W. Bend Mut. Ins. Co. v. TRRS Corp.

• Decision Date: 24 January 2020
• Docket Number: Docket No. 124690
• Citation: 161 N.E.3d 902,443 Ill.Dec. 250,2020 IL 124690
• Parties: WEST BEND MUTUAL INSURANCE COMPANY, Appellant, v. TRRS CORPORATION et al. (Gary Bernardino, Appellee).
• Court: Illinois Supreme Court

2020 IL 124690

161 N.E.3d 902

443 Ill.Dec. 250

WEST BEND MUTUAL INSURANCE COMPANY, Appellant,

v.TRRS CORPORATION et al. (Gary Bernardino, Appellee).

Docket No. 124690

Supreme Court of Illinois.

Opinion filed January 24, 2020

Thomas F. Lucas, Kristin D. Tauras, and Kelly E. Purkey, of McKenna Storer, of Chicago, for appellant.

Robert T. Edens, of Robert T. Edens, P.C., of Antioch, for appellee.

Kurt A. Niermann, of Porro Niermann Law Group LLC, of Aurora, for amicus curiae Illinois Trial Lawyers Association.

JUSTICE KILBRIDE delivered the judgment of the court, with opinion.

¶ 1 This case requires us to address a disagreement in our appellate court on the proper application of the primary jurisdiction doctrine. Generally, that doctrine "provides that where a court has jurisdiction over a matter, it should in some instances stay the judicial proceedings pending referral of a controversy, or some portion of it, to an administrative agency." Employers Mutual Cos. v. Skilling , 163 Ill. 2d 284, 206 Ill.Dec. 110, 644 N.E.2d 1163 (1994). Here, we must decide whether a circuit court may rely on the doctrine not to stay its own judicial proceeding but, instead, to enter an order staying an administrative proceeding in the Illinois Workers' Compensation Commission (IWCC).

¶ 2 On interlocutory appeal from the circuit court's order staying an IWCC proceeding, the Appellate Court, Second District, answered that question negatively. In relevant part, the appellate court disagreed with the First District's decision in Hastings Mutual Insurance Co. v. Ultimate Backyard, LLC , 2012 IL App (1st) 101751, 358 Ill.Dec. 585, 965 N.E.2d 656, that relied on the primary jurisdiction doctrine to direct the circuit court to enter an order staying an IWCC proceeding. 2019 IL App (2d) 180934, ¶ 29, 440 Ill.Dec. 421, 153 N.E.3d 997. Accordingly, the appellate court reversed the circuit court's stay order in this case and remanded for further proceedings. 2019 IL App (2d) 180934, ¶ 36, 440 Ill.Dec. 421, 153 N.E.3d 997.

¶ 3 For the following reasons, we affirm the judgment of the appellate court.

¶ 4 I. BACKGROUND

¶ 5 On October 2, 2018, plaintiff, West Bend Mutual Insurance Company (West Bend), filed in the circuit court of McHenry County a complaint for declaratory judgment against defendants, TRRS Corporation (TRRS), Commercial Tire Services, Inc. (Commercial Tire), and their employee, Gary Bernardino. As detailed below, this complaint led to extensive subsequent litigation, including an emergency motion to stay a pending IWCC proceeding, that resulted in the instant dispute.

¶ 6 In its declaratory judgment complaint, West Bend alleged that it issued a workers' compensation and liability insurance policy to TRRS and Commercial Tire, effective from June 20, 2016, to June 20, 2017. The policy required, in relevant part, that TRRS and Commercial Tire provide timely and proper notice of a covered worker's injury.

¶ 7 West Bend further alleged that on April 18, 2017, Bernardino was injured while working in the scope of his employment with TRRS and Commercial Tire. West Bend claimed, however, that TRRS and Commercial Tire did not timely report Bernardino's injury when it occurred "but chose to handle the injury itself and in the process paid Bernardino's lost wages and medical expenses relating to the April 18, 2017, injury" without West Bend's knowledge or permission.

¶ 8 West Bend first learned of Bernardino's injury on April 5, 2018, almost a year after his work-related injury. On April 10, 2018, West Bend sent TRRS and Commercial Tire a reservation of rights letter raising the issue of late notice. The letter also advised TRRS and Commercial Tire that West Bend would not reimburse them for any voluntary payments they made in connection with Bernardino's injury.

¶ 9 West Bend's complaint noted that Bernardino had filed an "application for adjustment of claim" with the IWCC. Bernardino also filed a separate negligence action in the circuit court seeking recovery for his personal injuries against several defendants, including his employers.

