The United States District Court for the Northern District of Illinois recently held an insurer has no duty to defend or indemnify a motor carrier in a worker’s compensation claim stemming from the death of an employee in a state not listed on the policy in Hartford Underwriters Ins. Co. v. Worldwide Transp. Shipping Co., No. 16 C 2381, 2018 U.S. Dist. LEXIS 43045 (N.D. Ill. Mar. 16, 2018). The Court granted Hartford’s summary judgment motion seeking a declaratory judgment against Worldwide. Worldwide Transportation Company (“Worldwide”) is an Iowa trucking company who applied for Iowa’s Worker’s Compensation Insurance from Hartford Underwriters Insurance Company (“Hartford”), an insurance company exclusively authorized to provide insurance in Iowa. The employee, John Finnegan, died in a workplace accident in McCook, Illinois. Finnegan was an Illinois resident and he performed all his work in Illinois. Worldwide’s application with Hartford listed Iowa as the “majority driving state,” it represented it had zero employees, and only mentioned Illinois once regarding long distance hauling. Hartford issued Worldwide a policy for liabilities arising under the Iowa Worker’s Compensation Act. The Court’s decision came down to an interpretation of the policy’s Residual Market Limited Other States Insurance Endorsement (“LOSI”). Hartford argued two of the three requirements of the LOSI were not met by Worldwide in the Finnegan claim, to wit:

b. The employee claiming benefits is not claiming benefits in a state where, at the time of injury, (i) you have other workers compensation insurance coverage, or (ii) you were, by virtue of the nature of your operations in that state, required by that state’s law to have obtained separate workers compensation insurance coverage, or (iii) you are an authorized self-insurer or participant in a self-insured group plan; and c. The duration of the work being performed by the employee claiming benefits in the state for which that employee is claiming benefits is temporary.

Justice Kendall held the second requirement turned on whether Worldwide was required under Illinois statute to purchase separate worker’s compensation insurance. Worldwide failed to satisfy this prong because Illinois statute requires the insurance provider to be authorized to operate an insurance business in Illinois, and Hartford was not. Further, Worldwide represented it had no employees until after Finnegan’s accident and Finnegan performed 100% of his work in Illinois. Justice Kendall held Worldwide failed to satisfy the third prong because Finnegan’s work in Illinois was not “temporary.” As discussed above, Finnegan was an Illinois resident who performed all his work in Illinois. Worldwide argued Finnegan was only an employee for two months when the accident occurred and likely would have worked in Iowa in the future. Justice Kendall found this argument unpersuasive as the possibility of working somewhere other than Illinois does not render Finnegan’s work in Illinois “temporary.” The Court also denied Worldwide’s affirmative defense of estoppel/waiver. Worldwide argued Hartford’s failure to conduct an audit until approximately two months after the policy was issued constituted a waiver. The Court held this would punish Hartford for relying upon the representations made by Worldwide. Insurer’s should be allowed to rely upon the information provided by those applying for insurance. Ultimately, Hartford and other insurers are not required to defend or indemnify an insured for accidents occurring outside the policy’s scope. The Northern District of Illinois’ ruling is an indication courts will read LOSI’s provisions narrowly moving forward. Motor carriers are advised to do their due diligence when applying for insurance or they may find themselves without coverage they thought they had.