Publications

Illinois Bar Journal

The Magazine of Illinois Lawyers

July 2013Volume 101Number 7Page 336

Illinois Law Update

July 2013 Illinois Bar Journal Cover Image

By students of the University of Illinois College of Law

Cases

Illinois Appellate Court

Court rejects assignment of claim against insolvent insurer
In re Liquidation of Legion Indem. Corp., 2013 IL App (1st) 120980, 2013 WL 1641384.

On April 16, 2013, the first district appellate court held that the insured of an insolvent insurer could not recover any proceeds from its insurance policies above the amount paid to an injured party in a settlement agreement.

In October 1998, Kristie Talley was fatally injured when her bicycle became trapped between a curb and a school bus. Talley's parents sued Barrington Transportation Co., Inc. ("Barrington"), the operator of the school bus.

Barrington was covered by two liability insurance policies with Legion Indemnity Company ("Legion") with a combined policy limit in the range of $6 million dollars. However, before the case reached trial, Legion became insolvent and was placed into liquidation under the control of the Illinois Department of Insurance ("Liquidator").

With its insurer insolvent, Barrington lacked the financial resources to compensate Talley's parents and opted to file for bankruptcy. The Talleys and Barrington ultimately negotiated a settlement agreement that was approved by the bankruptcy court. The agreement provided that the Talleys' claims amounted to $7,500,000 and that Barrington agreed to pay the Talleys $1,200,000 to settle their claims in exchange for the Talleys assigning their rights as against Legion to Barrington.

In April 2004, Barrington sought to recover the full limit of its proceeds under the two liability insurance policies. After considering Barrington's claim, the Liquidator determined that Barrington was only entitled to be reimbursed $1,200,000 out of Legion's assets. The trial court adopted the Liquidator's recommendation. The court based its decision in part on section 209(8) of the Illinois Insurance Code ("Code"), which states that judgments occurring "after the date of the entry of the liquidation...order shall [not] be considered in the proceedings as evidence of liability, or of the amount of damages." Id. at *3. The court also rejected the transfer of the Talleys' claim to Barrington as an impermissible assignment of a personal injury claim.

On appeal, Barrington argued that section 209(8) did not preclude the Liquidator from considering settlement agreements entered into after the date of the entry of liquidation. Barrington contended that the settlement agreement provided for the assignment of a contractual right to payment, not the assignment of a personal injury claim.

Barrington also offered as precedent the case of In re Liquidation of Pine Top Insurance Co., 266 Ill.App.3d 99, 639 N.E.2d 168 (1994), which involved similar facts. The injured party in Pine Top reached a settlement agreement with the insured, subsequently filed a claim in liquidation against the insurer, and was awarded the remaining proceeds of the insurance policy. Barrington argued that this case demonstrated that Illinois policy favored enforcing settlement agreements bargained for by the parties.

The appellate court held that the trial court correctly limited Barrington's recovery to the amount it paid the Talleys. The court ruled that the restriction in Section 209(8) was applicable because the settlement agreement was the product of a judgment entered by the bankruptcy court. The court rejected Barrington's characterization of the assignment as involving contractual rights and restated the Illinois public policy against assignment of personal injury claims. Finally, the court noted that Pine Top decision was not relevant to this case because the injured party in Pine Top did not assign their right to payment to the insured.

Presumption of vesting of health benefits under collective bargaining agreement
Marconi v. City of Joliet, 2013 IL App (3d) 110865, 2013 WL 1844257.

On May 2, 2013, the Illinois Appellate Court, Third District, held that a city's decision to reduce retired employees' health benefits promised under a collective bargaining agreement should be analyzed as a matter of contract, subject to a presumption in favor of the vesting of these benefits.

The plaintiffs in this case were three retired firefighters and one police officer who were employed by the City of Joliet until approximately July 2008. While employed, the plaintiffs were union members whose employment was governed by collective bargaining agreements with Joliet that included health insurance retirement benefits.

