Auto insurer not entitled to offset for medical expenses paid pursuant to worker's pension

Law Reporter, Nov 2004

Gillen v. State Farm Mut. Auto. Ins. Co., 812 N.E.2d 595 (Ill. App. Ct. 2004).

An Illinois appellate court held that an automobile insurer was not entitled to offset from its policy liability medical benefits that a worker's employer paid to his widow as part of his pension.

The appellate court disagreed with the insurer's reliance 011 State Farm Mut. Auto. Ins. Co. v. Murphy, 635 N.E.2d 533 (Ill App. Ct. 1994). There, a different state appellate division held that medical payments a worker received from his employer pursuant to his pension qualified as being paid under "worker's compensation, disability benefits, or other similar law" under the uninsured motorist setoff provision. The court here said there is an important distinction between workers' compensation and pension payments.

While the state's courts have enforced employers' liens on workers' compensation proceeds, the courts have consistently rendered special protection for employees receiving pension payments, finding that any reduction of such benefits violates an enforceable contractual relationship between employee and employer and impinges on the employee's constitutional protections. Thus, the court said, the phrase "worker's compensation, disability benefits or other similar law" does not encompass pension payments.

The court added that its decision is supported by public policy, noting that the couple's purchase of uninsured motorist coverage and payment of premiums established a contract, while working for the employer established a separate contract entitling the worker to medical payments. Noting that pension payments were not explicitly mentioned in the automobile policy's setoff provision, the court concluded that as policyholders, the couple should receive the full fruits of their contract with the insurer, for which they had already rendered consideration in the form of premium payments. Acknowledging that its ruling could result in a windfall for plaintiff, the court said it was more logical and legally sound that plaintiff benefit because the couple had paid their own money to obtain uninsured motorist coverage, and the husband had worked, separately from that contract, to obtain his pension. To allow otherwise, the court reasoned, would permit a setoff benefiting the insurer for a source of payment with which it had nothing to do.

Plaintiff's Counsel

* Joseph A. Power Jr., Chicago, Ill.

* Devon C. Bruce, Chicago, Ill.

Documents in this case are available through the Court Documents section in the back of this issue, courtesy of Mr. Power.