Gallagher v. Lenart

Docket No. 103522.

IN THE

SUPREME COURT

OF

THE STATE OF ILLINOIS

JAMES GALLAGHER et al., Appellants, v. JAROSLAW ROBERT

LENART et al., Appellants (Rail Terminal Services, LLC, Appellee).

Opinion filed August 9, 2007.

JUSTICE GARMAN delivered the judgment of the court, with

opinion.

Justices Freeman, Fitzgerald, Kilbride and Karmeier concurred in

the judgment and opinion.

Chief Justice Thomas specially concurred, with opinion.

Justice Burke took no part in the decision.

OPINION

Plaintiffs, James Gallagher and his wife, filed suit against

defendants Jaroslaw Robert Lenart and Pacella Trucking Express,

Inc., based on injuries Gallagher sustained when the truck he was

operating for his employer, Rail Terminal Services, LLC, collided

with the truck Lenart was operating for Pacella. After plaintiffs settled

their lawsuit against defendants, Rail Terminal sought to enforce its

workers’ compensation lien against the settlement proceeds allocated

to Gallagher (820 ILCS 305/5(b) (West 2004)). The circuit court of

Cook County found that Rail Terminal had waived its lien when it

settled Gallagher’s workers’ compensation claim. Accordingly, the

court granted defendants’ motion to adjudicate third-party claims and

issue settlement drafts. Rail Terminal appealed, and the appellate

court reversed and remanded, holding that Rail Terminal had not

waived its workers’ compensation lien, and that the circuit court erred

in granting defendants’ motion. 367 Ill. App. 3d 293. For the reasons

that follow, we affirm the judgment of the appellate court.

BACKGROUND

On April 10, 2001, James Gallagher was operating a truck for his

employer, Rail Terminal Services, LLC, when his truck collided with

another truck driven by Jaroslaw Robert Lenart, an employee of

Pacella Trucking Express, Inc. Gallagher injured his spine as a result

of the accident and was required to undergo surgery and take pain

medication.

After the accident, Gallagher filed a workers’ compensation claim

against Rail Terminal. Initially, Rail Terminal paid him $24,903.51

in temporary total disability benefits and $53,392.21 in medical

expenses. Then, on July 28, 2003, the parties settled Gallagher’s

claim for an additional lump-sum payment of $150,000.

The parties executed two documents as part of the settlement. The

first was entitled “Illinois Industrial Commission Settlement Contract

Lump Sum Petition and Order.” The settlement contract provided, in

relevant part:

“Respondent [Rail Terminal] to pay the petitioner [Gallagher]

$150,000.00 in full and final settlement of all claims under

the Workers’ Compensation Act for injuries allegedly

incurred on or about April 10, 2001 and any and all results,

developments or sequale [sic], past, present or future resulting

from this accident. Respondent denies these injuries are

compensable and this settlement is made to settle those issues

as a purchase of the peace against any and all claims of

temporary total compensation, permanent partial disability

and medical, surgical [or] hospital expenses, past, present or

future. Review under Sections 19(h) and 8(a) are waived by

the petitioner. The settlement is made in lieu of any additional

compensation beyond the date of approval of this contract and

includes only payment of temporary total compensation in the

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amount of $58,049.70, unpaid medical bills in the amount of

$388.02, and the aforementioned purchase of the peace.

Respondent is not responsible for any outstanding medical

bills not submitted for payment prior to approval of this

settlement contract.”

The second document the parties executed was entitled

“Resignation Agreement.” It was contingent upon the workers’

compensation arbitrator’s approval of the settlement contract

described above. In its recitals, the resignation agreement

acknowledged that Gallagher had a pending workers’ compensation

claim against Rail Terminal, and that the claim was being settled. It

further acknowledged that, as part of the settlement, Gallagher would

voluntarily resign from his position with Rail Terminal and waive all

claims arising from his employment. The agreement explained that

the basis for the settlement was that Rail Terminal had “no position

available within [Gallagher’s] permanent restrictions.” Thus, “in

consideration of [Rail Terminal’s] agreement to pay [Gallagher] the

sum of $1.00 *** in a lump sum after an Order issued approving the

settlement of [Gallagher’s] workers’ compensation claim,” Gallagher

agreed to be bound by a series of specific provisions.

First, Gallagher agreed to the sufficiency of the stated

consideration. Second, Gallagher agreed that, by signing the

resignation agreement, he was “voluntarily resigning his employment

with [Rail Terminal].” Third, Gallagher agreed to “refrain from suing

[Rail Terminal], or authorizing any complaint or suit against [Rail

Terminal], on his behalf for any action of any kind or character, in

law or equity, suspected or unsuspected, arising out of or related to

his employment with [Rail Terminal].” Fourth, Gallagher agreed not

to “seek reinstatement, future employment or return to active

employment status with [Rail Terminal].” Fifth, Gallagher agreed to

“release[ ] and forever discharge[ ]” Rail Terminal from any and all

claims arising out of his employment with Rail Terminal, including

claims based on a variety of statutes and legal theories specifically

enumerated in the resignation agreement. The latter provision

concluded by stating that it did “not apply to claims, if any, for which

releases are prohibited by applicable law or which arise after the date

that [Gallagher] executes his agreement.”

The resignation agreement also contained the following clause:

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“This Agreement does not constitute an admission by

Employer of any liability or wrongdoing but it is intended to

resolve in good faith any existing or potential disputes or

claims arising out of Employee’s relationship and separation

with Employer.”

While Gallagher’s workers’ compensation claim was still

pending, he filed a personal injury action against defendants Lenart

and Pacella in the Cook County circuit court. Gallagher sought

damages for the injuries he suffered as a result of the accident. In

addition, in an amended complaint, his wife raised a loss of

consortium claim.

On November 20, 2003, defendants filed a third-party action

against Rail Terminal seeking contribution pursuant to the Joint

Tortfeasor Contribution Act (740 ILCS 100/1 et seq. (West 2002)).

Defendants alleged that Rail Terminal failed to properly train and

supervise Gallagher. Rail Terminal filed a motion for summary

judgment arguing that it did not fail to train or supervise Gallagher,

and that no additional training or supervision would have prevented

the accident. The circuit court granted Rail Terminal’s motion.

Subsequently, on September 16, 2005, defendants reached a

settlement with plaintiffs. They agreed to pay Gallagher $125,000 for

his personal injury claim and pay his wife $225,000 for her loss-of-

consortium claim.

Shortly thereafter, Rail Terminal filed a motion to intervene in the

personal injury action. It also filed a motion to set aside the allocation

of the settlement proceeds and reallocate them. Rail Terminal’s

purpose for intervening was to assert its workers’ compensation lien

under section 5(b) of the Workers’ Compensation Act (820 ILCS

305/5(b) (West 2004)). Section 5(b) provides, in relevant part:

“Where the injury or death for which compensation is

payable under this Act was caused under circumstances

creating a legal liability for damages on the part of some

person other than his employer to pay damages, then legal

proceedings may be taken against such other person to

recover damages notwithstanding such employer’s payment

of or liability to pay compensation under this Act. In such

case, however, if the action against such other person is

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brought by the injured employee *** and judgment is

obtained and paid, or settlement is made with such other

person, *** then from the amount received by such employee

*** there shall be paid to the employer the amount of

compensation paid or to be paid by him to such employee

***. ***

***

*** [T]he employer may have or claim a lien upon any

award, judgment or fund out of which such employee might

be compensated from such third party.

