Which way is up?? Or who can we count on to paint the arrow on the package when deciding coverage issues??

In matters regarding only disputed coverage interpretations of an insurance policy which are an issue of pure contract law, the Appellate Court indicates they believe it is best left to the appropriate venue rather than the expertise of an Arbitrator or the Illinois Workers’ Compensation Commission. In Hastings Mutual Insurance Company v. Ultimate Backyard, in an appeal from the Circuit Court of Cook County, the Illinois Appellate Court, First District reversed and remanded an order denying a motion to stay proceedings and allowed the IWCC to interpret Section 4(b) of Workers' Compensation Act.

In Hastings, the insurer initially issued benefits under a WC policy after Petitioner sustained injury but then terminated benefits after the policy expired. It is undisputed the insurer complied with Section 4(b) requiring in pertinent part at least 10 day notice of cancellation. The insurer then sought to stay arbitration pending Circuit Court interpretation of the statute and insurance contract. The Circuit Court refused reasoning the IWCC was able to provide a specialized or technical expertise helping to resolve the controversy. It is important to note, the denial of a stay is treated as a denial of a request for a preliminary injunction, which is appealable under Rule 307(a)(1) using an abuse of discretion standard of review.

The Appellate Court reversed and remanded holding the mere interpretation of a statute and insurance contract is the type of issue the Circuit Court is well-versed in and not the type of question requiring the expertise of the IWCC. It was noted the Illinois legislature may vest exclusive original jurisdiction to an administrative agency, but it must do so explicitly through a comprehensive statutory administrative scheme, and the Workers' Compensation Act was insufficient to divest the Circuit Courts of jurisdiction.

In making their ruling, the Court noted factual issues were best left before the IWCC but indicated questions of law may be best left to the lower courts. Here, there was no question of fact regarding receipt of the notice because the notice was logged into a system and given a unique coding on the cancellation form indicating the date the form was received. The IWCC did not need to make any factual findings and the insurer contested the authority or jurisdiction of the IWCC to hear the case. Therefore, the Circuit Court should rule on questions of law when it could 'foreclose needless litigation.' Specifically, the determination the notice of cancellation met the statutory requirements of section 4(b) of the Workers' Compensation Act, relying on the undisputed fact the notice was logged and date stamped.

As a practice point, in situations where there is no dispute of fact but only of law, such as when there is a dispute whether the policy provides coverage to certain employees or to geographical locations, the insurer should contest the authority of the IWCC to hear the case with a motion to stay and immediately appeal any denial of said motion. A decision from an arbitrator or IWCC rather than the Circuit Court may dramatically affect the outcome of the case or frankly could simply extend litigation in both costs to the parties and in lengthening the entire process. Essentially, there is no need to waste the time of the IWCC by using their expertise and the Circuit Court is the appropriate venue to foreclose needless litigation. We had a similar case with a now-departed Arbitrator who made a coverage decision which was similar to this claim (almost the exact decision made by the Circuit Court in this case) and it resulted in almost two years of litigation including separate litigation over the entire coverage issue in a separate venue—all of which could have been avoided with a decision being made on the coverage issue.

This article was researched and written by Nathan Bernard, J.D. & Shawn R. Biery, J.D., MSSC who can be reached at nbernard@keefe-law.com or sbiery@keefe-law.com.