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Travelers Casualty & Surety Co. v. Madden

Case Date: 02/27/2004
Court: 5th District Appellate
Docket No: 5-03-0187 Rel

              NOTICE
 Decision filed 02/27/04.  The text of this decision may be changed or corrected prior to the filing of a Petition for Rehearing or the disposition of the same.

NO. 5-03-0187

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT

TRAVELERS CASUALTY AND SURETY
COMPANY, f/k/a AETNA CASUALTY AND
SURETY COMPANY, and POTOMAC
INSURANCE COMPANY,

          Plaintiffs-Appellants,

v.

KIRBY MADDEN, THOMAS APPLETON,
JERRY ROSS, PAUL ROBERTS, and LABOR
SPECIALISTS, INC.,

          Defendants,

and

DAVID ODOM,

          Defendant-Appellee.

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)		 Appeal from the
Circuit Court of
Jackson County.




No. 98-L-138









Honorable
Bruce D. Stewart,
Judge, presiding.
 


JUSTICE KUEHN delivered the opinion of the court:

Travelers Casualty and Surety Company, formerly known as Aetna Casualty andSurety Company, and Potomac Insurance Company appeal from the trial court's November20, 2002, order dismissing their complaint against David Odom on the ground that the suitwas barred by the doctrine of res judicata. They also appeal from the court's February 20,2003, denial of their motion to reconsider.

Illinois law requires virtually all employers to acquire workers' compensationinsurance coverage for their employees. If the employer is unable to find such coverage inthe open market, it can seek coverage in an involuntary market pool from which the employeris assigned an insurance carrier. Travelers Casualty and Surety Company (Travelers) andPotomac Insurance Company (Potomac) were pool-insurer participants.

The defendants operated an employee leasing business under different corporateentities. Initially, the business was known as MOAR Contract Services, Inc. Over time,MOAR Contract Services, Inc., developed a higher experience-modification factor of 1.97,which meant that over the three preceding years there had been a history of loss claims,resulting in the higher multiplier and corresponding higher workers' compensation premiums. Insurance for MOAR Contract Services, Inc., was apparently set to expire in December 1993.

New companies assigned a carrier through the involuntary market would be assigneda 1.0 experience-modification factor.

Towards the end of December 1993, a new company, S.I. Extended Contractors, Inc.(S.I. Extended), submitted an application to the Illinois Assigned Risk Plan for workers'compensation insurance coverage. The application was signed by S.I. Extended's president,David Odom, who indicated that S.I. Extended was a new business. Travelers wasdesignated as the insurance carrier for S.I. Extended, with a policy period of December 1993through December 1994.

For reasons unspecified in the record or briefs, the National Council on CompensationInsurance got involved in the matter and determined that MOAR Contract Services, Inc., andS.I. Extended were essentially the same company and were therefore combinable forexperience-rating purposes. The Illinois Department of Insurance affirmed this ruling. Themeaning of this ruling was that Travelers was entitled to additional premium compensationfor the policy plan year.

Just before S.I. Extended's coverage was set to expire with Travelers, S.I. Extendedindicated that it would not be renewing its policy and that it was discontinuing its operation. At about the same time, an entity known as Labor Specialists, Inc., submitted an applicationto the Illinois Assigned Risk Plan, stating that it was a new business. In essence, LaborSpecialists, Inc., was the former S.I. Extended. Potomac was designated as the insurancecarrier for Labor Specialists, Inc., and issued a policy for the plan year of January 1, 1995,through January 1, 1996.

On April 10, 1998, Travelers and Potomac filed suit against all three corporate entitiesin Cook County circuit court. Due to improper venue, on October 5, 1998, the case wastransferred to Jackson County circuit court. Thereafter, an amended complaint was filed,dropping S.I. Extended and MOAR Contract Services, Inc., as defendants and adding KirbyMadden, David Odom, Thomas Appleton, Jerry Ross, and Paul Roberts, men who hadoriginally incorporated MOAR Contract Services, Inc.

On July 6, 1998, S.I. Extended filed a chapter 7 bankruptcy petition (11 U.S.C.