*** The employer may[ ] at any time [after the filing of a

third-party action] join in the action upon his motion so that

all orders of court after hearing and judgment shall be made

for his protection.” 820 ILCS 305/5(b) (West 2004).

Rail Terminal claimed its lien amounted to $228,295.72 based on the

$24,903.51 it paid in temporary total disability benefits, the

$53,392.21 it paid in medical expenses, and the $150,000 lump sum

it paid pursuant to the settlement contract. In both of its motions, Rail

Terminal stated that it did not participate in or approve of the

settlement between defendants and plaintiffs. Furthermore, it claimed

that plaintiffs had structured the settlement to circumvent its workers’

compensation lien by allocating 64.3% of the settlement proceeds to

Gallagher’s wife.

On October 7, 2005, in response to Rail Terminal’s motions,

defendants filed a motion to adjudicate third-party claims and issue

settlement drafts. They argued that language in the settlement contract

between Rail Terminal and Gallagher constituted a waiver of Rail

Terminal’s workers’ compensation lien. In support of this contention,

defendants relied on Borrowman v. Prastein, 356 Ill. App. 3d 546

(2005), where the Fourth District of the appellate court concluded that

an employer that entered into a settlement contract similar to the one

between Rail Terminal and Gallagher had given up its right to assert

its workers’ compensation lien.

Plaintiffs joined defendants’ motion and filed responses of their

own to Rail Terminal’s motion to intervene and its motion to

reallocate the settlement proceeds. In their response to Rail

Terminal’s motion to intervene, plaintiffs, like defendants, relied on

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Borrowman and argued that Rail Terminal had waived its workers’

compensation lien. In addition, they pointed out that Rail Terminal

received Gallagher’s resignation as part of the settlement, suggesting

that Rail Terminal had knowingly contracted away the lien in

exchange for this concession. The response included an affidavit from

plaintiffs’ counsel, Jonathan Kurasch. He averred that Rail Terminal

was aware of plaintiffs’ personal injury action at the time it settled

Gallagher’s workers’ compensation claim, and that, in negotiating the

settlement, “no claim was ever made or reserved for continuation of

[Rail Terminal’s] rights” under section 5 of the Workers’

Compensation Act.

In plaintiffs’ response to Rail Terminal’s motion to reallocate the

settlement proceeds, they argued that their settlement with defendants

was fairly achieved, because all interested parties had the opportunity

to appear and protect their interests. They also argued that Rail

Terminal’s claim that the settlement funds were inappropriately

allocated was speculative.

Rail Terminal, for its part, filed both a reply to plaintiffs’

responses and a response to defendants’ motion to adjudicate third-

party claims and issue settlement drafts. Rail Terminal argued that the

settlement contract contained no specific waiver of its section 5(b)

workers’ compensation lien. It also argued that the Fourth District’s

decision in Borrowman was distinguishable from the instant case. In

addition, Rail Terminal contended that the resignation agreement did

not contain a waiver of its workers’ compensation lien and denied

that such a waiver provided the consideration for Gallagher’s

resignation. With respect to the allocation of the settlement, Rail

Terminal criticized plaintiffs for failing to produce any evidence in

support of allocating the majority of the proceeds to Gallagher’s wife.

Rail Terminal bolstered its reply and its response with affidavits

from William Ryan, its counsel; Patrick Holden, a claims adjuster for

Rail Terminal’s workers’ compensation insurer; and Michael

McCabe, an employee of the third-party administrator that handled

Gallagher’s workers’ compensation claim for Rail Terminal’s

workers’ compensation insurer. Ryan’s affidavit contained a

description of the events leading up to the September 16, 2005,

settlement conference between plaintiffs and defendants. Ryan

averred that at the previous settlement conference on August 19,

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2005, he informed the court, plaintiffs’ counsel, and defendants’

counsel that Rail Terminal was not prepared to waive a portion of its

workers’ compensation lien to facilitate a settlement between

plaintiffs and defendants. Ryan further averred that at no time prior

to or during the August 19, 2005, settlement conference did plaintiffs’

counsel or defendants’ counsel ever take the position that Rail

Terminal had waived its workers’ compensation lien as part of its

workers’ compensation settlement with Gallagher. According to

Ryan, the first time that position was taken was when defendants filed

their motion to adjudicate third-party claims and issue settlement

drafts.

Holden’s affidavit described his involvement with the settlement

of Gallagher’s workers’ compensation claim. He averred that, prior

to the settlement of that claim, he told plaintiffs’ counsel that Rail

Terminal would not waive its workers’ compensation lien as part of

the settlement. He also averred that both during the settlement

negotiations and after the settlement was reached, plaintiffs’ counsel

acknowledged the existence of Rail Terminal’s lien and indicated that

Rail Terminal would recover any amounts paid in settlement of

Gallagher’s workers’ compensation claim from subsequent civil

recovery by Gallagher.

McCabe’s affidavit, like Holden’s, described his involvement

with the settlement of Gallagher’s workers’ compensation claim.

McCabe averred that it was not customary for Rail Terminal’s

workers’ compensation insurer to waive an employer’s right to

recover its workers’ compensation lien as part of negotiations for the

settlement of a workers’ compensation claim without the receipt of

additional consideration. McCabe further stated that if such a waiver

was contemplated, a provision expressly memorializing it would have

been included in the settlement contract. In addition, McCabe stated

that Holden had communicated with plaintiffs’ counsel and indicated

that Rail Terminal’s workers’ compensation insurer did not intend to

waive Rail Terminal’s workers’ compensation lien as part of the

settlement with Gallagher.

On December 13, 2005, the circuit court held a hearing on Rail

Terminal’s motion to intervene, Rail Terminal’s motion to reallocate

the settlement proceeds, and defendants’ motion to adjudicate third-

party claims and issue settlement drafts. At the hearing, the parties

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reiterated the positions set forth in their respective pleadings. After

considering the parties’ arguments, the circuit court granted Rail

Terminal’s motion to intervene. It also granted defendants’ motion to

adjudicate third-party claims and issue settlement drafts, finding that

Rail Terminal had no workers’ compensation lien under Borrowman.

The court noted that, in deciding to grant defendants’ motion, it was

not relying on the resignation agreement. Finally, the court denied

Rail Terminal’s motion to reallocate the settlement. The court

reasoned that it did not need to reach the allocation issue in light of

its determination that Rail Terminal had no lien.

Rail Terminal appealed, and the First District of the appellate

court found in its favor, rejecting the Fourth District’s analysis in

Borrowman. 367 Ill. App. 3d at 298. The court reasoned that

Borrowman is unsupported by case law (367 Ill. App. 3d at 298-99),

contrary to several principles underlying the Workers’ Compensation

Act (367 Ill. App. 3d at 299-301), and at odds with general principles

of contract law (367 Ill. App. 3d at 301-02). It concluded that, in this

case, Rail Terminal had a valid workers’ compensation lien. 367 Ill.

App. 3d at 303. Accordingly, it reversed the circuit court’s decision

to grant defendants’ motion to adjudicate third-party claims and issue

settlement drafts. 367 Ill. App. 3d at 303. With respect to Rail

Terminal’s motion to reallocate settlement proceeds, the appellate

court declined to address the merits of the motion for the first time on

appeal and remanded the cause to the circuit court for consideration

of the allocation issue. 367 Ill. App. 3d at 303.

Plaintiffs filed a petition for leave to appeal (210 Ill. 2d R. 315),

which we allowed to address the conflict between Borrowman and

the appellate court’s decision in the instant case.

