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NO. 1-01-1545WC

IN THE APPELLATE COURT OF ILLINOIS

FIRST JUDICIAL DISTRICT

Industrial Commission Division

MODIFIED UPON DENIAL OF REHEARING

JUSTICE RARICK delivered the opinion of the court:

Claimant, Anne Hennessy, sought benefits pursuant to the Workers'Compensation Act (Act) (820 ILCS 305/1 et seq. (West 1996)) for injuries sustained whilein the employ of American Airlines. On August 20, 1993, Hennessy filed an application foradjustment of claim (93WC44523) arising from a back injury she sustained on June 29,1991. On August 20, 1996, she filed a claim (96WC44689) arising from a second backinjury she sustained on April 24, 1996. The arbitrator entered her decisions on May 21,1998. In both cases, the arbitrator awarded medical expenses and temporary total disability(TTD) benefits, but declined to impose penalties or assess attorney fees. Both partiesappealed. Hennessy filed her petition for review on June 9, 1998. The IndustrialCommission (Commission) consolidated the cases for review.

Prior to the parties filing their petitions for review before the Commission, oursupreme court issued its opinion in McMahon v. Industrial Comm'n, 183 Ill. 2d 499, 702N.E.2d 545 (1998), wherein it held that section 19(k) and 16 of the Act did not preclude theimposition of penalties and the assessment of attorney fees for unreasonable and vexatiousdelay in paying medical expenses.

Hennessy filed her statement of exceptions and supporting brief on July 30,1999. In it Hennessy argued, inter alia, that American Airlines' "failure to pay temporarytotal disability benefits and the withholding of medical services *** [was] unreasonable andproduced a vexatious delay in [Hennessy's] receipt of compensation***." Hennessy furtherargued that she was "entitled to penalties pursuant to section 19(k) of the Act for 50% of theamount payable on this award." She also sought section 19(l) penalties and attorney feespursuant to section 16.

On October 27, 1999, the Commission filed its decision and opinion onreview. In 93WC44512, the Commission affirmed and adopted the decision of thearbitrator. In 96WC44689, the Commission modified the arbitrator's decision, finding thatHennessy was entitled to additional TTD benefits and medical expenses. The Commissionfurther found that American Airlines' conduct was "unreasonable and vexatious" and thatHennessy was entitled to penalties and fees. Noting that Hennessy requested penalties onlyon the unpaid TTD benefits, however, the Commission calculated the amount of penaltiesand fees as follows:

Section 19(k) - $31,404.54 (unpaid TTD benefits) x .5 = $15,702.27

Section 16 - $15,702.27 x .2 = $3,140.45

Section 19(l) - $2,500

Both parties filed section 19(f) petitions requesting the Commission to recallits decision and correct a computational error. American Airlines argued that it had madeadditional payments after arbitration and that the amount of TTD benefits upon which theCommission calculated penalties and fees was erroneous. In her petition, Hennessy arguedthat in her statement of exceptions and supporting brief in 96WC44689 she specificallyargued that American Airlines' withholding of medical services was unreasonable andvexatious and requested section 19(k) penalties on the amount payable on the award.

The Commission denied both parties' petitions, finding that no clerical orcomputational error had been made. With respect to Hennessy's argument, the Commissionstated that it had chosen not to apply McMahon retroactively and therefore did not includemedical benefits in its calculation of penalties and fees.

Hennessy filed her petition for judicial review in the circuit court of CookCounty on December 17, 1999. In her brief, Hennessy argued that the Commission erredin failing to apply McMahan retroactively. She again noted that in her statement ofexceptions and supporting brief before the Commission, she had requested that penalties beawarded on both TTD and medical expenses. The circuit court confirmed the decision ofthe Commission, finding that because McMahon expressly overruled Childress v. IndustrialComm'n, 93 Ill. 2d 144, 442 N.E.2d 841 (1982), it represented a change in the law andtherefore should be given prospective application only.

On appeal, Hennessy argues that the Commission erred in refusing to applyMcMahon retroactively and therefore failed to consider her medical expenses when itcalculated the amount of section 19(k) penalties and section 16 attorney fees.

Initially, we note that in reviewing Hennessy's statement of exceptions andsupporting brief filed before the Commission, it appears that Hennessy did request penaltiesand fees be assessed on the medical expense award as well as the TTD award. She arguedthat American Airlines' "failure to pay temporary total disability benefits and the withholdingof medical services" was unreasonable and had resulted in a vexatious delay in her receiptof "compensation." She requested section 19(k) penalties equal to 50% "of the amountpayable of this award." The Commission's finding that Hennessy requested penaltiescalculated only on the unpaid TTD is incorrect.