The plaintiffs sued Joliet after the city decided to alter the plaintiffs' retirement and health benefits; the city had negotiated a new agreement with the unions for changes in benefits after the plaintiffs retired, and had applied some of the reductions to retirees as well as current union members. The plaintiffs motioned for summary judgment, arguing that copay increases and added deductibles "diminished or impaired" their healthcare benefits, and were unconstitutional under the pension protection clause of the Illinois Constitution. Id. at *3. The circuit court granted the motion, requiring Joliet to reinstate the healthcare benefits that the plaintiffs agreed to in the prior collective bargaining agreement.

On appeal, the third district stated that questions should not be answered on constitutional grounds if it is possible to answer them on non-constitutional grounds. The court analyzed whether Joliet was contractually obligated "to continue to provide the retirement health insurance benefits that it promised each plaintiff at the time of his retirement." Id. The court conceded that the issue had not been raised at trial, but noted the authority it possessed to correct the trial court when it makes an error in its proceedings.

To decide the contractual question, the court explored whether health care benefits should be presumed to have vested when agreed to in a collective bargaining agreement. Relying on a decision from the Supreme Court of Wisconsin, Roth v. City of Glendale, 237 Wis.2d 173, the court ruled that healthcare benefits agreed to under a collective bargaining agreement cannot be diminished after they are earned by the employee and the employee has retired, "[u]nless the contractual language or extrinsic evidence clearly shows otherwise." Id. at *8.

Therefore, the court held, an employee's right to their retirement healthcare benefits vests after they have been earned and the employee retires. The court rejected Joliet's argument that this holding conflicted with sections 367f and 367g of the Illinois Insurance Code, finding that those statutes only require that retired policemen and firefighters be offered the same insurance coverage as current employees, not that they have the same coverage.

Regarding the issue of whether the retirement health benefits of these plaintiffs had vested, the court held that the record was insufficient to answer that question, and remanded the issue to the circuit court.

Legislation

Surcharge for strip clubs to benefit sexual assault crisis centers. PA 097-1035
(Effective 1/1/13)

State lawmakers have enacted the Live Adult Entertainment Facility Surcharge Act to fund sexual assault crisis centers in Illinois. 35 ILCS 175. The Act defines a "Live Adult Entertainment Facility" as a business that 1) serves or allows alcohol consumption, and 2) has provided - within the preceding 30 days - nude or semi-nude activities predominantly related to an interest in nudity or sex. 35 ILCS 175/5. Activities include those performed by a person who is entirely unclothed as well as one who appears nude or semi-nude through transparent clothing.

Under the new law, a strip club operator is required to pay an annual surcharge in one of two ways. 35 ILCS 175/10. Either the operator can pay the Department of Revenue a) a $3 surcharge for each person who enters the facility, or b) a surcharge in a specified amount based on gross receipts. If the operator chooses to pay the $3 surcharge, he or she is required to record the admissions of customers who are subject to it. 35 ILCS 174/20. Furthermore, when an operator ceases to provide the activities set out by the Act, he or she must file a final return with the Department within one month of discontinuation.

The Department of Revenue will then direct 98 percent of the proceeds from the imposed surcharge to the Sexual Assault Services and Prevention Fund. The remaining 2 percent shall cover administration and enforcement costs related to the Act.

The Sexual Assault Services and Prevention Fund is a source of funding for sexual assault organizations. 35 ILCS 175/15. Qualifying organizations are those that contract with the Department of Revenue to provide assistance to victims of sexual assault and/or activities that seek to prevent sexual assault.

A county circuit court shall review all final administrative decisions of the Department of Revenue in connection with the administration of the surcharge. 35 ILCS 175/40. Furthermore, when an operator fails to provide a return, or provides a fraudulent return, he or she is guilty of a Class 4 felony under the Act. 35 ILCS 175/45.

Adult hosts of underage drinkers may face charges. PA 097-1049
(Effective 1/1/13)

The Liquor Control Act has been amended to charge social hosts of underage drinkers. 235 ILCS 5/6-16. The new law applies to a person who knowingly authorizes or allows underage drinking in his or her home. A violator will be guilty of a Class A misdemeanor and a fine of at least $500. However, if bodily harm or death to any person results from underage drinking, the violator is subject to a Class 4 felony.

A person who takes all reasonable steps to prevent underage drinking from occurring in his or her home, or who requests law enforcement upon discovering it, will not violate the new law.