ANALYSIS

I

This case requires us to consider the meaning of contract language

that has received conflicting constructions from different districts of

our appellate court. The construction of a contract presents a question

of law. People ex rel. Department of Public Health v. Wiley, 218 Ill.

2d 207, 223 (2006). Accordingly, our standard of review is de novo.

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Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d

100, 129 (2005).

II

As mentioned, the Fourth District addressed contract language

similar to the language of the settlement contract at issue here in

Borrowman v. Prastein, 356 Ill. App. 3d 546 (2005). In Borrowman,

the plaintiff fractured his heel when the safety rigging he was using

to paint the inside of a water tower collapsed. Borrowman, 356 Ill.

App. 3d at 547. After an orthopedic surgeon performed surgery on the

fracture, the plaintiff developed an infection in his bone, which the

surgeon subsequently treated with antibiotics. Borrowman, 356 Ill.

App. 3d at 547. Although the infection cleared, the plaintiff suffered

a variety of negative side effects from the antibiotics. Borrowman,

356 Ill. App. 3d at 547

The plaintiff filed a workers’ compensation claim against his

employer. Borrowman, 356 Ill. App. 3d at 547. He also filed a

medical malpractice lawsuit against the surgeon and a nursing

association. Borrowman, 356 Ill. App. 3d at 547. The plaintiff settled

the workers’ compensation claim for $230,000 and subsequently

settled the medical malpractice lawsuit for $750,000. Borrowman,

356 Ill. App. 3d at 547. Shortly after settling the medical malpractice

lawsuit, the plaintiff moved to adjudicate the employer’s claim that

it was entitled to a workers’ compensation lien against the plaintiff’s

recovery in the malpractice case. Borrowman, 356 Ill. App. 3d at 547.

The circuit court determined that the employer was entitled to a lien

of $175,973.71. Borrowman, 356 Ill. App. 3d at 547-48.

Both the plaintiff and the employer appealed. Borrowman, 356 Ill.

App. 3d at 548. The plaintiff argued that the employer was not

entitled to a lien at all or, alternatively, that the employer was entitled

to less than the amount awarded. Borrowman, 356 Ill. App. 3d at 548.

The employer argued that the circuit court miscalculated the lien and

that it was entitled to more than the amount awarded, relying on

Robinson v. Liberty Mutual Insurance Co., 222 Ill. App. 3d 443

(1991), and Kozak v. Moiduddin, 294 Ill. App. 3d 365 (1997).

Borrowman, 356 Ill. App. 3d at 548.

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The appellate court defined the issue in the case as “whether [the

employer] is entitled to a lien pursuant to section 5(b) of the

[Workers’ Compensation] Act [citation] when it agreed to settle its

claims with [the plaintiff] knowing a medical malpractice case was

pending.” Borrowman, 356 Ill. App. 3d at 548. After discussing

Robinson and Kozak, the court distinguished those cases on the

grounds that, in Robinson, the plaintiff’s workers’ compensation

claim was not settled, and in Kozak, the employer settled the

plaintiff’s workers’ compensation claim before it knew of the

plaintiff’s medical malpractice lawsuit. Borrowman, 356 Ill. App. 3d

at 550.

The court next quoted language from the settlement contract the

plaintiff and the employer entered into while the plaintiff’s medical

malpractice lawsuit was pending:

“ ‘The above constitutes a full, final[,] and complete

settlement of any and all claims for temporary total disability,

permanent partial and/or permanent total disability incurred

or to be incurred by said [p]etitioner by reason of an industrial

injury occurring on or about April 7, 1995, or by reasons of

any claim or cause of action by [p]etitioner against

[r]espondent of any nature whatsoever. Rights under

[s]ections 8(a) and 19(h) of the *** Act are hereby waived by

both parties.’ ” Borrowman, 356 Ill. App. 3d at 550.

The court observed that the settlement contract did not contain any

reservation of rights or waiver of rights with regard to the plaintiff’s

pending medical malpractice lawsuit. Borrowman, 356 Ill. App. 3d

at 550. The court then concluded that because the employer was

aware of the medical malpractice lawsuit and made no reference to it

in its “full, final[,] and complete settlement” with the plaintiff, the

employer forfeited its workers’ compensation lien rights. Borrowman,

356 Ill. App. 3d at 551. In addition, the court surmised that because

the employer did not mention its claim of a potential lien in the

settlement contract, the lien was not an issue in the negotiations that

led to the settlement. Borrowman, 356 Ill. App. 3d at 551.

Accordingly, the court reasoned that to hold that the employer was

entitled to a lien would “completely nullify both parties’ good-faith

dealings.” Borrowman, 356 Ill. App. 3d at 551. In light of these

considerations, the appellate court held that the employer “should be

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bound by the terms of its agreement and is not entitled to a section

5(b) lien on the malpractice case.” Borrowman, 356 Ill. App. 3d at

551. Thus, the appellate court reversed the judgment of the circuit

court. Borrowman, 356 Ill. App. 3d at 552.

Since Borrowman was decided, both the First District and the

Second District of the appellate court have declined to follow it. The

First District rejected Borrowman in the instant case. The court

characterized Borrowman as holding that “an employer forfeits or

waives its workers’ compensation lien by not specifically reserving

it in a settlement of the employee’s workers’ compensation claim

when the employer knew of the employee’s pending claim against a

third-party tortfeasor.” 367 Ill. App. 3d at 298. It then offered three

criticisms of this holding. 367 Ill. App. 3d at 298-302.

First, the court concluded that Borrowman is unsupported by case

law. 367 Ill. App. 3d at 298. The court pointed out that Borrowman

did not rely on the Robinson and Kozak cases in support of its

holding, but rather distinguished those cases after the intervenor-

employer cited them in support of its argument for a greater lien

award. 367 Ill. App. 3d at 298. According to the court, the plaintiffs

in Robinson and Kozak did not argue that the employers were not

entitled to workers’ compensation liens at all. 367 Ill. App. 3d at 298.

Rather, in Robinson, the plaintiff merely disputed the amount of the

lien the employer would receive, and in Kozak, the plaintiffs argued

that the employer was judicially estopped from asserting its otherwise

valid lien because it took an inconsistent position in a third-party

lawsuit. 367 Ill. App. 3d at 298 (citing Robinson, 222 Ill. App. 3d at

446, and Kozak, 294 Ill. App. 3d at 367). Moreover, neither of those

cases discussed a workers’ compensation settlement agreement. 367

Ill. App. 3d at 298.

Second, the appellate court determined that Borrowman is

contrary to several principles underlying the Workers’ Compensation

Act. 367 Ill. App. 3d at 299. The court emphasized that section 5(b)

of the Act is designed to allow employers and employees to reach the

true tortfeasor responsible for an employee’s injuries while

preventing employees from obtaining a double recovery. 367 Ill. App.

3d at 299-300. The court also noted that, under section 5(b), courts

have a duty to protect an employer’s workers’ compensation lien. 367

Ill. App. 3d at 300. The court concluded that Borrowman’s holding,

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which acknowledges the waiver or forfeiture of an employer’s

workers’ compensation lien, conflicts with this scheme. 367 Ill. App.

3d at 301.

