Court Opinion

ID: 4636098
Source: CourtListenerOpinion
Date Created: 2020-11-24 22:32:10.641919+00
Date Added: 2024-06-11T07:58:29.007283
License: Public Domain

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                                 Appellate Court                           Date: 2020.10.30
                                                                           10:21:27 -05'00'

    American Kitchen Delights, Inc. v. Illinois Workers’ Compensation Comm’n,
                         2020 IL App (1st) 191593WC

Appellate Court      AMERICAN KITCHEN DELIGHTS, INC., Appellant, v. THE
Caption              ILLINOIS WORKERS’ COMPENSATION COMMISSION et al.
                     (Jonathan Galindo, Appellee).

District & No.       First District, Workers’ Compensation Commission Division
                     No. 1-19-1593WC

Filed                June 12, 2020

Decision Under       Appeal from the Circuit Court of Cook County, No. 18-L-50818; the
Review               Hon. James M. McGing, Judge, presiding.

Judgment             Reversed.

Counsel on           Dennis Both, of Harvey, for appellant.
Appeal
                     Eric A. Witter, of Witter Law Offices, LLC, of Chicago, for appellee.

Panel                JUSTICE HUDSON delivered the judgment of the court, with
                     opinion.
                     Presiding Justice Holdridge and Justices Hoffman, Cavanagh, and
                     Barberis concurred in the judgment and opinion.
                                             OPINION

¶1      Respondent, American Kitchen Delights, Inc., appeals from an order of the circuit court of
     Cook County that confirmed a decision of the Illinois Workers’ Compensation Commission
     (Commission) finding that respondent knowingly failed to provide workers’ compensation
     coverage as required by the Workers’ Compensation Act (Act) (820 ILCS 305/1 et seq. (West
     2018)). We reverse.

¶2                                        I. BACKGROUND
¶3       On February 26, 2018, claimant, Jonathan Galindo, filed an application for adjustment of
     claim pursuant to the Act seeking benefits for injuries he allegedly sustained on February 2,
     2018, while working for respondent. At some point, claimant’s attorney learned that
     respondent did not have workers’ compensation coverage on the date of the alleged accident.
     Section 4(d) of the Act (820 ILCS 305/4(d) (West 2018)) states that an employer who
     knowingly fails to provide adequate insurance is not entitled to the benefits and protections of
     the Act and may be sued in the circuit court. See Keating v. 68th & Paxton, L.L.C., 401 Ill.
     App. 3d 456, 466 (2010). However, as a prerequisite to filing a civil action, a claim of an
     employer’s failure to provide workers’ compensation insurance must be presented to the
     Commission for a hearing. 820 ILCS 305/4(d) (West 2018); Keating, 401 Ill. App. 3d at 466.
     To this end, on April 19, 2018, claimant filed a motion for a preliminary hearing pursuant to
     section 4(d) of the Act (820 ILCS 305/4(d) (West 2018)), alleging that respondent knowingly
     failed to have workers’ compensation insurance on the date of the alleged accident. In its
     response to claimant’s motion, respondent acknowledged that it did not have workers’
     compensation coverage on the date of the alleged accident but asserted that claimant failed to
     present sufficient proof that it knowingly failed to comply with the Act’s insurance mandate.
¶4       The matter proceeded to a hearing on June 1, 2018, before Commissioner Michael
     Brennan. The only witness to testify at the section 4(d) hearing was Shahnawaz Hasan,
     respondent’s founder and president. Hasan testified that respondent is a food manufacturing
     company located in Harvey. Hasan received claimant’s application for adjustment of claim
     sometime in March 2018. Around the same time, claimant’s attorney spoke to Hasan about the
     claim and respondent’s lack of workers’ compensation insurance. Hasan confirmed that
     claimant worked for respondent, although he could not state with certainty that claimant had
     been employed on February 2, 2018. Claimant’s attorney offered into evidence a copy of one
     of claimant’s paychecks from respondent. Hasan confirmed that the paycheck covered the pay
     period between January 21, 2018, and February 3, 2018.
¶5       Hasan acknowledged that under Illinois law respondent is required to have workers’
     compensation insurance. Hasan testified that respondent has been in business for 32 years and,
     during that time, it has complied with all applicable federal and state insurance requirements.
     For the past three or four years, respondent’s workers’ compensation carrier has been FCCI
     Insurance Company (FCCI). The FCCI policy was purchased through an insurance broker.
     Hasan identified claimant’s exhibit No. 5 as a “Notice of Cancellation, Nonrenewal, or
     Declination” (Nonrenewal Notice) pertaining to policy No. WC00002490-4, respondent’s
     workers’ compensation insurance policy with FCCI. The Nonrenewal Notice stated that
     respondent’s workers’ compensation policy expired on December 31, 2017, and would not be
     renewed because of respondent’s “loss history.” Hasan confirmed that the address listed on the

