Penalties and Attorneys’ Fees for Unreasonable Denial of Benefits

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Injured workers that are unreasonably denied medical and disability benefits by insurance companies can seek substantial penalties from the Illinois Workers’ Compensation Commission.

To do this, injured workers must file their claim and a petition for penalties with the Commission.

Injured workers who feel their benefits have been unreasonably withheld by insurance companies should consider consulting a workers’ compensation attorney to handle this petition. In fact, they can also seek an award of attorneys’ fees with the penalties.



Section 19(l) “Late Fee” Penalties for Unreasonable Delays and Denials of Benefits

The Illinois Workers’ Compensation Act provides for “late fee” penalties of $30 per day that medical or disability benefits are unreasonably withheld by employers and insurance companies.

Section 19(l) of the Act provides:

If the employee has made written demand for payment of benefits under Section 8(a) or Section 8(b), the employer shall have 14 days after receipt of the demand to set forth in writing the reason for the delay.

In the case of demand for payment of medical benefits under Section 8(a), the time for the employer to respond shall not commence until the expiration of the allotted 30 days specified under Section 8.2(d).

In case the employer or his or her insurance carrier shall without good and just cause fail, neglect, refuse, or unreasonably delay the payment of benefits under Section 8(a) or Section 8(b), the Arbitrator or the Commission shall allow to the employee additional compensation in the sum of $30 per day for each day that the benefits under Section 8(a) or Section 8(b) have been so withheld or refused, not to exceed $10,000.

A delay in payment of 14 days or more shall create a rebuttable presumption of unreasonable delay.

820 ILCS 305/19(l) Illinois General Assembly | IWCC PDF.

Section 19(l) requires injured workers or their attorneys to first make a written demand for benefits under section 8(a), which includes medical treatment, temporary partial disability (TPD), vocational rehabilitation and maintenance benefits, or section 8(b), which includes temporary total disability (TTD) benefits.

The employer or their insurance company must then respond to the demand in writing within 14 days to explain the reason for delaying or denying the claimed benefits.

If employers or insurance companies “without good and just cause fail, neglect, refuse, or unreasonably delay the payment of benefits,” they are subject to pay penalties of $30 per day.

“The section 19(l) penalty is in the nature of a late fee.” Mechanical Devices v. Industrial Comm’n, 344 Ill. App. 3d 752 (2003) Google Scholar | Illinois Courts.

“If the payment is late, for whatever reason, and the employer or its carrier cannot show an adequate justification for the delay, an award of the statutorily specified additional compensation is mandatory.” McMahan v. Industrial Comm’n, 183 Ill. 2d 499 (1998) (emphasis added) Google Scholar | Illinois Courts.

“The employer [or insurance company] has the burden of justifying the delay, and the employer’s justification for the delay is sufficient only if a reasonable person in the employer’s position would have believed that the delay was justified.” Jacobo v. Illinois Workers’ Compensation Comm’n, 2011 IL App (3d) 100807WC Google Scholar | Illinois Courts PDF.

Section 19(k) Penalties for Deliberate and Bad Faith Non-Payment of Benefits

The Illinois Workers’ Compensation Act contains another penalties provision for even greater amounts when employers and insurance companies behave badly.

Section 19(k) provides:

In case where there has been any unreasonable or vexatious delay of payment or intentional underpayment of compensation, or proceedings have been instituted or carried on by the one liable to pay the compensation, which do not present a real controversy, but are merely frivolous or for delay, then the Commission may award compensation additional to that otherwise payable under the Act equal to 50% of the amount payable at the time of such award.

820 ILCS 305/19(k) Illinois General Assembly | IWCC PDF.

The standard for the Commission to award section 19(k) penalties is much higher than the section 19(l) late fee penalties.

Section 19(k) penalties are “intended to address situations where there is not only a delay, but the delay is deliberate or the result of bad faith or improper purpose.” McMahan v. Industrial Comm’n, 183 Ill. 2d 499 (1998) Google Scholar | Illinois Courts.

These penalties are also “intended to promote the prompt payment of compensation where due and to deter those occasional employers or insurance carriers who might withhold payment from other than legitimate motives.” McMahan v. Industrial Comm’n, 183 Ill. 2d 499 (1998) Google Scholar | Illinois Courts.

While the Commission has discretion to impose section 19(k) penalties, the “calculation of a penalty award under section 19(k) is simply a mathematical computation of 50% of the amount payable at the time of the award.” Jacobo v. Illinois Workers’ Compensation Comm’n, 2011 IL App (3d) 100807WC Google Scholar | Illinois Courts PDF.

Penalties equal to 50% of the amount in controversy can be extremely significant.

Section 16 Attorneys’ Fees for Deliberate and Bad Faith Non-Payment of Benefits

If the Commission awards section 19(k) penalties, it may also award attorneys’ fees under section 16 of the Illinois Workers’ Compensation Act:

Whenever the Commission shall find that the employer, his or her agent, service company or insurance carrier has been guilty of delay or unfairness towards an employee in the adjustment, settlement or payment of benefits due such employee within the purview of the provisions of paragraph (c) of Section 4 of this Act; or has been guilty of unreasonable or vexatious delay, intentional under-payment of compensation benefits, or has engaged in frivolous defenses which do not present a real controversy, within the purview of the provisions of paragraph (k) of Section 19 of this Act, the Commission may assess all or any part of the attorney’s fees and costs against such employer and his or her insurance carrier.

820 ILCS 305/16 Illinois General Assembly | IWCC PDF.

The penalties and attorneys’ fees provisions of the Illinois Workers’ Compensation Act have real bite and pursuing these in cases of unfair denials and delays of claims can be extremely effective.

Injured workers who have experienced unfair denials and delays of their claims should consider consulting a workers’ compensation attorney with experience pursuing these claims.

Further reading:

Hollywood Casino-Aurora, Inc. v. Illinois Workers’ Compensation Comm’n, 2012 IL App (2d) 110426WC (penalties available for unreasonable delays in payment of medical bills, not pre-authorization of medical procedures) Google Scholar | Illinois Courts PDF.

Avon Products, Inc. v. Industrial Comm’n, 82 Ill. 2d 297 (1980) (“When the employer acts in reliance upon responsible medical opinion or when there are conflicting medical opinions, penalties are not ordinarily imposed.”) Google Scholar.

This article does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.