Leased Employees and Workers’ Compensation Insurance
A workers’ compensation claimant was injured on January 10, 2003, and filed a workers’ compensation claim. Employers Consortium, Inc. (ECI) had contracted with his employer to provide out-sourced employee-related services, including the payment of workers’ compensation insurance. ECI treated the claimant as a leased employee by directly paying the claimant’s wages. ECI also secured workers’ compensation insurance from Travelers. The Workers’ Compensation Commission found that lending (ECI) and borrowing (Precision) employers were jointly and severally liable for claimant’s work-related injuries, and that claimant was covered under both employers workers’ compensation coverage. ECI was covered through Travelers Insurance, and Precision was covered under a worker’s compensation policy through West Bend Mutual Insurance Company. The Circuit Court reversed the Commission’s decision, finding lending employer’s insurer (Travelers) owed no coverage for claimant’s injuries. Precision, the borrowing employer, appealed; and Travelers, ECI’s insurer, cross-appealed.
The Travelers policy included four endorsements, providing workers’ compensation coverage to leased workers, provided by ECI, to the endorsed ECI clients. The endorsements did not include Precision. ECI did not secure an endorsement adding Precision to the policy until August 29, 2003, almost 8 months after the accident.
Precision argued that Section 4(a)(3) of the Workers’ Compensation Act controlled, which requires that “[e]very policy of an insurance carrier, insuring the payment of compensation under this Act shall cover all the employees and the entire compensation liability of the insured.” 820 ILCS 305/4(a)(3) (West 2002). Further, “[a]ny provisions in any policy, or in any endorsement attached thereto, attempting to limit or modify in any way, the liability of the insurance carriers issuing the same except as otherwise provided herein shall be wholly void.” 820 ILCS 305/4(a)(3) (West 2002). Travelers argued that Section 30 of the Employee Leasing Company Act controlled, which states that “[w]hen a workers’ compensation policy written to cover leased employees is issued to the lessor as the named insured, the lessee shall be identified thereon by the attachment of an appropriate endorsement indicating that the policy provides coverage for leased employees.” 215 ILCS 113/30 (West 2002).
The court held that ECI’s failure to secure an endorsement to add Precision to a workers’ compensation insurance policy under Travelers until after claimant’s injury was ineffective to withdraw claimant from the operation of the Workers’ Compensation Act, because the borrower-lender contract was in effect at the time of the injury.
Travelers Ins. v. Precision Cabinets, Inc., 2012 WL 938025, —N.E.2d —- (Ill.App. 2 Dist., 2012), No. 2-11-0258WC.
