Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund

2013 IL 113873

IN THE

SUPREME COURT

OF

THE STATE OF ILLINOIS

(Docket No. 113873)

SKOKIE CASTINGS, INC., as Successor to Wells Manufacturing

Company, Appellee, v. ILLINOIS INSURANCE GUARANTY

FUND, Appellant.

Opinion filed October 18, 2013.

JUSTICE KARMEIER delivered the judgment of the court, with

opinion.

Justices Freeman, Garman, Burke, and Theis concurred in the

judgment and opinion.

Chief Justice Kilbride dissented, with opinion.

Justice Thomas dissented, with opinion.

OPINION

¶1 When an insurance company authorized to transact business in

Illinois becomes insolvent and is unable to pay claims under policies

it has issued to its insureds, the Illinois Insurance Guaranty Fund will

step in to pay those claims after an order has been entered liquidating

the company. See 215 ILCS 5/532 et seq. (West 2010). The Fund’s

obligation to pay covered claims is subject to certain qualifications

and limitations, including a cap on the amount it will pay on any

particular claim. That cap is inapplicable, however, to “any workers

compensation claims.” 215 ILCS 5/537.2 (West 2010).

¶2 There is no dispute that claims under policies purchased by

employers to provide primary coverage for awards granted to their

injured employees under the Workers’ Compensation Act (820 ILCS

305/1 et seq. (West 2010)) fall within the “workers compensation

claim” exemption from the statutory cap. The question presented by

this declaratory judgment action is whether claims under policies

providing excess coverage for workers’ compensation awards are

exempt as well.

¶3 On cross-motions for summary judgment filed by an employer

whose workers’ compensation carrier had been liquidated and the

Illinois Insurance Guaranty Fund (the Fund), the circuit court of Cook

County answered this question in the affirmative and concluded, inter

alia, that claims under the excess coverage policies purchased by the

employer in this case were not subject to the statutory cap, that the

Fund had improperly terminated payments for the injured employee’s

workers’ compensation award after the cap was reached, and that the

Fund was obligated to reimburse the employer for all workers’

compensation payments it had made to its injured employee following

liquidation of the employer’s workers’ compensation carrier. The

appellate court unanimously affirmed. 2012 IL App (1st) 111533. We

granted the Fund’s petition for leave to appeal. Ill. S. Ct. R. 315 (eff.

July 1, 2013). For the reasons that follow, we now affirm the

judgment of the appellate court.

¶4 BACKGROUND

¶5 The pertinent facts are undisputed. Wells Manufacturing

Company was a Skokie, Illinois, business which manufactured alloy

and gray alloy castings and ductile iron.1 In the course of its business,

Wells elected to bring itself within the coverage of the Workers’

Compensation Act (820 ILCS 305/1 et seq. (West 2010)). By making

that election, Wells did not relieve itself of any liability for the

injuries sustained by its employees. It merely immunized itself from

being sued in tort by its employees for recovery of damages for

accidental injuries they sustained arising from and in the course of

their employment. 820 ILCS 305/2, 5 (West 2010). Once the election

occurred, Wells’ employees were limited to their remedies under the

Workers’ Compensation Act. 820 ILCS 305/5(a), 11 (West 2010).

1

At some point, and the record does not show when or how, Skokie

Castings, Inc., became a corporate successor to Wells Manufacturing.

Skokie Castings initiated this litigation as Wells’ successor and is the

nominal plaintiff. Because the operative facts all involve Wells, however,

we shall refer to the plaintiff as Wells in order to avoid confusion.

-2-

¶6 Employers such as Wells which elect to avail themselves of the

provisions of the Workers’ Compensation Act must make provision

for securing payment of the compensation provided for by the statute.

They may do so by purchasing insurance providing full coverage (820

ILCS 305/4(a)(3) (West 2010)), but that is not their only option. They

may also elect to demonstrate to the Illinois Workers’ Compensation

Commission that they possess the financial resources to self-insure

(820 ILCS 305/4(a)(1) (West 2010)); they may furnish “security,

indemnity or a bond” guaranteeing payment (820 ILCS 305/4(a)(2)

(West 2010)); or they make some other arrangement satisfactory to

the Commission (820 ILCS 305/4(a)(4) (West 2010)). In addition, the

law affords them the flexibility to use any of these latter three options

(self-insuring; furnishing security, etc.; or “other”) to secure payment

of part of their obligation and then to purchase an excess coverage

policy for the remainder. 820 ILCS 305/4(a)(2), (3) (West 2010). In

this case, that is the option Wells elected to take, self-insuring in part

and purchasing workers’ compensation excess coverage from Home

Insurance Company for the remainder.

¶7 The terms of the coverage which Wells purchased from Home

Insurance were set forth in two related policies which took effect on

August 1, 1984, an “Aggregate Excess Workers’ Compensation and

Employers’ Liability Policy” and a “Specific Excess Workers’

Compensation and Employers’ Liability Policy.” The “Aggregate

Excess” policy specified generally that it would indemnify Wells for

the sums Wells actually paid for either “compensation and other

benefits required of [it] by the workers’ compensation law” or “by

reason of *** Employers’ Liability, which shall mean the liability

imposed upon [Wells] by law for damages because of bodily injury

by accident or disease, [etc.].” Correspondingly, it also afforded

coverage for, among other things, “[l]egal expenses in connection

with hearings before the State Industrial Commission” or “reasonable

legal and other expenses in defense of any claim or suit against

[Wells]” alleging employer liability, as the case might be.

¶8 The second policy, titled “Specific Excess Workers’

Compensation and Employers’ Liability Policy,” specified that Home

Insurance agreed to indemnify Wells “against excess loss, subject to

the limitations, conditions and other terms of this policy, which

[Wells] may sustain on account of *** compensation and other

benefits required of [Wells] by the Workers Compensation Law.”

Under the policy, Well’s retained limit of liability, that is, the amount

-3-

Wells had to pay out itself before Home Insurance’s obligations under

the policy were be triggered, was $200,000. The upper limit of Home

Insurance’s obligation to indemnify Wells was listed as “Statutory

Workers’ Compensation—Unlimited Employers’ Liability.”

¶9 In February of 1985, while the foregoing policies were in effect,

a Wells employee named Mona Soloky was seriously injured in the

course and scope of her employment. Soloky filed a claim for benefits

with the Illinois Industrial Commission (now the Illinois Workers’

Compensation Commission (see Pub. Act 93-721, eff. Jan. 1, 2005))

pursuant to the Workers’ Compensation Act (820 ILCS 305/1 et seq.

(West 2010)). The Commission determined that Soloky was totally

and permanently disabled and awarded her all her reasonable and

necessary medical costs plus weekly benefit payments of $394.25 for

life.

¶ 10 Wells paid the amounts awarded to Soloky by the Commission

until the $200,000 retained limit of liability set forth in its excess

coverage policies with Home Insurance was reached. Thereafter , it

looked to Home Insurance to bear the cost of Soloky’s workers’

compensation award. Home Insurance employed a third-party

administrator named the Martin Boyer Company to handle the

payments it owed under the excess coverage policies it had issued to

Wells. Through the Martin Boyer Company, Home Insurance paid

benefits to Soloky pursuant to the Commission’s award. It did so until

it became insolvent, went into receivership and was liquidated.

¶ 11 As noted at the outset of this opinion, Illinois has established the

Insurance Guaranty Fund to help protect insureds such as Wells

where, as here, their insurance carriers become insolvent and cannot

meet their policy obligations. 215 ILCS 5/532 (West 2010). All

insurance companies authorized to transact business in Illinois are

members of the Fund (215 ILCS 5/534.5 (West 2010)) and must

remain so as a condition of their doing business here (215 ILCS 5/535

(West 2010)). Home Insurance Company was such a member.

¶ 12 The Fund itself is divided into separate accounts, one for

automobile insurance and the other for all other insurance to which

provisions of the Insurance Guaranty Fund statutes apply, including

insurance covering workers’ compensation. 215 ILCS 5/535 (West

2010). Members of the Fund, i.e., all insurance companies authorized

to conduct business here, are charged an annual fee to cover the

Fund’s contingent expenses. 215 ILCS 5/537.1 (West 2010). In

addition, the Fund assesses every member of the Fund for a share of

-4-

the total amount the Fund must pay out to cover claims when a

member becomes insolvent. For purposes of calculating the

assessments, which are made annually, the two Fund accounts, auto

and other, are treated separately, but within each account no

distinction is drawn between primary and excess policies. 215 ILCS

5/537.6 (West 2010).

¶ 13 When an order of liquidation is entered against an insolvent Fund

member, the Fund has a statutory obligation to pay “covered claims”

which existed prior to entry of the liquidation order or arising within

30 days after the entry of such order, or within other specified time

frames, and subject to various conditions and limitations. 215 ILCS

5/537.2 (West 2010). For purposes of the statute, a “covered claim”

is defined to include any “unpaid claim for a loss arising out of and

within the coverage of an insurance policy to which [the law

governing the Fund applies] and which is in force at the time of the

occurrence giving rise to the unpaid claim.” 215 ILCS 5/534.3(a)

(West 2010).

