the famous Kotecki rule the employer s liability is limited to its workers compensation liability. However, the employer may contract to remain liable for the pro rata share of damages proximately caused by its negligence. In a case filed prior to June 4, 2003, the employer may be considered in the apportionment of fault for purposes of determining liability under section 2-1117 of the Illinois Code of Civil Procedure. For cases filed after that date, the plaintiff s employer is not included in the apportionment of fault. That is an overview of employer tort liability to an employee for on-the-job injuries. Each of these limitations and permutations is discussed in more detail below. Workers Compensation Act: the exclusive remedy The Illinois Workers Compensation Act applies to employers and their employees for accidental injuries and deaths occurring on or after July 1, 1951. It applies to the following enterprises or businesses, among others: the erection, maintaining, removing, remodeling, altering or demolishing of any structure; construction, excavating or electrical work; mining, surface mining or quarrying; any enterprise in which sharp edged cutting tools, grinders or implements are used; and any business or enterprise in which goods, wares or merchandise are produced, manufactured or fabricated. 1 In general, employers, including general contractors and subcontractors, are required to file an application with the Illinois Workers Compensation Commission (formerly the Illinois Industrial Commission) for approval as a self-insurer; furnish security, indemnity or a bond that guarantees the employer s payment of workers compensation; or insure its entire workers compensation liability through an insurance carrier. 2 Generally speaking, an employee s sole remedy against his employer for injuries occurring in the scope of employment is the Illinois Workers Compensation Act. 3 No common law or statutory right to recover damages from the employer...for injury or death sustained by any employee while engaged in the line of his duty as such employee, other than the compensation herein provided, is available to any employee who is covered by the provisions of this Act, to any one wholly or partially dependent upon him, the legal representatives of his estate, or any one otherwise entitled to recover damages for such injury. 4 An employee is not, however, precluded from instituting legal proceedings against a third party for those injuries. 5 Where the injury or death for which compensation is payable under this Act was caused under circumstances creating a legal liability for damages on the part of some person other than his employer to pay damages, then legal proceedings may Employers can be sued by a third party, but under the famous Kotecki rule the employer s liability is limited to its workers compensation liability. 1. 820 ILCS 305/3; 820 ILCS 305/28. 2. 820 ILCS 305/4(a)(1) (3). 3. 820 ILCS 305/5(a); four exceptions have been recognized to the employer s protection that the Illinois Workers Compensation Act is the exclusive remedy for an injured employee: the injury was not accidental; the injury did not arise from the employee s employment; the injury was not received during the course of employment; and the injury was not compensable under the Illinois Workers Compensation Act. Collier v Wagner Castings Co, 81 Ill 2d 229, 237, 408 NE2d 198, 202 (1980); Fregeau v Gillespie, 96 Ill 2d 479, 483, 451 NE2d 870, 871-72 (1983); Meerbrey v Marshall Field and Co, Inc, 139 Ill 2d 455, 463, 564 NE2d 1222, 1226 (1990). A discussion of these exceptions is beyond the scope of this article. 4. 820 ILCS 305/5(a). 5. See 820 ILCS 305/5(b). Jennifer E. Simms is a senior associate with the Chicago firm Purcell & Wardrope, Chtd. She authored The Open and Obvious Doctrine and Landowner Liability: The Rule and the Exceptions, which appeared in the July 2004 Journal. 2

be taken against such other person to recover damages notwithstanding such employer s payment of or liability to pay compensation under this Act. 6 If the employee receives a judgment or settlement from a third party, the employer is entitled to reimbursement for the amount it paid the employee in workers compensation payments. 7 By agreeing to receive workers compensation payments, the employer may have a claim or lien upon any judgment or settlement the employee receives from a third party. 8 Generally, a release, settlement of a claim, or satisfaction of judgment is not valid without the consent of both the employee and the employer. 9 The employer may institute legal proceedings against the third party within three months of the action becoming barred if the employee fails to sue. 10 However, the employer must pay the employee any sum it recovers beyond the amount it paid the employee in workers compensation i.e., if the employer receives $1 million from a third party but paid the employee $600,000 in workers compensation, it must pay $400,000 of the $1 million to the employee. 