Roadside Auto Body, Inc. v. Miller

No. 2--95--1233

_________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
_________________________________________________________________

ROADSIDE AUTO BODY, INC. and ) Appeal from the Circuit Court
LIBERTY MUTUAL INSURANCE ) of Lake County.
COMPANY, )
)
Plaintiffs-Appellees, )
)
v. ) No. 92--MR--475
)
SCOTT A. MILLER, )
)
Defendant-Appellant )
) Honorable
(The Industrial Commission, ) Stephen E. Walter,
Defendant). ) Judge, Presiding.
________________________________________________________________

JUSTICE THOMAS delivered the opinion of the court:

The plaintiffs, Roadside Auto Body, Inc. (Roadside), and
Liberty Mutual Insurance Company (Liberty Mutual), filed this
declaratory judgment action in the circuit court of Lake County
against the defendants, Scott Miller and the Industrial Commission
(Commission), seeking to vacate as fraudulent a workers'
compensation settlement agreement approved by the Commission.
Following a bench trial, the trial court found that Miller
fraudulently filed a workers' compensation claim, and, therefore,
the settlement agreement entered into by the parties was void. The
court entered judgment in favor of the plaintiffs for $56,465.78,
which represented the amount the plaintiffs had paid Miller for
temporary total disability and medical benefits. The court further
ordered that the order of the Commission awarding Miller penalties
and attorney fees be set aside. Miller appeals.
Jim Best testified that he was the owner of Roadside and that
Miller was one of his employees in 1990. In May 1990, Miller
reported that he had suffered an injury to his back while working
at Roadside on March 26, 1990. As far as Best knew, there were no
witnesses to the accident. Best had some concerns that Miller's
back injury was due to a preexisting condition, so he called
Liberty Mutual, Roadside's insurance carrier, to voice his
concerns. Best was told that, as long as the injury occurred at
Roadside, it was compensable, even if the employee had a
preexisting condition.
On March 4, 1992, Best was informed that Liberty Mutual had
settled Miller's workers' compensation claim. At that time, Ron
Hinde, an employee of Roadside, told Best that he thought there was
something wrong with Miller's claim but he did not elaborate.
Thereafter, Best contacted John Simon and Larry Cozzi of Liberty
Mutual to discuss Miller's claim. At that time, Best had no
additional information about the legitimacy of Miller's claim. On
March 13, 1992, and March 18, 1992, Best talked with John Kaminski,
a fraud investigator for Liberty Mutual, about Miller's case.
Prior to March 18, 1992, Best did not have any specific information
from Hinde indicating that Miller's claim was not valid. After
refreshing his recollection from labor control records, Best stated
that on the date of the alleged accident Miller did not perform any
work on the truck he claimed to have been working on when he
injured his back.
Charles Whitley testified that he was the first Liberty Mutual
claim representative assigned to Miller's workers' compensation
claim. According to Whitley, Miller told him that he had injured
himself while attempting to lift some equipment with the help of
the owner of the vehicle, Ed Dominick.
John Simon, a claims specialist for Liberty Mutual, testified
that he received the Miller file on January 30, 1992. When he
reviewed the file and performed some follow-up investigation in
February 1992, there was no indication at that time that the claim
was not compensable. On March 4, 1992, Simon settled the claim
with Miller's attorney. That same day, Simon received a call from
Best who told Simon that Miller may have previously injured himself
somewhere else. Simon informed Best that a preexisting injury that
is aggravated is still compensable under the Workers' Compensation
Act (Act) (820 ILCS 305/1 et seq. (West 1994)). Despite the lack
of evidence indicating fraud, Simon sent the file to Kaminski for
further review. Simon also noted that on March 5, 1992, he
conferred with Ed Makauskas, a claims manager for Liberty Mutual,
and advised him that the insured thought the claim was fraudulent.
However, Makauskas did not believe fraud was involved. Simon
explained that often an allegation of fraud on the part of the
employer simply turns out to be a case involving an aggravation of
a preexisting condition.
Dawn Benjamin, the office manager at Roadside, testified that
her duties included submitting insurance forms. On May 21, 1990,
Miller reported his March 26, 1990, injury for the first time.
Miller told Benjamin that the injury occurred while he worked on Ed
Dominick's truck. Miller did not miss any work between March 26,
1990, and May 21, 1990.
Michael Nitti, the shop manager at Roadside, testified that,
from the date of the alleged injury until it was reported, he did
not observe Miller having any difficulty completing his employment
responsibilities. Nitti further testified that lifting an axle
assembly into place, as Miller claimed he had been doing at the
time of the accident, was typically a two-person job that was not
physically possible to accomplish without help. Nitti stated that
Roadside had a policy requiring all employees to immediately report
on-the-job injuries to him. He first learned of the alleged
incident when it was reported to Benjamin on May 21, 1990.
