4-9-12; Practice tip for our Employee Lending-Borrowing Readers—all leased employees are covered under the lender’s workers’ compensation policy when leased to the borrower even when the policy...

Precision Cabinets entered into a contract with Employers Consortium, Inc. (ECI), whereby ESI was responsible for, among other things, paying wages to leased employees and paying for workers’ compensation insurance. ECI secured a workers’ compensation policy from Travelers Insurance under its own name covering leased workers to only those ECI clients specifically endorsed under the policy. Precision was not specifically endorsed until after claimant was injured.

Claimant worked for Precision before the parties entered into the contract and after the parties contracted, ECI directly paid claimant’s wages. Claimant was injured after the parties entered into the contract but before Precision was specifically endorsed under the Travelers policy. It was undisputed claimant suffered an injury arising out of and in the course of his employment with Precision.    

Relying on section 30 of the Employee Leasing Company Act, Travelers argued ECI failed to secure an endorsement adding Precision to its policy and thus the Travelers policy did not cover the claimant on the date of injury. Section 30 states when a workers’ compensation policy written to cover leased employees is issued to the lessor as the named insured, the lessee shall be identified thereon by the attachment of an appropriate endorsement indicating that the policy provides coverage for leased employees.

Relying on section 4(a)(3) of the Illinois Workers’ Compensation Act and invoking statutory interpretation to override section 30 of Employee Leasing Company Act, the Appellate Court, Second District held, by choosing to purchase workers’ compensation coverage, ECI purchased coverage for all its employees and ECI’s failure to secure an endorsement adding Precision to the Travelers policy until after the date of injury was ineffective to withdraw the claimant from the operation of the Act.

Section 4(a)(3) states “every policy of an insurance carrier, insuring the payment of compensation under this Act shall cover all the employees and the entire compensation liability of the insured” and “any provisions in any policy, or in any endorsement attached thereto, attempting to limit or modify in any way, the liability of the insurance carriers issuing the same except as otherwise provided herein shall be wholly void.” 

As a practice point we want to emphasize the Appellate Court went to great lengths to ensure coverage to provide financial protection for the interruption or termination of a worker’s earning power. The Appellate Court hung its hat on the trusty ol’ legislative intent reasoning—i.e., a court must consider the plain meaning of the statute giving effect to the evil to be remedied and the purpose to be achieved. Here, the Appellate court read Traveler’s policy to include an unendorsed client, making sure no “evil” was done.

If you need the cite for this ruling, send a reply. This article was researched and written by Michael J. Danielewicz, J.D. and Sean C. Brogan, J.D. Please do not hesitate to contact them at mdanielewicz@keefe-law.com or sbrogan@keefe-law.com.