11 An employer s responsibility is equal to the amount it paid in workers compensation. This is the basis of the Kotecki cap. 12 Employer s immunity not a bar to third-party contribution claim In Doyle v Rhodes, the Illinois Supreme Court considered whether the immunity of an employer from an action at law by an injured employee provided by sections 5(a) and 11 of the [Illinois] Workers Compensation Act also bars an action for contribution against the employer by a third party who was partially responsible for the employee s injury. 13 The court held that under the Contribution Act, the employer s immunity from a suit in tort by its employee as plaintiff is not a bar to a claim for contribution against it by a defendant held liable to such a plaintiff. 14 The plaintiff, Charles L. Doyle, sued the defendant, Kathleen C. Rhodes, for injuries sustained when he was employed by Rein, Schultz & Dahl. The defendant filed a third-party complaint against the plaintiff s employer for contribution, which the trial court dismissed. 15 The employer argued on appeal to the Illinois Supreme Court that it was not subject to recovery under the Illinois Contribution Among Joint Tortfeasors Act because it was not liable to the plaintiff under the exclusive remedy provisions of the Illinois Workers Compensation Act. 16 The Illinois Contribution Among Joint Tortfeasors Act states that [e]xcept as otherwise provided in this Act, where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them. 17 The Illinois Supreme Court reviewed the legislative intent behind the Illinois Contribution Among Joint Tortfeasors Act and concluded that the only purpose was to codify the decision in Skinner v Reed-Prentice Division Package Machinery Co. 18 The Skinner decision overturned the long-standing common law rule which prohibited contribution among tortfeasors. 19 The Doyle court found that the intent of the contribution statute was to reach anyone who is culpable regardless of whether they have been immunized from a direct tort action by some special defense or privilege. 20 The employer in Doyle argued that the language subject to liability in tort prevented the defendant from seeking contribution against the employer because the employer was immunized from tort liability pursuant to the Illinois Workers Compensation Act. 21 The Illinois Supreme Court rejected this argument, reasoning that the limitation on an employer s liability is not automatic it must be pleaded and proven as an affirmative defense or common law liability will attach. 22 As the court noted, the employer may choose not to file the affirmative defense: for example, the employer might believe the plaintiff will be unable to prove negligence. 23 The Kotecki cap on employers liability In Kotecki v Cyclops Welding Corp, the Illinois Supreme Court was asked to consider whether an employer, sued as a third-party defendant in a product liability case, is liable for contribution in an amount greater than its statutory liability under the [Illinois] Workers Compensation Act. 24 The Kotecki court noted the conflict between workers compensation and contribution. 25 On the one hand, if unlimited contribution were not allowed, a third-party might be subject to the full amount of judgment despite greater fault by the employer. 26 If unlimited contribution were allowed, however, an employer might have to pay an employee an amount greater than its workers compensation liability, thereby losing the protections afforded by the Illinois Workers Compensation Act. 27 The Illinois Supreme Court struck a balance between the competing interests and limited the employer s liability in contribution to its workers compensation liability. 28 This limitation is commonly referred to as the Kotecki cap. The Kotecki waiver (contractually waiving the Kotecki cap) Kotecki does not prohibit an employer from contracting to remain liable for its pro rata share of damages proximately caused by its negligence, even though the employer has the ability to limit its liability. 29 Such a contrac- 6. Id. 7. Id. 8. See 820 ILCS 305/5(b); Gallagher v Lenart, 2006 WL 2506210, *3-8 (1st D 2006). but see Borrowman v Prastein, 356 Ill App 3d 546, 550-51, 826 NE2d 600, 604-5 (4th D 2005) (employer forfeited its lien rights by failing to reserve its rights in the workers compensation settlement with the employee when the employer knew of the pending negligence case against the third party). 9. Id. 10. Id. 11. Id. 12. 820 ILCS 305/11. 13. 101 Ill 2d 1, 4, 461 NE2d 382, 383-84 (1984). 14. Doyle at 14, 461 NE2d at 388. 15. Id at 4-5, 461 NE2d at 384. 