The Kotecki Exposures in Illinois
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The Illinois courts have created a potentially expensive yet uninsured exposure for Illinois employers by a series of decisions relating to what are known as "third party over" claims involving Workers' Compensation and General Liability insurance. Third party over actions involve situations where an injured employee sues a third party for negligence (a third party such as a work site owner, manufacturer of equipment, or a general contractor) and that third party then files suit against the employer for contribution toward the employee's damages.
The original case, Kotecki v. Cyclops Welding, had the Illinois Supreme Court ruling that an employer's maximum liability in a third party suit for contribution is limited to an amount no greater than its liability to its employee under the Workers' Compensation Act.
But later, a series of Illinois judicial decisions held that an employer could waive this Kotecki cap by contract, by means of indemnity provisions commonly contained in contracts between contractors and their clients or general contractors.
Finally, two Illinois Appellate Court decisions held that the exposure created by such a waiver of the Kotecki cap may be uninsured under both the standard general liability policy and the standard employers' liability coverage (part Two of the Workers' Compensation insurance policy).
To address this exposure, the Workers' Compensation policy should be endorsed to specifically amend the exclusions under Part Two-Employers Liability Insurance so that Kotecki waivers are specifically not excluded.
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