Refusal to Provide Workers’ Compensation is Expensive
Post 5240
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In Illinois Department of Insurance, Insurance Compliance Department v.USA Water And Fire Restoration, Inc., And Nicholas Pacella, Individually And As Officer, Nos. 23WC021808, 18INC00228, No. 25IWCC0467, the Illinois Department of Insurance (Petitioner) initiated an investigation after the Injured Workers’ Benefit Fund (IWBF) was added to a pending workers’ compensation claim. The claim alleged a work-related injury during employment with the Respondents who failed to maintain workers’ compensation Insurance.
Company Overview:
USA Water & Fire Restoration, Inc. was incorporated on January 17, 2014, and dissolved on June 14, 2019, for failure to file annual reports and pay franchise taxes. It then operated under assumed names including USA Board Up & Glass Co. and USA Plumbing and Sewer. The business involved rehabilitating structures damaged by fire or water (e.g., remodeling, repairs), subjecting it to automatic coverage under the Illinois Workers’ Compensation Act (Act).
Officers/Agents:
Tad Christensen (who was later identified as the true officer) had a history of fraud (e.g., 2005 insurance fraud charges under Action Fire Restoration; prior imprisonment). The Commission took judicial notice of Christensen’s criminal history.
Employee Evidence:
Illinois Department of Employment Security (IDES) quarterly wage reports showed employees (up to 6) from Feb. 2016–Aug. 2017 and Oct. 2017–Apr. 2018; zero reported in Sep. 2017. Illinois Department of Revenue records confirmed business activity (e.g., 2017 tax return signed by Christensen) but incomplete filings.
Violation Periods:
145 total days without coverage while doing business and employing workers.
Key Testimonies
Antonio Smith (Petitioner Investigator, 8 years experience) confirmed company’s subjection to Act; that there was no insurance during violation periods.
Summary of Law - Jurisdiction and Coverage
Section 3(1) of the Act (820 ILCS 305/3):
Automatically subjects employers to the Act if engaged in “erection, maintaining, removing, remodeling, altering or demolishing of any structure.” The company’s fire/water restoration (remodeling damaged structures) qualified.
Section 4(a) of the Act (820 ILCS 305/4(a)):
Requires all covered employers to secure workers’ compensation coverage via insurance or Commission-approved self-insurance.
Penalties and Culpability
Section 4(d) of the Act (820 ILCS 305/4(d)): For knowing/willful failure to comply with §4(a):
1. Civil penalty up to $500 per day per violation (post-1989 amendments).
2. Minimum $10,000.
3. Each day is a separate offense.
4. Personal liability for corporate officers/directors (e.g., Christensen) if they knowingly/willfully failed; primary liability on employer, secondary on officers if unpaid after 30 days.
Penalty Factors
1. Duration of violation (here: 145 days—significant but not continuous).
2. Number of claims (1 pending).
3. Prior awareness.
4. Number of employees (up to 6).
5. Ability to secure/pay coverage (no evidence of inability).
6. Mitigating circumstances (none alleged; intermittent prior coverage noted in mitigation).
7. Ability to pay penalty (no evidence presented).
Decision and Rationale
Findings:
The Company and Christensen knowingly/willfully violated §4(a) and Rule 9100.90 during 145 days (employees present, business active, no coverage/self-insurance). Violation was “knowing/willful” by inference from ignored notices, history of lapses, and non-appearance.
Penalty Assessed:
Maximum $500/day × 145 days = $72,500 against USA Water & Fire Restoration, Inc., and Tad Christensen (personally as officer). Exceeds minimum $10,000; justified by duration, claim, and awareness, tempered slightly by non-continuous lapses.
Enforcement:
Payable within 30 days by certified check/money order to Commission. Enforceable as circuit court judgment; judicial review per §19(f) of Act (bond fixed at $75,000). Debt owed to State.
ZALMA OPINION
Workers’ Compensation systems allow injured workers to obtain compensation for work related injuries without needing to prove anyone was responsible for the injury. It is a crime in almost every state to fail to report accurately employees for workers’ compensation insurance and a failure to provide any coverage requires punishment.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Post 5421
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Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
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LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
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