Last November, Partner Jack Shanahan argued before the Illinois Supreme Court in a case in which the appellate court ruled that the Illinois Insurance Guaranty Fund is obligated to make payments on behalf of a self-insured employer whose excess insurer became insolvent.  You can read our original post and see video of the argument before the court here.

In the case, as summarized and reported by our friends at the Illinois State Bar Association, the Illinois Supreme Court found no distinction between primary and excess workers’ compensation policies in applying the workers’ compensation exception to the statutory cap of the Illinois Guaranty Fund.  The court ruled in favor of an employer obligated to pay lifetime benefits to a seriously injured employee, where the employer’s excess insurer became insolvent.

The employer, Wells Manufacturing, the predecessor of Skokie Castings, had sued the Fund when it refused to pay the claim after reaching the $300,000 statutory cap applicable to the Fund under the statute, 215 ILCS 5/537.2 (West 2010).  Wells contended that the statutory exemption from the cap “for any workers compensation claims” required the Fund to shoulder the financial burden above the statutory limit.  The circuit court, appellate court, and supreme court agreed with Wells.  Observing the purpose of the fund – to protect policy holders of insolvent insurers and injured third parties making claims under policies of insurers who become insolvent – the supreme court characterized the Fund as a “substitute for the defunct insurer,” in this instance, Home Insurance.  The supreme court determined that the claim in question qualified as a covered workers’ compensation claim, and thus fell within the exception to the statutory cap, based on Home’s agreement to help Wells pay workers’ compensation awards granted by the Industrial Commission pursuant to the Workers’ Compensation Act.  In the court’s view, characterizing this claim differently based on the excess carrier’s obligation to reimburse the employer for payments made to an injured employee rather than to pay the employee directly would place mechanics over substance.

The court’s opinion can be found here.