Finally, the court concluded that Borrowman contradicts general

principles of contract law. 367 Ill. App. 3d at 301. The court noted

that the agreement at issue in Borrowman was a settlement contract

between an employer and employee that settled the employee’s

workers’ compensation claim. 367 Ill. App. 3d at 301. The court

further observed that the settlement contract did not contain any

reference to the employer’s workers’ compensation lien and,

specifically, did not include a waiver of that lien. 367 Ill. App. 3d at

302. According to the court, it was consistent with general contract

principles to presume that if the employer meant to waive its

statutorily created lien as part of the settlement of the employee’s

workers’ compensation claim, it would have specifically included

such a waiver in the settlement contract. 367 Ill. App. 3d at 302.

Borrowman’s holding, concluded the court, rewrote the settlement

contract by adding a provision the parties did not include. 367 Ill.

App. 3d at 302. The court reasoned that the plain language of the

settlement contract in Borrowman indicated that the parties did not

intend to resolve the issue of the employer’s workers’ compensation

lien within that settlement. 367 Ill. App. 3d at 302. Accordingly, the

court criticized the Borrowman court for assuming, without any basis,

that the contract’s silence on the issue of the workers’ compensation

lien meant that the employer chose to waive that lien. 367 Ill. App. 3d

at 302. The court added that waiver involves the voluntary and

intentional relinquishment of a known right, and the absence of any

reference to an employer’s lien in a settlement contract, without more,

cannot constitute a voluntary and intentional relinquishment of that

right. 367 Ill. App. 3d at 302.

The court went on to acknowledge that employers can, and

sometimes do, choose to waive their workers’ compensation liens.

367 Ill. App. 3d at 302. It concluded, however, that “based upon the

protections of the Act and general contract principles, such a waiver

of a workers’ compensation lien must be more explicitly and

affirmatively stated in a settlement agreement and cannot simply be

implied by a lack of any reference to that lien.” 367 Ill. App. 3d at

302-03.

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Based on this analysis, the court declined to follow Borrowman.

367 Ill. App. 3d at 303. The court noted that, in the instant case, “Rail

Terminal’s settlement of [Gallagher’s] workers’ compensation claim

did not include any mention or waiver of Rail Terminal’s workers’

compensation lien.” 367 Ill. App. 3d at 303. Thus, the court held that

“Rail Terminal had a valid workers’ compensation lien and *** did

not waive or forfeit this lien by failing to specifically reserve it in its

settlement.” 367 Ill. App. 3d at 303. Accordingly, the court reversed

the circuit court’s decision to grant defendants’ motion to adjudicate

third-party claims and issue settlement drafts. 367 Ill. App. 3d at 303.

After this court granted leave to appeal in the instant case, the

Second District handed down its decision in Harder v. Kelly, 369 Ill.

App. 3d 937 (2007), which followed the approach taken by the First

District in the instant case. In Harder, the plaintiff alleged that he was

injured when his vehicle was struck from behind by a vehicle

operated by an employee of the Canadian National Railroad Company

(CNRC). Harder, 369 Ill. App. 3d at 939. The plaintiff filed a

workers’ compensation claim against his employer and filed a

personal injury action against CNRC and its employee. Harder, 369

Ill. App. 3d at 939. Subsequently, he settled the workers’

compensation claim. Harder, 369 Ill. App. 3d at 939. The settlement

contract provided, in pertinent part:

“[Employer] agrees to pay and [plaintiff] agrees to accept

$16,634.25 in a lump sum in full and final settlement of all

claims for compensation, medical, hospital and other

expenses, past, present or future, arising out of the accident

described and under the terms of the [Act]. *** Review under

section 19(h) and all rights under Sections 4, 8, 16, and 19 of

the Act are expressly waived by the parties hereto. It is the

responsibility of [plaintiff] to satisfy the outstanding medical

charges out of the proceeds of this settlement. It is not the

responsibility of [employer] to satisfy any outstanding

medical charges, known or unknown.” Harder, 369 Ill. App.

3d at 939.

The plaintiff also settled his personal injury action. Harder, 369 Ill.

App. 3d at 939.

In the wake of the plaintiff’s personal injury settlement, his

employer’s workers’ compensation insurer moved to intervene as the

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employer’s subrogee to enforce the employer’s workers’

compensation lien. Harder, 369 Ill. App. 3d at 939. The circuit court

granted the insurer’s motion to intervene. Harder, 369 Ill. App. 3d at

939. However, the court ruled that, pursuant to Borrowman, the

employer had forfeited its workers’ compensation lien. Harder, 369

Ill. App. 3d at 939. Although the circuit court expressed serious

doubts about Borrowman’s reasoning, it concluded that, in the

absence of contrary authority, it was bound by Borrowman. Harder,

369 Ill. App. 3d at 939. Therefore, the court entered an order denying

the insurer’s claim of a lien under section 5(b). Harder, 369 Ill. App.

3d at 939.

The insurer appealed, and the appellate court reversed and

remanded. Harder, 369 Ill. App. 3d at 943. After discussing both

Borrowman and the instant case in detail (Harder, 369 Ill. App. 3d at

940-43), the appellate court stated:

“We find the reasoning in Gallagher persuasive and we

choose to follow that decision rather than Borrowman. Like

the court in Gallagher, we see no reason under the Act or

general contract principles why an employer should be

required to include an affirmative reservation of rights in a

settlement agreement when there is nothing in the agreement

otherwise suggestive of an intent to waive the right ***.”

Harder, 369 Ill. App. 3d at 943.

III

Before this court, plaintiffs urge that we construe the language of

the settlement contract and the resignation agreement that the parties

executed in a manner consistent with Borrowman. They claim that

Borrowman correctly “accepted the general principle that general

releases are intended to surrender all claims between the parties.”

Plaintiffs argue that the settlement contract and the resignation

agreement both contain general releases by which Rail Terminal

waived the right to assert its section 5(b) workers’ compensation lien

against Gallagher’s proceeds from the personal injury settlement.

According to plaintiffs, the language of the settlement contract alone

constitutes a waiver of Rail Terminal’s section 5(b) lien, and if there

is any doubt regarding the meaning of that language, the “even more

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encompassing” language of the resignation agreement clearly

expresses the parties’ intent to extinguish all claims between them,

including Rail Terminal’s claim to enforce its lien.

Plaintiffs further claim there is no need for this court to consider

the affidavits presented by Rail Terminal in construing the settlement

contract and the resignation agreement. They maintain that this case

can be resolved based solely on the language of these documents and

emphasize that neither the circuit court nor the appellate court relied

on Rail Terminal’s extrinsic evidence.

Finally, plaintiffs argue that construing the settlement contract and

the resignation agreement as waiving Rail Terminal’s right to assert

its section 5(b) lien is consistent with the public policy of preventing

employees who file workers’ compensation claims and personal

injury actions from obtaining double recovery for their injuries.

Plaintiffs contend that they settled their personal injury action for less

than they otherwise would have in reliance on Rail Terminal’s waiver

of its lien. Thus, they reason that a finding by this court that Rail

Terminal waived its lien will not result in a windfall for Gallagher.

Conversely, they argue that a finding that Rail Terminal did not waive

its lien will actually result in a double recovery for Rail Terminal by

allowing it both to recover its workers’ compensation payments and

retain the benefit of Gallagher’s resignation.