¶ 14 According to the record before us, an insured whose carrier has

been liquidated invokes the Fund’s protection by submitting a “proof

of claim” form to it to document the unpaid claim for which it is

seeking benefits from the Fund. There is no question that Wells

complied with the requisite procedures, nor is there any dispute that

the amounts owed by Home Insurance under the workers’

compensation excess coverage policies purchased by Wells to help

satisfy its obligations under the Workers’ Compensation Act and

which were left unpaid when Home Insurance became insolvent and

was liquidated met the requirements of a “covered claim” under

section 534.3(a) of the Insurance Code (215 ILCS 5/534.3(a) (West

2010)), triggering the Fund’s obligations under section 537.2 (215

ILCS 5/537.2 (West 2010)). The Fund therefore honored that claim

and assumed, from Home Insurance, responsibility for payment of the

sums still due Soloky under the Commission’s award.

¶ 15 After paying approximately $250,000 to Soloky, the Fund notified

Wells of its belief that Wells’ claim against the Fund was subject to

a $300,000 cap, which the Fund anticipated would soon be reached.

The Fund indicated that once the $300,000 maximum was exhausted,

it would cease making payments toward the Soloky award and that

arrangements needed to be made to transfer responsibility for the

matter to some other person or entity. Several months later, the Fund

did as it advised Wells it planned to do and stopped the payments to

-5-

Soloky. Since that time, Wells has undertaken direct financial

responsibility for payment of Soloky’s workers’ compensation award.

Wells estimates that by 2010, when this litigation commenced, this

additional sum exceeded half a million dollars.

¶ 16 Section 537.2 of the Illinois Insurance Code (215 ILCS 5/537.2

(West 2010)) imposes certain qualifications and limitations on the

Fund’s obligations, even where, as here, a claim is covered. Among

those is that where an order of liquidation was entered on or after

January 1, 1988, and before January 1, 2011, the Fund’s obligation

shall not exceed $300,000. 215 ILCS 5/537.2 (West 2010). It is this

provision which is the basis for the Fund’s refusal to continue

payments related to Soloky’s workers’ compensation award.

¶ 17 Although Wells is once again paying the Soloky award directly,

as it did before the retention limit was reached, it has continued to

dispute the Fund’s assertion that the Fund’s financial obligations with

respect to the claims related to Soloky which were left unpaid after

Home Insurance was liquidated are subject to the foregoing statutory

$300,000 cap. Wells argues that the law contains an express

exception to the cap for “any workers compensation claims” (215

ILCS 5/537.2 (West 2010)) and asserts that the claims left unpaid

under its excess coverage workers’ compensation policies when

Home Insurance dissolved constitute such “workers compensation

claims.” In Wells’ view, the exception to the statutory cap is therefore

applicable.

¶ 18 The Fund rejected Wells’ interpretation of the law and refused to

make further payments. Wells therefore commenced this action for

declaratory judgment against the Fund in the circuit court of Cook

County pursuant to section 2-701 of the Code of Civil Procedure (735

ILCS 5/2-701 (West 2010)). Wells’ complaint requested a

determination that the $300,000 cap set forth in section 537.2 of the

Insurance Code did not and does not apply under the circumstance of

this case, that the Fund improperly terminated payments for Soloky’s

workers’ compensation award once the statutory cap was reached,

that the Fund is and remains liable for any claims left unpaid when

Home Insurance was liquidated, and that the Fund should reimburse

Wells for the sums it was required to pay toward Soloky’s workers’

compensation award after the Fund ceased payment.

¶ 19 The Fund moved to dismiss pursuant to section 2-615 of the Code

of Civil Procedure (735 ILCS 5/2-615 (West 2010)). It did not dispute

Wells’ version of the facts, nor did it challenge the legal sufficiency

-6-

of Wells’ complaint for declaratory relief. Rather, it argued that

Wells’ construction of the Insurance Code was erroneous, that the

$300,000 cap does apply here, and that Wells’ cause of action should

therefore fail on the merits.

¶ 20 Wells responded that the Fund’s motion was procedurally

improper. The Fund, in turn, argued that a motion to dismiss under

section 2-615 is an appropriate mechanism for disposing of an action

for declaratory relief on the merits. The circuit court subsequently

decided that the Fund’s motion would be treated as a motion for

summary judgment. Wells replied to it as such and filed its own

cross-motion for summary judgment.

¶ 21 A hearing on the parties’ cross-motions was conducted by the

circuit court. Supplemental briefing followed, after which the court

entered a detailed and well-reasoned written order. After setting forth

the facts and examining the applicable law, the court concluded that

Wells’ claim under its workers’ compensation excess coverage policy

fell within the plain meaning of “any workers compensation claims”

under section 537.2 of the Insurance Code and was therefore exempt

from the $300,000 cap limiting the Fund’s obligations under other

types of policies. Accordingly, it denied the Fund’s motion for

summary judgment, granted summary judgment in favor of Wells and

concluded that the Fund had improperly terminated its payment of

benefits owed to Soloky pursuant to the award granted by the

Workers’ Compensation Commission; that the Fund is liable for all

sums Wells paid to Soloky or on her behalf pursuant to her workers’

compensation award following Home Insurance’s liquidation and

must reimburse Wells for those amounts; and that the Fund

“continues to owe benefits to Soloky pursuant to the Worker’s

Compensation Commission’s Award subject to the Guaranty Fund

Act.”

¶ 22 The Fund appealed. As in the trial court, the Fund took no issue

with the facts as asserted by Wells. Its argument was simply that the

circuit court erred in concluding that Wells’ claim for coverage under

its excess workers’ compensation policies with Home Insurance with

respect to Soloky’s workers’ compensation award qualified as “any

workers’ compensation claim” within the meaning of section 537.2

of the Insurance Code. In the Fund’s view, that term is applicable

only to claims for workers’ compensation benefits filed by an injured

employee. Because Wells’ claim here did not meet that definition, the

Fund argued that section 537.2’s exemption is inapplicable, that its

-7-

obligation to make payments following Home Insurance’s liquidation

has now been fully exhausted, and that summary judgment should

therefore have been entered in its favor and against Wells.

¶ 23 The appellate court rejected the Fund’s interpretation of the law

and affirmed. 2012 IL App (1st) 111533. This appeal to our court

followed. Ill. S. Ct. R. 315 (eff. July 1, 2013).

¶ 24 ANALYSIS

¶ 25 In undertaking our review, we begin by noting that while the

dispute before us was triggered by the work-related injury of an

employee who worked for an employer which had elected to bring

itself within the coverage of the Workers’ Compensation Act (820

ILCS 305/1 et seq. (West 2010)), this is not a workers’ compensation

case. There is no disagreement as to the meaning of the Workers’

Compensation Act or its applicability to Soloky, the employee who

was injured. Soloky’s entitlement to benefits was decided when she

filed her claim under the Act with the Workers’ Compensation

Commission and the Commission entered an award in her favor.

¶ 26 The matter before us here involves the separate and distinct

question of how the financial burden of paying Soloky’s award will

be distributed. Because Soloky’s employer elected to purchase

insurance to help meet its obligations under the Workers’

Compensation Act, as the Act permitted, and that coverage was in

effect when Soloky was injured, resolution of this question turns on

issues of insurance law. Because the company providing coverage to

Soloky’s employer for her workers’ compensation award was a

member of the Fund and was liquidated before meeting its obligations

under the policies it had issued, the dispositive issue of insurance law

in this case is the scope of the Fund’s obligations under the Insurance

Code.

¶ 27 The case was decided by the circuit court on cross-motions for

summary judgment. Summary judgment is proper when “the

pleadings, depositions, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a

matter of law.” 735 ILCS 5/2-1005(c) (West 2010). We review the

circuit court’s grant of summary judgment de novo. De novo review

is also appropriate because the case turns on the construction of

provisions of the Insurance Code, and statutory construction presents

a question of law. See Pielet v. Pielet, 2012 IL 112064, ¶ 30.

-8-

¶ 28 When construing a statute, our primary objective is to give effect

to the legislature’s intent. The best indication of legislative intent is

the statutory language. Wilkins v. Williams, 2013 IL 114310, ¶ 14.

Legislative intent may also be ascertained by considering the reason

and necessity for the law, the evils to be remedied, and the objects

and purposes to be obtained. Carter v. SSC Odin Operating Co., 2012

IL 113204, ¶ 37.

¶ 29 Every state has established an insurance guaranty fund to protect

policyholders in the event that an insurance company becomes

insolvent. Hasemann v. White, 177 Ill. 2d 414, 417 (1997). Ours is the

Illinois Insurance Guaranty Fund (the Fund). This court has described

the Fund as “a nonprofit entity created to protect policyholders of

insolvent insurers and third parties making claims under policies

issued by insurers that become insolvent.” Id. at 415-16. Its purpose

is

“ ‘to place claimants in the same position that they would

have been in if the liability insurer had not become insolvent.’

Lucas v. Illinois Insurance Guaranty Fund, 52 Ill. App. 3d

237, 239, 367 N.E.2d 469, 471 (1977). The Fund is not a

collateral or independent source of recovery; rather, it is a

substitution when the expected coverage ceases to exist.

Lucas, 52 Ill. App. 3d at 240, 367 N.E.2d at 471.” Gines v.

Ivy, 358 Ill. App. 3d 607, 609 (2005).

