Atlantic Mutual Insurance Co. v. Payton

                                        FOURTH DIVISION
                                        JUNE 30, 1997














1--95--2424

ATLANTIC MUTUAL INSURANCE         )  Appeal from the Circuit
COMPANY,                          )  Court of Cook County
                                  )
     Plaintiff-Appellee,          )
                                  )   
               v.                 )  No. 94 CH 07761
                                  )
                                  ) 
PHALLON PAYTON,                   )  Honorable Lester D. 
                                  )  Foreman, Judge    
     Defendant-Appellant.         )  Presiding.
                                                                 

     JUSTICE CERDA delivered the opinion of the court:
     This appeal involves a claim for uninsured motorist
benefits.  Phallon Payton, defendant in this declaratory judgment
action, was injured while riding as a passenger in a van owned by
his employer and driven by a co-employee.  Defendant received
workers' compensation benefits.  Defendant then made a claim for
uninsured motorist benefits under a policy issued by plaintiff,
Atlantic Mutual Insurance Company, to defendant's employer.  In
the declaratory action filed by plaintiff, the circuit court of
Cook County granted plaintiff's motion for judgment on the
pleadings.
     Defendant appeals from the judgment that found that
defendant could not recover uninsured motorist benefits under the
policy issued by plaintiff on the basis that Payton, who had
received workers' compensation benefits for his injury, was not
legally entitled to recover damages from his co-employee. 
Because Payton was injured while in the course of his employment,
Payton claimed that his driver, a co-employee, was immune from
suit under the Workers' Compensation Act and therefore was
uninsured under the uninsured motorist provision of Atlantic's
automobile policy.
     Payton argues on appeal that the exclusive-remedy provision
of the Workers' Compensation Act (820 ILCS 305/1 et seq. (West
1994)) did not make him ineligible for benefits under the
insurance policy, which stated that the amount payable was only
what the insured was "legally entitled to recover as compensatory
damages from the owner or driver of an uninsured motor vehicle." 
On the other hand, Atlantic believes that, because workers'
compensation recovery is the exclusive remedy provided under the
Workers' Compensation Act, defendant is barred from seeking
damages from his employer and co-employee.  Atlantic states that,
if Payton is not legally entitled to recover damages from his co-
employee, he cannot recover damages from the owner of the
vehicle, his employer.  Defendant was not "legally entitled to
recover" damages and therefore was not entitled to coverage under
the uninsured motorist provision of the employer's insurance
policy.
     Payton recognizes Williams v. Country Mutual Insurance Co.,
28 Ill. App. 3d 274, 276-79, 328 N.E.2d 117 (1975), which upheld
the denial of uninsured motorist coverage on the basis that the
injuries arose out of employment.  In that case, there was an
uninsured motorist provision that provided that uninsured
motorist coverage extended only in instances where the insured or
his representative had a legal right to recover damages from the
uninsured motorist.  The court in Williams held that the Workers'
Compensation Act precludes a common law action by an employee,
for accidental injury sustained by such employee, against a co-
employee, if the parties are covered by the provisions of the Act
and the injury arose out of and in the course of their
employment.  Williams, 28 Ill. App. 3d at 276-77.  Defendant
argues that Williams was contrary to the Illinois Supreme Court's
interpretation of the language "legally entitled to recover" in
Allstate Insurance Co. v. Elkins, 77 Ill. 2d 384, 396 N.E.2d 528
(1979).
     In Elkins, 77 Ill. 2d  at 390-91, the court held that the
existence of interspousal immunity did not bar recovery by a wife
under an uninsured motorist policy for damages sustained while
riding as a passenger in a vehicle driven by her husband.  At
that time, the interspousal immunity statute provided that
"neither husband nor wife may sue the other for a tort to the
person committed during coverture."   Ill. Rev. Stat. 1973, ch.