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     Nonrenewal Notice is respondent’s business address in Harvey. The Nonrenewal Notice states
     that it was mailed on October 30, 2017, but Hasan could not recall receiving it. Hasan noted
     that, although he is the president of the company, he does not handle all aspects of the
     business’s daily operations, such as receiving the mail.
¶6       Hasan testified that the process for insurance renewals is long and detailed. Respondent’s
     insurance broker typically contacts the company in September to initiate the renewal process.
     At that time, respondent provides the broker with information regarding its loss history, sales
     projections, and labor costs. Using this information, the broker shops for quotes from various
     insurance companies, including the existing one. Hasan usually writes a check for the renewal
     premiums in March. Hasan could not recall respondent’s insurance broker telling him in
     September 2017 that the workers’ compensation policy would not be renewed. To the contrary,
     Hasan testified that, as late as April or May 2018, he “assumed” that respondent had workers’
     compensation coverage because several of respondent’s other insurance policies had been
     cancelled and reinstated. In this regard, Hasan testified that respondent received an invoice
     from FCCI dated May 17, 2018. Respondent paid the invoice. Thereafter, respondent received
     rescission notices informing it that notices of cancellation previously issued with respect to
     respondent’s “commercial package,” “commercial auto,” and “umbrella” insurance policies
     had been rescinded effective May 23, 2018. Upon receiving the rescission notices, Hasan
     contacted respondent’s insurance broker, who confirmed that the workers’ compensation
     policy had not been renewed. It was then that Hasan became aware that respondent did not
     have workers’ compensation insurance. At that point, Hasan instructed the insurance broker to
     start looking for a new workers’ compensation insurance carrier. Hasan confirmed that as of
     June 1, 2018, the date of the section 4(d) hearing, respondent did not have workers’
     compensation insurance.
¶7       Claimant offered into evidence an e-mail dated April 12, 2018, which his lawyer had
     received from respondent’s attorney. In the e-mail, respondent’s attorney stated that she had
     been informed that respondent did not have workers’ compensation coverage on the date of
     claimant’s alleged accident. Hasan acknowledged the e-mail, stating:
                   “Yeah, that’s what we had assumed from what was going on, but I needed
              confirmation of the fact that why would the insurance agent issue three policies and not
              the fourth one. So we needed in writing from the insurance company that in fact that is
              happening, and that was not some kind of a mistake or misunderstanding on our part.”
     Hasan testified that he did not receive “[d]efinitive confirmation” in writing that respondent
     did not have workers’ compensation coverage until May 21, 2018.
¶8       On November 9, 2018, a three-member panel of the Commission entered an order finding
     that an employment relationship existed between claimant and respondent, that respondent was
     required to provide workers’ compensation insurance to its employees, and that respondent
     knowingly failed to provide workers’ compensation coverage on the date of claimant’s alleged
     accident. Regarding the latter finding, the Commission rejected any implication that the lapse
     of insurance was inadvertent and unknown. The Commission explained as follows:
              “The evidence demonstrates that as early as October 30, 2017, notice was sent to
              Respondent regarding the non-renewal of the workers’ compensation policy, effective
              December 31, 2017. Respondent, by its own admission, had also received notice of
              [claimant’s] pending workers’ compensation claim, which had been filed with the
              Illinois Workers’ Compensation Commission on February 26, 2018. Also, by

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             Respondent’s own admission, that by April 2018, Respondent’s assumption was that it
             no longer had a workers’ compensation policy of insurance, but wanted written
             confirmation of the cancellation, which was received in May 2018. Nonetheless, as of
             the June 1, 2018 hearing, Respondent remained without workers’ compensation
             coverage.
                 None of Respondent’s explanations offer any justification for its failure to secure a
             workers’ compensation policy in full force and effect on the alleged accident date of
             February 2, 2018, as required under the Act. Respondent’s lack of memory in terms of
             receiving notice, ignorance in the matter at hand, or internal procedures, does not
             relieve it of its legal obligation to provide workers’ compensation insurance.”
¶9        Respondent sought judicial review of the Commission’s decision in the circuit court of
       Cook County. In an order dated August 1, 2019, the circuit court confirmed the decision of the
       Commission. This appeal by respondent ensued.