In response, Rail Terminal asks this court to follow the approach

taken by the First District in the instant case and endorsed by the

Second District in Harder. Rail Terminal argues that the First and

Second Districts correctly rejected the rationale of Borrowman. It

criticizes Borrowman for ignoring the principles of contract

construction and argues that, under those principles, an employer

cannot waive its workers’ compensation lien unless it does so

explicitly. According to Rail Terminal, Borrowman is based on the

incorrect premise that if an employer intends to preserve its lien, it

must include a specific reservation of the lien in the settlement

agreement. Rail Terminal points out that the settlement contract and

the resignation agreement at issue in this case contain no references

to a section 5(b) workers’ compensation lien. It contends that,

construed as a whole, it is clear the settlement contract was intended

to apply to Gallagher’s rights to compensation under the Workers’

Compensation Act, not to Rail Terminal’s lien rights. With respect to

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the resignation agreement, it argues that the agreement’s specific

identification of claims Gallagher agreed to waive provides evidence

that when Gallagher and Rail Terminal intended for there to be a

waiver of a right, they clearly identified the right being waived and

the party waiving it.

As further support for its position, Rail Terminal directs our

attention to the affidavits of Holden and McCabe as evidence of the

intent of the parties at the time they settled Gallagher’s workers’

compensation claim. Rail Terminal argues that these affidavits

provide direct and unrefuted evidence that the parties did not intend

to incorporate the waiver of Rail Terminal’s workers’ compensation

lien into the settlement.

Lastly, Rail Terminal responds to plaintiffs’ arguments regarding

double recovery. It argues that if this court adopts plaintiffs’ position,

employees who settled workers’ compensation claims with their

employers under terms similar to those at issue here “will gain an

unintended and unauthorized windfall” through the employers’ loss

of their lien rights. Rail Terminal also contends that plaintiffs have

failed to cite anything in the record that supports their contentions

that they accepted less favorable terms in the workers’ compensation

settlement and the personal injury settlement in reliance on Rail

Terminal’s waiver of its lien.

IV

Turning to the merits, we begin by clarifying precisely what is at

issue. As mentioned, the Fourth District held in Borrowman that

because the employer was aware of the plaintiff’s medical

malpractice lawsuit against the defendants at the time the employer

and the plaintiff settled the plaintiff’s workers’ compensation claim,

the employer “forfeited its lien rights” by failing to refer to them in its

“ ‘full, final[,] and complete settlement’ with [the plaintiff].’ ”

(Emphases added.) Borrowman, 356 Ill. App. 3d at 551. In this case,

the First District summarized Borrowman as holding that “an

employer forfeits or waives its workers’ compensation lien by not

specifically reserving it in a settlement of the employee’s workers’

compensation claim when the employer knew of the employee’s

pending claim against a third-party tortfeasor.” (Emphasis added.)

-16-

367 Ill. App. 3d at 298. It then phrased its own holding in opposition

to its summary of Borrowman’s holding: “Rail Terminal had a valid

workers’ compensation lien and *** did not waive or forfeit this lien

by failing to specifically reserve it in its settlement.” (Emphasis

added.) 367 Ill. App. 3d at 303.

In this case, the First District used the terms “waive” and “forfeit”

interchangeably, due in part to the fact that, in Borrowman, the Fourth

District concluded that the employer forfeited its workers’

compensation lien, but then referred to an affirmative statement in the

settlement contract as evidence of that forfeiture. As this court has

stated, “[w]aiver arises from an affirmative act, is consensual, and

consists of an intentional relinquishment of a known right.” Home

Insurance Co. v. Cincinnati Insurance Co., 213 Ill. 2d 307, 326

(2004). Forfeiture, strictly defined, is different from waiver, as we

have noted in the criminal context. See People v. Blair, 215 Ill. 2d

427, 444 n.2 (2005). Rather than an intentional relinquishment of a

known right, forfeiture is the “ ‘failure to make the timely assertion

of the right.’ ” Blair, 215 Ill. 2d at 444 n.2, quoting United States v.

Olano, 507 U.S. 725, 733, 123 L. Ed. 2d 508, 519, 113 S. Ct. 1770,

1777 (1993).

We find this distinction instructive in the present case. Here,

when plaintiffs argue that the relevant question is “whether the

settlement (comprising the Commission contract and the resignation)

constituted a general release of all claims related to the on-the-job

incident,” they are, in fact, asserting that Rail Terminal waived its

workers’ compensation lien through the language of the settlement

contract and the resignation agreement. They are not arguing that Rail

Terminal failed to assert its lien in a timely fashion and thereby lost

its right to do so.

Indeed, for plaintiffs to argue that Rail Terminal forfeited its lien

under the circumstances of this case would run contrary to the plain

language of section 5(b). The third paragraph of section 5(b) provides

that an employer may claim a lien on the proceeds of a third-party

action, and the fourth paragraph provides that “[t]he employer may[ ]

at any time [after the filing of a third-party action] join in the action

upon his motion so that all orders of court after hearing and judgment

shall be made for his protection.” 820 ILCS 305/5(b) (West 2004).

Here, Rail Terminal filed a motion to intervene in plaintiffs’ action

-17-

against defendants, and the circuit court granted that motion. Thus,

Rail Terminal properly asserted its lien. Cf. Scott v. Industrial

Comm’n, 184 Ill. 2d 202, 216-17 (1998) (even where employer

forfeits lien by failing to obtain lien in third-party proceeding,

employer or its insurer may still make claim for credits under section

5(b) following conclusion of third-party proceeding, as lien is merely

means of enforcing statutory right). Accordingly, the issue before us

is not whether Rail Terminal forfeited its workers’ compensation lien.

Nor is the issue before us whether it is possible for an employer

to waive its workers’ compensation lien. Rail Terminal does not call

into question that an employer can do so. As this court has previously

observed, “an employer can choose not to seek reimbursement of its

workers’ compensation obligation. An employer can waive the lien

it holds on the worker’s recovery in his personal injury action.”

LaFever v. Kemlite Co., 185 Ill. 2d 380, 399 (1998). An employer

might, for instance, waive its lien to avoid liability for contribution to

the other tortfeasors allegedly responsible for an employee’s injury.

LaFever, 185 Ill. 2d at 399, citing Lannom v. Kosco, 158 Ill. 2d 535

(1994). It might also waive its lien to avoid paying its share of

attorney fees and costs under section 5(b). LaFever, 185 Ill. 2d at 400.

The issue we must consider is whether, based on the language of

the settlement contract and the resignation agreement, Rail Terminal

waived its workers’ compensation lien.

Preliminarily, we address Rail Terminal’s argument that, as a

procedural matter, plaintiffs have forfeited their reliance on the

resignation agreement for purposes of this appeal. It is true that

plaintiffs did not specifically quote the resignation agreement

language on which they now rely before the circuit court or the

appellate court, or in their petition for leave to appeal. In spite of this,

plaintiffs have not forfeited their argument that the language in

question constitutes a waiver of Rail Terminal’s workers’

compensation lien. Before the circuit court, plaintiffs relied primarily

on the language of the settlement contract to support their position,

but they also attached a copy of the resignation agreement to their

response to Rail Terminal’s motion to intervene and suggested that

Rail Terminal knowingly contracted away its workers’ compensation

lien in exchange for Gallagher’s resignation. Moreover, Rail Terminal

specifically addressed this point in replying to plaintiffs’ response to

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its motion to intervene and did so again at the December 13, 2005,

hearing before the circuit court. As for plaintiffs’ argument before the

appellate court, we note that plaintiffs were the appellees and were

urging the appellate court to affirm a judgment the circuit court chose

to base on its consideration of Borrowman and the settlement

contract. It is well established that where the appellate court reverses

the judgment of the circuit court, and the appellee in that court brings

the case before this court as an appellant, that party may raise any

issues properly presented by the record to sustain the judgment of the

circuit court, even if the issues were not raised before the appellate

court. Marshall v. Burger King Corp., 222 Ill. 2d 422, 430-31 (2006).