Edward Dominick was the owner of the truck that Miller
allegedly worked on when he was injured. Dominick testified that
he did not assist Miller in working on any part of his truck and
did not witness the alleged accident.
Ron Hinde testified that Miller was his co-worker at Roadside
and prior to that at All Tune and Lube. While both men were
working at Roadside, Miller told Hinde that he was going to report
an on-the-job back injury so that he could get his back repaired,
which he had injured while in the military. Hinde did not believe
that Miller injured his back at Roadside. Hinde did not come
forward with this information immediately because he did not want
to get involved. He eventually told Kaminski on March 18, 1992,
about Miller's previous back injury and his plans to have surgery
through workers' compensation. Hinde further testified that Miller
approached Hinde periodically pressuring him to corroborate
Miller's story. When Hinde refused, Miller became verbally abusive
and threatened to burn down Hinde's house.
John Kaminski, supervisor of field investigations for Liberty
Mutual, testified that his unit often received fraud claims only to
find out that the allegation of fraud was simply an aggravation of
a preexisting condition. When he received Miller's file, he did
not find anything to indicate that Miller's claim was fraudulent.
Rather, he thought this was another case involving an aggravation
of a preexisting injury without any evidence of fraud. When Best
voiced his concerns about fraud on March 5, 1992, there was no
indication of fraud. Nonetheless, to address Best's concerns,
Kaminski scheduled a meeting with Best for March 13, 1992.
Kaminski noted that he met with Best on that date but nothing
surfaced at that meeting to suggest anything other than an
aggravation of a preexisting condition. When Kaminski returned to
Roadside on March 18, 1992, Best asked him to talk with Hinde and
Nitti. After he talked with Hinde, Kaminski concluded that Miller
had fabricated his workers' compensation claim. He immediately
contacted Simon to determine the status of the settlement of the
case and learned that the Commission had already approved the
settlement contract executed on behalf of Miller and Roadside.
According to Kaminski, March 18, 1992, was the first time he heard
an allegation that Miller had not been injured working at Roadside.
Paul Schoenbeck testified that he was working with Miller at
the time of Miller's back injury. Schoenbeck stated that the
accident occurred because they were both lifting an axle when
Schoenbeck dropped his end of the axle causing Miller to hurt his
back. Schoenbeck stated that Best had been informed of the
accident on the date it occurred. Schoenbeck admitted that he and
Miller had been roommates for five months.
Lawrence Cozzi, an attorney employed by Liberty Mutual,
testified that he reviewed Miller's file and was convinced the
claim was compensable. He then signed the lump sum settlement
contract on March 11, 1992, on behalf of Roadside. At that time,
he was not aware of any evidence of fraud.
Miller testified that he had suffered a back injury while in
the military that had been diagnosed as spondylolisthesis. Miller
admitted that he talked to Hinde about back problems but denied any
conversation about having his back repaired through workers'
compensation benefits. Miller stated that his injury occurred
while he was working on Dominick's vehicle and trying to lift an
axle up from the floor by himself when he felt pain in his back.
Miller denied that he had threatened Hinde.
Dr. Richard Berglund testified in his deposition that he
examined Miller on April 6, 1990. Berglund opined that Miller was
suffering from an acute herniated disc rather than a long-term,
chronic injury. He further testified that he felt the likelihood
of Miller's back injury being a preexisting condition was minimal
because he would have experienced pain and disability. Dr.
Berglund acknowledged that the plaintiff never told him that he had
chronic back problems.
On appeal, Miller initially contends that the trial court
erred in vacating the Commission's approval of the settlement
contract because (1) the plaintiffs waived their right to allege
fraud by signing the contract which contained language stating that
it was "to resolve the dispute about the benefits to which the
petitioner is entitled"; (2) the proper forum to dispute the issue
of whether there was a work-related accident was before the
Commission and the plaintiffs waived their defense of the claim by
settling the case with knowledge of unresolved issues of fact; (3)
the plaintiffs waived their right to claim fraud by closing their
eyes to the fraud; and (4) the Commission had primary jurisdiction
over the case because they possessed specialized expertise to
determine whether Miller was injured at work.