¶ 10                                         II. ANALYSIS
¶ 11       On appeal, respondent raises three issues. First, respondent argues that the Commission
       improperly determined that it knowingly failed to provide workers’ compensation insurance
       for purposes of section 4(d) of the Act (820 ILCS 305/4(d) (West 2018)). Second, respondent
       claims that the Commission improperly considered “incompetent, after the fact evidence” in
       finding that it knowingly failed to provide workers’ compensation insurance. Finally,
       respondent maintains that a heightened standard of proof should be applied to a finding under
       section 4(d) of the Act (820 ILCS 305/4(d) (West 2018)) that an employer knowingly failed to
       provide workers’ compensation insurance. We find respondent’s first contention dispositive
       and reverse on that basis.
¶ 12       Section 4 of the Act contains regulations to ensure that employers maintain adequate
       workers’ compensation insurance and pay compensation claims to their employees. 820 ILCS
       305/4 (West 2018); Keating, 401 Ill. App. 3d at 464. In turn, section 4(d) empowers the
       Commission to enforce those regulations. 820 ILCS 305/4(d) (West 2018); Keating, 401 Ill.
       App. 3d at 464. Specifically, section 4(d) authorizes the Commission, after conducting a
       hearing in accordance with due process principles, to determine whether an employer failed to
       provide the requisite insurance. 820 ILCS 305/4(d) (West 2018); Keating, 401 Ill. App. 3d at
       465. If the employer is deemed noncompliant, the Commission must determine whether that
       noncompliance was knowing or negligent. 820 ILCS 305/4(d) (West 2018).
¶ 13       An employer who is found to have negligently failed to provide adequate workers’
       compensation insurance is subject to prosecution by the state’s attorney or the attorney general
       for a Class A misdemeanor. 820 ILCS 305/4(d) (West 2018); Keating, 401 Ill. App. 3d at 466.
       However, a finding that an employer’s failure to provide workers’ compensation insurance was
       knowing carries far more serious consequences. A knowing failure to provide adequate
       insurance is deemed “an immediate serious danger to public health, safety, and welfare
       sufficient to justify service by the Commission of a work-stop order on such employer,
       requiring the cessation of all business operations.” 820 ILCS 305/4(d) (West 2018). In
       addition, an employer who is found to have knowingly failed to provide workers’
       compensation insurance is subject to prosecution by the state’s attorney or attorney general for
       a Class 4 felony. 820 ILCS 305/4(d) (West 2018); Keating, 401 Ill. App. 3d at 466. Moreover,
       as noted previously, an employer who knowingly fails to provide adequate insurance is not

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       entitled to the benefits and protections of the Act and may be sued in civil court. 820 ILCS
       305/4(d) (West 2018); Keating, 401 Ill. App. 3d at 466. In such an action, proof of injury
       creates a rebuttable presumption of the employer’s liability. 820 ILCS 305/4(d) (West 2018).
       An employer may attempt to disprove liability but may not rely on the defenses of assumption
       of the risk or negligence or on a claim that the injury was caused by a fellow employee. 820
       ILCS 305/4(d) (West 2018); Keating, 401 Ill. App. 3d at 466. Section 4(d) also authorizes the
       Commission to impose civil penalties against an employer who knowingly and willfully fails
       or refuses to comply with the Act’s insurance mandate. 820 ILCS 305/4(d) (West 2018).
¶ 14       Here, the Commission determined that respondent knowingly failed to provide workers’
       compensation insurance. In so finding, the Commission stated that “as early as October 30,
       2017, notice was sent to Respondent regarding the non-renewal of the workers’ compensation
       policy, effective December 31, 2017.” The Commission did not elaborate upon the basis for
       this conclusion. Its statement appears to be a reference to the Nonrenewal Notice introduced
       by claimant, which indicates that it was mailed to respondent on October 30, 2017. Notice of
       an insurer’s intention not to renew a workers’ compensation policy is governed by section
       143.17a of the Illinois Insurance Code (215 ILCS 5/143.17a (West 2016)). See West Bend
       Mutual Insurance Co. v. Procaccio Painting & Drywall Co., 794 F.3d 666, 670 (7th Cir. 2015)
       (discussing section 143.17a of the Insurance Code in the context of workers’ compensation
       insurance). On the date FCCI purportedly mailed the Nonrenewal Notice to respondent, section
       143.17a stated in relevant part as follows:
                   “(a) A company intending to nonrenew any policy of insurance to which Section
               143.11 applies, except for those defined in subsections (a), (b), (c), and (h) of Section
               143.13, must mail written notice to the named insured at least 60 days prior to the
               expiration date of the current policy. In all notices of intention not to renew any policy
               of insurance, as defined in Section 143.11, the company shall provide a specific
               explanation of the reasons for nonrenewal. ***
                                                   ***
                   (d) Under subsection (a), the company shall maintain proof of mailing of the notice
               of intention not to renew to the named insured on one of the following forms: a
               recognized U.S. Post Office form or a form acceptable to the U.S. Post Office or other
               commercial mail delivery service. *** For all notice requirements under this Section,
               an exact and unaltered copy of the notice to the named insured shall also be sent to the
               named insured’s producer, if known, or the producer of record.” (Emphasis added.) 215
               ILCS 5/143.17a (West 2016).
       Thus, under section 143.17a of the Insurance Code, the only method for establishing
       compliance with the notice requirement is proof of mailing by the insurer. See Ragan v.
       Columbia Mutual Insurance Co., 183 Ill. 2d 342, 351 (1998) (noting that, where the legislature
       has provided a method for establishing compliance with a notice requirement, allowing other
       methods would circumvent the language and purpose of the statute).
¶ 15       Turning to the case at bar, although claimant obtained and introduced into evidence the
       Nonrenewal Notice itself, claimant did not produce proof of mailing of the Nonrenewal Notice
       by FCCI on “a recognized U.S. Post Office form or a form acceptable to the U.S. Post Office
       or other commercial mail delivery service.” 215 ILCS 5/143.17a(d) (West 2016). Absent
       evidence of proof of mailing of the Nonrenewal Notice in accordance with section 143.17a,
       we hold that the record was insufficient, as a matter of law, to support the Commission’s

