Thursday, November 14, 2013

IL Guarantee Fund must pay ongoing benefits owed by insolvent excess comp carrier

In a recent Illinois Supreme Court decision the question was who was going to keep paying a PTD  award related to a 1985 accident   with more than a million dollars in prior benefits when the excess carrier became insolvent and the Guarantee Fund refused to pay any more.  The case is Skokie Castings v Illinois Ins. Guarantee Fund, 2013 IL 113873 (October 18, 2013).

The case involved an appeal by the Fund from summary judgment by the circuit court that it had to continue to pay benefits and reimburse the employer for benefits paid after its refusal.   The Guarantee Fund asserted it had no further obligations because of a  $300,000 cap on Guarantee Fund claims and an exception did not apply for "any workers compensation claims"  (215 ILCS 5/537.2) because the case involved an excess carrier. 

The employer had an excess policy with Home Ins.  It paid the first $200,000 based on its self-retention limits.  Home became insolvent before fulfilling its contractual obligations.    The Illinois Guarantee Fund stepped in and paid the next $300,000, and claiming the cap of 215 ILCS 5/537.2 applied.    The Fund refused to pay any more claiming the cap applied and the employer then stepped in and paid the next $500,000.

The court indicated the issue was resolved as a matter of insurance law. 

"For purposes of the Fund, a covered workers’ compensation claim is therefore an unpaid claim for a loss “arising out of and within the coverage of” a workers’ compensation insurance policy to which this portion of the Insurance Code applies and which is in force at the time of the occurrence giving rise to the unpaid claim."  The court concluded that the cap did not apply and the Fund's attempt to distinguish primary and excess coverage was untenable. The Guarantee Fund's should honor the excess carrier's obligations even if  they may exceed its $300,000 cap for non-comp claims. 
A dissent found the conclusion unsupported as a matter of statutory construction and contract interpretation  but praised the explanation of comp benefits as "intellectually enriching" and "alluring in its simplicity."