Larsen v. Vaid
Key Takeaways
- 1 Under section 5(b), employer's pro rata cost share is based on gross reimbursement, not net after attorney fees.
- 2 Court rejects argument that 'gross' modifier in attorney fee clause implicitly reduces cost calculation base.
- 3 Relevant for workers' compensation practitioners and civil litigators handling third-party tort actions with employer lien disputes.
Summary
A police officer injured in a 2017 on-duty automobile accident received workers' compensation benefits totaling $399,930.16 from IRMA, her employer's workers' compensation administrator. She later settled her civil action against the at-fault driver for $325,000. IRMA intervened and refused to reduce its lien. After dismissal of the civil action, the trial court ordered IRMA to pay 100% of plaintiff's litigation costs ($21,344.88) plus 25% attorney fees ($81,250), leaving IRMA a net recovery of $222,405.12. IRMA appealed, arguing it should pay only 75% of costs because its mandatory 25% attorney fee obligation should first be subtracted from the gross reimbursement before calculating its pro rata cost share.
The First District affirmed, applying de novo review to this question of statutory interpretation under section 5(b) of the Workers' Compensation Act. The court held that the employer's obligation to pay a pro rata share of costs and its obligation to pay 25% attorney fees are two separate, independent obligations joined by the conjunctive 'and,' each operating independently. The phrase 'any reimbursement received by the employer' means the total reimbursement for compensation paid, without first subtracting attorney fees. The court relied heavily on the Illinois Supreme Court's analysis in Zuber v. Illinois Power Co. and declined to follow the Second District's contrary holding in Overlin v. Windmere Cove Partners, Inc., finding Overlin non-binding and unsupported by the statute's plain language.
This decision is significant for workers' compensation carriers and employers intervening in third-party tort actions: when the employer recovers 100% of the settlement as reimbursement, it bears 100% of the plaintiff's litigation costs, regardless of its concurrent attorney fee obligation.
Key Holdings
1. Under section 5(b) of the Workers' Compensation Act, the phrase 'any reimbursement received by the employer' means the total reimbursement for compensation paid or to be paid, without subtracting the mandatory 25% attorney fee obligation before calculating the employer's pro rata share of costs and expenses.
2. An employer's obligation to pay a pro rata share of litigation costs and its obligation to pay 25% attorney fees are two separate, independent obligations under section 5(b); the attorney fee obligation does not reduce the base amount used to calculate the cost-sharing obligation.
3. The use of 'gross amount' in the attorney fee clause of section 5(b) clarifies that the 25% fee must be calculated on total reimbursement before deducting costs — it does not signal that costs must be calculated after subtracting attorney fees.
4. The Second District's holding in Overlin v. Windmere Cove Partners, Inc., 325 Ill. App. 3d 75 (2001), which calculated costs based on net reimbursement after subtracting attorney fees, is neither binding on the First District nor supported by the plain language of section 5(b) or the Illinois Supreme Court's analysis in Zuber v. Illinois Power Co.