If you’re a contractor or subcontractor in Illinois, read this. A standard endorsement that many insurers quietly attach to workers’ comp policies could leave you fully exposed to lawsuits your insurance should be covering, and most contractors have no idea it’s even there.

Let’s say one of your workers gets hurt on a job site. They file a workers’ comp claim, you pay the benefits, and you think the matter is settled. Then the general contractor gets sued and they turn around and sue you for contribution. Suddenly you’re on the hook for damages that go far beyond what you paid in workers’ comp. You call your insurance carrier expecting coverage. They tell you there’s an exclusion on your policy.

That exclusion has a name: WC 12 03 06 A. And if it’s on your policy, and you’ve signed certain contract language, it could mean you’re carrying a massive, uninsured liability right now without knowing it.

What Is the “Kotecki Cap” and Why Does It Matter?

The Ruling: Kotecki v. Cyclops Welding Corp (Illinois Supreme Court, 1991)

This landmark ruling established that when an injured employee sues a general contractor and that GC turns around and sues the employer (you, the sub) for contribution, your contribution is capped at the amount you already paid in workers’ comp benefits. In other words, the law protected you from a second, larger financial hit for the same injury.

For decades, that cap was a meaningful protection for Illinois subcontractors. If your worker got hurt, you paid your workers’ comp claim, and your exposure ended there. The Kotecki cap was your shield. Then contract language started to erode it.

How the Cap Gets Waived Away

General contractors began inserting indemnification language into subcontract agreements that effectively requires subs to give up their Kotecki protection. The language is often buried deep in the contract and doesn’t use the word “Kotecki” at all. It looks something like this:

“This indemnification shall not be limited in any way by an amount or type of damage, compensation, or benefits payable under any applicable workers’ compensation, disability benefits, or other similar employee benefit acts.”

Translation: you just agreed to remove your own Kotecki cap. Now if there’s a lawsuit, your exposure is no longer limited to what you paid in workers’ comp. It could be the full value of a personal injury verdict.

Most subcontractors sign this language as a routine part of getting the job. They have no idea they’ve just waived a protection that could be worth hundreds of thousands of dollars.

Then Your Insurance Company Adds an Exclusion

Here’s where it gets worse. Since 2011, many Illinois workers’ compensation carriers began attaching a standard endorsement called WC 12 03 06 A to all their Illinois WC policies. This endorsement excludes coverage for any liability you’ve assumed under a contract, including, specifically, any agreement to waive the Kotecki cap.

So you’ve already waived your Kotecki protection in your subcontract. Now your insurance policy won’t cover the exposure that waiver creates. You are, in effect, fully exposed, and no one told you, including your own broker.

⚠️The Coverage Gap

Your subcontract creates the liability. Your WC policy excludes that liability. The gap between them is your personal financial exposure. This isn’t theoretical — it is a real, uninsured risk sitting in your current contracts right now if you haven’t addressed it.

What This Looks Like in Practice

❌ Without Protection

Your worker is injured. You’ve signed a Kotecki waiver in your subcontract. The injured worker sues the GC. The GC sues you for full contribution. Your WC carrier denies coverage due to the WC 12 03 06 A exclusion. You’re personally on the hook for a six-figure verdict, well beyond your workers’ comp payout.

✓ With Proper Protection

Same scenario, but your contracts and insurance are aligned. Your WC policy either doesn’t carry the exclusion, is SILENT on the matter, or you’ve had the endorsement removed. Your insurer defends and covers the contribution claim. Your out-of-pocket exposure stays at the workers’ comp benefits paid, as the law originally intended.

Why Some Carriers Are Getting This Wrong

Insurance carriers that apply this exclusion argue it protects them from unlimited, open-ended liability. That’s a reasonable concern — but the blanket application of this exclusion may actually be bad policy, both for the insurer and for the contractors they insure.

Here’s why: the Kotecki waiver is now standard language in most Illinois subcontract agreements. If you work for GCs in this state, there’s a strong chance you’ve already signed contracts that include it. The exposure exists whether your insurance covers it or not.

Carriers who refuse to cover this exposure aren’t eliminating the risk, they’re just pushing it off their books and onto yours. And in the process, they’re making themselves less competitive in the Illinois construction insurance market, pushing experienced contractors toward carriers who price and cover this risk properly.

A smarter insurance approach isn’t to exclude the risk, it’s to understand it, price for it, and cover it. That’s what coverage is for.

What You Should Do Right Now

If you’re an Illinois contractor or subcontractor, here are the steps to protect yourself:

1. Review your current WC policy for endorsement WC 12 03 06 A. Call your agent and ask directly: “Is this endorsement on my policy?” If yes, ask whether it can be removed or modified.

2. Review your subcontract agreements, especially the indemnification language. Look for phrases like “not limited in any way by… workers’ compensation… benefit acts.” If you see language like this, you may have already waived your Kotecki protection in that contract.

3. Talk to your broker about alignment. Your contract obligations and your insurance coverage need to match. A good broker will help you identify the gap and find a carrier willing to cover it or negotiate the contract language before you sign.

4. If you’re a GC, consider using a waiver of subrogation instead. Endorsement WC 00 03 13 (waiver of subrogation on the sub’s WC policy in your favor) can provide similar protection without requiring the sub to waive the Kotecki cap entirely.

5. Don’t assume this doesn’t apply to you because you haven’t had a claim. The exposure is present the moment you sign a contract with Kotecki waiver language, not when a claim arises — which is a crucial distinction.

Know What You’re Signing and What Your Policy Actually Covers

Illinois workers’ compensation insurance is supposed to protect your business when things go wrong on the job site. But a misalignment between your contract language and your policy exclusions can leave you with a massive uninsured exposure, one that could threaten everything you’ve built.

The Kotecki cap was designed to protect employers like you. Don’t sign it away without understanding what you’re giving up, and don’t assume your insurance will automatically fill the gap if you do.

Talk to your insurance agent. Review your contracts. Know your coverage.