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Illinois Insurance Guaranty Fund v. Liberty Mutual Insurance Co.

Court of Appeals of Illinois, First District, Second Division

November 12, 2013

ILLINOIS INSURANCE GUARANTY FUND, Plaintiff-Appellant,
v.
LIBERTY MUTUAL INSURANCE COMPANY, Defendant, and ZURICH AMERICAN INSURANCE COMPANY, and INTERLAKE MATERIAL HANDLING, Defendants-Appellees.

Held [*]

In an action arising from the workers’ compensation benefits received by a loaned employee after the lending employer’s workers’ compensation insurer was liquidated, the trial court properly dismissed the action filed by the Illinois Insurance Guaranty Fund seeking reimbursement from the borrowing employer’s workers’ compensation insurer for the benefits the Fund paid to the injured worker after the liquidation, since the liquidated insurer had no rights against the borrowing employer’s insurer that could have been passed to the Fund; furthermore, due to the passage of time, any action the liquidated insurer could have had against the borrowing employer's insurer would have expired.

Appeal from the Circuit Court of Cook County, No. 11-L-6510; the Hon. Michael B. Hyman, Judge, presiding.

Locke Lord, LLP (Rowe W. Snider and Margaret M. Schuchardt, of counsel), and Stone & Johnson, Chtrd. (J. Murray Pinkston III, of counsel), both of Chicago, for appellant.

Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC, of Chicago (BrianA. O’Gallagher and Brandt W. Allen, of counsel), for appellees.

Justices Harris and Pierce concurred in the judgment and opinion.

OPINION

QUINN, PRESIDING JUSTICE

¶1 I. INTRODUCTION

¶2 The circuit court correctly ruled in favor of the borrowing employer's insurance company on its motion to dismiss for failure to state a claim in an action brought by the Illinois Insurance Guaranty Fund (IIGF) seeking reimbursement from the borrowing insurance company for workers' compensation benefits IIGF paid to an injured worker after the insurance company for the lending employer that was obligated to make payments was liquidated. The additional defense of the expiration of the statute of limitations, as well as other defenses raised by the borrowing employer's insurance company, were also valid bases for dismissal.

¶3 II. BACKGROUND

¶4 Plaintiff, IIGF, was statutorily created in 1971 to provide protection for certain claims of policyholders under certain insurance policies issued by IIGF member companies that become insolvent. 215 ILCS 5/532 et seq. (West 2010). Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund, 2013 IL 113873, ¶1. This action concerns IIGF's efforts to attempt to be reimbursed for workers' compensation payments from a company that borrowed an employee after the insurance company for the employee's lending employer became insolvent.

¶5 IIGF's second amended complaint alleges John Earley (Earley) was hired by TGI Group on December 2, 2000. It further alleges that on December 19, 2000, Earley was performing work as a borrowed employee for Interlake Material Handling (Interlake) pursuant to a written contract between TGI Group and Interlake, although IIGF did not have any contract in its possession between TGI Group and Interlake. On that day, Earley was involved in a workplace accident which resulted in a workers' compensation claim. Earley's employer, TGI Group, had a workers' compensation policy issued by Legion Insurance Company (Legion). Legion made certain workers' compensation payments to Earley on behalf of Earley's employer, TGI Group, until Legion's date of liquidation on July 28, 2003. IIGF stepped in and began paying Earley his workers' compensation benefits and continues to pay Earley to the present time.

¶6 On July 17, 2008, almost five years after it took over Earley's payments, IIGF filed its original complaint, which was amended on February 9, 2009. Almost three years after that, on January 19, 2012, IIGF filed a second amended complaint, which is the subject of this appeal. No allegations were made against the named defendant, Liberty Mutual Insurance Company, in the second amended complaint although IIGF named it in the caption. The second amended complaint sought reimbursement from defendants Zurich American Insurance Company (Zurich) and Interlake under a workers' compensation policy Zurich issued to Interlake, Earley's alleged borrowing employer on the date of the accident. Specifically, IIGF sought reimbursement for all workers' compensation payments IIGF had made to Earley, reimbursement for IIGF's defense in Earley's workers' compensation claim, and a judgment that Zurich is responsible for all workers' compensation benefits payable to Earley in connection with the injuries Earley sustained on December 19, 2000.

ΒΆ7 IIGF further alleged in the second amended complaint that both Earley's presumed lending employer, TGI Group, and his borrowing employer, Interlake, are jointly and severally liable for Earley's workers' compensation benefits. It further alleged that the Zurich policy issued to Interlake is "other insurance" as that term is defined under the Illinois Insurance Code (215 ILCS 5/546(a) (West 2010)) and is, therefore, ...


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