Williams, McCarthy, Kinley, Rudy & Picha v. Northwestern National Insurance Group

Summary

The Seventh Circuit interprets Section 5(b) of the Illinois Workers’ Compensation Act concerning an employer’s obligation to pay a statutory attorney’s fee when an employee’s tort recovery creates a credit against future workers’ compensation payments. The court holds that the fee should be paid as the employer realizes benefits from the credit, rather than deducted in advance from the credit based on the maximum potential compensation award. The judgment affirming the district court is affirmed.

Holdings

1. The employer must pay the attorneys 25 percent of the reimbursement as the benefit from the tort recovery accrues—here, periodically as the employer's credit eliminates weekly compensation obligations—rather than deducting the projected fee immediately from the credit.
2. The federal court was not bound by Illinois intermediate appellate decisions that did not directly decide the disputed fee method or were poor predictors of what the Illinois Supreme Court would hold.

Questions Presented

1. Under section 5(b) of the Illinois Workers' Compensation Act, when an employee's tort recovery creates a credit against uncertain future workers' compensation payments, must the employer pay the attorneys' statutory 25 percent fee as the employer receives the benefit of the credit, or may the employer deduct the projected fee immediately from the credit?
2. How should a federal court sitting in diversity predict the Illinois Supreme Court's interpretation of an Illinois statute when Illinois intermediate appellate decisions provide incomplete or nonbinding guidance?

Disposition

affirmed