APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION
545 N.E.2d 177, 189 Ill. App. 3d 45, 136 Ill. Dec. 653 1989.IL.1439
Appeal from the Circuit Court of Cook County; the Hon. George M. Marovich, Judge, presiding.
JUSTICE DiVITO delivered the opinion of the court. BILANDIC, P.J., and HARTMAN, J., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE DIVITO
Plaintiffs Flashner Medical Partnership, the individual partners of Flashner Medical Partnership, and the Flashner Medical Corporation brought a declaratory judgment action against Chicago Insurance Company and several insurance program developers and brokers, seeking a declaration that CIC is obligated to defend and indemnify against underlying medical malpractice actions and that CIC and the other defendants are liable for all costs incurred as a result of non-coverage for a specified period. Plaintiffs now appeal from an order of the circuit court granting each defendant's motion to dismiss, raising as issues whether their declaratory judgment action was improperly dismissed as premature; whether the underlying tort claimants are necessary parties to this action; and whether the allegations of breach of contract, fraud, negligence, and violation of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 733-4) are sufficient to withstand a motion to dismiss. We reverse the judgment of the circuit court and remand for further proceedings not inconsistent with this opinion.
In 1982, plaintiffs purchased a one-year medical malpractice "occurrence based" insurance policy from Ambassador Insurance Company (Ambassador), a Vermont insurance company, effective December 31, 1982. That policy was procured by defendants Marketing Management, Inc. , and Butler & Messier , developers of insurance programs; defendant William Buelle, Inc. (Buelle), insurance brokers; and the respective agents of MMI, B & M, and Buelle. In mid 1983, Ambassador was placed on a "watch list" by the Vermont Insurance Commissioner, a fact allegedly known to defendants but not communicated to plaintiffs. In November 1983, Ambassador was placed into receivership and MMI, B & M, and Buelle informed plaintiffs that they had procured replacement insurance coverage with CIC. Plaintiffs maintain that defendants advised them that the CIC policy was retroactive to the effective date of the Ambassador policy and provided the same coverage as that policy.
On December 12, 1983, a telex was transmitted by Ronald Upton of MMI to Buelle, confirming coverage under the CIC policy. The telex stated:
The telex was relayed to plaintiffs, who maintain that, relying on the representations made in the telex, they made no attempts to secure alternative retroactive coverage.
On December 15, 1983, plaintiffs cancelled the CIC policy and procured prospective coverage with another company. At that time, plaintiffs had not received a copy of the CIC policy and were allegedly unaware that cancellation of the CIC policy would affect retroactive coverage under that policy.
In April or May of 1984, a medical malpractice action was brought against plaintiffs based on events which occurred during the period covered by the Ambassador policy. Plaintiffs notified Buelle and were advised to forward the court papers to MMI. Either MMI or CIC then retained an attorney to defend plaintiffs in that suit.
In November 1984, plaintiffs were contacted by an attorney retained by Ambassador to represent them in a prior pending medical malpractice action. That attorney was concerned about Ambassador's ability to pay for the defense of the claim while in receivership. Roger L. Messier of B & M assured plaintiffs that insurance under the CIC policy was available for coverage and defense of claims. Messier stated further that B & M and MMI "would guarantee continued defense of the claims." On February 6, 1985, plaintiffs were assured again by MMI's counsel that they were covered by the CIC policy on an occurrence basis and on the same terms as provided under the Ambassador policy.
On September 3, 1985, plaintiffs were advised by letter that the CIC policy covered claims based on occurrences between December 31, 1982, and November 11, 1983, only if such claims were made between November 11, 1983, the effective date of the CIC policy, and December 15, 1983, the date plaintiffs cancelled the CIC policy. Plaintiffs were informed that certain malpractice claims, although based on events that occurred between December 31, 1982, and November 11, 1983, were not covered by the CIC policy because the claims were not made between November 11, 1983, and December 15, 1983.
On March 10, 1987, a liquidation order was issued by a Vermont court terminating all attempts to rehabilitate Ambassador. The order provided for the discontinuance of the defense of claims and suits in which Ambassador's insureds were parties, including claims made and suits brought prior to the date of the order. The order provided further that expenses incurred between November 10, 1983, and the date of the order could be reimbursed through Ambassador's liquidation fund, but contained no similar provision for expenses incurred after the date of the order. After issuance of the order, attorneys in seven malpractice ...