The Illinois Workers Compensation Act does not allow medical providers to go after a workers compensation settlement received just after a bankruptcy filing.
In Re Hernandez, the Illinois Supreme Court held on Friday that the proceeds of a workers comp settlement are exempt from claims made by medical providers who treated the injury or illness associated with that claim.
Between 2009 and 2011, Elena Hernandez sustained on-the-job injuries and received medical treatment from three different clinics. In 2016, she filed for bankruptcy protection for minimal assets and her pending workers comp claim valued at $31,000. She owed a combined $138,000 to the three medical practices.
Two days after filing her bankruptcy petition, she settled her workers comp claim with her employer for about $30,500 without consulting the bankruptcy trustee because she said she believed the amount of the settlement was exempt from the Workers Compensation Act.
The health providers objected to the exemption on the grounds that amendments made to the Act in 2005 empowered them to reach her settlement and argued that the settlement was the product of fraud.
In March, a three-judge panel of the 7th U.S. Circuit Court of Appeals in Chicago certified the question of whether the Illinois Workers Compensation Act can exempt the proceeds of a workers comp settlement from the claims of medical care providers who treated the injury or illness associated with that settlement.
The court noted that while the 2005 amendments made several changes to the comp system, it needed classification on the boundaries of the workers comp act to classify a settlement as an exemption.
The Illinois Supreme Court held that the proceeds of a workers comp settlement are still exempt from medical provider claims associated with that claim and that there was “no ambiguity whatsoever in this provision.”
Although the health care providers argued that an exemption for their claims is “implicit” in the 2005 changes, the court found that the legislature would have indicated a clear intent to alter those provisions if it had intended to do so.
The court, therefore, held that the Act does exempt the proceeds of a workers compensation settlement from the claims of medical providers who treated the injury or illness associated with the settlement.
This article was first published by Business Insurance.