¶ 30 When an insurance company is liquidated, the Fund steps into its

shoes. Indeed, the Insurance Code provides that “[t]he Fund shall be

deemed the insolvent company to the extent of the Fund’s obligation

for covered claims and to such extent shall have all rights, duties, and

obligations of the insolvent company, subject to the limitations

provided in this Article, as if the company had not become insolvent.”

215 ILCS 5/537.4 (West 2010).

¶ 31 Because the Fund serves as a substitute for the defunct insurer, an

insured party can never recover more from the Fund than it would

have been entitled to receive under the policy it originally purchased

from its defunct insurer. Section 537.2 of the Insurance Code

expressly states that “[i]n no event shall the Fund be obligated *** in

an amount in excess of the face amount of the policy from which the

claim arises.” 215 ILCS 5/537.2 (West 2010). In some circumstances,

however, an insured party may be forced to accept less than would

have been due under the policy issued by defunct insurer. That is so

because, as we have already discussed, the Insurance Code caps the

-9-

Fund’s obligation to pay a covered claim at $300,00 where the order

liquidating the insured’s carrier was entered on or after January 1,

1988, and before January 1, 2011. 215 ILCS 5/537.2 (West 2010).

¶ 32 The statutory limitation contains an important exception. It does

not apply to “any workers compensation claims.” 215 ILCS 5/537.2

(West 2010). For purposes of this provision of the Code, “any

workers compensation claims” means, of course, any covered

workers’ compensation claims. It must mean that because the

statutory obligations of the Fund as set forth in section 537.2 of the

Insurance Code (215 ILCS 5/537.2 (West 2010)) pertain only to

“covered claims” as defined by section 534.3(a) of the Code (215

ILCS 5/534.3(a) (West 2010)). If a workers’ compensation claim

failed to meet the threshold statutory definition of a “covered claim,”

the obligations of the Fund would not come into play.

¶ 33 Section 534.3(a) defines “covered claim” as “an unpaid claim for

a loss arising out of and within the coverage of an insurance policy”

to which this portion of the Insurance Code applies and which is in

force at the time of the occurrence giving rise to the unpaid claim.

215 ILCS 5/534.3(a) (West 2010). For purposes of the Fund, a

covered workers’ compensation claim is therefore an unpaid claim for

a loss “arising out of and within the coverage of” a workers’

compensation insurance policy to which this portion of the Insurance

Code applies and which is in force at the time of the occurrence

giving rise to the unpaid claim.

¶ 34 In this case, there is no question that the amounts owed by Home

Insurance under the policies purchased by Wells which were left

unpaid when Home Insurance became insolvent and was liquidated

qualified as “covered claims” within the meaning of section 534.3(a)

(215 ILCS 5/534.3(a) (West 2010)) and were therefore within the

Fund’s protection under section 537.2 of the Code (215 ILCS 5/537.2

(West 2010)). Moreover, it is indisputable that these covered claims

arose out of and were within the coverage of policies which had been

purchased to help insure Wells against liability for workers’

compensation awards granted by the Industrial Commission pursuant

to the Workers’ Compensation Act (820 ILCS 305/1 et seq. (West

2010)). The claims therefore qualified as covered workers’

compensation claims for purposes of section 537.2. Because covered

workers’ compensation claims are exempt from section 537.2’s

$300,000 cap on the Fund’s liability, the cap is inapplicable in this

case.

-10-

¶ 35 Here, as it did below, the Fund attempts to avoid this conclusion

by arguing the statutory reference to “any workers compensation

claims” embraces only claims for workers’ compensation benefits

brought directly by injured employees. This contention is untenable

and was properly rejected by the lower courts. As we have just

discussed, the only claims protected by the Fund are “covered claims”

which, by definition, are claims arising out of insurance policies

subject to this portion of the Insurance Code. In workers’

compensation cases, claims for benefits by injured employees arise

under the Workers’ Compensation Act, not policies of insurance, and

are made to the Workers’ Compensation Commission, not the

employer or the employer’s insurer. See 26 Ill. Jur. Workers’

Compensation § 6:04 (2004). If successful, the claims result in

awards by the Commission, and it is those awards that the employer

must pay directly, through insurance, or through a combination of

those methods. An injured employee’s administrative claim for

statutory benefits from the Commission is therefore entirely separate

and distinct from the type of insurance claim to which sections

534.3(a) and 537.2 of the Code refer.

¶ 36 Although Wells’ policy from Home Insurance provided excess

rather than primary coverage for Wells’ liability under the Workers’

Compensation Act, that distinction is of no consequence for purposes

of this appeal. As discussed earlier in this opinion, the Workers’

Compensation Act recognizes that employers may secure their

obligation to pay the compensation for which the Act provides in a

variety of ways and references both excess liability insurance policies

(820 ILCS 305/4(a)(2) (West 2010)) as well as policies which provide

coverage for all of the payments for which an employer is liable under

the Act (820 ILCS 305/4(a)(3) (West 2010)). While it is true that

these two types of policies may operate differently, the record in this

case indicates that once the $200,000 retention limit was reached,

Home Insurance processed the amounts due with respect to Soloky’s

workers’ compensation award by using a third-party administrator

and making payments directly to Soloky, the same procedure

normally employed where a workers’ compensation policy provides

primary coverage.

¶ 37 Even in situations where an excess carrier reimburses the

employer for payments due an injured employer under a workers’

compensation award rather than paying the injured employee directly,

the difference is one of mechanics, not substance. Whether coverage

-11-

is considered primary or excess and whether payment due under a

policy is made directly to the injured employee or as reimbursement

to the employer for payments it made to the injured employee, the

fact remains that it is always the employer who has purchased the

coverage. The purpose of the coverage is always the same: to help the

employer secure its obligation to pay the compensation awarded to its

injured employees by the Workers’ Compensation Commission. And

legal liability for the paying the Commission’s award is always

unchanged. It remains with the employer. Whenever and however a

workers’ compensation carrier pays benefits pursuant to an insurance

policy it has issued, it is paying those benefits on the employer’s

behalf. See Illinois Workers’ Compensation Commission, Handbook

on Workers’ Compensation and Occupational Diseases 4 (2013). By

statute, an insurance carrier can only be held primarily liable for

paying an injured employee under limited circumstances. See 820

ILCS 305/4(g) (West 2010). In setting forth those circumstances, the

law makes no reference to and does not differentiate between primary

and excess coverage policies. For purposes of the Fund, both are

therefore properly regarded as workers’ compensation insurance

polices.

¶ 38 Nothing in the terms of the Workers’ Compensation Act or the

law governing the Insurance Guaranty Fund provides any basis for

reaching a contrary conclusion, i.e., that a policy cannot be deemed

to provide workers’ compensation coverage simply because the

coverage it affords is excess rather than primary. To say that a policy

must provide full coverage in order to qualify as a workers’

compensation insurance policy would therefore require that we depart

from the plain language of the law and read into it exceptions,

limitations or conditions which the legislature did not express. That,

of course, is something we may not do. People ex rel. Madigan v.

Kinzer, 232 Ill. 2d 179, 184-85 (2009).

¶ 39 Something else we may not do is construe a statute in a way that

would yield absurd or unjust results. Township of Jubilee v. State of

Illinois, 2011 IL 111447, ¶ 36. But that is precisely what would

happen if we interpreted the law to mean that the only workers’

compensation policies exempt from the $300,000 statutory cap are

those providing primary coverage. If that were how the law worked,

an employer who elected to secure its workers’ compensation

obligations by purchasing a primary coverage policy but with a large

deductible could receive payments from the Fund without limitation

-12-

after its insurer became insolvent, while an identical employer who

purchased an excess policy from the very same insurer with a retained

liability limit identical to the first employer’s deductible would have

to bear the full burden of workers’ compensation costs once the

$300,000 cap was reached. In other words, we would have a situation

where identical employers purchase insurance policies from the

identical insurer to help cover the same type of loss—workers’

compensation obligations—above the identical loss threshold, yet one

would enjoy the full protection of the Fund and the other would not.

¶ 40 Such an anomaly cannot be justified based on differentials

between premiums paid by employers who elect to purchase primary

workers’ compensation coverage and premiums paid by those who

elect to secure their workers’ compensation obligations through

excess coverage policies. For one thing, there is no evidence in the

record before us regarding the existence of such differentials or how

significant they may be. Many factors affect the premiums charged by

insurers, and it could be that a policy providing excess coverage will

actually be comparable in cost to a policy providing primary coverage

where the loss retention amount and the deductible amounts in the

respective policies are the same. But again, this record is silent on the

matter and we cannot found our interpretation of the law on

speculation.

¶ 41 Even if we accepted, for the sake of argument, that excess

coverage policies are normally less expensive than primary coverage

policies, that still not would alter our conclusion. For purposes of this

case, any difference in premiums paid is significant only if (1)

employers who pay lower premiums for excess coverage receive

disproportionately better treatment under the law when their

insurance carriers are liquidated than employers who pay higher

premiums for primary coverage, and (2) the Insurance Guaranty Fund

is thereby left having to pay out more than a liquidated member itself

would have had to pay under a particular policy and to make such

payments using resources for which it has not obtained and cannot

obtain funding, leaving it unable to meet its statutory obligations. But

none of these things actually happens. The Fund is structured so that

insureds purchasing coverage to meet their obligations under the

Workers’ Compensation Act receive just what they paid for, no more

and no less, and so that the Fund itself will be able to collect whatever

monies are necessary to provide that protection.