Section 19(f) of the Act provides that "[t]he decision of the
Commission acting within its powers, according to the provisions of
paragraph (e) of this Section shall, in the absence of fraud, be
conclusive unless reviewed as in this paragraph hereinafter
provided." (Emphasis added.) 820 ILCS 305/19(f) (West 1994). The
Illinois Supreme Court has held that the statute does not confer
jurisdiction upon the Commission to reopen and set aside a lump sum
settlement. Michelson v. Industrial Commission, 375 Ill. 462, 467-
68 (1941). However, the statute plainly indicates that fraud is a
basis upon which a Commission decision may be reexamined and the
supreme court has long held that a party may maintain a complaint
before the circuit court in equity to procure relief from a
judgment of the Commission based on fraud. Daugherty v. National
Union Electric Corp., 160 Ill. App. 3d 747, 749 (1987). Were a
circuit court not empowered, in equity, to set aside a fraudulently
obtained judgment rendered by the Commission, that portion of
section 19(f) of the Act that permits such relief would be rendered
meaningless and insulate a defendant from liability for fraudulent
conduct. Daugherty, 160 Ill. App. 3d at 749.
Applying the above-mentioned principles, we reject Miller's
claim that the circuit court was not the proper forum and lacked
jurisdiction to hear this fraud case. Moreover, Miller's claim of
waiver is not supported by the record.
After careful perusal of the record, we find it apparent that
right up to the time of settlement Roadside and Liberty Mutual had
no indication that Miller did not incur an injury at work. Rather,
the investigation and communication concluded prior to settlement
revealed that Miller may have had a preexisting condition and Best
was unclear as to whether Roadside was liable for an aggravation of
that injury. Liberty Mutual did not learn that Miller had
fabricated his claim until Kaminski spoke with Hinde on March 18,
1992, several days after the Commission had approved the
settlement. Since the fraud perpetrated by Miller was the basis
for the settlement, he cannot successfully argue waiver. Because
the Commission was not empowered to reopen the case, the plaintiffs
properly filed their complaint in the circuit court of Lake County.
The present case differs from the typical workers'
compensation case where the issue of a work-related injury is at
stake. Here, the facts suggest that the complainant himself did
not believe he sustained an accident at work but asserted falsely
that he did so. In the typical case, a complainant genuinely
believes his injury was work-related and that it occurred within
the scope of his employment, but his belief may simply be erroneous
as opposed to fraudulent. At any rate, we would agree that the
Commission is well qualified to resolve issues involving fraud in
connection with an allegedly work-related injury. However, the
issue was never brought before the Commission in this case and the
contract was approved by the Commission without knowledge on the
part of the plaintiffs or the Commission that Miller had filed a
fraudulent claim. Under the circumstances, the circuit court was
empowered to set aside the judgment of the Commission approving the
parties' settlement.
Miller next argues that the trial court erred in admitting the
testimony of Hinde. He contends that because Hinde's testimony did
not specify the location where the conversation between the two of
them occurred it lacked an adequate foundation.
Miller does not cite any authority in support of his argument.
Supreme Court Rule 341(e)(7) requires that arguments in an
appellant's brief be supported by citation to authority. 155 Ill.
2d R. 341(e)(7). Accordingly, we find that Miller has waived the
argument on appeal. See Ollivier v. Alden, 262 Ill. App. 3d 190,
199 (1994). Even assuming that Miller did not waive the argument,
we would find that Hinde's testimony was properly admitted, despite
the absence of a specific location, to impeach Miller's testimony
and as a party admission. See People v. Cobb, 97 Ill. 2d 465, 479-
81 (1983); Boyce v. Risch, 276 Ill. App. 3d 274, 278-79 (1995).
Miller next argues that the plaintiffs failed to prove fraud
by clear and convincing evidence.
The elements of fraudulent misrepresentation are (1) a false
statement of material fact; (2) known or believed to be false by
the party making it; (3) intent to induce the other party to act;
(4) action by the other party in justifiable reliance on the truth
of the statement; and (5) damage to the other party resulting from
such reliance. Giammanco v. Giammanco, 253 Ill. App. 3d 750, 757
(1993). These elements must be proved by clear and convincing
evidence. Williams v. Chicago Osteopathic Health Systems, 274 Ill.
App. 3d 1039, 1048 (1995). However, the trial court's findings of
fact will not be disregarded unless they are against the manifest
weight of the evidence. Chicago Title & Trust Co. v. First
Arlington National Bank, 118 Ill. App. 3d 401, 410 (1983). On
appeal, the reviewing court must take questions of testimonial
credibility as resolved in favor of the prevailing party and must
draw from the evidence all reasonable inferences in support of the
judgment. Chicago Title & Trust Co., 118 Ill. App. 3d at 410.
