In Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund, 2012 IL App. (1st) 111533, the Court held that the guaranty fund had the same obligation to provide worker’s compensation benefits when an excess insurer became insolvent, as it did when benefits were triggered for primary insurers.  This case has special importance for self-insured employers who carry large self-insured retentions for their worker’s compensation obligations and rely on excess insurance for catastrophic or stop loss coverage.  Although all guaranty funds have limits on how much they are obligated to pay out for liability limits, all statutes have exceptions for worker’s compensation benefits.  In this case, the Illinois Guaranty Fund terminated benefits owed to one of the plaintiff’s employees who had been awarded benefits for life for her total and permanent disability when the payments reached the statutory cap of $300,000.

In a very thorough and thoughtful opinion, the Illinois Appellate Court rejected the Guaranty Fund’s disingenuous argument that the self-insured employer’s claim for reimbursement under its excess policy was not a “worker’s compensation claim,” because it was not being made on behalf of the employee.  The Court based its decision on two separate reasons.  First, the statutory exception applied to “any worker’s compensation claim,” which was not defined and could not be as narrowly interpreted as the Fund asserted.  Second, it found that under Illinois law, and a majority of jurisdictions, a self-insured employer is not the same as an insurer for purposes of the guaranty fund law and thus, self-insured employers could recover from their state’s guaranty funds after their excess insurers became insolvent.  See MGM Mirage v. Nevada Insurance Guaranty Ass’n, 209 P.3d 766, 772 (Nev. 2009) (and cases cited therein).