¶ 10 Ultimately, West Bend sought a judgment declaring that it did not have a duty to defend or indemnify TRRS and Commercial Tire in connection with Bernardino's workers' compensation claim or his personal injury lawsuit, both predicated on his April 18, 2017, work-related injury. West Bend argued that it was entitled to a declaratory judgment because TRRS and Commercial Tire failed to provide West Bend with reasonable notice of Bernardino's injury as required by its policy. West Bend further argued that TRRS and Commercial Tire made a "voluntary decision to forgo coverage for the claim." West Bend also sought a declaration that it was not obligated to indemnify TRRS and Commercial Tire for any payment made to Bernardino or on his behalf in connection with the April 18, 2017, injury because "these payments were made voluntarily by TRRS/Commercial Tire at their cost."

¶ 11 On October 9, 2018, a week after West Bend filed its complaint seeking a declaratory judgment, West Bend filed an emergency motion to stay a pending IWCC proceeding. In its emergency motion, West Bend informed the circuit court that Bernardino's pending workers' compensation case had been "set for trial" in the IWCC on November 19, 2018. This pleading and the circuit court's associated rulings are the focus of this appeal.

¶ 12 On October 12, 2018, the circuit court entered an ex parte order granting West Bend's emergency motion to stay Bernardino's IWCC proceedings. The court also scheduled a status hearing on the matter for October 26, 2018.

¶ 13 On October 25, 2018, Bernardino filed an emergency motion in the circuit court asking the court to vacate its October 12 stay order. Bernardino argued, in relevant part, that West Bend's declaratory judgment action alleged factual issues related to late or unreasonable notice by TRRS and Commercial Tire that were best resolved by the IWCC. Bernardino also argued that the circuit court should "exercise restraint and allow the IWCC to take jurisdiction." Bernardino asked the circuit court to vacate its October 12 stay order and enter an order staying West Bend's complaint for declaratory judgment pending resolution of his claim in the IWCC.

¶ 14 West Bend filed a response, relying largely on the primary jurisdiction doctrine and this court's decision in Skilling , 163 Ill. 2d 284, 206 Ill.Dec. 110, 644 N.E.2d 1163. Under that authority, West Bend argued that the circuit court had primary jurisdiction to rule on the legal issue that West Bend raised in its declaratory judgment action. For additional support, West Bend cited the Appellate Court, First District, decision in Hastings Mutual Insurance Co. , 2012 IL App (1st) 101751, 358 Ill.Dec. 585, 965 N.E.2d 656, that reversed a trial court's order denying an insurance company's motion to stay a pending IWCC proceeding.

¶ 15 The circuit court set the matter for a hearing and granted Bernardino leave to file a reply to West Bend's response. In his reply, Bernardino argued for the first time that West Bend had not sufficiently proved that it had issued an insurance policy covering the worksite where he was injured in Lake of the Hills, Illinois, precluding the circuit court from making a coverage determination.

¶ 16 On November 1, 2018, the circuit court conducted a hearing on Bernardino's emergency motion to vacate the order staying the IWCC proceeding. After disagreeing with Bernardino's position that the coverage dispute should be resolved by the IWCC, the court ruled as follows:

"I'm vacating the original order staying [the IWCC proceeding] so that we could proceed with this hearing and I am—because I wanted to proceed on the merits. I thought procedurally that was appropriate, and—but I am now reinstating the stay after hearing the argument because I believe that this is ultimately a question of law and more appropriately brought before the court than the [IWCC], and that this court has primary jurisdiction over the issue regarding the coverage following the claim of late notice."

The court then entered an order granting West Bend's emergency motion to stay the pending IWCC proceeding and scheduled a hearing for January 7, 2019, for status on the completion of written discovery.

¶ 17 On November 6, 2018, Bernardino filed a motion in the circuit court to vacate the court's November 1 order staying the IWCC proceeding. In that motion, Bernardino reasserted his prior argument that there was a "threshold" factual question related to whether West Bend's insurance policy covered the Lake in the Hills worksite where he was injured. Bernardino informed the court that he filed a subpoena with the National Council of Compensation Insurance (NCCI) seeking a certification of the existence or nonexistence of insurance coverage by TRRS or Commercial Tire for his injuries.

¶ 18 Bernardino also argued that, even if there was insurance coverage, the circuit court and IWCC had concurrent jurisdiction over the parties' dispute and the circuit court should not enter a stay of the entire IWCC proceeding. Instead, Bernardino asserted that any stay issued by the circuit court should be "limited to the issue of determination of coverage based on notice, specifically [authorizing] the IWCC to make threshold determinations regarding the existence of coverage, but not to make findings of fact regarding notice being given to [West Bend]."

¶ 19 Two days later, on November 8, 2018, Bernardino filed a notice of a Rule 307(a)(1) interlocutory appeal from the circuit court's November 1 stay order in appellate case No. 2-18-0934.

¶ 20 Also on November 8, 2018, the circuit court conducted a hearing on Bernardino's motion to vacate the November 1 stay order. At that hearing, counsel for West Bend expressly rejected Bernardino's position that there was no insurance coverage for his injuries. West Bend explained that its policy with TRRS and Commercial Tire broadly applied to all their Illinois...