American Airlines argues that the Commission made a factual determinationthat penalties were not warranted, and that such determination was not contrary to themanifest weight of the evidence. The language the Commission used in its original decisionand in its denial of Hennessy's section 19(f) petition clearly refutes this argument. Althoughthe arbitrator, in 96WC44689, found as a matter of fact that American Airlines' conduct wasnot unreasonable or vexatious and that penalties and fees were therefore not warranted, theCommission, in 96WC44689, did not adopt these findings. In this case the Commissionmade a factual finding that American Airlines' conduct was unreasonable and vexatious. The Commission declined to include medical expenses in its calculation because iterroneously thought that Hennessy was not seeking penalties on that part of the award. Inits denial of Hennessy's section 19(f) petition, the Commission stated that they "chose notto apply McMahon[] retroactively and therefore did not include medical benefits in itscalculation of penalties." In its original decision, the Commission made no mention ofMcMahon or the issue of whether the rule announced therein applies retroactively. TheCommission's rationale in its denial of Hennessy's section 19(f) petition is different than inits original order. Regardless of whether the Commission declined to include the medicalexpense award in its penalties and fees calculation because it misunderstood Hennessy'sargument or because it chose not to apply McMahon retroactively, the Commission's mistakewas one of law, not fact.

Generally, when a court issues an opinion, the decision is presumed to applyboth retroactively and prospectively. Deichmueller Construction Co. v. Industrial Comm'n,151 Ill. 2d 413, 603 N.E.2d 516 (1992). This presumption can be overcome in one of twoways. First, the issuing court itself may expressly state that its decision will be appliedprospectively only. See, e.g., Molitor v. Kaneland Community Unit District No. 302, 18 Ill.2d 11, 163 N.E.2d 89 (1959). Second, a later court may, under some circumstances,override the presumption by declining to give the previous opinion retroactive effect, at leastwith respect to the parties appearing before the later court. Aleckson v. Village of RoundLane Park, 176 Ill. 2d 82, 679 N.E.2d 1224 (1997). Nowhere in McMahon does oursupreme court state that its decision is to be given prospective application only. Accordingly, our analysis will focus on whether the Commission and circuit court actedproperly in overriding the presumption by declining to give McMahon retroactive effect.

In Elg v. Whittington, 119 Ill. 2d 344, 518 N.E.2d 1232 (1987), our supremecourt articulated the test for determining whether a holding should be applied prospectivelyonly:

Whether the rule will be applied prospectively will depend uponwhether: 'the decisions to be applied nonretroactively * * *establish[es] a new principle of law, either by overruling clear past precedent on which litigants may have relied [citation], orby deciding an issue of first impression whose resolution wasnot clearly foreshadowed.' [Citation.] If this criteria is met, thequestion of prospective or retroactive application will beanswered by considering: (1) whether, given the purpose andprior history of the rule, its operation will be retarded orpromoted by prospective or retroactive application and (2)whether prospective application is mandated by the balance ofequities. Elg 119 Ill. 2d at 357, 518 N.E.2d at 1238.

This test was first promulgated by the United States Supreme Court in Chevron Oil v.Huson, 404 U.S. 97, 30 L. Ed. 2d 296, 92 S. Ct. 349 (1971), and adopted by our supremecourt in Board of Commissioners of Wood Dale Public Library District v. County ofDuPage, 103 Ill. 2d 422, 469 N.E.2d 1370 (1984).

The circuit court specifically found that because McMahon expressly overruledChildress, it represented a change in the law, and that under such circumstances, the decisionshould be given prospective application only. We find that the circuit court misapplied theChevron test. Although McMahon overruled clear past precedent, there is no indication thatthe parties relied on Childress. Before the Commission, neither party cited Childress ormade any argument with respect to whether the amount of medical expenses awarded shouldbe included in the determination of the amount of penalties and fees. Thus, the first criteriaof the Chevron test was not met. Because our supreme court did not state in McMahon thatit was to be given prospective application only, and because the parties did not rely onChildress, the precedent overruled by McMahon, the presumption of retroactive applicationis not overcome.

Our conclusion is supported by our supreme court's decision in Scott v.Industrial Comm'n, 184 Ill. 2d 202, 703 N.E.2d 81 (1999). In Scott, this court rejected theclaimant's argument that the Commission should have included medical expenses incalculating the amount of penalties and fees. Scott v. Industrial Comm'n, 292 Ill. App. 3d290, 686 N.E.2d 609 (1997). Relying on Childress, we held that medical expenses were not"compensation" as the term is used in the Act. Subsequent to our decision in Scott, oursupreme court issued its decision in McMahon. This court's decision in Scot was affirmedin part and reversed in part. Our supreme court held, inter alia, that on remand, thecalculation of penalties should be guided by its decision in McMahon.

We hold that McMahon should have been applied retroactively, and remandthe cause to the Commission for a determination of whether American Airlines' delay inpaying medical expenses was vexations and unreasonable and, if so, whether penalties andattorney fees should be assessed thereon.

For the foregoing reasons, the judgment of the circuit court of Cook Countyis reversed and the cause remanded to the Commission for further proceedings.

Circuit court reversed; remanded to Commission.

McCULLOUGH, P.J., and HOFFMAN, O'MALLEY, andHOLDRIDGE, JJ.,concur.