2018 IL App (1st) 163351
Ill. App. Ct.2019Background
- Marque Medicos Farnsworth, LLC and Medicos Pain & Surgical Specialists (providers) treated Martha Llamas, an employee of Sleep Innovations, for a work injury and billed Sleep Innovations’ workers’ compensation insurer, Liberty Mutual.
- Llamas authorized direct payment to providers; providers were later directed to bill Liberty.
- Llamas and Sleep Innovations entered an IWCC settlement providing that respondent would pay all necessary and related medical expenses submitted prior to approval; the settlement did not specify outstanding bill amounts.
- Liberty made some late payments (~$80,000) but left some bills unpaid (~$5,200) and failed to pay statutory interest (alleged > $24,000).
- Providers sued for breach of contract, violation of the Workers’ Compensation Act §8.2(d), quasi-contract (unjust enrichment), implied-in-fact contract, and under Insurance Code §155; the trial court dismissed claims with prejudice.
- On appeal, the court considered whether medical providers have a direct cause of action against an employer’s workers’ compensation insurer for delayed or unpaid medical bills and related statutory interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether providers are third-party beneficiaries of insurer’s workers’ compensation policy (breach of contract) | Policy language making insurer “directly and primarily liable to any person entitled to benefits” and the Act’s direct-pay provisions make providers intended beneficiaries | Providers are incidental beneficiaries; policy does not name providers or a defined class | Providers are not third-party beneficiaries; breach-of-contract claim dismissed |
| Whether unjust enrichment (contract implied in law) lies against insurer | Providers conferred benefit by treating injured worker and insurer should not be unjustly enriched by nonpayment | Benefit was conferred on the employee, not the insurer; no direct retention by insurer alleged | Claim dismissed for failure to allege specific benefit unjustly retained by defendant |
| Whether an implied-in-fact contract arose between providers and insurer | An implied promise existed: insurer would pay if providers followed billing instructions | Any obligation to pay arose from insurer’s preexisting legal duties under the policy and Act—not new consideration | Claim dismissed because performance was pursuant to defendant’s preexisting legal duty (no valid consideration) |
| Whether providers may recover under Insurance Code §155 for insurer’s vexatious delay | Providers seek §155 penalties for unreasonable delay in settling claims | §155 remedies extend only to insureds and assignees; providers are not insureds or assignees of the policy | §155 claim dismissed; providers lack standing to recover under §155 |
Key Cases Cited
- Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252 (1931) (third-party beneficiary requires contract language showing intent to directly benefit the third party)
- Kelsay v. Motorola, Inc., 74 Ill. 2d 172 (1978) (purpose of the Workers’ Compensation Act is prompt and equitable compensation for injured employees)
- Doyle v. Holy Cross Hospital, 186 Ill. 2d 104 (1999) (consideration requires a bargained-for exchange; there is no consideration for performing a preexisting legal duty)
- Martis v. Grinnell Mutual Reinsurance Co., 388 Ill. App. 3d 1017 (2009) (medical providers are incidental beneficiaries of workers’ compensation policies absent express language creating a direct benefit)
- McMahan v. Industrial Comm’n, 183 Ill. 2d 499 (1998) (refusal to pay medical expenses undermines the purposes of the Workers’ Compensation Act)
- Yassin v. Certified Grocers of Illinois, Inc., 133 Ill. 2d 458 (1990) (§155 remedies limited to insureds and assignees)
- Garcia v. Lovellette, 265 Ill. App. 3d 724 (1994) (distinguishable example where a claimant was an insured under the policy and thus could invoke §155)