16. Id at 5-6, 461 NE2d at 384-85. 17. Ill Rev Stat 1981, ch 70, 302(a) (this section is identical to 740 ILCS 100/2(a), currently in effect); see also Doyle at 6, 461 NE2d at 384. 18. 70 Ill 2d 1, 374 NE2d 437; Doyle at 8-9, 461 NE2d at 385-86; see also Kotecki v Cyclops Welding Corp, 146 Ill 2d 155, 159, 164, 585 NE2d 1023, 1025, 1027 (1991); Herington v J. S. Alberici Const Co, Inc, 266 Ill App 3d 489, 494, 639 NE2d 907 (5th D 1994). 19. Doyle at 7, 461 NE2d at 385; see also Skinner at 13-16, 374 NE2d at 442-43 (finding that a thirdparty action could be maintained against an employer for indemnification and contribution and that no valid reason existed for the continued existence of the no-contribution rule in Illinois). 20. Doyle at 9, 461 NE2d at 386. 21. Id at 10, 461 NE2d at 386. 22. Doyle at 10-14, 461 NE2d at 386-88; Herington at 496, 639 NE2d at 912; see also Braye v Archer- Daniels-Midland Co, 175 Ill 2d 201, 207-10, 676 NE2d 1295, 1299-1300 (1997) 23. Doyle at 10-11, 461 NE2d at 387; see also Herington at 496, 639 NE2d at 912; Braye at 207-8, 676 NE2d at 1299. 24. Kotecki at 156, 585 NE2d at 1023. 25. Id at 162-63, 585 NE2d at 1026-27. 26. Id at 163, 585 NE2d at 1027. 27. Id at 162-63, 585 NE2d at 1026-27. 28. Id at 165, 585 NE2d at 1027-28. 29. Braye at 210, 676 NE2d at 1300; see also Herington at 496, 639 NE2d at 912; Liccardi v Stolt Terminals, Inc, 178 Ill 2d 540, 546, 687 NE2d 968, 971 (1997). 3

tual waiver is commonly referred to as a Kotecki waiver. This outcome is consistent with Illinois public policy that favors comparative fault and the freedom of contract. 30 In Herington v J.S. Alberici Const Co, Inc, the fifth district was asked to consider whether an otherwise void indemnity section of a subcontract was a waiver of the Kotecki cap: Subcontractor hereby assumes the entire liability for its own negligence and the negligence of its own employees.subcontractor agrees to indemnify and save harmless Contractor and its agents, servants and employees, from and against all loss, expense, damage or injury, including legal fees, that Contractor may sustain as a result of any claims predicated or [sic] said allegations of Subcontractor s own negligence. 31 The fifth district reasoned that since an employer may chose not to raise its limitation on liability as noted in Doyle, the employer may also bargain away that limitation within a subcontract. 32 Likewise, the Herington court found that the employer had contractually waived its workers compensation limits and thereby became liable for unlimited contribution but only with the defendant with whom the employer had a contract. 33 In Braye v Archer-Daniels-Midland Co, the Illinois Supreme Court found that the following language was a waiver of the Kotecki cap: If [All Tri-R s] work under the order involves operations by [All Tri-R] on the premises of [ADM] or one of its customers, [All Tri-R] shall take all necessary precautions to prevent the occurrence of any injury to person or damage to property during the progress of such work and, except to the extent that any such injury or damage is due solely and directly to [ADM s] or its customer s negligence, as the case may be, [All Tri-R] shall pay [ADM] for all loss which may result in any way from any act or omission of [All Tri-R], its agents, employees or subcontractors. 34 In Liccardi v Stolt Terminals, Inc, the Illinois Supreme Court found that the following language was a waiver of the Kotecki cap: If Vendor performs services hereunder, Vendor agrees to indemnify and hold harmless Stolt Terminals (Chicago) Inc. from all loss or the payment of all sums of money by reason of all accidents, injuries, or damages to persons or property that may happen or occur in connection therewith. 35 In Estate of Willis v Kiferbaum Const Corp, Kiferbaum was the general contractor for a building that entered into a subcontract agreement with Arlington. 36 The subcontract agreement stated as follows: The Subcontractor agrees to assume entire responsibility and liability, to the fullest extent permitted by law, for all damages or injury to all persons, whether employees or otherwise, and to all property, arising out of it, resulting from or in any manner connected with, the execution of the work provided for in this Subcontractor [sic]...and the Subcontractor, to the fullest extent permitted by law, agrees to indemnify and save harmless the Contractor...from all such claims including, without limiting the generality of the foregoing, claims for which the Contractor may be or may be claimed to be, liable and legal fees and disbursements paid or incurred to enforce the provisions of this paragraph. 