68, par. 1.  The court noted that the effect of the interspousal
immunity doctrine was not to destroy the cause of action of the
injured spouse but was to confer immunity on the tortfeasor
spouse.  Elkins, 77 Ill. 2d  at 384.  The court also noted that
the immunity was like a defense because it could be waived by the
defendant spouse.  Elkins, 77 Ill. 2d  at 384.  
     The court in Elkins interpreted the policy's phrase "legally
entitled to recover" as meaning that the claimant must be able to
prove the elements of her claim necessary to entitle her to
recover damages.  Elkins, 77 Ill. 2d  at 390.  The fact that
statutory immunity might be invoked by an uninsured motorist was
relevant to the question of the right to enforce payment but that
did not affect the claimant's legal entitlement to recovery. 
Elkins, 77 Ill. 2d  at 390.
     Payton argues that the workers' compensation exclusivity
provision was similar to interspousal immunity in being an
affirmative defense that did not negate the essential elements of
plaintiff's cause of action and argues that the immunity could be
waived by the employer.  
     We find that Elkins is distinguishable because the Workers'
Compensation Act does not just provide the employer with a
defense of exclusivity but takes away from the employee the right
to recover damages from his employer and co-employee.  The Act
provides:
          "No common law or statutory right to recover damages
     from the employer, his insurer *** or employees or any of
     them for injury or death sustained by any employee while
     engaged in the line of his duty as such employee, other than
     the compensation herein provided, is available to any
     employee who is covered by the provision of this Act."  820
     ILCS 305/5(a) (West 1994).
     The case before us differs from third-party cases, which do
not involve employee, co-employee and employer relationships. 
Third-party cases dealing with spousal immunity or parental
immunity deal with different policies and different approaches. 
The Workers' Compensation Act provides a remedy for injuries
inflicted by negligent or intentional acts upon an employee
Fregeau v. Gillespie, 96 Ill. 2d 479, 483-86, 451 N.E.2d 870
(1983).  When the legislature created spousal immunity, it did
not create a remedy for an injured spouse.  When the legislature
took away common law tort actions between employers and employees
and between co-employees, in return, as a trade off, it provided
a no-fault system of workers' compensation.  In Illinois the
legislature created this exclusive remedy not only for employers
and co-employees but also specifically and expressly for
insurers.  
     We agree with the court in Gray v. Margot, Inc., 408 So. 2d 436 (1981), which pointed out that interspousal immunity is a
personal defense that merely cuts off a right of action and
conversely that the tort immunity provided under Louisiana's
workers' compensation scheme denies a plaintiff a cause of
action.  In Gray the action would have been against a co-
employee.  The Gray court also believed that, unlike interspousal
immunity, tort immunity under its workers' compensation statute
is not personal to an employer and may be invoked by his insurer. 
Gray v. Margot, 408 So. 2d  at 438.
     In Doyle v. Rhodes, 101 Ill. 2d 1, 14, 461 N.E.2d 382
(1984), the supreme court held that an employer remains "subject
to liability in tort" to an employee in spite of section 5(a) of
the Act.  The court reasoned that the Act provided an affirmative
defense that must be established and that is waived if not
asserted by the employer.  Doyle, 101 Ill. 2d  at 11.  The supreme
court held that the circuit court should not have dismissed the
third-party complaint seeking contribution from the employer. 
Doyle, 101 Ill. 2d  at 14.   The case was decided under the
Contribution Act.  Defendant argues that Doyle is binding
authority to hold that he is legally entitled to recover
compensatory damages from his employer and that an affirmative
defense admits the legal sufficiency of a cause of action.  
     We find Doyle distinguishable from this case.  In Doyle the
court had to decide between two public policies--one under the
Workers' Compensation Act and the other under the Contribution
Act.  The supreme court decided that the public policy to
allocate liability in proportion to fault was a stronger public
policy and permitted contribution against the employer.  We see
no strong public policy in the provision in the Illinois
Insurance Code on uninsured motor vehicle coverage (215 ILCS
5/143a (West 1994)) to override the exclusive remedy under the
Workers' Compensation Act, which provides damages for injuries
suffered.  Also, in this case we have an insurance policy and the
Uninsured Motor Vehicle Coverage Act whose wording is similar to
the language in the Workers' Compensation Act (820 ILCS 305/5(a)
(West 1994)): "No common law or statutory right to recover
damages."  This indicates that the Workers' Compensation Act
provides the exclusive remedy.
