On October 16, 2020, the 2nd District of the Illinois Appellate Court issued its decision in the case of West Bend Mutual Insurance Company v. TRRS Corporation, et. al. The decision addressed a consolidated interlocutory appeal concerning the propriety of a circuit court’s order staying the proceedings on a claim filed before the Illinois Workers’ Compensation Commission.

FACTS and PROCEDURAL HISTORY

Gary Bernardino was injured in a forklift accident in April of 2017 while in the course of his employment with TRRS and Commercial Tire. The accident resulted in injuries that required rotator cuff surgery. The employers opted to cover Bernardino’s lost wages and medical expenses without ever reporting the injury to the workers’ compensation insurance carrier, West Bend. When Bernardino learned that he would require a follow-up surgery, he filed an Application for Adjustment of Claim with the Illinois Workers’ Compensation Commission on March 29, 2018. On September 12, 2018, Bernardino filed a petition for an immediate hearing under Section 19(b) of the Illinois Worker’s Compensation Act  along with a petition for penalties and fees for unreasonable and vexatious delay under Sections 16 and 19(k) of the Act.

On October 2, 2018, West Bend filed a complaint for declaratory judgment in the circuit court of McHenry County, naming both employers and the injured worker Gary Bernardino as defendants. West Bend alleged that it had written a workers’ compensation insurance policy for the employers that would have covered Bernardino’s claim if the employers had not violated the terms of the policy by failing to provide proper notice of Bernardino’s injury and paying for the expenses related to the first surgery and that the employers had therefore voluntarily decided to forgo coverage. West Bend sought a declaration from the circuit court that it had no duty to defend or indemnify the employers in connection with Bernardino’s workers’ compensation claim.

The Illinois Workers’ Compensation Commission scheduled a hearing on Bernardino’s 19(b) petition to take place on November 19, 2018. On October 9, 2018, West Bend filed an emergency motion in the circuit court to stay the proceedings at the Commission until the declaratory judgement action was resolved. The Circuit Court granted the motion to say the Commission proceedings.

On October 25, 2018, Bernardino filed an emergency motion in the circuit court to vacate the stay order, arguing that the Commission was the proper venue for a ruling on the coverage issue raised in West Bend’s declaratory judgment action. The Circuit Court found that the matter was ultimately a question of law, and was more appropriately brought before the circuit court than the Commission, and on November 1, 2018 entered an order granting West Bend’s emergency motion to stay the Commission proceedings.

Bernardino filed a motion on November 6, 2018 seeking to vacate the stay order dated  November 1, 2018.  On November 8, 2018, Bernardino filed his notice of a Rule 307(a)(1) interlocutory appeal from the stay order dated November 1, 2018. That same day, the circuit court conducted a hearing on Bernardino’s motion to vacate the say order dated November 1, 2018. The circuit court continued Bernardino’s motion to vacate the stay order to January 7th, 2019.  On December 10, 2018, Bernardino filed his notice of a Rule 307(a)(1) interlocutory appeal from the continuance order dated November 8, 2018 and on December 12, 2018, Bernardino filed a motion to consolidate both appeals, which was granted by the Appellate Court.

ANALYSIS BY THE APPELLATE COURT

The Appellate Court began by examining its own jurisdiction. Rule 307(a)(1) provides that an appeal may be taken from an interlocutory order that grants, modifies, reuses, dissolves or refuses to dissolve or modify an injunction. The Illinois Supreme Court has held that the issuance of a stay of an administrative order pending judicial review constitutes an injunction for purposes of appeal under Rule 307(a)(1). Therefore, the trial court’s stay order dated November 1, 2018 is reviewable under Rule 307(a)(1) and Bernardino perfected his appeal by filing a notice of an interlocutory appeal within 30 days of the entry of the order. However, the Appellate Court dismissed Bernardino’s appeal of the circuit court’s order of November 8, 2018 for lack of jurisdiction in that the order was merely a continuance and did not grant, modify, refuse, dissolve or refuse to dissolve or modify an injunction.