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       finding that the Nonrenewal Notice was sent to respondent “as early as October 30, 2017.” See
       Ragan, 183 Ill. 2d at 351-52 (holding that envelope, which allegedly contained a cancellation
       notice and was metered and imprinted with a mailing date, was insufficient to meet statutory
       proof-of-mailing requirements under section 143.14(a) of the Insurance Code (215 ILCS
       5/143.14(a) (West 1994))); Guillen v. Potomac Insurance Co. of Illinois, 323 Ill. App. 3d 121,
       130-31 (2001), aff’d as modified & remanded, 203 Ill. 2d 141 (2003) (holding that unsigned
       letter purportedly sent to the insured regarding addition of lead exclusion to policy was
       insufficient to meet statutory proof-of-mailing requirements under section 143.17a of the
       Insurance Code). Thus, the Nonrenewal Notice itself, without proof of mailing in accordance
       with section 143.17a, was insufficient to establish that respondent knowingly failed to provide
       workers’ compensation insurance on the date of claimant’s alleged accident.
¶ 16        The Commission cited three additional justifications in support of its conclusion that
       respondent knowingly failed to provide workers’ compensation coverage on the date of
       claimant’s alleged accident. First, the Commission observed that respondent, by its own
       admission, had received notice of claimant’s pending workers’ compensation claim, which was
       filed on February 26, 2018. Second, the Commission noted that, by April 2018, “[r]espondent’s
       assumption was that it no longer had a workers’ compensation policy of insurance, but wanted
       written confirmation of the cancellation [sic], which was received in May 2018.” Third, the
       Commission pointed out that, as of the June 1, 2018, hearing, respondent remained without
       workers’ compensation coverage. While we are not prepared to say that there are no
       circumstances under which an event that postdates the alleged accident would be sufficient to
       establish that an employer knowingly failed to provide workers’ compensation insurance, we
       are unable to discern how the postaccident events cited by the Commission in this case do so.
       Neither the fact that respondent was aware of claimant’s workers’ compensation claim after
       February 26, 2018, nor the fact that by April 2018 respondent was under the assumption that
       it did not have workers’ compensation coverage sheds any light on what respondent knew or
       did not know regarding its workers’ compensation coverage as of the date of claimant’s alleged
       accident on February 2, 2018. Likewise, while we do not condone the lack of urgency exhibited
       by respondent in obtaining workers’ compensation coverage after it learned that its policy had
       lapsed, the fact that it still did not have coverage as of June 1, 2018, provides no indication as
       to what respondent knew about the status of its workers’ compensation coverage on February
       2, 2018. The Commission therefore erred in relying on these events in support of its finding
       that respondent’s failure to provide workers’ compensation insurance on the date of claimant’s
       accident was knowing.

¶ 17                                       III. CONCLUSION
¶ 18       In short, we conclude that the Commission erred in finding that respondent knowingly
       failed to comply with the Act’s insurance mandate. The evidence presented by claimant was
       insufficient to support the Commission’s finding that the Nonrenewal Notice was sent to
       respondent as early as October 30, 2017. Moreover, the remaining justifications proffered by
       the Commission were insufficient to establish what respondent knew about the status of its
       workers’ compensation insurance on the date of claimant’s alleged accident. Accordingly, we
       reverse the judgment of the circuit court of Cook County, which confirmed the decision of the
       Commission.

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¶ 19   Reversed.

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