Applying the above-mentioned principles, we conclude that the
trial court's finding that Miller filed a fraudulent claim was not
against the manifest weight of the evidence. In that regard, we
first note that numerous inconsistencies existed between Miller's
version of the alleged accident and other evidence in the case:
(1) although he claimed to have injured his back on March 26, 1990,
while working on Dominick's vehicle, he waited nearly two months to
report the accident; (2) Miller told a Liberty Mutual
representative that he was working with Dominick when he hurt his
back, but Dominick denied it and Miller claimed at trial that he
was lifting the axle alone; (3) Roadside computer records did not
show that Miller worked on Dominick's vehicle on the day Miller
claimed; (4) Schoenbeck, a friend of Miller, testified that while
he and Miller lifted the axle, he lost his grip on the axle causing
Miller to injure his back, yet Miller claimed he was lifting it
alone.
Whereas the trial court found Miller's testimony to lack
credibility, the trial court found Hinde's testimony particularly
credible and persuasive. Hinde testified that Miller told him that
he had hurt his back in the military and wanted to get it repaired
through workers' compensation and that he wanted to get out of his
line of work by collecting the proceeds of a workers' compensation
claim. Once Miller filed his claim, he repeatedly pressured Hinde
to claim that he had witnessed the alleged accident. When Hinde
refused, Miller threatened to burn Hinde's house down. It has long
been a rule of law that efforts made by a party to suborn witnesses
or fabricate evidence imply an admission that the party has no
right to recover if the case was tried on the evidence as it
exists. Chicago City Railway Co. v. McMahon, 103 Ill. 485, 488
(1882).
Miller relies heavily on the testimony of Dr. Berglund, who
opined that Miller was suffering from a herniated disc rather than
a long-term chronic back injury. However, Miller did not inform
Berglund about his history of back problems. At any rate, the fact
that Berglund's testimony may have favored Miller does not render
the trial court's finding against the manifest weight of the
evidence in light of all the evidence presented in the case and
given the trial court's evaluation of the credibility of the
witnesses.
Miller next argues that the plaintiffs did not reasonably rely
on any statement of Miller. Miller contends that because Liberty
Mutual was conducting a fraud investigation at the time of
settlement they could not have relied on the statements of Miller.
We disagree.
Generally, in a fraud action, the determination of whether the
plaintiff's reliance was justifiable necessitates examination of
all facts which the plaintiff knew, as well as those facts which
the plaintiff could have learned through the exercise of ordinary
prudence. Weber v. De Kalb Corp., Inc., 265 Ill. App. 3d 512, 516
(1994). However, it has been noted that, when a defendant makes a
positive statement of material fact with the intention of inducing
a party to act in reliance thereon, it is ineffective to charge the
plaintiff with negligence. Commercial National Bank v. Federal
Deposit Insurance Corp., 131 Ill. App. 3d 977, 982 (1985). One is
justified in relying upon the representations of another, without
independent investigation, where the person to whom the
representations are made does not have the same ability to discover
truth as the person making the representations. Gerill Corp. v.
Jack L. Hargrove Builders, Inc., 128 Ill. 2d 179, 195 (1989).
Here, as previously stated, the plaintiffs had no reason to
believe that Miller had not been injured at work at the time of the
settlement. Moreover, they were not obligated to conduct a further
investigation in view of Miller's positive statement of fact that
he had been injured on the job and the plaintiffs' lack of ability
to discover the truth. The evidence in that regard was almost
exclusively within the control of Miller, and before Hinde came
forward it would have been difficult if not impossible for the
plaintiffs to discover the truth. Under the circumstances, we find
that the trial court properly found that the plaintiffs justifiably
relied on a material misrepresentation by Miller.
Lastly, we note that Miller argues for the first time in his
reply brief that the trial court erred in both setting aside the
settlement contract and entering a monetary judgment on behalf of
the plaintiffs. He maintains that the proper remedy for his fraud
was to vacate the settlement and remand the cause to the
Commission.
Initially, we find that Miller waived the issue by raising it
for the first time in his reply brief. See 155 Ill. 2d R. 341(g).
Assuming that the issue has not been waived, Miller's argument
would be rejected nevertheless. It is axiomatic that damages are
recoverable in a fraud case and that the measure of damages is
determined by assessing the loss to the plaintiff. Giammanco, 253
Ill. App. 3d at 758-61; Shah v. Chicago Title & Trust Co., 119 Ill.
App. 658, 662 (1983). Thus, we find no error in the trial court's
award of damages to the plaintiffs for the amount the plaintiffs
lost in paying the settlement. A remand to the Commission is not
proper since it has no jurisdiction to hear a common-law fraud case
and therefore, no jurisdiction to assess damages in this case.
Here, the circuit court did not make a decision with respect to an
award under the workers' compensation statute but instead assessed
damages in a fraud case. The authority cited by Miller in support
of his position has no application here.
For the foregoing reasons, the judgment of the circuit court
of Lake County is affirmed.
Affirmed.
GEIGER and HUTCHINSON, JJ., concur.