General Contractor Entitled to Immunity under Workers’ Compensation Act

February 26, 2021 4:14 PM | Carson Griffis (Administrator)

By:  Richard C. Harris, Adler Murphy & McQuillen LLP

In Munoz v. Bulley & Andrews, LLC, 2021 IL App (1st) 200254, the Illinois Appellate Court, First District, recently answered the question of whether a party is entitled to immunity under the exclusive remedy provision of the Workers’ Compensation Act based solely on its preexisting contractual obligation to cover benefits and insurance premiums. The First District  answered this question in the affirmative, even though the contractually obligated party was not the injured worker’s direct employer.

Bulley LLC executed an agreement to be the construction manager for a project at a building in Chicago. The agreement required the LLC to purchase and maintain workers’ compensation insurance for the employees of its subcontractors. The LLC procured a policy and named Bully Concrete, among others, as additional insureds. Thereafter, the LLC hired Bully Concrete to perform work for the project. Although Bulley Concrete was a wholly owned subsidiary of the LLC, the companies were distinct and separate. They performed different specialties, had their own presidents, and employed different people.

The plaintiff sued the LLC and alleged he was injured on the worksite during the course of his employment for Bulley Concrete. The LLC moved to dismiss the claim on grounds that it was legally obligated to pay the plaintiff’s workers’ compensation benefits and had, in fact, paid more than $76,000 in medical bills. In response, the plaintiff argued that his workers’ compensation claim was made only against Bulley Concrete. Moreover, the plaintiff argued, a parent company is not shielded under the Act from a lawsuit by an injured employee of its subsidiary.

In affirming the circuit court’s dismissal, the appellate court noted that the Act’s exclusive remedy provision is part of the quid pro quo which balances the sacrifices and gains of employees and employers. In past cases, the Illinois Supreme Court held that allowing a party who paid nothing toward workers’ compensation benefits to escape tort liability under the Act’s exclusive remedy provision would be tantamount to allowing the party to “have its cake and eat it too.” Other cases held that a general contractor did not become an injured worker’s employer under the Act merely because it paid the benefits, reasoning that the aforementioned quid pro quo cannot be maintained if a party is permitted to selectively decide whether it will cover the benefits after an employee is injured.

However, when a general contractor assumes a pre-existing contractual obligation to pay the premiums for every worker on the jobsite, and, in fact, pays the benefits for an injured employee, the general contractor may avail itself of the Act’s exclusive remedy provision. To hold otherwise would equate to “declaring that a party who has paid for the cake may neither keep it nor eat it.”

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