Barbee v. Illinois Ins. Guar. Fund

• Citation: 915 N.E.2d 871
• Decision Date: 24 September 2009
• Docket Number: No. 5-08-0390.,5-08-0390.
• Parties: Beverly Joyce BARBEE, Plaintiff-Appellant, v. ILLINOIS INSURANCE GUARANTY FUND, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

915 N.E.2d 871

Beverly Joyce BARBEE, Plaintiff-Appellant, v. ILLINOIS INSURANCE GUARANTY FUND, Defendant-Appellee.

No. 5-08-0390.

Appellate Court of Illinois, Fifth District.

September 24, 2009.

Steven F. Hanagan, Hanagan & Dousman, Mt. Vernon, for Appellant.

J. Murray Pinkston III, Stone & Johnson, Chartered, Chicago, for Appellee.

Justice CHAPMAN delivered the opinion of the court:

Beverly Joyce Barbee appeals from the trial court's July 10, 2008, declaratory judgment in favor of the Illinois Insurance Guaranty Fund. One issue was presented in this declaratory judgment. Barbee sought to have the court declare that the Illinois Insurance Guaranty Fund (the Fund) was obligated to pay death benefits coverage to her deceased husband's dependents after the underlying insurance company had been declared insolvent and thereafter liquidated by a state government. The trial court dismissed the case pursuant to a motion filed by the Fund. The dismissal was on the basis that the decedent's disability claim and the survivor's death benefits claim were separate and independent claims and that the claim for death benefits was untimely and therefore not a "covered" claim. We affirm.

Barbee's husband sustained a devastating work injury in 1976. Through his employer, he was awarded permanent and total disability benefits under the Workmen's Compensation Act (Ill.Rev.Stat. 1973, ch. 48, par. 138.8(f) (now see 820 ILCS 305/8(f) (West 2008))). These benefits were awarded on May 30, 1980. The insurance company who issued Wilford Barbee's employer's policy was American Mutual Liability Insurance Company. Following the award, the company began the payment of his disability benefits.

Approximately 10 years later, the State of Massachusetts determined that American Mutual Liability Insurance Company was insolvent, and Massachusetts entered a liquidation order. After the insurance carrier became insolvent, the Fund accepted Wilford Barbee's permanent and total disability award as a "covered claim" under the Illinois Insurance Guaranty Fund statute—article XXXIV of the Illinois Insurance Code (Ill.Rev.Stat.1983, ch. 73, par. 1065.82 et seq. (now see 215 ILCS 5/532 et seq. (West 2008))). Thereafter, the Fund assumed and continued the disability benefits payments to Wilford Barbee.

On January 26, 2007, Wilford Barbee died as a result of injuries he sustained in the original workers' compensation accident. His death occurred approximately 17 years after the insolvency of the insurer. Following his death, Mrs. Barbee asserted her own claim for death benefits with the Fund. The Fund denied that coverage existed. Barbee then filed an action for a declaratory judgment asking the court to declare that coverage for the death claim did, in fact, exist.

The Fund filed a motion to dismiss the claim pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2006)) on the basis that the death benefits claim was a new claim—separate and independent from the original disability benefits claim. The Fund contended that the survivor's claim was distinct in that there was a different claimant, a different date of loss, a different rate of calculation, and completely different benefits. The Fund also argued that the claim was "untimely"—beyond the time limitation for the presentation of a claim to the Fund. On July 10, 2008, the trial court agreed with this argument and granted the Fund's motion, thereby dismissing Barbee's claim.

Barbee appeals.

On appeal, Barbee asks us to determine whether the Fund remains liable for survivor's death benefits, because the Fund accepted the timely filed disability claim of the now—deceased employee after the insurer had become insolvent.

When a judgment pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2006)) is appealed to this court, we must review that judgment on a de novo basis. Van Meter v. Darien Park District, 207 Ill.2d 359, 368, 278 Ill.Dec. 555, 799 N.E.2d 273, 278 (2003). In reviewing that judgment, we must construe all the pleadings and supporting documentation in the light most favorable to the nonmoving party. Van Meter, 207 Ill.2d at 367-68, 278 Ill.Dec. 555, 799 N.E.2d at 278.

The Fund was created in order to maintain the status quo of a claimant, ensuring that payments would continue uninterrupted in the event that an insolvent company was liquidated. 215 ILCS 5/532 (West 2006).

However, coverage pursuant to the Fund was not automatic. Because of its statutory nature, we will examine several sections of the statute.

