Jacobo and the Pursuit of Penalties

An award of penalties is a goal for many Petitioners’ attorneys. Several offices we all can name file a Petition for Penalties with every case on the off chance penalties and attorney’s fees may be awarded. Generally speaking, many petitions are frivolous and without grounds. Penalties can only be awarded when the Respondent’s conduct is found to be unreasonable and vexatious. In fact, most often, the Respondent’s conduct in question is simply a matter of doing nothing at all.

The recent case of Jacobo v. IWCC and New Breed Leasing of Illinois, 2011 IL.App.3d 1000807WC, 959 N.E.2d 772 (3rd Dist. 2011), is a good example of this. Petitioner sustained injuries when a forklift backed into her. The arbitrator found a compensable claim and subsequently awarded TTD and PPD benefits as well as medical benefits and penalties. The arbitrator awarded penalties, finding the denial based upon the respondent’s IME was unreasonable. The Commission affirmed the underlying award, but vacated the award for penalties, finding reliance upon the IME was reasonable. To this point, there was no unreasonable or vexatious withholding of benefits by Respondent.

Subsequent to the Commission award, petitioner appealed the Commission decision only with regard to the penalties. The Respondent did not appeal the award. Despite not appealing the award, the Respondent did not pay any part of the award. Over a year passed after the Commission award and the matter remained on appeal on the issue of penalties at the circuit court. During that time, Petitioner’s attorney several times communicated to Respondent that the appeal was only concerning the issue of penalties and not the award of benefits. The parties came to an agreement regarding the amount of the award but despite numerous communications from Petitioner’s attorney requesting payment, still no part of the award was paid. Petitioner’s attorney filed a second Petition for Penalties before the Commission based upon the Respondent’s failure to pay the portion of the award which had not been appealed.

Ultimately, in two separate decisions, the Appellate Court upheld the Commission’s decision denying the initial penalty petition and found that the reliance upon the IME was reasonable. With regards to the second penalty petition for non-payment, the Appellate Court found that the award of penalties for non-payment of the initial award was justified under the Act. 

In rendering its decision and upholding the award for penalties for non-payment, the Appellate Court focused upon the fact that the employer had not appealed any aspect of the award and the Petitioner’s attorney had made it abundantly clear that the only issue they were appealing was the matter of penalties. While there is no statutory provision requiring payment of an undisputed portion of an award, there was no basis at that point either upon which to justify non-payment of the award. Additionally, the Appellate Court noted that prior case law supported the argument that penalties are appropriate when an award has been made and a portion is uncontested upon appeal.

 In Jacobo, the Appellate Court noted it was clear from correspondence that the Respondent had notice the only portion of the award the Petitioner was appealing was the issue of penalties. It was this certain knowledge and the lack of any other justification for the non-payment which ultimately seemed to turn the Court’s decision to affirm the award of penalties for non-payment of the initial award.

 It was the failure to do anything that doomed the Respondent in Jacobo, both in the failure to pay and the failure to respond when Petitioner’s attorney made attempts to come to an agreement. The Appellate Court made it clear in its decision that they felt Respondent passed up numerous chances to remedy the problem. This was not a one-time failure to take action but a repeated failure to respond to requests for action and to respond to Court decisions. It also serves as a warning that the Appellate Court is taking the issue of penalties more seriously. Given the result in Jacobo, we would expect to see this becoming more of an issue in the future.

 In order to avoid this particular penalties trap, once a decision is issued, if the Respondent declines to appeal any portion of the award, we recommend swiftly working to an agreement as to the amount of the award which is uncontested, and then paying that portion, even if some of the award remains on appeal. That way, penalties such as those in Jacobo are avoided and there is the added benefit of avoiding any interest payments which would accrue on an unpaid award.