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January 3, 1973


The opinion of the court was delivered by: Bauer, District Judge.


This cause comes on the defendant's motion to dismiss Count V of the Amended Complaint.

The plaintiff is Advance Labor Services, Inc. ("Advance"), an Illinois corporation engaged in the business of providing temporary employees to various employers throughout Illinois. The defendant is Hartford Accident and Indemnity Company ("Hartford"), a Connecticut corporation having its principal place of business in a state other than the State of Illinois. The amount in controversy exceeds $10,000, exclusive of interest and costs. Jurisdiction is thus properly based upon diversity of citizenship, 28 U.S.C. § 1332.

The following facts are relevant to the proper disposition of the instant motion. In early 1969, Advance having been refused workmen's compensation and occupational disease insurance by at least three different insurance carriers, went into Illinois' "assigned risk pool". Pursuant to Ill.Rev.Stat. ch. 73 § 1083, the Illinois Industrial Commission selected Hartford as Advance's carrier for such insurance. Under § 1083 Hartford was obligated to offer Advance a "standard policy" containing "only the usual and customary provisions found in such policies" and covering:

  ". . . the entire liability of [Advance] to pay
  compensation to employees under both the Workmen's
  Compensation Act and Workmen's Occupational Diseases
  Act as respects the entire business operations of
  [Advance] within this State."

Under the Illinois Workmen's Compensation Act, where an employer loans the services of his employee to another, both the loaning employer and the borrowing employer are liable for injuries sustained by a loaned employee, Ill.Rev.Stat. ch. 48 § 138.1(a)(4). Thus, if an Advance employee sustains a compensable injury while working for a customer of Advance, both Advance and the customer would be jointly and severally liable for benefits under the Act. However, § 138.1(a)(4) further provides that:

  ". . . such loaning employer is in the absence of
  agreement to the contrary entitled to receive from
  such borrowing employer full reimbursement for all
  sums paid or incurred pursuant to this paragraph . .

Prior to the time that Hartford's master policy was sent to Advance but subsequent to the payment of the premium, Hartford issued to certain Advance customers certificates of insurance containing the following typed language which had been added to the printed form:

  "The Company hereby agrees to indemnify and hold
  harmless any individual, partnership or corporation
  who contracts to use the services of Advance Labor
  Services, Inc. and their Workmen's Compensation and
  Occupational Disease Insurors against any and all
  losses, costs and expenses arising out of claims
  brought under the provisions of the Workmen's
  Compensation Act or the Workmen's Occupational
  Diseases Act of the State of Illinois by employees
  who, at the time of an alleged accident or exposure
  to disease, were carried on the payroll of Advance
  Labor Services, Inc." (See Exhibit "B" of the

Certificates containing such language were issued during the entire first policy year, February 15, 1969 to February 15, 1970. The policy actually issued to Advance by Hartford, a standard printed policy used for all employers regardless of the business they are engaged in, contained the following clause:

  "12. Subrogation: In the event of any payment under
  this policy, the Company shall be subrogated to all
  rights of recovery therefor of the insured and any
  person entitled to the benefits of this policy
  against any person or organization, and the insured
  shall execute and deliver instruments and papers and
  do whatever else is necessary to secure such rights.
  The insured shall do nothing after loss to prejudice
  such rights. (See Exhibit "A" attached to the

In early November, 1969, Hartford offered to insure Advance for a new policy year beginning February 15, 1970. Advance accepted the offer in December, 1969 by tendering $17,440.00 to Hartford.

In mid-January, 1970, Hartford sent letters to two Advance customers stating that the insurance company would no longer indemnify or hold them or their insurors harmless from workmen's compensation or occupational disease claims. From that date, Hartford has refused to issue certificates of insurance ...

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