Illinois Insurance Guaranty Fund v. Virginia Surety Company, Inc.
979 N.E.2d 503
Ill. App. Ct.2012Background
- Szaradzinski, a loaned employee from T.T.C., was injured while working for MGM; the insolvent insurer for T.T.C. prompted the Illinois Insurance Guaranty Fund to pay benefits and seek reimbursement from MGM's insurer, Virginia Surety.
- Virginia Surety argued MGM’s policy covered only MGM employees and did not include borrowed workers; the policy premia and underwriting file suggested coverage tailored to MGM’s own employees and leased workers were excluded.
- The Fund relied on section 1(a)(4) of the Workers’ Compensation Act and section 546(a) of the Illinois Insurance Code to pursue reimbursement from Virginia Surety for the same- facts claim.
- Virginia Surety relied on its underwriting file and the Adjustable Forms precedent to argue that the River East wrap-up arrangement did not create “other insurance” for borrowed employees and that no premium was retained for the borrowed workers.
- The circuit court granted summary judgment for the Fund; on appeal, the Illinois Appellate Court reversed, holding that Virginia Surety’s policy was not “other insurance” under 546(a) and that the borrowing/lender coverage did not require duplicative coverage or premium payments under the Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Virginia Surety’s policy “other insurance” under 546(a)? | Fund: policy covers borrowed employees must be exhausted first. | Virginia Surety: policy covers MGM employees only; not “other insurance.” | No; policy is not “other insurance” under 546(a). |
| Does 1(a)(4) require duplicative coverage for loaned employees? | Fund: lender and borrower must duplicate coverage. | Virginia Surety: duplication not required; Exclusion applies. | Duplication not required; no duplicative coverage mandated. |
| Does 4(a)(3) require including borrowed employees in MGM’s policy? | Fund: borrowed employees must be insured under MGM’s policy. | Virginia Surety: MGM need not cover borrowed employees. | No; section 4(a)(3) does not compel duplicative coverage for borrowed employees. |
| Does Evans govern the liability shift for loaned employees here? | Evans supports joint liability of loaning and borrowing employers. | Evans not controlling on coverage/liability here. | Evans not controlling; does not compel Fund recovery. |
Key Cases Cited
- Evans v. Abbott Products, Inc., 150 Ill. App. 3d 845 (Ill. App. 1st Dist. (1986)) (discusses loaned-employee liability framework; not authority on insurance coverage here)
- Adjustable Forms, 382 Ill. App. 3d 663 (Ill. App. 1st Dist. (2008)) (wrap-up policy; insurer not liable for borrowed-employee injury where no premium retained for River East site)
- Carroll Tiling Service, Inc., 342 Ill. App. 3d 883 (Ill. App. 2d Dist. (2003)) (section 4(a)(3) coverage cannot exclude a covered employee; broad application of Act coverage)
- Precision Cabinets, Inc., 2012 IL App (2d) 110258WC (Ill. App. 2d Dist. (2012)) (temporary agency coverage extends to client’s site; endorsements matter)
- Mason v. John Boos & Co., 2011 IL App (5th) 100399 (Ill. App. 5th Dist.) (duplication not required where benefits fixed by Act)
- Roth v. Illinois Insurance Guaranty Fund, 366 Ill. App. 3d 787 (Ill. App. 4th Dist. (2006)) (funds are last-resort cross-offset; public policy in favor of solvent insurer)
- Farmland Mutual Insurance Co., 274 Ill. App. 3d 671 (Ill. App. 1st Dist. (1995)) (Fund as last resort; not insurers’ windfall)
- Barbee v. Illinois Insurance Guaranty Fund, 395 Ill. App. 3d 211 (Ill. App. 1st Dist. (2009)) (insurer-liquidation protections; Fund’s role limited)
- Kelsay v. Motorola, Inc., 74 Ill. 2d 172 (Ill. (1979)) (workers’ compensation no-fault framework; statutory protections)
- General Casualty Co. of Illinois v. Carroll Tiling Service, Inc., 342 Ill. App. 3d 883 (Ill. App. 2d Dist. (2003)) (illustrative of 4(a)(3) scope)
- Travelers Insurance v. Precision Cabinets, Inc., 2012 IL App (2d) 110258WC (Ill. App. 2d Dist. (2012)) (endorsement scope and borrowed-employee coverage)