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No. 3-01-0341WC

IN THE
APPELLATE COURT OF ILLINOIS
THIRD JUDICIAL DISTRICT
INDUSTRIAL COMMISSION DIVISION

JUSTICE HOLDRIDGE delivered the Opinion of the court:

Claimant, Doris Nornhold, sought benefits pursuant to the Workers' Compensation Act(Act) (820 ILCS 305/1 et seq. (West 1994)) for injuries sustained on September 16, 1997, whileemployed as a laborer at National Manufacturing Company. An arbitrator for the IllinoisIndustrial Commission (Commission) issued a decision finding that claimant had sustained injuryas a result of a work accident on September 16, 1997, and awarded claimant 6 1/7 weekstemporary total disability (TTD) benefits, medical expenses in the amount of $7,738.10, andfinding that claimant was entitled to permanent partial disability (PPD) benefits under section8(e) of the Act for 40% of the left leg. In addition, the arbitrator found that the employer'sconduct in delaying payment of benefits was unreasonable and vexatious. Accordingly, thearbitrator awarded penalties in accordance with section 19(k) and attorney fees in accordancewith section 16(l). The arbitrator calculated penalties and attorney fees as a percentage of theentire award (both TTD and PPD benefits).

The employer sought review before the Commission, which affirmed and adopted thearbitrator's award with one modification. The Commission calculated the penalties and fees as apercentage of only the TTD benefits. The majority of the Commission agreed with theemployer's contention that, as no PPD benefit was "due and owing" at the time of the arbitrationhearing, there could be no "unreasonable and vexatious" delay in paying PPD benefits. Thus, theCommission held that penalties and fees would only be calculated based upon the amount "dueand owing" at the time of the arbitration hearing. One Commissioner dissented from themodification, maintaining that the plain language of the Act required calculation of penalties andfees based upon the "amount payable at the time of such award."

Claimant then sought review in the circuit court of Whiteside County, which remandedthe case to the Commission for further decision as to the issue of assessment of penalties andattorney fees. The court held that the calculation of penalties and fees could be based upon theentire amount awarded at arbitration, including PPD benefits. On remand, the Commission,again with one dissent, modified the earlier decision and found that penalties and fees should becalculated based upon the entire award. The employer then appealed to the circuit court ofWhiteside County, which confirmed the decision of the Commission. The employer thenappealed to this court.

The employer does not dispute the Commission's finding that it engaged in unreasonableand vexatious conduct in failing to promptly pay TTD and medical benefits to the claimant. Nordoes the employer dispute the imposition of penalties and attorney fees against it. Indeed, theonly issue before this court is the proper amount of penalties and attorney fees to be imposedagainst the employer for its unreasonable and vexatious delay in payment of TTD and medicalbenefits. Specifically, we must determine whether the calculation of penalties under section19(k) and attorney fees under section 16 of the Act may be based on the entire amount of compensationawarded by the Commission to a claimant, including an award of PPD, which was not known bythe parties until the award was entered.

The question presented in this case requires us to interpret section 19 and section 16 ofthe Act. Statutory interpretation is a question of law subject to de novo review. NavistarInternational Transportation Corporation v. Industrial Comm'n, 315 Ill. App. 3d 1197 (2000). The primary goal of statutory construction is to ascertain and give effect to the intention of thelegislature and the best way of doing so is to examine the language of the statute. Navistar, 315Ill. App. 3d at 1207.

Section 19(k) provides:

"In case[s] where there has been any unreasonable or vexatiousdelay of payment or intentional underpayment of compensation, orproceedings have been instituted or carried on by the one liable topay the compensation, which do not present a real controversy, butare merely frivolous or for delay, then the Commission may awardcompensation additional to that otherwise payable under this Actequal to 50% of the amount payable at the time of such award. Failure to pay compensation in accordance with the provisions ofSection 8, paragraph (b) of this Act, shall be consideredunreasonable delay." (Emphasis added.) 820 ILCS 305/19(k) (West1992). A plain reading of the statute shows the intent of the legislature that any unreasonable,vexatious or frivolous conduct will trigger penalty equal to 50% of the amount payable at thetime of such award. Thus, the amount of the penalty is not tied to the amount of the vexatiouslywithheld payment, in which case the statute would have simply stated that the penalty would beequal to 50% of the withheld payment. Clearly, the statute links the penalty to the amountpayable at the time of the award, not the amount vexatiously withheld from the claimant. Thestatute is intended to address situations where there is not only a delay in payment ofcompensation, but a delay that is unreasonable and vexatious in nature. McMahan v. IndustrialComm'n, 183 Ill. 2d 499, 515 (1998). But the question still must be answered as to whatconstitutes "the amount payable at the time of the award."

Here, the employer acted unreasonably and vexatiously in withholding payment of TTDbenefits and claimant was entitled to penalties equal to 50% of the amount payable at the time ofsuch award. An award of PPD was entered at the same time the penalty was awarded. Thequestion before us is, whether the PPD should be included in the "amount payable at the time ofthe award." We hold that it is not.

In Moore v. Industrial Comm'n, 188 Ill. App. 3d 31 (1989), the court was asked tointerpret the phrase "amount payable" in section 19(k) of the Act. The court considered Larson'streatise on workers' compensation:

"'Once the right to a penalty is established, there remains thequestion in some instances of how to calculate the amount. Itmight be thought that the percentage penalty figure should beapplied only to the portion of the award as to which impropernonpayment of delay has been found, and some cases so hold. Butin California, the 10% statutory penalty is applied to all benefits ofthe same type as those for which payment has been unreasonablywithheld. This means that late payments of only legal fees ormedical bills will not subject the employer to a penalty for theentire award. Likewise, if the delayed payments are for temporarydisability, the penalty will not be calculated on the amount ofpermanent disability benefits. But once a penalty is imposed forfailure to pay a type of benefit, the penalty is calculated on theentire amount of that type of benefit, including amounts which hadbeen paid before the occurrence of the unreasonable delay.' 3 A.Larson, Workmen's Compensation, Section 83.41(d)(1989)." Moore, 188 Ill. App. 3d at 36.

We note, however that in the instant matter, unlike Moore, no benefit had been paid at thetime the penalty was imposed. However, we find the analysis of the Moore court, holding thatthe "amount payable" as used in section 19(k) meant that the penalty is to be 50% of the entiretype of benefit awarded, to be instructive. In essence, for purposes of calculation of penaltiesunder section 19(k), each type of benefit (TTD, PPD and medical) constitutes "an award." Moore, 188 Ill. App. 3d at 36. Further, Section 19(k) penalties and attorney fees pursuant tosection 16 may be based on the entire amount of an award that has accrued or only upon theunpaid portion thereof, as the Commission in its discretion sees fit. Navistar InternationalTransportation Corp. v. Industrial Comm'n, 1--01--3285 (May 16, 2002) slip op. 11-13.

Here, since the employer was found to have unreasonably withheld payment of the entire TTD benefits, the penalty should have been 50% of the entire TTD, but should not have includedPPD benefits, none of which had accrued at the time of the penalty hearing, in the calculation. See also, Zitzka v. Industrial Comm'n, No.1-01-0955 (March 14, 2002) slip op. at 12 ("penaltiesand attorney fee awards should be calculated on the amount of the award that has accrued at thetime of the penalty hearing."). We therefore reverse the judgment of the circuit court ofWhiteside County and reinstate the decision of the Commission dated June 8, 1999.

Circuit court reversed; Commission decision of June 8, 1999, reinstated.

McCULLOUGH, P.J., and HOFFMAN, O'MALLEY, and RARICK, JJ., concurring.