The Appellate Court found that the proper standard of review of the November 1, 2018 stay order was de novo as opposed to the abuse of discretion standard because the question presented was a question of law.  The Appellate Court agreed with West Bend that as a matter of law, the circuit court was the proper venue for its declaratory judgment action, but that by staying the Commission proceedings, the circuit court had erroneously applied the doctrine of primary jurisdiction.

What is the doctrine of primary jurisdiction?

The doctrine of primary jurisdiction, like the rule requiring exhaustion of administrative remedies, is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties. ‘Exhaustion’ applies where a claim is cognizable in the first instance by an administrative agency alone; judicial interference is withheld until the administrative process has run its course. ‘Primary jurisdiction,’ on the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views. United States v. Western Pacific R.R. Co., 352 U.S. 59 (1956). 

The Illinois Supreme Court has consistently held that under the doctrine of primary jurisdiction, when a court has jurisdiction over a matter, it should, on some occasions, stay the judicial proceedings pending referral of the controversy, or a portion of it, to an administrative agency having expertise in that area.

How do Illinois courts determine when they should apply the doctrine of primary jurisdiction?

In considering whether the doctrine applies, the courts must first determine whether the legislature has vested “exclusive original jurisdiction” over the disputed matter in an administrative agency. If it cannot be shown that the legislature intended to deprive the circuit court of its jurisdiction over the disputed subject matter, then the circuit court shares concurrent jurisdiction with the administrative agency. The question then becomes whether the circuit court should stay the judicial proceedings pending referral of a controversy, or some portion of it, to the administrative agency having expertise in the area. Thus, under the doctrine, a matter should be referred to an administrative agency when it has a specialized or technical expertise that would held resolve the controversy. And if an agency’s technical expertise is not likely to be helpful, courts should not relinquish authority over a matter to the agency.

The Illinois Supreme Court has ruled that when there is concurrent jurisdiction, the issue becomes which forum’s jurisdiction is “paramount”. In this case, the jurisdiction of the circuit court is paramount. A declaratory judgment action solely concerns the scope of coverage afforded in a workers’ compensation insurance policy. The construction of that insurance policy is not a determination of the factual issues related to the determination of workers’ compensation benefits owed, the nature and extent of Bernardino’s injuries, or any potential defenses to the workers’ compensation claim. If it was, then the circuit court would have no original jurisdiction in the case and the Commission would have exclusive jurisdiction.

THE APPELLATE COURT’S DECISION

The Appellate Court reversed the Circuit Court’s order staying the Commission proceedings, noting that Bernardino’s 19(b) petition sought only to determine whether he is entitled to receive medical services, and that a stay of those proceedings would contradict the legislature’s clear intent to provide an expedited process for employees awaiting medical services if the proceedings at the Commission could be suspended while the employer and insurance provider dispute the issue of coverage in the circuit court.

THE TAKEAWAYS

  • In Illinois, when an insurance provider files a complaint for declaratory judgment in a workers’ compensation case, the circuit court is going to have jurisdiction to hear and rule on that complaint for declaratory judgment. However, that same court should not grant a stay of the underlying Commission proceedings while the insurance carrier and the employer dispute the coverage issue in circuit court.
  • If you are representing the injured worker in such a proceeding, be sure to appeal any stays of Commission proceedings ordered by the Circuit Court using Rule 307(a)(1). Only appeal the actual stay order. You do not need to appeal continuance orders related to that stay order, as they will be dismissed for lack of jurisdiction by the Appellate Court.
  • If the injured worker is not named as a defendant in the complaint for declaratory judgment, make sure that you file a motion to intervene in the action to protect the rights of the injured employee and ensure that the proceedings before the Commission are not improperly stayed by the circuit court pending resolution of the complaint for declaratory judgement.  You might also want to go ahead and add the Injured Workers’ Benefit Fund as a Respondent in your claim as soon as you learn that there may be an issue with coverage.

Here is a link to the Appellate Court’s decision:  West Bend Mutual Insurance Co. v. TRRS Corp., 2019 IL App (2d) 180934

As always, if you find yourself in a procedural quandary, or if you have any other questions about workers’ compensation in Illinois, do not hesitate to contact me for a free consultation.