Even though the circuit court relied on its consideration of

Borrowman and the settlement contract in granting the motion to

adjudicate third-party claims and issue settlement drafts, plaintiffs

properly raised the resignation agreement before the circuit court.

Thus, it is inconsequential whether they made the precise argument

they now ask us to consider when they were before the appellate

court. Finally, with respect to plaintiffs’ petition for leave to appeal,

we observe that while the briefs plaintiffs submitted to this court

develop their argument regarding the resignation agreement in

considerably more detail than their petition, the petition did refer to

the resignation agreement and argue that it placed Rail Terminal on

further notice that its settlement with Gallagher was intended to be a

general settlement of all claims. Thus, plaintiffs’ argument regarding

the resignation agreement is properly before us.

The principles that guide our analysis are familiar. The primary

objective in construing a contract is to give effect to the intent of the

parties. Virginia Surety Co. v. Northern Insurance Co. of New York,

224 Ill. 2d 550 (2007); Schek v. Chicago Transit Authority, 42 Ill. 2d

362, 364 (1969); see also Farm Credit Bank of St. Louis v. Whitlock,

144 Ill. 2d 440, 447 (1991) (“A release is a contract, and therefore is

governed by contract law”). A court must initially look to the

language of a contract alone, as the language, given its plain and

ordinary meaning, is the best indication of the parties’ intent. Virginia

Surety, 224 Ill. 2d at 556; Air Safety, Inc. v. Teachers Realty Corp.,

185 Ill. 2d 457, 462 (1999). Moreover, because words derive their

meaning from the context in which they are used, a contract must be

construed as a whole, viewing each part in light of the others. Board

-19-

of Trade of the City of Chicago v. Dow Jones & Co., 98 Ill. 2d 109,

122-23 (1983). The intent of the parties is not to be gathered from

detached portions of a contract or from any clause or provision

standing by itself. Martindell v. Lake Shore National Bank, 15 Ill. 2d

272, 283 (1958). If the language of the contract is susceptible to more

than one meaning, it is ambiguous. Farm Credit, 144 Ill. 2d at 447.

In that case, a court may consider extrinsic evidence to ascertain the

parties’ intent. Quake Construction, Inc. v. American Airlines, Inc.,

141 Ill. 2d 281, 288 (1990).

We further note the long-standing principle that instruments

executed at the same time, by the same parties, for the same purpose,

and in the course of the same transaction are regarded as one contract

and will be construed together. Sandra Frocks, Inc. v. Ziff, 397 Ill.

497, 504 (1947); see also In re Estate of Mayfield, 288 Ill. App. 3d

534, 541 (1997). Here, the settlement contract and the resignation

agreement were executed in conjunction with one another. Indeed, the

resignation agreement provides:

“This Agreement will become effective after it is signed and

the settlement contracts in the aforementioned workers’

compensation claim have been approved by the Arbitrator.

This Agreement is contingent upon approval of said

contracts.”

Accordingly, we shall consider the settlement contract and the

resignation agreement with reference to one another.

Turning to the settlement contract, plaintiffs argue that the

following language constitutes a waiver of Rail Terminal’s section

5(b) workers’ compensation lien:

“Respondent [Rail Terminal] to pay the petitioner [Gallagher]

$150,000 in full and final settlement of all claims under the

Workers’ Compensation Act for injuries allegedly incurred on

or about August 10, 2001 and any and all results,

developments or sequale [sic], past, present, or future

resulting from this accident.” (Emphasis added.)

Plaintiffs emphasize that the settlement contract disposes of “all

claims” without restriction, in that it constitutes a “full and final

settlement.” Furthermore, according to plaintiffs, Rail Terminal’s lien

-20-

is a “claim[ ] under the Workers’ Compensation Act,” and it resulted

from Gallagher’s “accident.”

We agree that a claim to enforce a workers’ compensation lien

qualifies as a “claim under the Workers’ Compensation Act” in the

abstract. As defined by Black’s Law Dictionary, “claim” can refer to

any of the following:

“1. The aggregate of operative facts giving rise to a right

enforceable by a court ***. 2. The assertion of an existing

right; any right to payment or to an equitable remedy, even if

contingent or provisional ***. 3. A demand for money,

property, or a legal remedy to which one asserts a right ***.

4. An interest or remedy recognized at law; the means by

which a person can obtain a privilege, possession, or

enjoyment of a right or thing ***.” Black’s Law Dictionary

264 (8th ed. 2004).

Thus, “claim” is decidedly a broad term.

A careful reading of the settlement contract, however, reveals that

it specifies the claims under the Act to which it refers, and a claim to

enforce a workers’ compensation lien is not one of them. Plaintiffs’

reading of the settlement contract ignores the sentence immediately

following the sentence quoted above, to wit:

“Respondent denies these injuries are compensable and this

settlement is made to settle those issues as a purchase of the

peace against any and all claims for additional temporary total

compensation, permanent partial disability and medical,

surgical [or] hospital expenses, past, present or future.”

Construing the terms of the settlement contract as a whole, as we

must (Martindell, 15 Ill. 2d at 283), it is readily apparent that the

second sentence of the contract informs the meaning of the first. In

denying that “these injuries are compensable,” Rail Terminal is

denying the compensability of “injuries allegedly incurred on or about

August 10, 2001,” the same “injuries” giving rise to the “claims under

the Workers’ Compensation Act” to which the settlement contract

applies. The settlement contract goes on to state that “this settlement

is made to settle those issues,” which clearly refers to issues related

to Rail Terminal’s denial that the injuries are compensable.

Subsequently, the contract specifies that, in settling the issues

-21-

regarding the compensability of the injuries, Rail Terminal is

purchasing the peace “against any and all claims for additional

temporary total compensation, permanent partial disability and

medical, surgical [or] hospital expenses, past, present or future.” In

referring to claims for “additional” benefits, it is obvious the contract

is referring to claims beyond those already made by Gallagher at the

time of the settlement. Thus, the settlement contract applies to all

claims by Gallagher for “temporary total compensation, permanent

partial disability and medical, surgical [or] hospital expenses” based

on “injuries allegedly incurred on or about August 10, 2001.” It does

not apply to a claim by Rail Terminal to enforce its workers’

compensation lien.

Plaintiffs’ argument that the “full and final settlement of all

claims” language creates a general release to which we must give

broad effect is similarly unavailing. Plaintiffs contend that general

releases are intended to surrender all claims between the parties and

terminate their relationship. They suggest that where, as here, there

is no dispute that Rail Terminal, the alleged releasor, was aware of

the claim it was releasing, the general release should be given effect

as to that claim. In support of their argument, plaintiffs rely on this

court’s observation in Farm Credit Bank of St. Louis v. Whitlock that

“where both parties were aware of an additional claim at the time of

signing the release, courts have given effect to the general release

language of the agreement to release that claim as well.” Farm Credit,

144 Ill. 2d at 447, citing Frank Rosenberg, Inc. v. Carson Pirie Scott

& Co., 28 Ill. 2d 573, 578 (1963). See Perschke v. Westinghouse

Electric Corp., 111 Ill. App. 2d 23, 31 (1969); Cwik v. Condre, 4 Ill.

App. 2d 380, 383 (1954).

