Workers’ Compensation – Asbestos:

Illinois Appellate Court Finds Exclusivity Provisions No Bar To Direct Action Against Employer For Asbestos-Related Disease

In a case of first impression, the First District Illinois Appellate Court, applying Illinois law, held employers liable for direct claims by former employees for asbestos-related disease that would otherwise have been barred as untimely under workers’ compensation statutes.  This decision has potential implications beyond the asbestos and workers’ comp realms, including whether a company’s historical or current commercial general liability insurance might cover direct actions by current or former employees for claims that could have been brought under workers’ comp laws but for statutes of limitation or repose.

The issue addressed by the Court was whether an employee can sue his employer outside of the Workers’ Compensation Act (Act) and the Workers’ Occupational Disease Act, when the employee first learns of the injury after the expiration of the statute of repose under those acts.  Plaintiff James Folta was allegedly exposed to asbestos at a plant owned by defendant Ferro Engineering from 1966 to 1970.  Forty-one years after leaving the employ of Ferro Engineering, on May 17, 2011, Folta was diagnosed with mesothelioma.  By this time, any potential workers’ comp claim against Ferro Engineering was time barred by the Act’s 25-year statute of repose for asbestos-related injuries and the three-year statute of repose for asbestos-related diseases.  Thus, instead of filing a workers’ comp claim, Folta filed a direct action against Ferro Engineering and other defendants who supposedly supplied Ferro Engineering with products or equipment containing asbestos.

Ferro Engineering filed a motion to dismiss Folta’s claim, arguing that because Folta’s injuries arose out of his employment, his action was barred under the statute of repose.  Folta argued that workers’ comp exclusive remedy provisions did not bar his direct action, because that provision does not apply to claims that are “not compensable under the Act.”  Meerbrey v. Marshall Field & Co., Inc., 139 Ill.App.2d 455 (1990).  The circuit court granted Ferro Engineering’s motion to dismiss, holding that the running of the statute of repose does not render a cause of action noncompensable.

On appeal, the Court first addressed the purpose and limitations of the Act:  “The Act imposes liability without fault upon the employer and, in return, prohibits employees from bringing common-law actions against their employers…The purpose of [the] exclusivity bars is twofold:  they are intended both to prevent double recovery and to prevent the proliferation of litigation.”  The Court then turned to the meaning of the phrase “not compensable under the Act.”  Folta argued that an injury is not compensable under the Act whenever a plaintiff, through no fault of his own, is barred from seeking recovery under the Act under the statutes of repose.  Ferro Engineering argued that an injury is not compensable only if it does not arise out of and in the course of employment.  The Court rejected Ferro Engineering’s argument, finding that its proposed definition would render superfluous other exceptions set forth in Meerbrey (e.g., that the injury did not arise from or was not received during the course of employment).  In accepting Folta’s argument, the Court held:  Through no fault of his own, “plaintiff’s injury is quite literally not compensable under the Act [and the Workers’ Occupational Disease Act.”], in that all possibility of recovery is foreclosed because of the nature of plaintiff’s injury.”

The Court held that there is no fear of double recovery, since Folta is barred from seeking recovery under the Act.  For the same reason, the Court held that allowing Folta to bring a direct action will not cause the proliferation of litigation, because filing a common-law claim is his only avenue to seek redress for his alleged injuries.  Folta’s alternative arguments – that application of the exclusivity provisions would violate his equal protection and due process rights under the Illinois Constitution – were not addressed by the Court.

This opinion is notable, not only because it resolves an issue of first impression in Illinois, but because it was decided by the First District (Cook County), and not the Fifth District (Madison County). Workers’ comp exclusivity provisions have been largely ignored in Madison County. But, as indicated by the circuit court’s decision in this case, Cook County has been willing to enforce the exclusivity provisions where there are no allegations that bring the claim outside the workers’ comp bar (e.g., allegations of willful conduct).

Whether companies may have insurance coverage under their historical or current commercial general liability (CGL) policies for direct claims by current or former employees that could have been brought under workers’ comp laws but for statutes of repose depends on the language of their policies.  Generally, depending on the timeframe, CGL policies contain workers’ comp exclusions and/or employer’s liability exclusions.  A typical workers’ comp exclusion might bar coverage for “any obligation for which the insured may be held liable under any workers’ compensation law.”  A typical employer’s liability exclusion might bar coverage for “bodily injury to an employee of the insured arising out of and in the course of employment by the insured.”  This language in the employer’s liability exclusion likely bars coverage for claims like Folta’s.  But, if a CGL policy only contains a workers’ comp exclusion, coverage may be available, because the policyholder cannot be held liable under workers’ comp statutes due to statutes of repose.  In the aftermath of Folta v. Ferro Engineering, companies facing a direct action by a current or former employee should consider whether their CGL policies provide coverage for the claim.  Ellen Folta v. Ferro Engineering, No. 11 L 6753, 2014 IL App. (1st) 123219 (June 27, 2014).


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