-13-

¶ 42 Starting with the last point, which pertains to burdens on the

Fund, it is important to keep in mind that it is not insureds who fund

the Insurance Guaranty Fund. As explained earlier in this separate

dissent, Fund members do. Home Insurance was, itself, a member of

the Fund. The statutory assessments it was required to make while it

was still doing business in Illinois helped pay claims which would

otherwise have gone unpaid when other members of the Fund became

insolvent. Now that Home Insurance has become insolvent, it is

entirely fair and appropriate that the other members of the Fund now

contribute toward paying the claims which Home Insurance left

unpaid, and that they do so to the full extent specified by the law.

¶ 43 There is no basis whatever for concern that this will place an

undue burden on the Fund’s resources. The assessments which each

Fund member must pay is based on the proportion that the particular

member’s net direct written premiums for the preceding year bears to

the total net direct written premiums of all the member companies for

the preceding year on the kinds of insurance in that account (auto or

other). Although the law includes a limit on the amount any given

member must pay in a particular year, if the total assessment in an

account (auto or other) together with the other assets in the particular

account are not sufficient to meet that account’s obligations for the

year in question, the obligation is not extinguished or reduced.

Payment is simply delayed until funds become available. 215 ILCS

5/537.6 (West 2010). Under this system, the Fund is assured that it

will ultimately recover any and all amounts it must pay out under the

law to meet the obligations of its insolvent members, regardless of the

type of risk or scope of coverage provided by the insolvent members’

policies.

¶ 44 There is likewise no merit to the argument that differentiating

between primary and excess coverage policies is necessary to prevent

employers from attempting to get more than they bargained for and

subverting the purposes for which the Fund was created. To the extent

an employer receives a price break from his workers’ compensation

carrier by purchasing an excess coverage policy, it is because the

employer is getting less in return. Until the loss retention level is met,

the burden of paying the workers’ compensation award will be the

employer’s alone. The insurer will owe nothing. Our construction of

the Insurance Code does not change this in any way.

¶ 45 If the insurer under an excess coverage policy becomes insolvent

before the loss retention threshold is reached and the policy

-14-

provisions have therefore not yet been triggered, the Fund will not yet

owe anything. The employer will continue to make payments. It is

only when the coverage threshold is reached and the excess coverage

policy would otherwise have kicked in under the terms of the policy

that the Fund’s obligation would commence.

¶ 46 Moreover, this obligation is not open-ended. An insured will

never receive any more from the Fund than it bargained and paid for

through its now-liquidated insurer. It cannot receive more, for the law

expressly provides that “[i]n no event shall the Fund be obligated ***

in an amount in excess of the face amount of the policy from which

the claim arises.” 215 ILCS 5/537.2 (West 2010). As a result, the

obligations owed by the Fund under the statute as a result of the

excess carrier’s liquidation will end when the excess carrier’s

obligation would have ended under the policy it issued to its insured.

At that point, the financial burden for addressing the loss will revert

back to the insured. Windfalls to insured employers are therefore an

impossibility.

¶ 47 Had Home Insurance not become insolvent, there is no dispute

that the workers’ compensation excess coverage policy it issued to

Wells would have required it to continue making payments beyond

the $300,000 level. Requiring the Fund to continue making payments

under the circumstances present here therefore does nothing more

than place Wells in exactly the same position it would have been in

had Home Insurance not been subject to an order of liquidation,

giving it no more and no less than the benefit of its original bargain

and enabling it to avoid what would otherwise be a substantial

financial loss, namely, having to pay out of pocket for the same

workers’ compensation expenses the now worthless Home Insurance

policy should have covered. When the General Assembly described

the purpose of the law as being “to avoid financial loss to claimants

or policyholders because of the entry of an Order of Liquidation

against an insolvent company” (215 ILCS 5/532 (West 2010)), this is

surely exactly what it had in mind.

¶ 48 CONCLUSION

¶ 49 For the foregoing reasons, the circuit and appellate courts were

correct when they ruled that the Fund acted improperly when it

invoked the $300,000 cap set forth in section 537.2 of the Insurance

Code (215 ILCS 5/537.2 (West 2010)) to terminate payments to cover

Wells’ liability for the amounts still due and unpaid under Soloky’s

-15-

workers’ compensation award following liquidation of Wells’

workers’ compensation carrier. Because the payments at issue are for

a covered workers’ compensation claim within the meaning of the

relevant statutory provisions, the $300,000 statutory cap is

inapplicable. The judgment of the appellate court, which affirmed

entry of summary judgment in favor of Wells and against the Fund,

is therefore affirmed.

¶ 50 Affirmed.

¶ 51 CHIEF JUSTICE KILBRIDE, dissenting:

¶ 52 I respectfully dissent from the majority opinion. The answer to the

critical question here, namely, whether the self-insured employer’s

claim against its insolvent excess-insurance carrier constitutes “any

workers compensation claim[ ],” lies not in the transformation of the

question or in the use of a more intuitive approach to statutory

construction. Instead, the answer is found in the measured application

of our traditional rules of statutory construction to the plain language

of the Code and the relevant insurance policies.

¶ 53 While the majority’s extended discussion of the broad nuts and

bolts of the workers’ compensation system and the facts underlying

the injured worker’s receipt of benefits is intellectually enriching, it

is not an adequate substitute for the application of our formal

approach to statutory construction. Indeed, the majority’s detailed

discussion, along with statements on the standard of review, the

objective of statutory construction, and other issues not in dispute,

constitute nearly half of its opinion. The novelty of the majority’s

approach is evident from the conspicuous absence of the usual indicia

of traditional statutory or policy construction.

¶ 54 The proper resolution of this appeal demands a straightforward

analysis of the language in the Code and the excess-insurance

policies. If Wells’ claim, as defined by the policies, falls within the

scope of the phrase “any workers compensation claims” as used in

section 537.2 of the Code (215 ILCS 5/537.2 (West 2010)), then the

Fund’s payment obligation is not capped. If it does not, then the Fund

properly capped its payments at $300,000. On its face, this court’s

mission is as simple as that. Yet, the majority opinion doubles down

on that simplicity by declining to perform any of the inherently more

complex tasks of statutory construction required.

-16-

¶ 55 Instead, the majority quickly concludes, only a few pages into its

analysis, that the Fund’s cap is inapplicable. Its analytical basis to that

point boils down to:

(1) Wells unpaid claims against Home were “covered

claims” under the Act, a fact not disputed by either party;

(2) those claims arose out of the excess insurance policies

issued to Wells to help insure it against workers’

compensation liability, a fact the majority deems

“indisputable”; followed by

(3) its conclusion that Wells’ claims “qualified as covered

workers’ compensation claims for purposes of section 537.2,”

making the Act’s $300,000 cap inapplicable. Supra ¶ 34.

¶ 56 The majority’s conclusion is unaided by consideration of the

policy language, instead effectively relying on the summary assertion

that the policies “had been purchased to help insure Wells against

liability for workers’ compensation awards.” (Emphasis added.)

Supra ¶ 34.

¶ 57 Moreover, the majority recognizes that an insurer pays benefits on

behalf of the insured employer (supra ¶ 37), yet it fails to recognize

the reason why the insurer makes any payments at all, i.e., to fulfill

its duties under the terms of the policy. An insurer pays workers’

compensation benefits only because it is contractually liable to the

employer to make those payments. With that in mind, it is easy to

understand why the statute “does not differentiate between primary

and excess coverage policies” (supra ¶ 37): it is because the language

of each policy already dictates the insurer’s payment liability that

will be passed along to the Fund. The Code need not distinguish

between the two types of policies when each policy’s terms already

do just that.

¶ 58 Consequently, even though the majority believes it is

“indisputable” that Home undertook the contractual duty to help pay

Wells’ workers’ compensation liability (supra ¶ 34), that belief is not

based on the actual policy language agreed to by the parties. Instead,

that conclusion arises from the erroneous presumption that the excess

insurance policies were intended to fulfill Wells’ statutory obligation

to pay benefits under the Workers’ Compensation Act. Supra ¶ 34.

Here, the majority is effectively answering the ultimate question

pending without the benefit of any linguistic analysis.

-17-

¶ 59 If the majority’s truncated approach is correct, the opinion could

simply end with its intuited statement that Wells’ policies are for

workers’ compensation liability coverage. Supra ¶ 34. While the

majority appears comfortable in relying on the simplicity of this bare

assertion to resolve the instant appeal, I respectfully reject that

approach and opt for a more reasoned, traditional one. Although the

majority’s shorthand may provide a convenient means of avoiding

this inherently more complex task, simply declaring that Wells’

claims are workers’ compensation claims does not make it so.

Nothing can replace the tried and true, albeit sometimes arduous,

application of our rules of construction. Although the majority’s

position “is alluring in its simplicity, as applied it fails to adequately

give meaning to the intent of the language of the policies at issue and

fails to take into account the relationship between a primary and an

excess carrier.” Roberts v. Northland Insurance Co., 185 Ill. 2d 262,

275 (1998) (Freeman, C.J., concurring in part and dissenting in part,

joined by Miller and McMorrow, JJ.).

