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Merger of companies complicates workers' compensation liability

At our Rockford, Illinois, law firm, we represent injured or ill workers in the surrounding region whose impairments are work related in their claims for workers' compensation. It is a good idea to consult with an experienced workers' compensation lawyer as soon as possible after an injury for a thorough assessment of the workers' compensation claim and guidance about any legal issues that could arise.

While some cases are straightforward, sometimes complicated legal or factual issues can arise that a seasoned lawyer may pick up on and help to resolve.

Which employer is liable in workers' compensation when an employee is injured shortly after the employer merged with another company?

A new Illinois case illustrates an unexpected complexity that arose in a workers' compensation claim when a work injury occurred just after the employee's trucking company employer had merged with another company. The facts of the Oct. 24 case - Illinois Insurance Guaranty Fund v. Priority Transportation, Inc. - are extremely detailed, so we provide a simplified summary.

Tim Witte was a truck driver for Fox Midwest Transport when it merged with another trucking company. A couple of weeks after the merger, he fell on ice while stepping out of his truck, sustaining severe injuries. Fox Midwest's workers' comp insurance policy with Fremont Casualty Insurance Company was still in effect and paid out on the claim until mid-2003, when the state put Fremont through involuntary liquidation.

The Illinois Insurance Guaranty Fund is a state-created nonprofit entity that pays workers' compensation benefits to claimants when their employers' insurers go out of business. This Fund picked up Witte's claim after Fremont's liquidation.

The Fund sued several parties, including Witte, Transit Group (the surviving company after the merger) and Ace Insurance Company (its workers' compensation insurer), claiming that Transit Group's insurance company should have paid the claim instead of the Fund.

Under Illinois law, before the Fund becomes liable in a workers' comp claim, the claimant must exhaust all his rights to coverage under any other insurance policy that could have liability.

The appeals court agreed with the trial court that on the date of the merger, the former employer ceased to legally exist, so that when Witte was injured shortly thereafter, he was Transit Group's employee, so Transit Group was liable through Ace, its workers' comp insurer. Therefore, in 2003 when Fremont, Fox Midwest's insurer, was liquidated, Ace, not the Fund, was liable for the benefits.

Key takeaways

While in this case, no one challenged the employee's workers' compensation eligibility and coverage for the injury - which is the most common reason a lawyer gets involved - related legal issues can complicate things. For example, a company merger, bankruptcy or sale might cause delay in a claim while liability is sorted out, or legal issues could involve the claimant unnecessarily if not quickly resolved. In the case we write about today, for example, while the issue was which insurer was liable and the claimant had been paid his benefits all along, the original injury was in 2000, but the appeals court decision came down in 2019. The claimant was one of the named parties - 19 years later.    

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