37 Arlington then entered into a sub-subcontract agreement with Decking & Steel, which employed the deceased Robert P. Willis II. 38 The sub-subcontract agreement identified Arlington as the contractor and Decking & Steel as the subcontractor. 39 The sub-subcontract agreement stated: the Subcontractor shall indemnify and hold harmless the Owner, the Architect and the Contractor and all of their agents and employees from and against all claims, damages, losses, and expenses...arising out of or resulting from the performance of the Subcontractor s work under this Subcontract, provided that any such claim...is attributable to bodily injury...to the extent caused in whole or in part by any negligent act or omission of the Subcontractor of anyone directly or indirectly employed by him or anyone for whose acts he may be liable, regardless of whether it is caused in part by a party indemnified hereunder. 40 The sub-subcontract agreement also stated: In any and all claims against the Owner, the Architect, or the Contractor or any of their agents or employees by any employee of the Subcontractor, anyone directly or indirectly employed by him or anyone for whose acts he may be liable, the indemnification obligation under this Paragraph 11.11 shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Subcontractor under workers or workmen s compensation acts, disability benefit acts or other employee benefit acts. 41 The plaintiff filed suit against Kiferbaum and Arlington, who both filed third-party complaints for contribution against the deceased s employer, Decking & Steel, who filed a motion that its liability should be limited pursuant to Kotecki. 42 Arlington argued that the subsubcontract waived the employer s Kotecki cap and Kiferbaum argued that it If the employee receives a judgment or settlement from a third party, the employer may have a lien in the amount paid to the employee in workers compensation payments. was a third-party beneficiary of the subsubcontract. 43 The trial court denied the employer s motion as to Arlington but granted the motion as to Kiferbaum. 44 The first district found that the subsubcontract provision constituted a valid waiver of the Kotecki cap as to Arlington s contribution claim. 45 However, the Willis court found that the subcontract agreement between Arlington and Kiferbaum did not contain the words shall not be limited or similar language and, therefore, did not contain a waiver of the Kotecki cap. 46 The Willis court also declined to extend the Kotecki waiver in the sub-sub- 30. Braye at 212-13, 215-17, 676 NE2d at 1301-02, 1303. 31. Herington at 491, 639 NE2d at 909, quoting general conditions of the written contract between the defendant and the third party defendant. 32. Id at 496, 639 NE2d at 912; see Braye at 206, 676 NE2d at 1298. 33. Herington at 495-96, 639 NE2d at 912. 34. Braye at 204, 676 NE2d at 1297, quoting a purchase order which allegedly governed the work in question. 35. Liccardi at 543, 687 NE2d at 970, quoting written contract at issue. 36. 357 Ill App 3d 1002, 1003, 830 NE2d 636, 639 (1st D 2005). 37. Id, quoting subcontract. 38. Id. 39. Id. 40. Id at 1004, 830 NE2d at 639-40, quoting subcontract agreement. 41. Id at 1004, 830 NE2d at 640, quoting subcontract agreement. 42. Id. 43. Id. 44. Id at 1004-5, 830 NE2d at 640. 45. Id at 1006-7, 830 NE2d at 641-42. 46. Id at 1007, 830 NE2d at 642. 4

contract to Kiferbaum because the subcontract did not 1) grant Kiferbaum the right to enforce Arlington s subcontracts, 2) contain any provision that Arlington s sub-subcontracts contain language designating Kiferbaum as a third-party beneficiary, and 3) include any direct reference or obligations by the employer to Kiferbaum. 47 The first district advised general contractors in Illinois to insert language into future standard contracts requiring that their subcontractors designate the general contractor as an explicit thirdparty beneficiary of all subcontracts entered into in furtherance of the general contract. 48 Employers, joint liability, and apportionment of fault Joint liability is provided under section 2-1117 of the Illinois Code of Civil Procedure, found at 735 ILCS 5/2-1117: Except as provided in Section 2 1118, in actions on account of bodily injury or death or physical damage to property, based on negligence, or product liability based on strict tort liability, all defendants found liable are jointly and severally liable for plaintiff s past and future medical and medically related expenses. Any defendant whose fault, as determined by the trier of fact, is less than 25% of the total fault attributable to the plaintiff, the defendants sued by the plaintiff, and any third party defendant except the plaintiff s employer, shall be severally liable for all other damages. Any defendant whose fault, as determined by the trier of fact, is 25% or greater of the total fault attributable to the plaintiff, the defendants sued by the plaintiff, and any third party defendants except the plaintiff s employer, shall be jointly and severally liable for all other damages. 