"The purpose of this Article is to provide a mechanism for the payment of covered claims * * *." (Emphasis added.) 215 ILCS 5/532 (West 2006). The statute defines a "covered claim" as "an unpaid claim for a loss arising out of and within the coverage of an insurance policy to which this Article applies and which is in force at the time of the occurrence giving rise to the unpaid claim * * * made by a person insured under such policy or by a person suffering injury or damage for which a person insured under such policy is legally liable * * * if[] (i) The company issuing the policy becomes an insolvent company * * * and (ii) The claimant or insured is a resident of this State at the time of the insured occurrence." 215 ILCS 5/534.3(a) (West 2006). The Fund is obligated to pay under several circumstances on all "covered claims," including those that are in existence before the order of liquidation is entered, as well as those that arise within 30 days after the liquidation order is entered or before the expiration of the insurance policy at issue, as long as the policy ended within 30 days after the date that the liquidation order had been entered. 215 ILCS 5/537.2 (West 2006). The Fund essentially steps into the shoes of the insolvent insurer by assuming the insurer's obligations, but only with regard to "covered claims." 215 ILCS 5/537.4 (West 2006).

The statute further indicates that a "covered claim" is a "claim which appears on the books and records of the insolvent company as of the date of the Order of Liquidation or a claim for which notice is given in writing to the liquidator of the insolvent company's domiciliary state or to an ancillary receiver in this State, if any, or to the Fund or its agents prior to the earlier of the last date fixed for the timely filing of proofs of claim in the domiciliary liquidation proceedings or 18 months after the entry of the order of liquidation." 215 ILCS 5/540.5(a) (West 2006).

COVERED CLAIM

Claim for Which Written Notice Is Given Within 18 Months of Liquidation Order

At the time that American Mutual Liability Insurance Company became insolvent, there was no doubt that Wilford Barbee's claim for workers' compensation disability benefits was a covered claim. And, in fact, the Fund continued to make those payments. No one contends that Wilford Barbee's death was not causally connected to the injuries he sustained in this work injury and that, ordinarily, upon the filing of a claim for death benefits, benefits would have been paid to his surviving family. A death benefits claim is a type of claim that is covered by the Fund when the underlying insurance company becomes subject to an underlying liquidation order. Here, however, the court found that Barbee's death benefits claim was not a "covered claim" as defined by the statute. Timely notice under the statute required that a claim be filed prior to September 9, 1990. Because Barbee's husband's death did not occur until 2007, she could not fulfill the statute's notice requirements for his death benefit claim. In so deciding, the court rejected Barbee's argument that notice of the disability claim was adequate regarding the death benefit claim, holding instead that the right of recovery for her husband's death was separate and independent from his disability benefits claim and thus would have required a separate notice.

The Fund contends that a separate notification is required because the claimants are different and that there are different rate calculations, different dates of loss, different benefits, and different benefits periods.

The Workers' Compensation Act (820 ILCS 305/1 et seq. (West 2006)) supports this argument because it also distinguishes disability claims from death benefit claims. Under the Workers' Compensation Act, the Barbee death claim did not arise until his death in 2007. The Workers' Compensation Act has a three-year statute of limitations relative to death claims, and so Barbee would have had until the third anniversary of his death in 2010 to file her claim for death benefits. 820 ILCS 305/7 (West 2006).

The Fund argues that it does not cover all claims, but only "covered claims." See Claudy v. Commonwealth Edison Co., 255 Ill.App.3d 714, 732, 193 Ill.Dec. 537, 626 N.E.2d 1088, 1100 (1993), rev'd on other grounds, 169 Ill.2d 39, 214 Ill.Dec. 188, 660 N.E.2d 895 (1995). Because the claim did not exist at the time the order of liquidation was entered, since the death occurred more than 18 months after the order had been entered, the death benefits claim did not constitute a "covered claim."

The order of liquidation was entered on March 9, 1989. Therefore, the Fund contends that the last possible date for filing a claim that the Fund would be required to cover was September 9, 1990. Because the loss giving rise to the death benefits had not yet transpired, the Fund claims that Barbee could not have then filed her claim.

Barbee argues that while the death occurred in 2007, the "occurrence giving rise to the unpaid claim" (215 ILCS 5/534.3(a) (West 2006)) was her husband's accidental injury rather than his subsequent death. And because the disability claim was already on the books of the insolvent insurance carrier at the time the Fund interceded, it was already apprised of a potential claim in the event her husband died of those injuries, thereby meeting the notice requirement of section 540.5 of...