     In contrast to Doyle v. Rhodes, wherein the court refused to
dismiss a third-party complaint against the employer because an
affirmative defense could be waived, the supreme court in the
case of Ramsey v. Morrison, Nos. 80303 and 80304 consolidated
(February 6, 1997), held that the circuit court properly
dismissed the third- party action against the plaintiff's co-
employee for contribution.
     Kotecki v. Cyclops Welding Corp., 146 Ill. 2d 155, 165, 585 N.E.2d 1023 (1991), held that the employer's liability in
contribution is limited to and will not exceed the employer's
liability for workers' compensation benefits.  
     Defendant has already received workers' compensation
benefits in the amount of $116,907.  The limit of defendant's
employer's liability under the Act has been reached.  Paragraph
D-2(a) of the policy is entitled "Limit of Insurance" and
provides:
               "2.  Any amount under this coverage shall
          be reduced by:
               a.  All sums paid or payable under any
          worker's compensation, disability benefits or
          similar law ***."
               Payton argues that the inclusions of this provision in the
policy indicates that it was contemplated that the injured party
may have received workers' compensation benefits from his
employer.  Therefore, the policy provides that Payton is entitled
to recover damages under the policy that are to be reduced by the
set-off of the benefits received in order to avoid a double
recovery.
     We do not find any ambiguity in the policy.  The limitation
or exclusion of coverage under paragraph D-2(a) does not grant
coverage.  Only the insuring clause entitled "coverage" grants
coverage.  We agree with Atlantic that D-2(a) applies where the
insured employee who has been injured is entitled to recover
damages from an uninsured stranger to the employment
relationship.
     Cases from other jurisdictions have dealt with the issue of
liability between co-employees in attempting to obtain coverage
under uninsured motorist statutes.  In the case of State Farm
Mutual Automobile Insurance v. Webb, 54 Ohio St.3d 61, 562 N.E.2d 132, 134 (1990), the court stated:  
               "Likewise, in the case here, immunity
               under R.C. 423.741 is 'conditioned' upon
               a determination that the co-employee is
               entitled to worker's compensation.  At
               the point when the immunity is obtained,
               there is nothing conditional about it. 
               Any claim filed after such immunity is
               established is ineffective against the
               party so protected."
                    In the case sub judice, Payton has received all of his
workers' compensation benefits and is therefore barred from
obtaining an additional remedy.  In the case of Fregeau v.
Gillespie, 96 Ill. 2d 479, 486, 451 N.E.2d 870 (1983), the
supreme court stated:
               "The employee here chose to obtain
               compensation under the Act, which was
               designed to provide speedy recovery
               without proof of fault for accidental
               injuries.  He is barred under the
               holding in Collier from bringing an
               action against his co-employee for civil
               damages."  
                    Larson, a well-known author on the topic of workers'
compensation laws, had noted that:
               "Ordinarily, for the uninsured motorist
               clause to operate in the first place,
               the uninsured third person must be
               legally subject to liability.  Thus, if
               the third person is specifically made
               immune to tort suit by the compensation
               act's exclusive remedy clause, the
               uninsured motorist provision does not
               come into play."  2A A. Larson,
               Workmen's Compensation Law sec.
               71.23(j), at 14-55 (Supp. 1987).
                    The case of Peterson v. Kludt, 317 N.W.2d 43 (Minn. 1982),
makes clear the policy reason why a coemployee should not be able
to sue a coemployee for tort damages.  The court pointed out:
               "We do not deem it material whether the
               statute intended, when passed, to cover
               this situation or not.  One of the
               trade-offs in passing the Workers'
               Compensation Act was that one employee
               would not be eligible to sue another in
               a situation such as is presented here. 
