Legal Aspects of Workers’ Legal Aspects of Workers’ Compensation; Employer Compensation; Employer

Liability; and General LiabilityLiability; and General Liability

Illinois Judicial SystemIllinois Judicial SystemCircuit Courts Circuit Courts (DuPage County is (DuPage County is 1818thth Circuit) Circuit)

Appellate Courts Appellate Courts (DuPage is in 2(DuPage is in 2ndnd District) 5 totalDistrict) 5 total

Illinois Supreme Illinois Supreme Court (only one)Court (only one)

Federal CourtsFederal CourtsDistrict CourtsDistrict Courts

Circuit Court of Circuit Court of Appeals (Illinois is Appeals (Illinois is part of 7part of 7thth Circuit) Circuit)

U.S. Supreme U.S. Supreme CourtCourt

All Federal Court All Federal Court Decisions are Decisions are publishedpublished

Illinois Industrial CommissionIllinois Industrial CommissionNot a court per seNot a court per se

Arbitrators are not Arbitrators are not judges and most judges and most times do not have times do not have a legal educationa legal education

It is an It is an administrative administrative forumforum

Decisions are not Decisions are not publishedpublished

Has it’s own Has it’s own internal appeal internal appeal processprocess

Final appeals can Final appeals can be made to the be made to the Illinois Circuit CourtIllinois Circuit Court

Workers CompensationWorkers CompensationOriginally intended Originally intended to be the exclusive to be the exclusive remedy for injured remedy for injured employeesemployees

Employees Employees exchange statutory exchange statutory limits on damages limits on damages in return for a “no in return for a “no fault” systemfault” system

Workers Comp PolicyWorkers Comp PolicyPart A: Coverage for Part A: Coverage for employee injuriesemployee injuries

Statutory Limits; no Statutory Limits; no aggregateaggregate

Injury must have a Injury must have a “causal connection” to “causal connection” to the workthe work

““in course of” and in course of” and “arising out of”“arising out of”

Part B: Employers Part B: Employers LiabilityLiability

Covers “third party” Covers “third party” claims against claims against employer as a result employer as a result of injury to an of injury to an employeeemployee

Bodily injury may be Bodily injury may be from accident or from accident or disease. Bodily injury disease. Bodily injury includes deathincludes death

Employer’s Liability ClaimsEmployer’s Liability ClaimsContribution – Joint Contribution – Joint & Several Liability& Several Liability

Tender- Breach of Tender- Breach of Contract/Failure to Contract/Failure to Procure InsuranceProcure Insurance

Adjudication of Adjudication of LiensLiens

Joint & Several LiabilityJoint & Several LiabilityPublic Policy: To allow plaintiff (injured Public Policy: To allow plaintiff (injured party) opportunity to collect full damages party) opportunity to collect full damages from injuryfrom injuryIllinois Law: Any defendant that is 25% or Illinois Law: Any defendant that is 25% or more at fault can be required to pay 100% more at fault can be required to pay 100% of the damages awarded.of the damages awarded.As of 6/4/2003: The employers % of fault is As of 6/4/2003: The employers % of fault is not included in this calculationnot included in this calculationLegislation is pending making this even Legislation is pending making this even more onerous for defendants more onerous for defendants

ContributionContribution

The right to recover from other The right to recover from other defendants their proportional share defendants their proportional share of damages that a defendant has of damages that a defendant has paid as a result of joint and several paid as a result of joint and several liability.liability.

Dinner tab analogy.Dinner tab analogy.

Stare DecisisStare DecisisLatin: To abide by, or adhere to decided Latin: To abide by, or adhere to decided cases.cases.

All Appellate Court and Supreme Court All Appellate Court and Supreme Court decisions are published.decisions are published.

Circuit Courts follow Appellate decisions in Circuit Courts follow Appellate decisions in their district and give strong weight to their district and give strong weight to decisions from other districtsdecisions from other districts

Supreme Court decisions are the law of Supreme Court decisions are the law of the land. Everyone follows the land. Everyone follows

Significant Case LawSignificant Case LawKotecki – Employer is only liable to the Kotecki – Employer is only liable to the extent of it’s worker’s compensation extent of it’s worker’s compensation exposure called the “Kotecki cap”exposure called the “Kotecki cap”

Reason: Workers’ comp is supposed to be Reason: Workers’ comp is supposed to be the exclusive remedythe exclusive remedy

Problem: “Kotecki cap could leave Problem: “Kotecki cap could leave plaintiff’s short on collecting damages or plaintiff’s short on collecting damages or “unfairly penalize” other defendants“unfairly penalize” other defendants

Example:Example:

Waiving the Kotecki CapWaiving the Kotecki Cap

““Braye” DecisionBraye” Decision

Employer waives it’s cap by signing a Employer waives it’s cap by signing a construction contract which provides construction contract which provides indemnification to an upstream indemnification to an upstream contractor.contractor.