¶ 60 In my view, the key to the resolution of this appeal is the nature

of Wells’ “covered claim” because section 537.2 limits the Fund’s

payment obligation to $300,000 “except that this limitation shall not

apply to any workers compensation claims.” (Emphasis added.) 215

ILCS 5/537.2 (West 2010). To determine whether the cap applies, the

court must carefully examine two critical components, the statutory

language adopted by the legislature and the policy language agreed to

by the parties. That crucial language, however, makes only incidental

appearances in the majority’s discussion. That same language

provides the focus for my dissent.

¶ 61 As the majority correctly notes, it is undisputed that Wells’ claim

is a “covered claim.” Supra ¶ 34. The plain language of the Code

bears out that conclusion. A “covered claim” is defined in relevant

part as:

“an unpaid claim for a loss arising out of and within the

coverage of an insurance policy to which this Article applies

and which is in force at the time of the occurrence giving rise

to the unpaid claim, *** made by a person insured under such

policy ***[.]” (Emphases added.) 215 ILCS 5/534.3 (West

2010).

Here, Wells has presented a “covered claim” because it is “an unpaid

claim” filed by Wells, an Illinois resident and “insured person” under

-18-

its policies with Home, an insurance company that became insolvent.

See 215 ILCS 5/534.3 (West 2010).

¶ 62 In turn, the determination of whether Wells’ covered claim is also

a workers’ compensation claim within the meaning of the statutory

exception to the Fund’s $300,000 payment cap relies on the

interaction between Code sections 537.2 and 534.3. In relevant part,

section 537.2 states:

“The Fund shall be obligated to the extent of the covered

claims existing prior to the entry of an Order of Liquidation

against an insolvent company *** and if the entry of an Order

of Liquidation occurs on or after January 1, 1988 and before

January 1, 2011, such obligations shall not: (i) exceed

$300,000, except that this limitation shall not apply to any

workers compensation claims ***.” (Emphases added.) 215

ILCS 5/537.2 (West 2010).

¶ 63 Despite the focus of this case necessarily being the nature of

Wells’ “claim,” the majority chooses instead to shift its focus to the

“coverage” Wells allegedly purchased and away from the actual

“claim” it is making. Supra ¶¶ 36-43. By straying from the precise

language in the statute and declining to review the policy terms, the

majority inadvertently distorts the question before this court and

ignores the significance of the legislature’s key word: “claim.”

¶ 64 Looked at as a whole, this case loosely involves two distinct

“claims.” The first is the injured worker’s claim for compensation

awarded against Wells, her former employer. That claim is based

strictly on Wells’ statutory liability under the Act. The second is

Wells’ claim under its insurance policies with Home; that claim is

premised solely on Home’s breach of its duty under those policies

after its insolvency.

¶ 65 By definition, the injured worker’s original claim against Wells

is a workers’ compensation claim. That, however, is clearly not the

claim at issue in this case. To constitute a “covered claim,” Wells’

“loss” must be “arising out of and within the coverage of an insurance

policy to which this Article applies.” Here, the injured worker’s claim

against Wells is purely statutory and does not arise out of any

insurance policy. The only “unpaid claim” raised must be “for a loss

arising out of and within” the excess-insurance policies issued to

Wells, “a person insured under such polic[ies],” by Home. See 215

ILCS 5/534.3 (West 2010) (defining a “covered claim”). Thus, the

-19-

only possible “covered claim” is Wells’ contractual insurance claim

against Home.

¶ 66 Once Home became insolvent, section 537.4 of the Code defined

the Fund’s obligation to undertake its responsibilities, stating that the

Fund “shall be deemed the insolvent company *** and *** shall have

all rights, duties, and obligations of the insolvent company *** as if

the company had not become insolvent.” (Emphasis added.) 215

ILCS 5/537.4 (West 2010). Thus, that section limits the Fund’s duties

to the contractual responsibilities Homes bore under its policies,

making Wells’ “claims” against the Fund the same contractual

“claims” it possessed against Home.

¶ 67 The next step is to identify the fundamental nature of Wells’

“claims.” That step necessitates a close examination of the policy

language that created Home’s payment obligations. If that language

shows the policies were intended to satisfy Wells’ statutory liability

for its injured employee’s award, then Wells’ claims would be

“workers compensation claims,” as the majority concluded. If it does

not reveal that intent, the majority’s conclusion necessarily fails.

¶ 68 Courts must construe language in an insurance policy de novo and

apply that language as written unless it contravenes public policy.

Roberts, 185 Ill. 2d at 266. The majority’s approach bypasses any

review of the relevant policy language and simply concludes that

Wells’ claim is a workers’ compensation claim because its excess

insurance policies were essentially liability policies, with any

differences arising merely in their “mechanics.” Supra ¶¶ 34, 37.

¶ 69 I roundly disagree with the majority’s decision to equate Wells’

excess-insurance policies with a workers’ compensation claim. The

excess-insurance policies, however, do not affect Wells’ “liability”

for workers’ compensation benefits; that liability is set by the Act and

cannot be the basis for Wells’ covered claim unless Home

contractually assumed that duty under a bono fide liability coverage

policy. See supra ¶ 37 (recognizing that the legal liability for paying

benefits here remains unchanged). Thus, unlike the majority, I believe

a review of the policy language is critical here. Before my analysis of

Home’s duties under the policy language, however, a review of the

intrinsic differences between claims brought pursuant to primary

liability and excess insurance policies is useful.

¶ 70 Primary insurance “is insurance coverage in which, under the

terms of the policy, liability attaches immediately upon the happening

of the occurrence that gives rise to liability.” 44A Am. Jur. 2d

-20-

Insurance § 1755 (2003). In contrast, “[e]xcess or secondary coverage

*** is coverage in which, under the terms of the policy, liability

attaches only after a predetermined amount of primary coverage has

been exhausted.” 44A Am. Jur. 2d Insurance § 1755 (2003). Excess

insurance provides protection against catastrophic loss and is

intended to apply only when high levels of liability are present,

greatly reducing the excess insurer’s risk.

¶ 71 This court has previously stated that primary liability insurance,

or self-insurance, is inherently different from the excess-insurance

coverage bargained for by the parties here. Kajima Construction

Services, Inc. v. St. Paul Fire & Marine Insurance Co., 227 Ill. 2d

102, 116 (2007) (relying on “the clear distinctions between primary

and excess insurance coverage”). In Roberts, Justice Freeman

explained that excess insurance offers a secondary level of protection

that “attaches only after a predetermined amount of primary insurance

or self-insured retention has been exhausted.” (Emphasis added.)

(Internal quotation marks omitted.) Kajima, 227 Ill. 2d at 114-15

(quoting Roberts, 185 Ill. 2d at 277 (Freeman, C.J., concurring in part

and dissenting in part, joined by Miller and McMorrow, JJ.), quoting

Scott M. Seaman & Charlene Kittredge, Excess Liability Insurance:

Law and Litigation, 32 Tort & Ins. L.J. 653, 656 (Spring 1997)).

Subsequently, in Kajima, this court unanimously found “Justice

Freeman’s separate writing in Roberts *** to be particularly

instructive.” Kajima, 227 Ill. 2d at 114.

¶ 72 Accordingly, if Wells had purchased workers’ compensation

liability coverage from Home, as the majority asserts (supra ¶ 34),

Home would have been contractually responsible for making benefit

payments to satisfy Wells’ statutory liability under the Act. See 44A

Am. Jur. 2d Insurance § 1755 (2003) (explaining that primary

insurance “is insurance coverage in which, under the terms of the

policy, liability attaches immediately upon the happening of the

occurrence that gives rise to liability”). See also In re Claim of

National Union Fire Insurance Co. of Pittsburgh, PA for Benefits

from the New Jersey Worker’s Compensation Security Fund, 2008

WL 516290, at *4 (N.J. Super. Ct. App. Div. Feb. 29, 2008) (per

curiam) (concluding that an excess-insurance policy is “not a primary

workers’ compensation insurance policy, designed for payment to

injured employees”); Oneida Ltd. v. Utica Mutual Insurance Co., 694

N.Y.S.2d 221, 224 (N.Y. App. Div. 1999) (recognizing that an

excess-insurance policy “ ‘is not considered to be workers’

-21-

compensation insurance since *** no statutory workers’

compensation benefits are paid directly to an injured employee under

the excess policy’ ”). Under that scenario, once Home was liquidated,

the Fund would have taken over Home’s payment duties, in essence

becoming an alternate payor for Home’s contractual obligation to

satisfy Well’s statutory liability. See 215 ILCS 5/537.4 (West 2010)

(imposing on the Fund “all rights, duties, and obligations of the

insolvent company *** as if the company had not become

insolvent”). Consequently, Home’s contractual payment

responsibility would have brought Wells’ claim against the Fund

within the scope of the phrase “any workers compensation claims” in

section 537.2, and the Fund’s $300,000 payment cap would not apply.