We have no quarrel with the statement from Farm Credit on

which plaintiffs rely. It is, however, inapposite here. As described

above, the settlement contract is explicitly limited to the settlement

of claims by Gallagher against Rail Terminal for temporary total

disability benefits, permanent partial disability benefits, and medical

expenses. It therefore does not contain a “general release” of the type

to which this court was referring in Farm Credit. Indeed, “general

release” is a conclusory term, and determining whether particular

language constitutes a general release is entirely a matter of

construing that language. See Farm Credit, 144 Ill. 2d at 447 (release

-22-

is contract and therefore governed by contract law, and intention of

parties to contract must be determined from instrument itself).

In Farm Credit, for instance, the plaintiff, a bank, filed a

foreclosure action against the defendants after they defaulted on the

second of two loans. Farm Credit, 144 Ill. 2d at 444-45. The

defendants raised the affirmative defense that a release agreement

they entered into after the default barred the foreclosure action, which

was directed at the property used to secure the first loan. Farm Credit,

144 Ill. 2d at 445. The circuit court granted summary judgment in

favor of the defendants, and the appellate court affirmed. Farm

Credit, 144 Ill. 2d at 445. This court reversed, holding that the release

agreement was ambiguous because it was unclear, based on the

language of the agreement, whether the parties intended the

agreement to release the defendants from all claims or merely claims

related to the second loan, in which case the plaintiff could proceed

with its foreclosure action. Farm Credit, 144 Ill. 2d at 448. The

plaintiff and the defendants were aware of claims that could arise in

relation to the first loan at the time they executed the release

agreement (Farm Credit, 144 Ill. 2d at 448), a fact that would have

placed the defendant’s foreclosure action within the purview of the

release, and thus barred it, if the language of the agreement had

unambiguously created a general release (see Farm Credit, 144 Ill. 2d

at 447 (“where both parties were aware of an additional claim at the

time of signing the release, courts have given effect to the general

release language of the agreement to release that claim as well”)).

However, because it was unclear whether the release constituted a

general release, this court concluded it was necessary to refer to

extrinsic evidence to determine the parties’ intent and remanded the

cause for further proceedings. Farm Credit, 144 Ill. 2d at 448. The

approach we have taken in this case to analyzing the settlement

contract accords with the approach we took to analyzing the language

of the agreement at issue in Farm Credit, only here the contract

language unambiguously does not constitute a general release. Cf.

Rakowski v. Lucente, 104 Ill. 2d 317, 323-24 (1984) (where release

was “comprehensive, precise and unambiguous” and defendant knew

at time he executed release that he might have basis for contribution

claim, contribution claim fell within scope of release).

-23-

We further hold that, even if the language of the settlement

contract did constitute a general release, it would not be sufficiently

explicit to waive Rail Terminal’s workers’ compensation lien.

Considering the integral role the workers’ compensation lien plays in

the workers’ compensation scheme, we do not believe general

language is sufficient to effect such a waiver. On the contrary, the

waiver of a workers’ compensation lien must be explicitly stated.

Accord 367 Ill. App. 3d at 302-03 (concluding “waiver of a workers’

compensation lien must be more explicitly and affirmatively stated in

a settlement agreement and cannot simply be implied by a lack of any

reference to that lien”). Here, the language of the settlement contract

contains no mention of Rail Terminal’s workers’ compensation lien

and therefore is not sufficiently explicit to waive the lien.

The adoption of an explicit-waiver rule in this context is

consistent with this court’s previous recognition in In re Estate of

Dierkes, 191 Ill. 2d 326 (2000), that “[t]he plain language of section

5(b) shows that an employer’s reimbursement of workers’

compensation payments from an employee’s third-party recovery is

crucial to the workers’ compensation scheme.” (Emphasis added.)

Dierkes, 191 Ill. 2d at 331. As this court explained in Dierkes,

because an employer may be required to pay compensation to an

injured employee under the Act even though the employer was

without fault, section 5(b) serves the important purpose of allowing

“ ‘both the employer and the employee an opportunity to reach the

true offender while preventing the employee from obtaining a double

recovery.’ ” Dierkes, 191 Ill. 2d at 331-32, quoting J.L. Simmons Co.

ex rel. Hartford Insurance Group v. Firestone Tire & Rubber Co.,

108 Ill. 2d 106, 112 (1985). In the end, “ ‘[t]his is fair to everyone

concerned: the employer, who, in a fault sense, is neutral, comes out

even; the third person pays exactly the damages he or she would

normally pay ***; and the employee gets a fuller reimbursement for

actual damages sustained than is possible under the compensation

system alone.’ ” Dierkes, 191 Ill. 2d at 332, quoting 6 A. Larson & L.

Larson, Larson’s Workers’ Compensation Laws §110.02, at 110–3 to

110–4 (1999). This court underscored its discussion of the

significance of the workers’ compensation lien by reiterating that

“ ‘[i]t is of utmost importance that the trial court protect an

employer’s [workers’ compensation] lien.’ ” (Emphasis added.)

-24-

Dierkes, 191 Ill. 2d at 333, quoting Blagg v. Illinois F.W.D. Truck &

Equipment Co., 143 Ill. 2d 188, 195 (1991).

As Dierkes confirms, the workers’ compensation lien is deeply

rooted in the overall scheme of the Workers’ Compensation Act.

Consequently, there must be something more than general waiver

language before the lien can be considered waived. Requiring explicit

waiver will ensure that a lien that is “crucial to the workers’

compensation scheme” (Dierkes, 191 Ill. 2d at 331) and of “utmost

importance” (Dierkes, 191 Ill. 2d at 333) will not be considered

waived absent unmistakable settlement language to that effect. Such

a rule will have the salutary effect of placing both the parties and the

courts in workers’ compensation cases on notice that a specific

reference to the lien in a waiver provision is required before the lien

can be deemed waived. As a result, settling parties will be less likely

to expend time and money arguing over the interpretation of

settlement provisions, and valuable judicial resources will be

conserved.

We note it is not uncommon to require the explicit waiver of

certain rights. In various other contexts, where an important statutory

right is at issue, an explicit manifestation of intent is required before

the right in question can be deemed waived. See, e.g., Wright v.

Universal Maritime Service Corp., 525 U.S. 70, 80-81, 142 L. Ed. 2d

361, 371, 119 S. Ct. 391, 397 (1998) (union-negotiated waiver of

employees’ statutory right to judicial forum for claims of employment

discrimination must be “clear and unmistakable”); Eastern Associated

Coal Corp. v. Massey, 373 F.3d 530, 533, 536-37 (4th Cir. 2004)

(applying “clear and unmistakable” waiver rule set forth in Wright);

Forest Preserve District v. Illinois Labor Relations Board, 369 Ill.

App. 3d 733, 754 (2006) (“A party to a collective bargaining

agreement may waive its rights to bargain under the [Illinois Public

Labor Relations] Act where the contractual language evinces an

unequivocal intent to relinquish such rights. [Citation.] However,

evidence that a party to a labor agreement intended to waive a

statutory right must be clear and unmistakable. The language

sustaining the waiver must be specific and waiver is never

presumed”); Fowler v. Boise Cascade Corp., 948 F.2d 49, 55 (1st

Cir. 1991) (recognizing that, under Maine law, employer cannot

waive statutory right to immunity from suits arising out of employees’

-25-

injuries “unless the employer explicitly makes such a waiver”);

Kendall v. U.S. Dismantling Co., 20 Ohio St. 3d 61, 65, 485 N.E.2d

1047, 1051 (1985) (“The statutory and constitutional immunity

granted to complying employers is crucial to workers’ compensation

law. *** [B]efore this immunity may be considered to have been

waived, the waiver must be express, and must refer specifically to this

particular immunity. Although express indemnity agreements worded

in general terms may suffice for other purposes, we are not inclined

to construe them as effective waivers of this immunity absent a clear

evocation of the parties’ intent to that effect”); Bester v. Essex Crane

Rental Corp., 422 Pa. Super. 178, 187, 619 A.2d 304, 308 (1993)

(holding that indemnification clause in contract between employer

and equipment lessor did not meet statutory requirement that

employer “expressly provide[ ] for” indemnification to effectuate

waiver of immunity from suits by third parties). We find additional

support in these decisions for requiring the explicit waiver of a

workers’ compensation lien.

