Mutual Insurance Group Cites Loophole In Opposing Illinois Workers’ Comp Proposal

INDIANAPOLIS, May 8, 2014 /PRNewswire-USNewswire/ — The largest
property/casualty insurance trade association in the country is on record
opposing a legislative proposal in Illinois that would create tort liability for
most, if not all, safety service organizations that collaborate with employers,
insurers, and brokers to create safer workplaces. The National Association of
Mutual Insurance Companies says a loophole in Senate Bill 3287 renders the
apparent retention of exclusivity for certain service organizations meaningless.

Mark Johnston, NAMIC’s state affairs director for the Midwest, says the bill
undermines the core principle that the workers’ compensation system is the
exclusive remedy for on-the-job injuries. “Existing state law clearly states
that a service organization retained by the employer, his insurer, or his broker
to provide safety service, advice, or recommendations has immunity similar to
that available to an employer, insurer, or broker for employee injuries covered
by the Workers’ Compensation Act. If SB 3287 becomes law, it would restrict that
immunity to only an organization that is wholly owned by the employer, insurer,
or broker,” Johnston says.

The loss of immunity only applies to third-party organizations retained by the
entity and not service organizations that are part of the entity. “You’ll see
that the elimination of immunity extends to all service organizations affiliated
with an entity in any way except through 100 percent downstream ownership,”
Johnston explains.

If an entity and the service organization are separate subsidiaries of a common
upstream parent, there is no immunity as the service organization is wholly
owned by a different, albeit affiliated, firm. This would also be the case when
the service organization and insuring function are part of the same corporate
person, as neither owns the other.

“Even if this loophole were to be closed, the bill would still be objectionable
because it would treat small companies more harshly than larger firms. We
believe that the bill, by chipping away at workers’ compensation fundamentals,
is bad public policy and should be rejected,” Johnston says.

The House Judiciary Committee will conduct a hearing on the legislation proposal
May 7.

NAMIC has 1,400 mutual insurance member companies serving more than 135 million
auto, home, and business policyholders and writing in excess of $196 billion in
annual premiums.

Lisa Floreancig

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SOURCE National Association of Mutual Insurance Companies

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