¶ 73 The language in both Wells’ insurance policies, however,

definitively establishes that they were not intended to provide either

primary or workers’ compensation liability coverage. Both policies

contain provisions making them inapplicable to payments “arising out

of the operations *** as respects which the Insured carries a full

coverage Workers’ Compensation *** policy.” Thus, the policies

would not apply if Wells had insurance for its workers’ compensation

liability, establishing that the two policies were intended to serve as

“excess-only.” Tellingly, both policies are also conditioned on Wells

being “qualified” or “authorized” as a self-insurer and its continuation

of that status. Obviously, it would be antithetical for a qualified self-

insurer to have primary liability insurance coverage. Therefore, the

policy language rebuts the majority’s “indisputable” conclusion that

the policies were intended to provide Wells with workers’

compensation liability coverage (supra ¶ 34). To the contrary, by

making the business decision to self-insure, Wells voluntarily

assumed the role of providing its own equivalent first-line workers’

compensation liability coverage.

¶ 74 In an attempt to reduce its out-of-pocket expenses, however,

Wells contracted with Home to provide excess-insurance coverage.

Wells’ only “covered claim” is based exclusively on those excess-

insurance policies. See 215 ILCS 5/534.3 (West 2010) (requiring a

“covered claim” to be for “a loss arising out of and within the

coverage” of the policies issued by a defunct insurer). Under its

excess-only policies, Home’s contractual duty to Wells was

considerably different than it would have been under a liability

insurance policy. Contrary to the majority’s assertion (supra ¶ 37),

however, this court has expressly recognized that the difference in

-22-

those contractual duties is one of substance, not mere mechanics. In

Kajima, 227 Ill. 2d at 116, we found a “clear distinctions between

primary and excess insurance coverage,” contradicting the majority’s

position in this case. While “the primary policy provides ‘first dollar’

liability coverage up to the limits of the policy,” giving the primary

insurer contractual first-line responsibility for making benefit

payments, excess insurance “ ‘attaches only after a predetermined

amount of primary insurance or self-insured retention has been

exhausted.’ ” Roberts, 185 Ill. 2d at 276-77 (Freeman, C.J.,

concurring in part and dissenting in part, joined by Miller and

McMorrow, JJ.) (quoting Scott M. Seaman & Charlene Kittredge,

Excess Liability Insurance: Law and Litigation, 32 Tort & Ins. L.J.

653, 656 (Spring 1997)); see Kajima, 227 Ill. 2d at 114-15.

¶ 75 Turning back to the language in Well’ excess-insurance policies,

I note that although the exact language differs somewhat, the effect

is the same. The parties’ “Aggregate Excess Workers’ Compensation

and Employers’ Liability Policy” was designed “[t]o indemnify the

Insured [Wells] for payment, as hereinafter defined, in excess of the

‘Insured’s Retention.’ ” (Emphasis added.) The policy defines

“payment” as “the amount the insured shall have actually paid: ***

for compensation and other benefits required of the Insured by the

workers’ compensation law.” (Emphases added.) Thus, in the

aggregate excess-insurance policy, the parties agreed that Home

would only “indemnify” Wells for amounts over its retention limit

that it “actually paid” as “required of [it as] the Insured” by the Act.

¶ 76 Similarly, in Wells’ “Specific Excess Workers’ Compensation

and Employers’ Liability Policy,” Home “agree[d] to indemnify the

Insured [Wells] against excess loss, *** which the Insured may

sustain on account of: (a) compensation and other benefits required

of the Insured by the Workers’ Compensation Law.” (Emphases

added.) Home’s “Limit of Liability” for indemnification is “only for

the ultimate net loss in excess of *** the ‘retained limit(s)’ ” of

$200,000. (Emphasis added.) The term “ultimate net loss” is defined

in the policy as “the sum actually paid in cash in the settlement or

satisfaction of losses for which the Insured is liable.” (Emphasis

added.) Summarizing the parties’ expressed intentions in the specific

excess-insurance policy, Home was only obliged to “indemnify”

Wells for amounts over its retention limit that Wells “actually paid”

“on account of: (a) compensation and other benefits required of the

Insured by the Workers’ Compensation Law.” (Emphasis added.)

-23-

¶ 77 According to the parties’ contractual agreement, Wells had to

submit a periodic “statement from or on behalf of the Insured

showing each payment made by the Insured during such period in

excess of the Insured’s Retention,” before Home would “promptly

reimburse the insured for such indemnification as the company is

obligated to pay under the terms of this policy.” The fact that Home

previously used the services of a third-party administrator as a matter

of convenience to make the required payments does not change the

nature of its underlying contractual duty. See supra ¶ 10.

¶ 78 In summary, the policy language makes it indisputably clear that

Home never agreed to assume responsibility for paying the workers’

compensation benefits owed by Wells. In turn, section 537.4 compels

the Fund to undertake only Home’s contractual duties and obligations

under its excess-insurance policies. Thus, the Fund’s duty is limited

to the contractual indemnification obligation Home undertook in

providing the excess insurance. Simply put, the Fund’s duty is not to

pay Wells’ workers’ compensation liability for it because Home never

undertook that obligation. Instead, the policies limited Home’s

responsibility to indemnifying Wells for benefits it has already paid

out-of-pocket. The contractual duty that was passed to the Fund was

necessarily defined solely by those same policy terms. A limited

contractual duty to make reimbursement for payments actually made

by an insured cannot transform Wells’ “covered claim” into a

“workers’ compensation claim.” The majority’s contrary conclusion

is simply not supported by any language in the insurance policies.

¶ 79 Furthermore, the critical connection between the Fund’s duties

and the type of insurance purchased by Wells is underscored by the

role available to the injured worker in the instant litigation, a factor

not addressed by the majority. If Wells’ covered claim were in fact a

workers’ compensation liability claim, the worker would have had a

vital interest in the outcome of the case because her continued receipt

of benefits would be implicated. Accordingly, she would have

standing to participate in this case. The injured worker here, however,

indisputably will continue to receive her workers’ compensation

benefits regardless of that party that prevails, demonstrating that she

has no interest in the outcome in this matter and lacks standing to

participate. Indeed, no party has even suggested that the injured

worker could ever seek recovery from the Fund, and she has never

been involved in this litigation. The injured worker’s clear inability

to participate in this case or to demand payment from the Fund at any

-24-

point further proves that Wells’ “covered claim” is not based on

workers’ compensation “liability” coverage it acquired from Home,

as the majority posits.

¶ 80 The majority’s view of section 537.2 would effectively allow

Wells to shift its exclusive statutory burden of paying benefits to the

Fund by relying on its indemnity policies with Home. But, the policy

language shows the parties never intended Home to assume Wells’

payment obligation, as it would have done under a true workers’

compensation liability policy. Moreover, if the majority’s assertion

that the difference between undertaking the burden of paying an

employer’s workers’ compensation liability and reimbursing an

employer who has already fulfilled that statutory duty “is one of

mechanics, not substance” is accurate, a serious question is raised

about why the insurance industry found it necessary to create two

types of insurance. See supra ¶ 37. Logically, if the two types of

policies differed only in their “mechanics,” insurers would have had

no incentive to go to the expense of creating, marketing, and

administering excess-insurance policies. They simply could have sold

liability policies. Moreover, if the two types of policies are essentially

the same, as the majority claims, this court’s contrary statement in

Kajima must be incorrect. Kajima, 227 Ill. 2d at 116 (explaining “the

clear distinctions between primary and excess insurance coverage”).

In an attempt to add support to its conclusion, the majority also

correctly notes that “it is always the employer who has purchased the

coverage” (supra ¶ 37), but this truism is a merely red herring. The

identity of the policies’ purchaser is irrelevant to our analysis; the

nature of the insured’s claim is the critical factor.

¶ 81 Here, after considering the available alternatives, Wells

vouluntarily chose not to purchase workers’ compensation liability

coverage that would have obliged the Fund to act as a substitute payor

for the unpaid workers’ compensation claims remaining after Home

was liquidated. Consequently, neither Home nor the Fund become an

alternate payor for Wells’ statutory liability under the terms of the

policies it purchased. Because Wells’ original claim against Home

was for indemnification, not workers’ compensation, the claim it now

has against the Fund is also only for indemnification and is not “any

workers compensation claim[],” capping the Fund’s payment

obligation at $300,000. See 215 ILCS 5/537.2 (West 2010).

¶ 82 The majority’s holding that Wells’ policy claim constitutes a

workers’ compensation claim for purposes of section 537.2 blurs the

-25-

clear distinction this court previously recognized between self-insured

employers that obtain excess coverage and employers that specifically

seek out primary workers’ compensation liability coverage. Kajima,

227 Ill. 2d at 116 (refusing to “eviscerate” the “clear distinctions

between primary and excess insurance coverage”). By opting for

primary liability coverage, employers choose to eliminate their

obligation to pay any workers’ compensation awards out-of-pocket

after satisfying their deductible. In exchange for that enhanced

benefit, they agree to pay substantially higher insurance premiums.

Primary liability carriers charge higher premiums than excess-

insurance carriers because the former accept greater risk. Roberts, 185

Ill. 2d at 271. “ ‘[E]xcess premiums are lower because excess

coverage is, by its very nature, not supposed to be triggered until the

underlying policy has been exhausted up to its limits.’ ” Kajima, 227

Ill. 2d at 116 (quoting Roberts, 185 Ill. 2d at 281 (Freeman, C.J.,

concurring in part and dissenting in part, joined by Miller and

McMorrow, JJ.)).

¶ 83 On the other hand, employers may make the business decision

either to go without any insurance coverage, thus bearing the full

burden of paying all workers’ compensation claims out-of-pocket, or,

like Wells, to pay all benefits out-of-pocket up to their high retention

limit and purchase far cheaper excess-insurance with indemnity-only

coverage to address their potential catastrophic liability. Scott M.

