The Illinois Appellate Court recently ruled in the case of Larsen v. Vaid, No. 1-25-2100, determining the cost responsibilities of the Intergovernmental Risk Management Agency (IRMA) in a workers' compensation settlement. The court found that IRMA must cover 100% of the costs incurred by Amanda Larsen, a police officer who was injured in an automobile accident while on duty. This decision has implications for how costs are calculated in similar workers' compensation cases.
Amanda Larsen was injured in a car accident with Vishal Vaid on August 20, 2017, while performing her duties as a police officer. Following her injury, she filed a workers' compensation claim against her employer, the Village of Carol Stream Police Department. In this case, IRMA served as the administrator of workers' compensation benefits for the police department and paid a total of $399,930.16 to cover Larsen's medical expenses and lost wages.
In addition to her workers' compensation claim, Larsen also pursued a civil lawsuit against Vaid in 2018. However, she voluntarily dismissed this action and later refiled her claim on May 9, 2023. During a pretrial settlement conference, IRMA refused to reduce its lien on Larsen's workers' compensation benefits as part of the settlement agreement. Eventually, on May 9, 2025, Larsen settled her personal injury case against Vaid for a total of $325,000, which included $250,000 from Vaid's insurance policy and $75,000 from Vaid personally.
After the settlement, Larsen filed a motion regarding the pro rata costs associated with her case. She argued that IRMA was responsible for 100% of the costs incurred in obtaining the settlement, while IRMA contended that it should only pay 75% of those costs. The disagreement centered around how to interpret section 5(b) of the Illinois Workers' Compensation Act, which outlines the responsibilities of employers regarding costs and attorney fees in third-party claims.
On appeal, the Illinois Appellate Court, led by Justice D.B. Walker, reviewed the trial court's decision that had ordered IRMA to pay 100% of the costs and expenses incurred by Larsen. The court found that IRMA's interpretation of the statute was incorrect. The court stated, "The employer’s share of costs and his contribution to attorney fees are two separate employer obligations." This ruling clarified that the costs associated with the settlement should be calculated based on the total reimbursement received by the employer, without subtracting attorney fees.
The court emphasized that section 5(b) of the Illinois Workers' Compensation Act requires employers to pay their pro rata share of all costs and necessary expenses related to third-party claims. The ruling affirmed that IRMA's obligation to pay costs is based on the entire settlement amount received, which in this case was $325,000. The court concluded that IRMA was responsible for paying Larsen's total costs of $21,344.88, as it received the full settlement amount as reimbursement for its workers' compensation payments.
This ruling has significant implications for similar cases in Illinois. It clarifies the responsibilities of employers and their insurance agencies concerning costs in workers' compensation claims involving third parties. By affirming that employers must cover their pro rata share of costs based on the total reimbursement received, the court has set a precedent that may affect future interpretations of the Workers' Compensation Act.
The court's decision also highlights the importance of understanding the relationship between workers' compensation benefits and third-party claims. It reinforces the notion that while employers are entitled to reimbursement for compensation paid to injured employees, they also bear the responsibility of covering associated costs and attorney fees.
In conclusion, the Illinois Appellate Court's ruling in Larsen v. Vaid serves as a critical reminder of the obligations of employers and their insurance providers under the Workers' Compensation Act. The decision not only impacts the parties involved in this case but also sets a standard for how similar disputes will be resolved in the future.
As for what’s next, IRMA has the option to appeal this ruling to the Illinois Supreme Court. However, there are currently no related cases pending that would directly affect this decision.