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03/23/94 TEXTILE MAINTENANCE v. INDUSTRIAL

March 23, 1994

TEXTILE MAINTENANCE, APPELLANT,
v.
THE INDUSTRIAL COMMISSION OF ILLINOIS, FARMERS INSURANCE GROUP, AND OFELIA GONZALEZ, APPELLEES.



Appeal from the Circuit Court of Kane County. No. 92-MR-277. The Honorable R. Peter Grometer, Judge Presiding.

Rehearing Denied July 28, 1994.

Rakowski, Woodward, Slater, Rarick, McCULLOUGH

The opinion of the court was delivered by: Rakowski

JUSTICE RAKOWSKI delivered the opinion of the court:

This appeal arises from an accident sustained by Ofelia Gonzalez (claimant) on July 5, 1988. The claimant filed an application foradjustment of claim pursuant to the Workers' Compensation Act (Act) (Ill. Rev. Stat. 1987, ch. 48, par. 138.1 et seq. (now codified, as amended, at 820 ILCS 305/1 et seq. (West 1992))) against Textile Maintenance (employer). Farmers Insurance Group (Farmers) appeared at the arbitration hearing as an additional respondent and disputed coverage for the claimant's July 5, 1988, accident, asserting that there had been effective cancellation of the policy on June 7, 1988. In addition to the coverage dispute, the employer argued that the Industrial Commission (Commission) did not have jurisdiction to interpret its insurance policy with a third party. The Commission affirmed the arbitrator's finding on the coverage issue and also concluded that it was authorized by the Act to interpret insurance policies between the employer and a third party. On administrative review, the circuit court confirmed the decision of the Commission. The issues on appeal are: (1) whether the Commission has jurisdiction to construe, interpret, and rule on the language of a workers' compensation insurance policy between the employer and the insurance company; (2) whether the notice of cancellation complied with the Illinois Insurance Code, the Act, and the employer's workers' compensation policy; and (3) whether the trial court properly interpreted Farmers' workers' compensation policy when it applied the 10-day, rather than the 60-day, cancellation date.

At the arbitration hearing, the claimant testified that on July 5, 1988, she caught her left hand in a shirt sleeve press and sustained burns to four fingers. She was hospitalized for a short time and skin grafts were applied to the burned areas. She subsequently returned to work on August 24, 1988, and was paid 7 3/7 weeks temporary total disability by Farmers prior to its notice of cancellation being acknowledged by the National Counsel of Compensation Insurance (NCCI). NCCI is an agent of the Commission whose function is to compile and monitor insurance information for the Commission. The claimant also incurred $10,388.40 in medical expenses which have not been paid by the employer or Farmers.

Bonnie Ropp testified for Farmers that she had been employed with the insurance group since 1977. In June 1988 she was working as commercial account and records supervisor and was responsible for supervising the billing and maintenance of policies and custody and care of the individual customer files. She stated that Farmers was composed of a number of companies. Truck Exchange Insurance (TEI) and Mid-Century Insurance Company (MCI) were the two workers' compensation carriers. Ropp stated that she handled matters for both companies.

According to Ropp's testimony, she sent the employer a "Notice of Cancellation" on May 25, 1988, because of the nonpayment of premiums. It was subsequently established that the notice identified MCI as the issuing company even though the company which issued the policy was TEI. (MCI did not become the employer's workers' compensation insurance carrier until August 1988.) The notice did contain the correct policy number, cancellation date, and the statement that the payroll information and premium payment were overdue. The post office stamp with the date of mailing was also on the notice. Although the employer notified Farmers in February 1988 that its address changed from Schaumburg, Illinois, to Hoffman Estates, the first notice was sent to the employer on February 10, 1988, at the Schaumburg address. This notice requested payroll information by March 5, 1988.

After mailing the notice of cancellation to the employer on May 25, 1988, Ropp sent a similar notice to NCCI. Penny Fettis of NCCI acknowledged receipt of the notice of cancellation for the nonpayment of premiums. The notice was to take effect on June 7,

1988. Pursuant to section 4(b) of the Act, coverage would be provided for 10 days after this date, until June 17, 1988. A notice that the policy was actually cancelled was mailed to the employer on June 16, 1988. The policy was subsequently reinstated on a prospective basis as of July 21, 1988, when the required payroll information and premiums were received. Therefore there was a lapse in coverage between June 17, 1988, and July 21, 1988. (The date of the claimant's accident was July 5, 1988.)

The employer first contends that the Commission did not have jurisdiction to determine disputed insurance coverage issues between an employer and the insurer of its workers' compensation policy and that it acted outside the scope of its authority.

An administrative agency is a creature of statute and has no general or common-law powers. ( Abatron, Inc. v. Department of Labor (1979), 162 Ill. App. 3d 697, 700, 515 N.E.2d 1336, 114 Ill. Dec. 65.) Any authority claimed by the agency must arise from the express language of the statute or be incident to the authority conferred by the legislature. ( Abatron, Inc., 162 Ill. App. 3d at 700, 515 N.E.2d at 1338.) The primary rule of statutory construction is to ascertain and give effect to the legislative intent. In re Marriage of Logston (1984), 103 Ill. 2d 266, 277, 469 N.E.2d 167, 82 Ill. Dec. 633.

The Commission is an administrative agency which was created by legislative enactment for the purpose of administering the Act. ( Michelson v. Industrial Comm'n (1941), 375 Ill. 462, 466, 31 N.E.2d 940.) The title of the Act provides that it is an Act to "promote thegeneral welfare of the people of this State by providing compensation for accidental injuries or death suffered in the course of employment * * *. Section 18 of the Act provides:

"All questions arising under this Act, if not settled by agreement of the parties interested therein, shall, except as otherwise provided, be determined by the Commission." (Ill. Rev. Stat. 1987, ch. ...


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