We advise our clients, law students and seminar attendees to always pay attention to subrogation issues and to ensure close awareness, sometimes even intervening after a petitioner files a third-party claim.

Shawn Biery

It is even less common when a petitioner in a workers' compensation claim has a potentially viable third-party claim that isn’t pursued until the employer files the third-party action. In a recent case, the Illinois 1st District Appellate Court has sent the question back to the Cook County trial court to determine whether an injured worker would be adequately represented in a subrogation case if she were not allowed to directly intervene.

In A&R Janitorial v. Pepper Construction Co., the appellate court reversed and remanded a matter finding that the hearing court erred in denying an employee's petition to intervene in action filed by her employer against defendants as the employee's subrogee, pursuant to Section 5(b) of the Illinois Workers' Compensation Act.

Factually, Teresa Mroczko was working for A&R Janitorial at a Blue Cross Blue Shield building in Chicago when a desk fell on her. Pepper Construction Co. was hired to replace carpeting as part of a renovation project, and it is alleged that an employee of its subcontractor, Perez & Associates, moved the desk that fell on Mroczko.

Mroczko filed a WC claim against her employer for which she has received more than $342,000 in benefits to date of the initial decision, according to the appellate court’s decision.

In June 2015, Mroczko filed a personal injury claim against Pepper Construction, Perez & Associates, Interface America Inc. and the Blue Cross and Blue Shield Association. The claim was dismissed as untimely in December 2015, as she had not filed within the applicable WC two-year statute of limitations.

Her argument was that the injury was the direct result of construction work, and she said the four-year statute of limitations for bringing such a claim was applicable. However, the circuit court said the two-year statute of limitations under the Workers’ Compensation Act applied to her third-party claim for liability.

Her employer, however, timely filed a complaint to protect its subro rights against Pepper Construction Co. and Perez & Associates in August 2014. So Mroczko, in November 2016, petitioned the court to intervene in her employer’s claim, saying she would not be adequately represented by attorneys for A&R Janitorial — arguing they would seek only their recovery for amounts paid in workers’ compensation benefits. She argued that she should still be entitled to additional damages for pain and suffering.

The trial court in December 2016 denied the petition to intervene under the doctrine of res judicata (or claim preclusion to some), which prevents a party from filing the same claim against the same party after a court has already ruled on the merits in an identical case.

Mroczko filed an appeal, and while the case was pending, her employer filed an amended complaint seeking damages to cover pain and suffering, which the circuit court allowed. The underlying case settled for $850,000 while the appeal was pending.

The appellate court said whether Mroczko’s interests would be adequately protected if she were not allowed to intervene is a threshold issue that the trial court neglected to answer. As such, the trial court abused its discretion by applying an improper legal standard in denying the petition, the appellate court said. The appellate court said Mroczko clearly has an interest in her employer’s case, because the employer was seeking to recover damages for her pain and suffering.

The court in part noted, “Appellant contends plaintiffs cannot adequately represent her interests based on her argument that plaintiff has an incentive to settle for an amount less than, or equal to, what plaintiff paid in the workers’ compensation claim. On appeal, plaintiff contends it will adequately represent appellant’s interests because plaintiff may not be fully indemnified if it does not pursue maximum damages.”

Mroczko also argued her employer’s attorney had a conflict of interest, and the employer argued to refute the allegations of a conflict by arguing it never represented Mroczko, a statement the appellate court said was “incongruent” with its argument that it has every incentive to pursue maximum damages in the third-party liability case.

In short, the appellate court said the statement called into question whether Mroczko’s employer was adequately representing her interest in the subrogation case.

The appellate court remanded the case for the trial court to reach a decision on whether Mroczko’s rights will be adequately represented if she is not allowed to directly intervene in the case. We will report on any follow-up decision as it becomes available.

The takeaway for interested observers, regardless of the final decision in this particular case, is how important it is to ensure timely filing of any third-party claim when subrogation is potentially viable. We track the subrogation deadlines in claims with any potential viability and report same to our clients on all claims we defend to ensure any potential recovery is not lost due to a lack of filing.

Shawn R. Biery is a partner of Keefe, Campbell, Biery and Associates, a Chicago-based workers' compensation defense firm. This column was reprinted with his permission from the firm's client newsletter.