49 The Illinois legislature amended section 2-1117 on June 5, 2003, to include the phrase except the plaintiff s employer, effectively codifying the fifth district holding in Lilly v Marcal Rope and Rigging, Inc 50 that had been abrogated by the Illinois Supreme Court in Unzicker v Kraft Food Ingredients Corp. 51 In Lilly, the fifth district was asked to consider whether an employer is a third party defendant who could have been sued by the plaintiff under section 2-1117. 52 At the time Lilly was decided, section 2-1117 had the phrase any third party defendant who could have been sued by the plaintiff rather than the current phrase any third party defendants except the plaintiff s employer. 53 The defendant argued that the employer was within the class of those who could have been sued by the plaintiff based on the holding in Doyle that employers were subject to liability in tort under the Illinois Contribution Among Joint Tortfeasors Act. 54 The fifth district rejected the defendant s argument and found that an employer is not a third party defendant who could have been sued by the plaintiff and should not be considered in the determination of a defendant s relative fault under section 2-1117. 55 The holding in Lilly was overruled by the Illinois Supreme Court in Unzicker. 56 The Unzicker court found that employers could be considered in the division of fault under section 2-1117. 57 Following the Illinois Supreme Court decision in Unzicker, the Illinois legislature amended Section 2-1117 of the Illinois Code of Civil Procedure to include the phrase any third party defendant except the plaintiff s employer. 58 The first district found in Carollo v Al Warren Oil Company, Inc that the amendment was a substantive change and was not retroactive. 59 In Skaggs v Senior Services of Central Illinois, Inc, the fourth district addressed the possibility that a settlement between the plaintiff and a co-defendant destroyed the non-settling defendant s right to have the trier of fact consider the settling defendant s percentage of fault under section 2-1117 of the Illinois Code of Civil Procedure. 60 The Skaggs court noted that, prior to June 4, 2003, the Illinois Supreme Court in Unzicker had found that the liability of the plaintiff s employer should be considered in the division of fault pursuant to section 2-1117 because the plaintiff s employer was considered to be a third party defendant who could have been sued by the plaintiff. 61 However, the fourth district found that the June 4, 2003, amendment to section 2-1117 excepts a plaintiff s employer from being considered in the apportioning of fault. 62 Consequently, prior to June 4, 2003, the trier of fact should determine the percentage of fault attributable to the plaintiff s employer for purposes of determining liability under section 2-1117 of the Illinois Code of Civil Procedure. 63 However, a plaintiff s employer is not to be considered in the apportionment of fault after June 4, 2003. 64 Typical statutory construction and a reading of the Carollo decision suggests that the application of section 2-1117 is determined by the date of the plaintiff s injury. 65 47. Id at 1007-9, 830 NE2d at 642-44. 48. Id at 1010-11, 830 NE2d at 645. 49. 735 ILCS 5/2-1117 (emphasis supplied). 50. 289 Ill App 3d 1105, 682 NE2d 481 (5th D 1997). 51. 203 Ill 2d 64, 783 NE2d 1024 (2002). Also see Carollo v Al Warren Oil Co, 355 Ill App 3d 172, 188-89, 820 NE2d 994, 1007 (1st D 2004). 52. Lilly at 1106, 682 NE2d at 482. 53. See 735 ILCS 5/2-1117; Lilly at 1107, 682 NE2d at 482. 54. Id at 1108, 682 NE2d at 483. 55. Id at 1107, 682 NE2d at 482. 56. Unzicker at 96, 783 NE2d at 1043. 57. Id (the Illinois Supreme Court also found that section 2-1117 was constitutional). 58. 735 ILCS 5/2-1117; see also Carollo at 190, 820 NE2d at 1008; Skaggs v Senior Services of Central Illinois, Inc, 355 Ill App 3d 1120, 1127-28, 823 NE2d 1021, 1027 (4th D 2005). 59. Carollo at 190, 820 NE2d at 1008; see also Ready v United/Goedecke, 2006 WL 2434935, *2-3 (1st D 2006). 60. Skaggs at 1127, 823 NE2d at 1027; see also Ready, 2006 WL 2434935, *5 (finding that settling defendants must appear on jury verdict form). 61. Id at 1127-28, 823 NE2d at 1027; see also Carollo at 188-89, 820 NE2d at 1007-8. 62. Skaggs at 1129, 823 NE2d at 1028. 63. Id at 1127, 823 NE2d at 1027; see also Carollo at 188-89, 820 NE2d at 1007-8. 64. Skaggs at 1129, 823 NE2d at 1028. 65. Carollo at 188, 820 NE2d at1006 ( At the time of plaintiff s injury, section 2-1117 provided, in relevant part, as follows ). Reprinted from the Illinois Bar Journal Vol 94, No. 11, November 2006 www.isba.org 5