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Closing the Door on Breach of Contract Claims: An Analysis of New Appellate Court Case Midwest Neurosurgeons, LLC. v. F.W. Electric, Inc.
As workers’ compensation professionals, we cannot underestimate the importance of addressing all medical bills prior to settlement. What happens when there is a dispute regarding payment of bills post-settlement?
The Illinois Appellate Court recently addressed whether a medical provider can sue an employer for payment of unpaid bills after settlement contract approval in Midwest Neurosurgeons, LLC v. F.W. Electric, Inc., 2025 IL App (5th) 240957. The Court concluded that a medical provider could not bring a breach of contract claim as they were not a third-party beneficiary of a workers’ compensation settlement. Also, the Court denied the employer’s demand for sanctions under Rule 137.
In 2010, the petitioner treated with Midwest Neurosurgeons (“Midwest”) for a work injury and filed an Application for Adjustment of Claim seeking benefits. In 2016, the petitioner and his employer reached a settlement. Per the terms of the settlement, the employer agreed to pay “the reasonable, necessary and causally related medical expenses” between the date of accident and settlement approval.
Following the settlement, Midwest filed a breach of contract suit seeking $87,204.33 in unpaid bills, asserting it was an intended third-party beneficiary of the settlement. The employer moved to dismiss, arguing medical providers lack standing to sue employers directly for workers’ compensation expenses. In addition, the employer sought Rule 137 sanctions. The Circuit Court dismissed the complaint and denied sanctions. Both parties appealed.
The Appellate Court affirmed the dismissal, holding Midwest was not an intended third-party beneficiary of the settlement agreement. The Court reasoned that there was a strong presumption that contracts are intended to benefit only the contracting parties. Further, a third-party beneficiary must be expressly identified by name or by a defined class. The Court found the settlement agreement did not name Midwest or reference “medical providers” as a class. Although the contract referenced payment “directly to the providers,” the Court found no intent to create third-party rights. In addition, the Court noted that the Illinois Workers’ Compensation Act’s purpose was to create prompt compensation to employees, not create enforceable rights for a healthcare provider. Moreover, Section 8.2(e-20) of the Act allows providers to seek payment from the employee post-award or settlement. The Act did not provide a mechanism for an employer to seek reimbursement. Therefore, the appropriate route for reimbursement was for Midwest to pursue the petitioner.
Regarding Rule 137, the Court found that there was no evidence the Circuit Court abused its discretion by denying sanctions. Thus, the Court affirmed denial of Rule 137 Sanctions.
The Midwest Neurosurgeons decision underscores the importance of precise language in workers’ compensation settlement contracts. Employers should avoid naming specific medical providers or broadly referencing provider classes, as doing so may inadvertently create third-party beneficiary claims. The court reaffirmed that workers’ compensation settlements are designed to benefit employees, not healthcare providers. Under Illinois law, providers must seek reimbursement from the employee, not the employer, as outlined in Section 8.2(e-20) of the Workers’ Compensation Act. Meanwhile, employees retain the right to enforce payment obligations under Section 19(g). Ultimately, this case reinforces that healthcare providers lack standing to sue employers directly for unpaid medical bills arising from workers’ compensation claims, and that any enforcement mechanism must follow statutory channels. Although respondents are protected from claims from medical providers, attorneys and claims professionals should clearly address medical bills prior to contract approval to mitigate costs and litigation associated with Section 19(g) petitions.