Does paying a subcontractor’s workers’ compensation insurance premiums entitle the general contractor to the exclusive-remedy protections of the workers’ compensation statute? Munoz v. Bulley & Andrews, LLC. Supreme Court of Illinois (2022), by Hugh Anderson

Bulley & Andrews was the general contractor on a project on South Riverside in Chicago. Several years earlier Bulley & Andrews had acquired a company called Takao Nagai Concrete Restoration. Though it was eventually renamed Bulley & Andrews Concrete Restoration (Bulley Concrete), this subsidiary company was operated as a separate entity. The two companies had separate federal tax
identification numbers, filed separate state and federal tax returns, and had different
company executives and employees.

On the South Riverside project, Bulley & Andrews used Bulley Concrete for the
concrete work on the project. For other subcontractors, Bulley & Andrews entered
into written subcontracts; Bulley Concrete performed its scope of work without such
a subcontract.

The plaintiff, Donovan Munoz, was a Bulley Concrete employee. He suffered a back
injury while pulling insulating blankets off recently poured concrete on a winter day.
Under the exclusive remedy feature of the workers’ compensation statute, Munoz
was precluded from pursuing any claim against his employer other than recovery of
workers’ compensation benefits. After recovering approximately $78,000 in workers’
compensation, Munoz filed a lawsuit against Bulley & Andrews (the general
contractor), the project owner, and the property management company. His claims
against Bulley & Andrews included allegations that the general contractor had failed
in a duty to assure safe conditions for the subcontractors’ workforces; that Bulley &
Andrews failed to prevent Bulley Concrete from using unsafe equipment; that the
insulating blankets were worn and unfit; and that Bulley & Andrews failed to regulate
and limit the hours worked by laborers at the site.

In response to the Munoz lawsuit, Bulley & Andrews asserted that it was shielded
from the Munoz claims by the exclusive remedy provisions of the workers’
compensation statute. Workers’ compensation allows workers to obtain prescribed
damages without proving the employer’s fault; the employer exchanges its common
law defenses for immunity to open-ended common law damages claims.

Although Bulley & Andrews was not Munoz’s direct employee, it contended that
because Bulley Concrete was a wholly owned subsidiary, and Bulley & Andrews had
not only paid the policy premiums but also the specific damages that Munoz had
collected under the workers’ compensation policy, Bulley & Andrews should be
entitled to the exclusive remedy protection, in the same manner that Bulley Concrete
was protected. In further support of its position, Bulley & Andrews pointed out that
its contract with the project owner legally obligated Bulley & Andrews to insure the
project, including providing workers’ compensation insurance.
The trail court and intermediate appellate court agreed with Bulley & Andrews,
dismissing the Munoz lawsuit as to the general contractor. Munoz appealed the case
to the Illinois Supreme Court.


Decision: The basic Illinois law regarding the scope of the exclusive remedy shield was
reasonably well established: in a 1976 case involving claims by an injured
subcontractor employee against a general contractor that had paid worker’s
compensation benefits, the Illinois Supreme Court had declared that “only an injured
worker’s direct employer can claim immunity.” Further, the court had specifically
stated that “immunity does not hinge on the payment of benefits”—rather,
“immunity is conferred only on immediate employers of an injured worker.”
However, the trial court and intermediate appellate court had noted that the
seemingly straightforward rule articulated in 1976 had been complicated by a 2008
decision (Ioerger v. Halverson Construction Co.) that based immunity on whether an
entity paid workers’ compensation benefits to an injured worker pursuant to a
preexisting legal obligation. The Bulley trial and appellate courts held that the prime
contract with the project owner created such an obligation, thereby conferring
immunity on Bulley & Andrews under the rule in the Ioerger case.


The Illinois Supreme Court reversed the lower court decisions, holding that the Ioerger
decision was limited to the special circumstance where immunity was granted to a
joint venture partner of the employer. The decision expressly states that an entity that
is legally distinct from the immediate employer cannot insulate itself from potential
liability by paying workers’ compensation premiums or benefits on behalf of the
immediate employer.

To recognize a means by which immunity may be purchased
by a general contractor who is not the injured worker’s
immediate employer would be contrary to the intended
purpose of the [workers’ comp] act.


We reiterate, the Act includes no category granting
nonemployers and legally distinct entities the ability to
acquire immunity and insulate against liability for
negligence by paying workers’ compensation insurance
premiums or benefits on behalf of an injured worker’s
direct employer.


Comment: Over the years there has been discussion and commentary about revising
the worker’s compensation laws for construction such that all employers on a jobsite
enjoy immunity from injured worker claims, whether the injured worker is their own
employee or the employee of another contractor or subcontractor. Such a revision
would be consistent with the idea that a jobsite is analogous to a factory floor, with a
comprehensive approach to safety (via the general contractor) and substantial
interaction among the various workers—the current practice of allowing claims
against the other employers at the site undercuts the advantages of workers’
compensation. To this author’s knowledge, such proposed revisions have not gained
traction.


Although the ruling in the Munoz case appears to be emphatic, there is some
uncertainty created by a suggestion in the decision that if there had been a written
contract between Bulley & Andrews and Bulley Concrete requiring the general
contractor to provide workers’ compensation insurance or benefits to Bulley Concrete
employees, perhaps Bulley & Andrews would be regarded as an agent of Bulley
Concrete and therefore be able to claim immunity, similar to the entitlement of a joint
venture partner. This suggestion seems to be in contradiction to the basic holding of
the case.