Workers’ Compensation Act Does Not Require Borrowing Employer to Provide Insurance when Employee Leasing Company Provided Insurance
In Illinois Insurance Guaranty Fund v. Virginia Surety Co., Janusz Szaradzinski was injured on the job while his employer, T.T.C. Illinois (“T.T.C”), leased him to MGM Company, Inc. (“MGM”). The workers’ compensation insurer for T.T.C. became insolvent. The Illinois Insurance Guaranty Fund (“the Fund”) made payments to Szaradzinski and then filed this action for reimbursement from MGM’s workers’ compensation insurer, Virginia Surety Company, Inc. (“Virginia Surety”). T.T.C. was a temporary employment agency which loaned Szaradzinski and other workers to MGM. T.T.C. was contractually responsible for paying Szaradzinski’s salary and maintaining workers’ compensation coverage.
Szaradzinski was at MGM’s site, performing MGM’s work, when a tire he was inflating exploded. It caused nose and skull fractures which required emergency medical care, surgery, and his hospitalization for about 10 days. Szaradzinski received medical expenses and total temporary disability benefits of about $400 per week for about a year, as provided by the Illinois Workers’ Compensation Act (“Act”). Approximately $91,000 of the benefits Szaradzinski received were from the the Fund, after T.T.C.’s workers’ compensation insurer, Credit General Insurance Company, was involuntarily dissolved by the Illinois Insurance Department. The Fund filed suit against MGM and its insurer, Virginia Surety.
The court reviewed whether a borrowing employer’s insurer was liable for benefits paid by the Fund after employee leasing company’s insurer became insolvent. The Fund had relied on a combination of three statutes: Section 546(a) of the Code, Section 1(a)(4) of the Act, and Section 4(a)(3) of the Act. The plain terms of section 546(a) of the Code do not create “other insurance” coverage–the legislation only requires the exhaustion of a policy which covers “the same facts, injury, or loss that gave rise to the covered claim against the Fund.” 215 ILCS 5/546 (West 2000).
Section 1(a)(4) of the Act, imposed three key provisions regarding workers’ compensation liability in this loaned-employee arrangement: (1) both MGM and T.T.C. were made liable for Szaradzinski’s workers’ compensation; (2) the lender was given a right of action against the borrower to recover any compensation it was required to pay to discharge this liability; and (3) the employers were authorized to reverse this payment priority. When the Illinois legislature specified that the borrowing employer was primarily liable, but the two employers may agree to reverse this payment priority, the legislature ensured that one of the two employers would be financially prepared for employee accidents and that an injured employee would not lose his or her rights to benefits merely because he or she sought compensation from the wrong employer. The Illinois legislature did not require both a lending employer and borrowing employer to procure identical coverage for the same employees. The legislature did not mandate duplicate coverage and premiums in a loaned worker arrangement, because other sections of the Act limit the amount of compensation a worker may receive, bar any common law or statutory right to recovery from the employer except as provided under the Act, and do not allow a worker to receive a second recovery for the same injuries. Furthermore, regardless of which of the two employers pays the workers compensation benefits, the exclusivity provision of the Act immunizes both the borrowing employer and the lending employer from further claims. Accordingly, the court did not construe Section 1(a)(4) of the Act to have required MGM to duplicate the coverage that T.T.C. was contractually obligated to obtain for employees it was lending to MGM.
The terms of Section 4(a)(3) of the Act require that an employer’s policy “cover all the employees and the entire compensation liability of the insured,” or authorizes the employer to split coverage between two insurers or between one insurer and self-insurance, provided “the entire compensation liability of the employer to employees working at or from one location shall be insured in one such insurance carrier or shall be self-insured.” Insurance carrier also cannot limit or modify its liability. There was not enough present to the court to support the proposition that a borrowing employer must duplicate the coverage that a lending employer, in apparent compliance with Section 4(a)(3), has procured for all of its employees. 820 ILCS 305/4(a)(3) (West 2000).
Thus, none of the three statutes the Fund relied upon shifted liability from T.T.C.’s defunct insurer to MGM’s insurer. The court held that the statutory language is clear and unambiguous, and there were no terms which could be construed to require that when a lending employer has workers’ compensation coverage, a borrowing employer obtain duplicative coverage, pay duplicate premiums, or increase its self-insured retention to cover borrowing employees. And, given that a double recovery is not permitted, we find that duplicative coverage over the same workers would not further the purpose of the three statutes or the overall purpose of the Act.
Illinois Insurance Guaranty Fund v. Virginia Surety Co., 979 N.E.2d 503 (Ill.App. 1st Dist. 2012).