Stricter penalties for speeding. PA 097-0831
(Effective July 1, 2013)

Starting this summer, defendants cited for operating a vehicle more than 25 miles per hour over the speed limit in urban areas or more than 30 miles per hour over the limit on highways face stricter penalties. Judges may no longer enter an order of supervision as a penalty for these offenses.

Previously, drivers who committed these offenses and met certain other criteria, including an unlikeliness to commit further crimes, could be granted court-ordered supervision and be spared a criminal record.

Encouraging collaboration between farmers’ markets and convention centers. PA 097-1015
(Effective January 1, 2013)

The Illinois General Assembly passed a resolution effective this year to encourage collaboration between farmers' markets and convention centers. Specifically, the Act encourages operators of convention centers throughout Illinois to provide convention center space to hold farmers' markets in inclement weather. Providers should offer this space at discounted or no cost when the weather prevents the market from taking place in its usual outdoor location.

Vehicle seizures expanded to out-of-state drivers. PA 097-0984
(Effective January 1, 2013)

Drivers with out-of-state licenses revoked or suspended for driving while intoxicated, hit and run, reckless homicide, or various other statutory suspensions are now subject to Illinois' provisions for seizure and forfeiture. Illinois law enforcement may seize any car operated by a person whose driver's license has been suspended or revoked for the reasons listed above, including all similar provisions under the law of another state.

New offenses and increased fines for unauthorized use of disability decals or license plates. PA 097-0844
(Effective January 1, 2013)

The law on use of disability license plates, decals, and devices has been expanded to explicitly provide for items issued to now-deceased individuals. Drivers are now prohibited from using plates, decals, or devices issued to individuals who are now deceased to exercise the privileges granted by these items under the Illinois Vehicle Code.

Additionally, fines for violations in this area are increased. The fines for unauthorized plate, decal, or device holders who exercise associated privileges under the Code are now fined $1,000 for a second or subsequent offense. Violators of the new provisions regarding deceased individuals are guilty of a Class A misdemeanor and subject to a $2,500 fine.

Family members no longer exempt from prosecution for aiding fugitive. PA 097-0741
(Effective January 1, 2013)

Any individual over the age of 18 is now guilty of a Class 4 felony if he or she actively "aids or assists" a criminal offender in escaping a jurisdiction in which the offender "is to be arrested, charged, or prosecuted." Individuals must have an intent to prevent the offender from being apprehended by law enforcement.

Family members are not exempt from this new provision, but they are still exempt from the provisions regarding concealing knowledge of an offense or harboring an offender. Spouses, parents, children, and siblings all constitute family members for these purposes.

Administrative Agencies

Amendments to Carnival and Amusement Rides Safety Act regulate “zip lines”
Department of Labor

The Illinois Department of Labor (the "Department") recently adopted amendments to regulations governing safety standards and guidelines for zip lines operating in the State of Illinois. 56 Ill. Adm. Code 6000. The amendments add multiple definitions, set forth safety requirements, and outline site plan and design report requirements. The statutory authority for these changes is the Carnival and Amusement Rides Safety Act, 430 ILCS 85. The new rules became effective March 27, 2013.

The Department included new definitions in the general definitions of Subpart 10. For example, a zipline is defined as "a system consisting of a pulley or trolley that is suspended on a cable mounted on an incline allowing a rider to travel from the departure point to an arrival point by holding on to, or attaching to, the pulley or trolley." 56 Ill. Adm. Code 6000.10. In this subpart, the Department also defined carabiners, Certified Arborists, Licensed Professional Engineer, and Licensed Structural Engineer. Id.

Further, the Department included new definitions in Subpart 350, which is specific to zip lines. For example, a mobile zip line means "a zip line that is designed or adapted to be moved from one location to another and is not fixed at a single location," and a canopy tour means "a guided exploration or transit of the forest canopy, most commonly by means of a series of zip lines or aerial walkways with platforms." 56 Ill. Adm. Code 6000.350(a).