Seaman & Charlene Kittredge, Excess Liability Insurance: Law and

Litigation, 32 Tort & Ins. L.J. 653, 656-57 (Spring 1997). The lower

risk undertaken by the insurer’s risk is similarly reflected in its lower

excess-insurance premiums. 44A Am. Jur. 2d Insurance § 1755

(2003). Even though the sparse record on summary judgment in this

case does not contain a cost comparison, the parties confirmed during

oral arguments before this court that excess insurance premiums paid

by self-insured parties are generally substantially lower than primary

insurance policy premiums, a fact ignored by the majority.

¶ 84 Under the majority’s construction of the Code, self-insured

employers purchasing excess insurance providing only

indemnification would receive benefits identical to those received by

employers paying much higher premiums for expensive primary

liability coverage that contractually off-loads their ultimate out-of-

pocket payment responsibility. That benefit, of course, is on top of the

significant financial advantage self-insured employers initially receive

from paying far lower insurance premiums. Such an outcome would

-26-

create a perverse incentive by encouraging employers to eschew

primary liability coverage whenever possible, while obtaining the

same limits on its out-of-pocket payments by buying far cheaper

excess-only policies.

¶ 85 By effectively acting as their own primary insurers, however, self-

insurers such as Wells voluntarily choose to undertake a far greater

risk of out-of-pocket loss than do employers that rely on primary

liability coverage from an outside source. If Wells could limit its total

out-of-pocket exposure by obtaining far less expensive indemnity-

only insurance and then relying on the Fund for reimbursement

beyond the applicable cap, the greater risk it assumed as a self-insurer

would be untethered from the premiums it paid.

¶ 86 Curiously, Justice Freeman has chosen to depart in this case from

his strong advocacy in Roberts for basing parties’ ultimate workers’

compensation liability on the differential degree of risk intentionally

undertaken by the first-line and excess insurers. Roberts, 185 Ill. 2d

at 279 (Freeman, C.J., concurring in part and dissenting in part,

joined by Miller and McMorrow, JJ.). In Roberts, Justice Freeman

correctly recognized that policy interpretations should “give[ ] full

effect to the level of risk each carrier intended to expose itself to” and

noted that placing a heavier payment burden on the excess insurer, or

the Fund as Home’s surrogate, rather than on the first-line insurer

“turns the concept of excess coverage on its head.” Roberts, 185 Ill.

2d at 280, 282 (Freeman, C.J., concurring in part and dissenting in

part, joined by Miller and McMorrow, JJ.). See also Kajima, 227 Ill.

2d at 114 (finding “Justice Freeman’s separate writing in Roberts” to

be “particularly instructive”).

¶ 87 Despite this court’s prior approval of allocating employers’

liability for benefit payments according to the differing degrees of

risk undertaken by first-line insurers, such as Wells, and excess

insurers, the majority suggests that the Fund’s proposed construction

of section 537.2 yields absurd or unjust results. Supra ¶ 39. For

example, the majority believes it is absurd for the Act to provide

differing coverage for “identical employers [that] purchase insurance

policies from the identical insurer to help cover the same type of

loss—workers’ compensation obligations—above the identical loss

threshold.” Supra ¶ 39. If the two employers and policies were truly

identical, I would agree. But, if one employer has chosen to protect

against out-of-pocket losses by buying a true workers’ compensation

liability policy while another has chosen to become self-insured,

-27-

effectively becoming its own first-line liability insurer, and

purchasing only excess coverage to reimburse it for payments it has

made, as here, then the two scenarios are simply not identical. The

employers have each made the rational business decision that best fits

their company’s individual circumstances after taking into account

the relevant variables, such as the differences in coverage.

¶ 88 The majority’s error derives from its decision to ignore inherent

differences in the actual terms of the insurance policies obtained by

its two hypothetically “identical employers.” If Employer 1 obtained

a primary liability policy, then it contractually transferred the

responsibility for making direct payments to its injured workers to its

liability insurer. If, however, as here, Employer 2 chose to be self-

insured and purchased an excess-only policy, then its insurer merely

agreed to reimburse its for payments it had already made. In

Employer 2’s case, the excess insurer does not contractually

undertake the primary payment responsibility for an injured worker’s

benefits.

¶ 89 It cannot be overstated that the Fund assumes only those duties

and obligations owed by the insolvent insurer under the specific

policy purchased. 215 ILCS 5/537.4 (West 2010). If the insurer did

not bear the responsibility for paying workers’ compensation benefits,

the Fund does not either. The protection the legislature afforded to

each employer is dependent not on the majority’s generalized concept

of “fairness” but on the specific coverage provided by the particular

policy. See 215 ILCS 5/534.3 (West 2010) (defining a “covered

claim” as one “arising out of and within the coverage of an insurance

policy”).

¶ 90 The conclusion reached by the majority would also likely create

more demand for cheaper excess-only coverage, placing a greater

potential burden on the Fund’s resources. To pay out more, the Fund

would have to increase the annual assessments paid by insurance

companies that finance it. See 215 ILCS 5/537.6 (West 2010)

(explaining the Fund’s assessment and funding processes). Increases

in those assessments would, in turn, be passed along to insureds as

higher premiums, raising the cost of excess insurance.

¶ 91 In addition, the majority erroneously asserts that “[t]here is no

basis whatever for concern that [relying on members’ assessments to

finance unlimited payments to the insureds of insolvent companies]

will place an undue burden on the Fund’s resources.” Supra ¶ 43. But,

-28-

in a point quickly glossed over by the majority (supra ¶ 43), the

maximum amount of each assessment is statutorily limited to

“2% of [each] member company’s net direct written premium

*** for the calendar year preceding the assessment. *** If the

maximum assessment, together with the [Fund’s] other assets

***, does not provide, in any one year, *** an amount

sufficient to make all necessary payments ***[,] the unpaid

portion shall be paid as soon thereafter as funds become

available.” (Emphasis added.) 215 ILCS 5/537.6 (West

2010).

¶ 92 The 2% limit on assessments provides all the “basis” needed to

support my conclusion. As the number of self-insured employers

relying on excess-only insurance policies who seek payments from

the Fund beyond the applicable caps expands, the Fund’s long-term

payment obligations could readily outstrip its ability to replenish its

resources under the 2% assessment limit. Indeed, even the majority

admits that the assessment limit may create significant delays in the

Fund’s distribution of payments. While the majority attempts to

minimize this consequence with the assurance that the Fund “will

ultimately recover any and all amounts it must pay out *** to meet

the obligations of its insolvent members” (emphasis added) (supra ¶

43), its explanation ignores the very real impact payment delays

would have on injured workers’ receipt of what it deems to be

workers’ compensation liability payments.

¶ 93 If the Fund’s payments are indeed for Wells’ workers’

compensation liability, as the majority claims, delays in those

payments are contrary to the legislative purposes of both the Fund and

the Illinois Workers’ Compensation Act. “[T]he fundamental purpose

of the Act *** was to afford protection to employees by providing

them with prompt and equitable compensation for their injuries.”

(Emphasis added.) (Internal quotation marks omitted.) McNamee v.

Federated Equipment & Supply Co., 181 Ill. 2d 415, 421 (1998)

(quoting Mitsuuchi v. City of Chicago, 125 Ill. 2d 489, 494 (1988),

quoting Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 180-81 (1978)).

Moreover, the legislative impetus behind the Fund was “to avoid

excessive delay in payment” of covered claims. 215 ILCS 5/532

(West 2010). The view adopted by Wells and the majority

contravenes the stated purposes of both the Code section creating the

Fund and the Workers’ Compensation Act. Accordingly, the

majority’s construction of section 537.2 violates the fundamental

-29-

principle that courts must construe statutes to give effect to the stated

intent of the legislature, not to contradict it. Exelon Corp. v.

Department of Revenue, 234 Ill. 2d 266, 275 (2009).

¶ 94 Nonetheless, the majority maintains that its disposition is surely

“exactly what [the legislature] had in mind” when it expressed the

Guaranty Fund Act’s stated purpose as “to avoid financial loss to

claimants or policyholders” when an insurer becomes insolvent (215

ILCS 5/532 (West 2010)). Supra ¶ 47. The statutory language also

shows, however, that the Act’s protection was never designed to be

all-inclusive. See Exelon, 234 Ill. 2d at 275 (explaining that

construction of statutes should be consistent with their stated

legislative purpose). The plain language of section 537.2 shows that

in the vast majority of circumstances the Fund is obliged to protect

claimants and policyholders only up to the payment cap created by the

state legislature, here $300,000. Claimants and policyholders still

incur all additional losses. Moreover, section 537.4 specifically

obliges the Fund only to fulfill the insolvent insurer’s duties “subject

to the limitations provided in this Article.” (Emphasis added.) 215

ILCS 5/537.4 (West 2010). This phrase expressly caps the Fund’s

obligations at the amounts adopted by the legislature in section 537.2,

here $300,000. The majority states that “[r]equiring the Fund to

continue making payments *** here therefore does nothing more than

place Wells in exactly the same position it would have been in ***

and enabling it to avoid what would otherwise be a substantial

financial loss, namely, having to pay out of pocket for the same

workers’ compensation expenses the now worthless Home Insurance

policy should have covered” was the legislature’s intent. Supra ¶ 47.