               To allow an employee to sue his fellow
               worker for negligence and thus permit
               his employer to be reimbursed from the
               recovery for workers' compensation
               benefits already paid is 'to shift tort
               liability from employer to fellow
               employee in a manner never intended by
               the workers' compensation system.'"
               Peterson, 317 N.E.2d  at 48, quoting
               Minnesota Workers' Compensation Study
               Commission, A Report to the Minnesota
               Legislature and Governor, 41 (1979).  
                    In this case, the coverage clause states:
               "We will pay all sums the insured is
               legally entitled to recover as
               compensatory damages from the owner or
               driver of an uninsured motor vehicle."
               Atlantic Mutual, the employer's insurance carrier, stands in the
shoes of both the driver and the owner of the uninsured motor
vehicle.  The accident took place during the course of
employment.  Payton has received workers' compensation benefits,
and therefore he is barred from bringing a civil action for the
same injuries against his co-employee, employer, and the insurer. 
     A reason that the driver is deemed uninsured is because the
Workers' Compensation Act grants immunity from any liability
towards a co-employee.  Now Payton is trying to argue that the
exclusive remedy and immunity protection provided by the Act do
not apply.  He cannot have application and non-application of the
provisions of the Act at the same time.
     Payton is in a better position to receive damages if his 
fellow employee is uninsured.  This was explained in the case of
Perkins v. Insurance Company of North America, 799 F.2d 955, 959
(5th. Cir. 1986), where the court stated:  
               "We also note that to hold INA liable in
               this instance would create the anomaly
               that Perkins would be better off with
               the driver uninsured than if the driver
               had carried an adequate personal
               liability insurance policy providing
               coverage for the driver's liability.  If
               the driver had such a personal policy,
               then there would be no uninsured
               motorist claim by Perkins because the
               driver would be insured.  However, in a
               suit against the driver, Perkins would
               not be able to preclude the operation of
               the exclusive remedy clause of
               Mississippi's worker's compensation
               statute because the driver could assert
               his co-employee immunity.  *** Thus
               Perkins, under his argument, achieves a
               greater overall recovery than he would
               if the driver were adequately insured. 
               We doubt that the uninsured motorist
               statute was intended to produce such a
               result."    
                    We do not believe that the Illinois Uninsured Motorist
Statute intended to place Payton in a more advantageous position
because his driver was uninsured under the Act.  We agree with
the court in Perking.  
      The Ramsey court had to determine whether a third party
sued by an injured employee may recover contribution from a
coemployee who is immune from a direct suit by a fellow employee
under section 5(a) of the Workers' Compensation Act.  The court
stated that, in balancing the policies of contribution and the
immunity granted to coemployees under the Workers' Compensation
Act, it believed that co-employee immunity must prevail over the
third party's right to contribution.  The court stated:
               "In other words, the liability of the
               coemployee is paid by the employer in
               the form of workers' compensation
               benefits and the coemployee is immune
               from suit.  In this manner, the system
               achieves the goal of placing the burden
               of employee injuries on the employer.  
                    Allowing contribution to be
               recovered from a coemployee would
               entirely defeat the effect of the
               immunity granted to coemployees and
               would thereby defeat a central purpose
               of the Workers' Compensation Act." 
               Ramsey, slip op. at 9.
                    In the case of Wisman v. Rhodes & Shamblin Stone, Inc., 447 S.E.2d 5 (W.Va. 1994), the plaintiff employee argued that the
insurer must pay him uninsured motorist benefits that he was
"legally entitled to recover" and that the insurer could not
raise the workers' compensation bar as a defense to the policy's
contractual obligations.  The Wisman court held:
               "We conclude that an employee who
               receives workers' compensation benefits
               for an injury that occurs within the
               course and scope of employment is not
               entitled to assert a claim for uninsured
               or underinsured motorist benefits. 
               Because the provisions for employer and
               coemployee immunity contained in W.Va.
               Code  23-2-6 and 6a (1994), workers'
               compensation is the exclusive remedy
               available to an injured employee, and an
               uninsured or underinsured motorist
               carrier has no liability."  Wisman, 447 S.E.2d  at 8-9.
