The Dilemma

John Van Cleve injured his back when another car apparently caused his vehicle to drive off the road. At the time, John was driving a truck provided by his employer, Maxit, Inc., for business-related activity. John filed a worker's compensation claim against Maxit, which wasn't covered by a workers' compensation insurance policy. Therefore, John also made claim under the plaintiff's underinsured motorist insurance policy.

John and his wife then settled the underinsured motorist claim with Maxit in exchange for $800,000. As part of the settlement transaction they signed a document titled "Release of All Claims." Among other things, they agreed to "hereby release, acquit and forever discharge Maxit" and all its affiliated parties from anything else related to the accident and "covered by the Underinsured Motorist policy provisions."

John continued to pursue his workers' comp claim and under the terms of its settlement, Maxit paid John a total of $200,000 over several payments. But Maxit later filed a complaint alleging that the defendants had breached the release by continuing to pursue the worker's compensation claim. What happened?

The decision

The trial court granted judgment in favor of the plaintiff. It said the release document was "clear and unambiguous" and released Maxit from any further financial responsibility related to the accident. The defendants appealed.

The appeals court, relying on another case, said the release did not clearly explain if it pertained only to claims arising under the underinsured motorist policy or to the pending worker's comp claim as well. Further, it pointed out that the Illinois' Workers' Compensation Act says that no one may waive any provisions in the Act without first obtaining approval from the state's Workers' Compensation Commission - which Maxit had not done. To say the release included the workers' comp claim would be "unlawful, unenforceable, and void," said the appeals court. It reversed the trial court's decision.

The implications

Now would be a good time to check that your dealership has adequate workers' compensation coverage. Also consult with knowledgeable legal counsel before you have employees - or anyone you're involved with in a settlement - sign any waivers so you can make sure you are clearly following the law. Better safe than surprised.