The evidence shows that complications arose during Jackson's birth, ultimately resulting in an emergency cesarean section, and that the newborn's physical condition was less than optimum. These circumstances, standing alone, would not necessarily put the hospital on notice that a claim would be filed. Similarly, the receipt of the records requests from Coleman Tri-County Services and the University of Illinois Division of Services for Crippled Children would not necessarily indicate that a claim was in the offing. Although the requests might indicate that the child was having developmental problems, there is no indication that the problems were related to the complications at birth or that the family believed that the problems were related to the birth.
The hospital was put on notice of a potential claim, however, when attorney John Paul Womick requested Yvonne Tison's medical records in November 1986 and March 1987. Even if the Court were to agree that the first request -- a general request for all of Tison's records -- did not signal a potential lawsuit against the hospital itself, the second request -- which specifically targeted the fetal monitoring strips -- clearly indicated that any potential lawsuit would be related to the complications of Dustin Jackson's birth.
The testimony of hospital administrator Aukamp and the medical records department employees supports this conclusion. Aukamp himself testified that had he known about these circumstances, he would have considered it a reportable incident. Aukamp Deposition at 94-97. The only problem was that Womick's records requests were not brought to Aukamp's attention. Aukamp tries to suggest that he wasn't notified about Womick's requests because the medical records department did not think that the requests implicated a potential lawsuit against the hospital. But the testimony of June Wollard and Carolyn Dippie is to the contrary.
Both Wollard and Dippie testified that they assumed that Womick's requests meant a potential lawsuit against the hospital regarding Dustin Jackson's birth. Moreover, Wollard testified that it was standard practice to notify the administration about medical records requests from attorneys. She said that Womick's requests should have been forwarded to the administration, but she could not say for certain whether that procedure was in fact followed.
Based upon these facts, it is clear that the hospital "reasonably should have been aware" prior to July 1, 1987, that the circumstances surrounding Dustin Jackson's birth "might be expected to result in a claim or suit." Therefore, Jackson's claim is excluded from coverage under Exclusion No. 8 and Endorsement No. 8 of the ACIC policy.
The hospital argues that Exclusion No. 8 should be more narrowly construed. In support of this proposition, the hospital cites General Accident Insurance Co. of America v. Trefts, 657 F. Supp. 164, 167 (E.D. Mo. 1987), which involved interpretation of the following question on an application for a lawyers professional liability insurance policy: "Does any lawyer [in the applicant's law firm] know of any circumstances, act, error or omission that could result in a professional liability claim against him or his predecessors in business?" Id. at 165.
Judge Hungate construed the question to require disclosure of circumstances that could result in a claim "only in those circumstances when a client has given to the lawyer some indication through a complaint or expression of dissatisfaction with his services that a claim might or would be made." Id. at 167. Thus, the hospital argues in the instant case that Exclusion No. 8 should be construed to apply only to those circumstances in which a patient has given the hospital some indication through a complaint or an expression of dissatisfaction with the hospital's services that a claim might arise.
The Trefts case is distinguishable in several important respects. First, the precise language of the application asks whether a lawyer "knows" of any circumstances that could result in a claim. This language was properly construed as requiring actual knowledge upon the part of lawyer. Cf. Gibraltar Casualty Co. v. A. Epstein & Sons, 206 Ill. App. 3d 272, 562 N.E.2d 1039, 150 Ill. Dec. 236 (1st Dist. 1990) (policy excluded coverage "for claims of which [the insured] had prior knowledge."). The ACIC policy, in contrast, excludes coverage for incidents in which the insured "could have reasonably foreseen" that a claim might arise. This language requires only a reasonable expectation of a claim -- not actual knowledge of a claim.
Secondly, the testimony of record in Trefts indicated that the application question "was construed to require information of which a named insured lawyer would have actual knowledge, for instance if a client had stated a circumstance might lead to a malpractice claim or dispute." Trefts, 657 F. Supp. at 166. In the instant case, on the other hand, the evidence indicates that the hospital knew that it should report incidents that could might result in claims -- even in the absence of a complaint or the threat of a lawsuit.
The hospital's reliance upon Hoyt v. St. Paul Fire & Marine Ins. Co., 607 F.2d 864 (9th Cir. 1979), is similarly misplaced. That case did not involve a question of whether a claim was foreseeable. Rather, the issue in Hoyt was whether a letter sent to the insured by an attorney constituted a claim made during the policy period. The court suggested that the letter put the insured on notice that a claim might be expected to follow, but the court found that no formal claim had been filed. Id. at 866. Thus, Hoyt is contrary to the hospital's position, as are the remainder of the cases cited by the hospital.
The hospital next argues that ACIC should be estopped from denying coverage of the Jackson claim because ACIC knew, based upon consultant Denise Doheny's evaluation, that the hospital had an inadequate risk management program. In making this argument, the hospital relies upon Boyles v. Freeman, 21 Ill. App. 3d 535, 315 N.E.2d 899, 902 (1st Dist. 1974), in which the court acknowledged the general rule that
when an insured in good faith qualifies his statements [on an application for insurance], the insurer has the choice of ignoring the limitation or refusing the risk, but it cannot ignore the limitation and then seek to avoid the policy because the statement without the qualifications is false.