The opinion of the court was delivered by: Bauer, District Judge.
MEMORANDUM OPINION AND ORDER
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 ...