That statement is true, however, only if the excess coverage policy

that Wells actually purchased is transformed into a primary workers

compensation liability policy that it already declined to buy. The

majority’s justification fails to support its interpretation of the Act; in

fact, its interpretation has to be assumed to support its justification.

Contrary to its declaration that this court cannot “depart from the

plain language of the law and read into it exceptions, limitations or

conditions which the legislature did not express” (supra ¶ 38), that is

exactly what the majority is doing. The majority’s approach ignores

the language specifically chosen by the legislature for the payment

cap exception (“any workers compensation claims” (emphasis

added)) that would require this court to look to the policy language to

determine the true nature of Wells’ claim.

-30-

¶ 95 The legislature’s rationale for creating a single exception to the

payment caps for workers’ compensation claims is readily apparent.

215 ILCS 5/537.2 (West 2010). As previously noted, the Workers’

Compensation Act’s purpose is to protect workers injured in the

workplace “by providing them with prompt and equitable

compensation for their injuries.” (Internal quotation marks omitted.)

McNamee, 181 Ill. 2d at 421 (quoting Mitsuuchi v. City of Chicago,

125 Ill. 2d 489, 494 (1988), quoting Kelsay v. Motorola, Inc., 74 Ill.

2d 172, 180-81 (1978)). Once the policy language is actually

examined, it is apparent that Wells’ covered claim is not a workers’

compensation claim. Accordingly, my proposed outcome is consistent

with the legislature’s intent to cap the Fund’s other payment

obligations, as well as with the overall purpose of the Guaranty Fund

and the plain language of sections 537.2 and 537.4. Under this

construction, Wells’ injured worker will continue to be afforded full

protection and will receive her payments in a timely manner. Any

delays in receiving money from the Fund will be limited to Wells’

reimbursement payments, not the workers’ compensation benefits

being paid to Wells’ seriously injured worker. 215 ILCS 5/537.6

(West 2010) (stating “If the maximum assessment, together with the

[Fund’s] other assets ***, does not provide, in any one year, *** an

amount sufficient to make all necessary payments ***[,] the unpaid

portion shall be paid as soon thereafter as funds become available”

(emphasis added)). Under the majority’s rationale, the burden of the

delay would be imposed solely on the injured benefit recipient,

contrary to the legislature’s stated intent.

¶ 96 The legislature did not, however, express a similar intent to

provide comprehensive protection to self-insured employers such as

Wells. Employers alone can control their potential out-of-pocket risks

based on the reasonable consequences of their rational business

decisions about the type of insurance coverage necessary to meet their

needs and goals. Accordingly, my construction is completely

consistent with the legislative purpose of section 537.2. See Exelon,

234 Ill. 2d at 275 (requiring courts to effectuate the legislature’s

intent by examining the plain, ordinary, and unambiguous language

of the statutes, taken as a whole).

¶ 97 Although the majority also suggests that employers who purchase

primary coverage are not treated unfairly by its interpretation of

section 537.2, its supporting assertion that “[i]t is only when the

coverage threshold is reached *** that the Fund’s obligation would

-31-

commence ” (emphasis added) (supra ¶ 45) misses the point. This

case is not about employers who buy indemnification-only coverage

obtaining an unfair benefit by receiving earlier payments from the

Fund. It is about the legislature’s statutory restriction on the total

amount employers may receive from the Fund, regardless of when

those payments begin. It is the end of the Fund’s obligation, not its

beginning, that is at issue.

¶ 98 The majority also maintains that “[w]indfalls to insured

employers are *** an impossibility” because the Fund’s payment

obligation is coextensive with that of the policy. Supra ¶ 46.

Obviously, the Fund would never pay more than the policy requires.

The legislature, however, specifically drafted section 537.2 to require

the Fund to pay the lesser of the sums due under the policy or the cap,

except when the claim is for a workers’ compensation claim. 215

ILCS 5/537.2 (West 2010). If the legislature had intended the Fund

to pay the full benefits due under the every type of policy, it would

not have included any payment caps in section 537.2 (215 ILCS

5/537.2 (West 2010)). The policy limits themselves would have

provided all the caps needed. Once again, the majority’s point is only

appropo if Wells’ covered claim is presumed to be a workers’

compensation claim. Making that presumption, however, overlooks

the actual language used in the applicable statutes and the underlying

excess-insurance policies.

¶ 99 After carefully reviewing the relevant statutory provisions, the

intent of the legislature, and the applicable policy language under this

court’s traditional rules of statutory construction, I am compelled to

conclude that legislative exception to the Fund’s payment cap for

workers’ compensation claims does not apply to Wells’

indemnification claim against its defunct insurer. Accordingly, the

Fund was obliged to make payments only up to its $300,000 statutory

cap. It has fulfilled that obligation, leaving Wells responsible for

making its injured employee’s remaining workers’ compensation

benefits without reimbursement.

¶ 100 If Wells should become insolvent, or is otherwise unable to

continue those payments, Wells’ injured worker is still assured of

receiving her full workers’ compensation award. The Self-Insurers

Advisory Board (SIAB), created in the Workers’ Compensation Act

to administer and pay claims against insolvent self-insured employers,

would become responsible for the continuation of her benefit

payments. 820 ILCS 305/4a-1, 4a-6 (West 2010) (creating the SIAB

-32-

and obliging it to “assume *** the outstanding workers’

compensation *** obligations of the insolvent self-insured”). Because

I would reverse the appellate court’s judgment and remand the cause

to the circuit court for entry of summary judgment in favor of the

Fund, I must respectfully dissent from the majority opinion.

¶ 101 JUSTICE THOMAS, dissenting:

¶ 102 Like Chief Justice Kilbride, I am convinced that the claims at

issue in this case are not “workers compensation claims,” as that term

is used in section 537.2 of the Code (215 ILCS 5/537.2 (West 2010)).

Accordingly, I respectfully dissent.

¶ 103 Clearly, the public policy purpose of the “workers compensation

claims” exception to the $300,000 statutory cap is to ensure that an

injured worker receives all of the benefits to which he or she is

entitled in the event that the employer’s workers’ compensation

insurer becomes insolvent. Yet I simply cannot see how that public

policy purpose is implicated in this case.

¶ 104 In the typical case of workers’ compensation liability coverage,

the insurer agrees to pay when due the benefits required of the

employer by the workers’ compensation law. In other words, with

liability coverage, the insurer legally assumes the employer’s

obligation to pay the injured employee’s benefits. Indeed, the

Workers’ Compensation Act contemplates this very arrangement

when it specifically authorizes an employer to “[i]nsure his entire

liability to pay such compensation.” 820 ILCS 305/4(a)(3) (West

2010). Under these circumstances, if the insurer becomes insolvent,

the employee’s benefits will not be paid, as the insolvent insurer has

assumed the legal obligation to pay them directly. This is the situation

for which the exception to the statutory cap exists.

¶ 105 In our case, by contrast, the policy involved is not one of liability

in which Home legally assumed Wells’ obligation to pay its

employees’ workers’ compensation benefits. Rather, the policy

involved is one for indemnification, in which Home agreed only to

reimburse Wells for workers’ compensation benefits it “actually

paid,” once those benefits reached a certain amount. In other words,

Wells, as the employer, has legally retained sole responsibility for

paying its injured employee’s claims. And this distinction is crucial

because, unlike a case involving workers’ compensation liability

coverage, Home’s insolvency in our case would have no bearing on

whether the injured employee is in fact paid. Again, Wells contracted

-33-

only for reimbursement of payments actually made. This means that,

to the extent that Wells is seeking indemnification from Home, the

injured employee’s benefits have to have already been paid.

Conversely, if at any point Wells stops paying its injured employee’s

benefits, for whatever reason, Wells would have no claim against

Home because, again, that policy only provides reimbursement for

payments that have already been made. No payment, no

reimbursement. Either way, whatever arrangement Wells has with

Home is completely divorced from and therefore has no bearing on

whether the injured employee is actually paid.

¶ 106 In other words, the crucial distinction in this case is not between

primary and excess coverage but between liability and

indemnification coverage. This is because under any liability policy,

be it primary or excess, the insurer legally assumes the employer’s

obligation to pay the injured employee’s benefits. A primary liability

policy simply means that the insurer assumes that legal obligation

earlier than under an excess liability policy. Consequently, if a

liability carrier becomes insolvent, be it a primary or an excess, the

workers’ compensation claims that the carrier has assumed legal

responsibility for paying will not be paid. By contrast, the insolvency

of an indemnification carrier will never affect whether an injured

employee's benefits are in fact paid because an indemnification carrier

only reimburses a responsible employer for claims that the employer

has already paid.

¶ 107 And again, this case involves an indemnification policy, not a

liability policy. Consequently, the public policy that I am convinced

informs the “workers compensation claims” exception to the

$300,000 statutory cap—to ensure that injured employees continue to

be paid despite a workers’ compensation insurer’s

insolvency—simply is not present in this case. Consequently, I am

hard-pressed to characterize the claims at issue as “workers

compensation claims” rather than as what they patently are—claims

for reimbursement of workers’ compensation claims that have already

been paid.

¶ 108 Accordingly, I respectfully dissent.

-34-