All zip lines must have a design report and be reviewed and sealed by both a licensed professional engineer and a licensed structural engineer. 56 Ill. Adm. Code 6000.350(d)(1). The design report shall consider: static and dynamic loads on anchors and components; fatigue limits for structures; protection against metallic corrosion and wood rot; clearances and hazard analysis; platform, walkway, ladder and foundation size and load ratings; and an anchor and foundation analysis. 56 Ill. Adm. Code 6000.350(d)(1)(A)-(G). Fixed zip lines must be inspected annually by a third party, and the inspection results must be made available to the Department. 56 Ill. Adm. Code 6000.350(d)(2).

The amendments also include general compliance criteria for zip lines. 56 Ill. Adm. Code 6000.350(e). For example, zip lines must be composed of flexible steel wire rope, have no exposed wires or strands within reach of participants, and may not be spliced. 56 Ill. Adm. Code 6000.350(e)(1)(A). Safety requirements are also required for the zip line arrival point and the zip line departure platform. 56 Ill. Adm. Code 6000.350(e)(2)-(3).

Further, each site "shall have an operating manual for the safe operations of zip line activities on that site" that includes, at least, 17 enumerated items. 56 Ill. Adm. Code 6000.350(f)(3)(A)-(Q). Operators are prohibited from using the Department's approval "in any advertisement, brochures, commercials, TV or radio show, or newspaper, or in any other public manner." 56 Ill. Adm. Code 6000.350(i).

Affordable Housing Planning and Appeal Act regulations specify appeals process for developers
Illinois Housing Development Authority

Newly enacted regulatory provisions, effective March 29, 2013, authorize the Illinois Housing Development Authority to adopt rules implementing the responsibilities of the State Housing Appeals Board (the "Board") under the Affordable Housing Planning and Appeal Act, 310 ILCS 67/60. These provisions are intended to provide direction to local governments and affordable housing developers. The new rules describe the governing structure, the duties, and the responsibilities of the Board, and they specify the process of appeal by affordable housing developers. This segment will briefly describe the structure of these regulatory provisions.

"Affordable housing" is defined as housing that has sales or rental value falling within the means of a household of moderate or low income - with fees being no more than 30 percent of the gross annual household income. See 47 Ill. Adm. Code 395.103. A moderate-income household is one with income greater than fifty percent but not to exceed eighty percent of the area median income. Id. A low-income household is one with a gross household income not to exceed fifty percent of the area median household income. Id.

Subpart B describes the organizational structure, membership structure, duties, and responsibilities of the Board. 47 Ill. Adm. Code 395.201-204. Subpart C regulates and defines procedures for appeals by affordable housing developers, including procedural burdens, and the right to hearings and similar proceedings. 47 Ill. Adm. Code 395.301-319.

New written risk-reduction policy requirements for long-term care facilities
Department of Public Health

Amendments to the Skilled Nursing and Intermediate Care Facilities Code (the "Code"), effective March 29, 2013, mandate additional minimum written resident care policies and procedures for long-term care facilities. See 77 Ill. Adm. Code 300.610. Long-term care facility policies are required to be available for review by the public, staff, and residents. Id.

Facilities must include among their written resident care policies provisions designed to identify and develop strategies to control risk of injury to residents and health care workers associated with lifting, transferring, or movement of a resident. 77 Ill. Adm. Code 300.610(c)(4).

These written policies shall include, at a minimum, five provisions: 1) provisions for risk assessment, taking into account resident handling needs and the physical environment in which handling occurs; 2) provisions describing policies to train nurses in identifying and controlling risks of injury to residents and health workers during resident handling; 3) provisions dealing with evaluation of risk-reducing alternatives; 4) a provision restricting, to the extent feasible with existing equipment and absent an emergency, manual resident movement of all or most of a resident's weight; and 5) provisions for refusal by nurses to perform or be involved in resident handling or movement where the nurse, in good faith, believes it will expose the resident or the nurse to unacceptable risk of injury. Id.

Editor-in-Chief

Jessica Lanford

Editors

  • Thomas Olson, Cases
  • Amy Timm, Legislation
  • Ryan Clark, Administrative

Writers

  • Kristin Isaacson, Cases
  • Alan Schilling Legislation
  • Susana Burd, Administrative