policy for medical expenses incurred for his dependent son,
Mitchell. New York Life has refused to reimburse Garman for
the $13,760 he spent for his son's care at a facility called
Elan One. Cross motions for summary judgment are now before
Mitchell was originally admitted to River Edge Hospital in
Forest Park, Illinois. During his sixty-nine day stay there he
was treated by Dr. Schwarz, a psychiatrist, for "steadily
deteriorating behavior." Dr. Schwarz diagnosed Mitchell's
condition as a major affective disorder and prescribed long
term treatment at Elan One. He specified that Mitchell should
receive individual psychotherapy, group therapy, family
therapy and activity therapy and be enrolled in the hospital
school program. On the basis of Schwarz's recommendation,
Mitchell was transferred to Elan One where he was placed under
the care of Dr. Davidson, a psychiatrist and medical director
of the facility.
Elan One is a psychiatric facility designed to treat
adolescent behavioral problems. It is licensed by the State of
Maine as a psychiatric hospital and qualifies as a psychiatric
hospital under the Illinois Mental Health Code, 1977
Ill.Rev.Stat. ch. 91 1/2 §§ 1-5, 1-6. Claims for treatment at
Elan One are consistently paid by the major insurance
companies, including Aetna, Bankers Life, State Blue Cross/Blue
Shield Plans, Guardian Life, John Hancock, Metropolitan Life,
Prudential, Sentry, Travelers and United States Life.
At issue is the interpretation of the policy's coverage for
psychiatric treatment and hospitalization. The policy, under
its Major Medical provisions, provides for reimbursement for
room and board charges if made by a hospital and for
psychotherapy sessions if administered by a doctor. Under the
policy, a hospital is defined as one which is equipped with
permanent facilities for diagnosis and major surgery, and has
twenty-four hour continuous nursing service by registered
professional nurses and twenty-four hour continuous
supervision by a staff of physicians. The major surgery
requirement does not apply to facilities concerned with
treatment of chronic disease.
Relying on statements of Dr. Davidson, New York Life
contends that Elan One does not qualify as a hospital under
the policy because it does not have the required staffing and
Mitchell's psychotherapy sessions were not conducted by
qualified physicians. At his deposition Davidson testified
that Elan One has a nurse on duty for one eight hour shift a
day, six days a week and doctors work at the facility on a
regular basis. He acknowledged that no medical personnel are
on duty at night or in the early morning. Davidson described
Elan One's diagnostic facilities as simple but complete, with
equipment for blood and urine work. He also stated that Elan
One has diagnostic equipment for audiometry and ophthalmologic
tests and emergency equipment to administer oxygen and
Garman responds that New York Life is attempting to avoid
its contract by applying criteria to a mental hospital which
are appropriate only to a facility designed to treat physical
ailments. He asserts that nothing in the language of the
policy requires the physical presence of a licensed physician
twenty-four hours a day and maintains that since Davidson is
a qualified doctor who directly supervises all Elan One's
diagnosis and treatment activities, the requirements of the
policy are satisfied. He argues that Elan One satisfies the
twenty-four hour nursing service requirement because a
registered nurse who lives on the premises is on call
twenty-four hours a day.
It is fundamental that insurance policy provisions seeking
to narrow the insurer's liability must be construed in favor
of the insured. State Farm Mutual Automobile Insurance Co. v.
Childers, 50 Ill. App.3d 453, 8 Ill.Dec. 52, 365 N.E.2d 290
(1977); Bell v. Continental Assurance Co., 123 Ill. App.2d 274,
260 N.E.2d 114 (1970). Exceptions to liability must be
expressed in unequivocal language so that it is reasonable to
assume the insured understood and accepted these limitations.
Michigan Mutual Liability Co. v. Hoover Bros., Inc., 96 Ill. App.2d 238,
237 N.E.2d 754 (1968).
In construing the policy the court must consider the subject
matter of the
policy, the surrounding circumstances, the situation of the
parties and the predominant purpose of the policy, which is to
indemnify. Great Central Insurance Co. v. Bennett, 40 Ill. App.3d 165,
351 N.E.2d 582 (1976). Moreover, a literal
interpretation of one provision should be avoided if such
interpretation leads to unreasonable or absurd results. Welborn
v. Illinois National Casualty Co., 347 Ill. App. 65,
106 N.E.2d 142 (1952).
New York Life contends that the sole issue is interpretation
of the contract and that the purposes of treatment at Elan One
and the actions of other insurance companies in paying for
treatment at Elan One have no relevance in this case. This
contention is without merit. An insurance policy cannot be
interpreted in a factual vacuum and language which appears
unambiguous might not be so in a particular factual setting.
Glidden v. Farmers Automobile Insurance Assoc., 57 Ill.2d 330,
312 N.E.2d 247 (1974). Since the policy does not define
psychiatric hospital, it is not possible, on the facts
presented here, to determine the scope of the term. The issue
of whether Elan One is a hospital within the meaning of the
policy turns on: 1) the intention of the parties; 2) the
subject matter the policy was intended to cover and 3) whether
literal interpretation of the term hospital would lead to an
unreasonable or absurd result. See Triple-X Chemical
Laboratories, Inc. v. Great American Insurance Co., 54 Ill. App.3d 676,
12 Ill.Dec. 447, 370 N.E.2d 70 (1977); Great
Central Insurance Co. v. Bennett, 40 Ill. App.3d 165,
351 N.E.2d 582 (1976); Welborn v. Illinois National Casualty Co.,
347 Ill. App. 65, 106 N.E.2d 142 (1952). These are factual
issues which are appropriately reserved for trial.
Similarly, the issue of whether the psychotherapy sessions
fall within the policy's coverage is not capable of summary
disposition. Whether the policy contemplated coverage for
psychotherapy sessions conceived and supervised by licensed
doctors, but conducted by specifically trained
paraprofessionals, is a factual determination which depends on
the intention of the parties. See Rivota v. Kaplan, 49 Ill. App.3d 910,
7 Ill.Dec. 176, 364 N.E.2d 337 (1977).
In addition to requesting reimbursement, Garman seeks
punitive damages for bad faith in refusing to pay his claim.
Punitive damages are not favored under the law. First National
Bank of Des Plaines v. Amco Engineer Co., 32 Ill. App.3d 451,
335 N.E.2d 591 (1975). Punitive damages may be awarded for
breach of contract only in those situations where the breach
itself constitutes an independent wilful tort. Ledingham v.
Blue Cross Plan for Hospital Care of Hospital Service Corp.,
29 Ill. App.3d 339, 330 N.E.2d 540 (1975). However, the action of
New York Life in denying payments which have been honored by
other major insurance companies and denying coverage for
expenses incurred at a facility which qualifies under the law
of two states as a legitimate psychiatric hospital and which
was recommended by a licensed doctor allows a question of fact
as to whether punitive damages may be recoverable. See
Ledingham v. Blue Cross Plan for Hospital Care of Hospital
Service Corp., 29 Ill. App.3d 339, 330 N.E.2d 540 (1975). Thus,
this issue must also be reserved for trial.
Accordingly, the motions for summary judgment are denied.
© 1992-2003 VersusLaw Inc.