Question: Who pays for the new Question: Who pays for the new “Kotecki Gap”“Kotecki Gap”

Example:Example:

Kotecki covered or notKotecki covered or not““Christy-Foltz” if insured Christy-Foltz” if insured contractually agrees to accept contractually agrees to accept liability then the Employers Liability liability then the Employers Liability exclusion “loss assumed by contract” exclusion “loss assumed by contract” denies coverage.denies coverage.““Michael Nicholas” the insured Michael Nicholas” the insured contract exception to the contractual contract exception to the contractual liability exclusion in the CGL policy liability exclusion in the CGL policy triggers coverage for Braye waivers.triggers coverage for Braye waivers.

More ComplicationsMore ComplicationsBoth Christy-Foltz Both Christy-Foltz and Michael and Michael Nicholas were Nicholas were Appellate Court Appellate Court decisionsdecisions

A different A different outcome was outcome was reached by another reached by another appellate court on appellate court on Michael NicholasMichael Nicholas

Virginia Surety CaseVirginia Surety Case

Illinois Supreme Court DecisionIllinois Supreme Court Decision

““Law of the land” effective March 26, Law of the land” effective March 26, 20072007

Affects suits against employers under Affects suits against employers under both CGL and Employers Liability (EL) both CGL and Employers Liability (EL) PoliciesPolicies

Virginia Surety Legal StuffVirginia Surety Legal StuffContribution liability of an employer in suit Contribution liability of an employer in suit brought by an employee is always to brought by an employee is always to recover solely for the employer’s own tort recover solely for the employer’s own tort liabilityliabilityTherefore; the CGL exception to the Therefore; the CGL exception to the contractual liability exclusion “insured contractual liability exclusion “insured contract” is not triggered because the contract” is not triggered because the contract is not assuming the tort liability of contract is not assuming the tort liability of another.another.““Michael Nicolas” is overruled.Michael Nicolas” is overruled.

Virginia Surety con’tVirginia Surety con’t

Employer’s waiver of Kotecki is a Employer’s waiver of Kotecki is a waiver of an “affirmative defense”, waiver of an “affirmative defense”, and is not a “loss assumed by and is not a “loss assumed by contract, so the exclusion to the EL contract, so the exclusion to the EL opolicy does not apply.opolicy does not apply.

Christy-Foltz is overruledChristy-Foltz is overruled

Employers Liability Policy covers Employers Liability Policy covers Kotecki gap.Kotecki gap.

Virginia Surety RamificationsVirginia Surety RamificationsEL policy limits EL policy limits need to be need to be adequate to cover adequate to cover true exposuretrue exposureUmbrella coverage Umbrella coverage limits very limits very importantimportantResponse to Response to request for Kotecki request for Kotecki coverage.coverage.

Insurance Company PositionsInsurance Company PositionsWest Bend General Counsel: Virginia West Bend General Counsel: Virginia Surety case provides Kotecki coverage Surety case provides Kotecki coverage under the EL policyunder the EL policyHastings General Counsel; Virginia Surety Hastings General Counsel; Virginia Surety case creates a new gap in Kotecki case creates a new gap in Kotecki coverage (since changed opinion).coverage (since changed opinion).Zurich Construction: We have always Zurich Construction: We have always added contractual endorsement to added contractual endorsement to employer’s liability policy covering Kotecki employer’s liability policy covering Kotecki and excluding coverage under the CGLand excluding coverage under the CGL

Prime Meridian IssuesPrime Meridian IssuesCertificates and alert infoCertificates and alert infoReview of client EL limits and Review of client EL limits and umbrella coverageumbrella coverageMemo to clients on Virginia Surety Memo to clients on Virginia Surety CaseCaseNeed to look at subcontractors Need to look at subcontractors insurance limits and adequacy, both insurance limits and adequacy, both our GC’s and subs who sub out work our GC’s and subs who sub out work (R&R) etc.(R&R) etc.