Based on the foregoing analysis, the decision in Borrowman is

overruled. Initially, we note the court in Borrowman made no attempt

to apply the fundamental principles of contract construction to the

settlement contract at issue in that case. Instead of giving effect to all

the relevant contract language, the court focused narrowly on the

declaration that the contract constituted a “full, final[,] and complete

settlement.” In doing so, the court overlooked that the contract

straightforwardly provided for a “full, final[,] and complete

settlement of any and all claims for temporary total disability,

permanent partial and/or permanent total disability” incurred by the

plaintiff by reason of his accident. (Emphasis added.) Borrowman,

356 Ill. App. 3d at 550. Just as the settlement contract at issue here

applies only to Gallagher’s claims against Rail Terminal for

“additional temporary total compensation, permanent partial disability

and medical, surgical [or] hospital expenses,” so too was the

settlement contract in Borrowman restricted to claims by the

employee against the employer. Accord Harder, 369 Ill. App. 3d at

939, 943 (reversing judgment of circuit court that employer waived

workers’ compensation lien where settlement contract provided for

“full and final settlement of all claims for compensation, medical,

hospital and other expenses” arising out of the plaintiff’s accident).

-26-

In addition, because the language of the settlement contract in

Borrowman contained no mention of the employer’s workers’

compensation lien, that language obviously was not sufficiently

explicit to waive the lien.

Our analysis cannot end here. We must also consider the effect of

the language contained in the resignation agreement. Turning to that

agreement, plaintiffs argue that the sixth paragraph effectuates a

waiver of Rail Terminal’s workers’ compensation lien. Paragraph six

provides:

“This Agreement does not constitute an admission by

Employer of any liability or wrongdoing but it is intended to

resolve in good faith any existing or potential disputes or

claims arising out of Employee’s relationship and separation

with employer.” (Emphasis added.)

Plaintiffs assert that Rail Terminal’s lien qualifies as a “dispute[ ] or

claim[ ]” arising out of Gallagher’s relationship with Rail Terminal.

Unlike the language of the settlement contract, paragraph six of

the resignation agreement expresses no limitations on the types of

“disputes” and “claims” to which it refers. However, like the

language of the settlement contract, it contains no specific reference

to Rail Terminal’s workers’ compensation lien. As a result, it is not

sufficiently explicit to effectuate the waiver of the lien.

In light of the foregoing, there is no need for us to refer to the

extrinsic evidence presented by the parties. A court may consider

extrinsic evidence to ascertain the intent of the parties to a contract if

the language of the contract is ambiguous. Quake, 141 Ill. 2d at 288.

Here, there is no ambiguity to resolve. As discussed, the settlement

contract, by its own terms, waives only Gallagher’s claims against

Rail Terminal, and neither the settlement contract nor the resignation

agreement explicitly refers to Rail Terminal’s workers’ compensation

lien, as would be required to waive the lien.

This leaves only plaintiffs’ arguments regarding the policy of

preventing double recovery in workers’ compensation cases.

Plaintiffs first contend that they settled their personal injury action for

less than they otherwise would have in reliance on Rail Terminal’s

waiver of its lien, so a finding that Rail Terminal waived its lien will

not result in a double recovery for Gallagher. This argument rests on

-27-

a factual assertion regarding plaintiffs’ basis for settling the personal

injury action that is not borne out by the record. Plaintiffs’ second

argument regarding double recovery is that finding, as we have, that

Rail Terminal did not waive its lien will result in a double recovery

for Rail Terminal by allowing it both to recover its workers’

compensation payments and retain the benefit of Gallagher’s

resignation. We note that plaintiffs’ attempt to relate this argument to

the policy of preventing double recovery is purely rhetorical, as that

policy involves “the general principle that an employee is not entitled

to a double recovery.” (Emphasis added.) Scott, 184 Ill. 2d at 217. In

reality, plaintiffs are merely asking us to conduct a generalized

inquiry into the fairness of Gallagher’s bargain with Rail Terminal,

which we decline to do. Courts generally will not inquire into the

adequacy of consideration for a contract. Sta-Ru Corp. v. Mahin, 64

Ill. 2d 330, 338 (1976). Moreover, Gallagher specifically

acknowledged in the resignation agreement that a $1 payment and the

approval of the settlement contract, which unambiguously did not

waive Rail Terminal’s workers’ compensation lien, would constitute

sufficient consideration for his resignation.

CONCLUSION

For the reasons expressed above, we hold that Rail Terminal did

not waive its section 5(b) workers’ compensation lien when it settled

Gallagher’s workers’ compensation claim. Accordingly, we affirm the

judgment of the appellate court, which reversed the circuit court’s

decision to grant defendants’ motion to adjudicate third-party claims

and issue settlement drafts and remanded the cause to the circuit court

for consideration of Rail Terminal’s motion to set aside and reallocate

the settlement.

Affirmed.

JUSTICE BURKE took no part in the consideration or decision

of this case.

CHIEF JUSTICE THOMAS, specially concurring:

-28-

I agree with the result reached by my colleagues in affirming the

appellate court’s decision in the instant case and in overruling

Borrowman v. Prastein, 356 Ill. App. 3d 546 (2005). I also agree with

the conclusion that a bright-line rule should be adopted so as to

require an explicit and affirmative reference to the workers’

compensation lien before it can be waived by settlement language.

I would only add that even in the absence of such a bright-line

rule, I do not believe that the general language of paragraph six of the

parties’ resignation agreement was intended to encompass Rail

Terminal’s workers’ compensation lien. Paragraph six provides that

“[t]his Agreement does not constitute an admission by Employer of

any liability or wrongdoing but it is intended to resolve in good faith

any existing or potential disputes or claims arising out of Employee’s

relationship and separation with Employer.” (Emphasis added.) The

first clause of the above-quoted sentence suggests–like all of the other

language of both agreements–that it is only concerned with claims

that Gallagher may have against Rail Terminal. Although the second

clause uses some broad language about “any existing or potential

disputes or claims,” I believe that this second clause must be read in

relation to the first clause. Reading paragraph six in this way leads to

the conclusion that the second clause is simply referring to claims that

the employee (Gallagher) may have against the employer (Rail

Terminal) and not claims that Rail Terminal may have against

Gallagher, such as a workers’ compensation lien. This becomes even

clearer when all of the language of both documents are read together

as a whole, as they must be. See In re Estate of Mayfield, 288 Ill.

App. 3d 534, 541 (1997). All of the rights that are specifically

mentioned as being waived in both documents are claims that

Gallagher may have against Rail Terminal. Paragraph six reinforces

this theme by stating that the agreement does not constitute an

admission by the employer of any liability or wrongdoing even

though it is resolving in good faith existing or potential disputes and

claims. In essence, the parties intended that Gallagher receive

$150,000 in immediate compensation for permanent partial disability,

plus an additional $1 in consideration, in exchange for his resignation

and his waiver of any claims against Rail Terminal.

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