                    It is interesting to note that many of the statutes
conferring immunity to protect parties do not expressly protect
insurers.  However, in the Workers' Compensation Act, the
Illinois legislature has expressly included insurers along with
employers and employees as being protected from tort actions. 
Insurers thus have the same rights as employers and employees.
     The plaintiff in this case has not been left without a
remedy.  The plaintiff has received workers' compensation
benefits.  The employer and coemployee cannot be held liable for
additional tort damages.  Under Kotecki v. Cyclops Welding Corp.,
146 Ill. 2d 155 (1991), the employer cannot be held liable to a
stranger to the employment relationship, a third party, for more
money than the employee is entitled to receive under the Act. 
The plaintiff employee has reached that limit in this case.  Also
the uninsured motorist statute does not overcome the public
policy of protecting employers and employees under the Workers'
Compensation Act.  The employer did not yield the protection
provided under the Act when it purchased an uninsured motorist
insurance policy.  The uninsured motorist policy was purchased
for protection when an employee is injured by a third party.  The
workers' compensation insurance policy was purchased to pay
benefits when there is an injury to an employee during the course
of employment.  In this case, the co-employee's acts were not
covered under Atlantic's insurance policy.
     The judgment of the trial court is affirmed.
     Affirmed.
     BURKE, J., concurs.
     WOLFSON, P.J., dissents.



     JUSTICE WOLFSON, dissenting:
     Before Doyle v. Rhodes, 101 Ill. 2d 1, 461 N.E.2d 382 was
decided in 1984 we wondered how an employer could be "subject to
liability in tort" under the Contribution Act.  After all,
section 5(a) of the Worker's Compensation Act seemed to bar an
employee's action against an employer.
     The supreme court's answer is clear:
          "The Worker's Compensation Act provides employers
     with a defense against any action that may be asserted
     against them in tort, but that defense is an affirmative
     defense whose elements--the employment relationship and
     the nexus between the employment and the injury--must be
     established by the employer, and which is waived if not
     asserted by him in the trial court."  Doyle, 101 Ill. 2d 
     at 11.
     That is, says Doyle, an employee can sue an employer in
tort.  If the employer chooses, for some reason, not to assert
the affirmative defense of section 5(a) the employee may obtain a
judgment against the employer.  We know that an employer may, by
contract, relinquish the liability limitation set forth in
Kotecki.  Braye v. Archer-Daniels-Midland Co., 175 Ill. 2d 201
(1977).
     It follows, then, that Phallon Payton was "legally entitled
to recover damages" from his employer unless and until the
employer asserted a defense under section 5(a).  Since the 
1-95-2424 employer is not a party to this action, there is no one
to assert the affirmative defense contained in section 5(a).
     I agree that Ramsey v. Morrison, 175 Ill. 2d 218 (1997),
bars an employee's negligence claim against a coemployee.  But
that case indicates a claim may be brought against the employer
for his employee's negligence.  Presumably, it would be up to the
employer to assert the section 5(a) exclusivity bar.  If, for
some reason, he chooses not to, the case proceeds.  At any rate,
this is not a case where either an employee or a third party is
suing an employer or a co-employee for an event covered by the
Workers' Compensation Act. 
     I do not see why, as the majority believes, Atlantic Mutual
"stands in the shoes of both driver and the owner of the
uninsured vehicle."  If Atlantic Mutual wanted to bar an action
like this one it could have said so in its policy.  Paragraph
D-2(a) of the policy, contained in the "Limit of Insurance"
section, recognizes coverage would be reduced by workers'
compensation benefits.  I do not read that language as an attempt
to bar any coverage above and beyond Payton's recovery under the
Workers' Compensation Act.
     Payton should not be precluded from coverage under the
terms of this uninsured motorist policy.  He does not seek a
double recovery.  He seeks a full recovery.
     I believe the majority decision unjustifiably diminishes the
holding in Doyle v. Rhodes.  For that reason, I respectfully
dissent.