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The Illinois Insurance Guaranty Fund is on the hook for a costly claim after the liquidation of a self-insured employer's excess workers compensation insurer, a divided Illinois' Supreme Court ruled Friday.
The state's high court in Skokie Castings Inc. v. Illinois Insurance Guaranty Fund addressed whether a statutory cap limiting the fund's liability to $300,000 for claims filed under certain insurance policies applies to excess workers comp coverage.
Illinois courts previously determined that the guaranty fund's liability cap does not apply to claims insured under primary workers comp polices, the Illinois Supreme Court's opinion shows.
“The question presented by this declaratory judgment action is whether claims under policies providing excess coverage for workers compensation awards are exempt as well,” the court's opinion states.
The underlying case involved a Wells Manufacturing Co. employee named Mona Soloky who was seriously injured on the job in 1985, court records state. Skokie is a successor to Wells.
The Illinois Workers' Compensation Commission determined that Ms. Soloky was totally and permanently disabled and awarded her medical costs plus $394.25 of weekly lifetime benefits.
Wells paid those amounts until reaching a $200,000 retained limit. Thereafter, Home Insurance Co., Well's excess insurer, paid Soloky's award until the excess insurer became insolvent and was liquidated. The fund then took up Soloky's payments, but notified the employer that the claims was subject to the $300,000 cap.
When the fund stopped payment, Wells resumed paying the claims and by the time litigation over the issue commenced in 2010, the employer had paid more than $500,000, court records show.
Wells argued in circuit court that Illinois law contains an express exception to the fund’s liability cap for “any workers compensation claims.” The employer said the exception to the cap applies to claims left unpaid under its excess workers comp coverage.
The circuit court agreed, concluding that Wells’ claim to the fund under its excess workers comp policy fell within the plain meaning of “any workers compensation claims” and was therefore exempt from the $300,000 cap limiting the fund’s obligation.
The fund then argued in appellate court that the wording “any workers’ compensation claim” applied only to claims for benefits filed by injured workers. But the appellate court rejected that interpretation.
A 5-2 majority of the Supreme Court agreed.
The majority found that nothing in Illinois’ workers comp act or laws governing the guaranty fund provide “any basis for reaching a contrary conclusion, i.e., that a policy cannot be deemed to provide workers compensation coverage simply because the coverage it affords is excess rather than primary.”
The dissenting justices essentially argued that an injured worker’s claim for compensation and an employer’s appeal for insurance indemnification under an insurance contract are different and the latter does not fit the definition of “any workers compensation claims.”
But the high court upheld the appellate court’s ruling in favor of Wells and against the fund.