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American Home Assurance Co. v. Stone

August 4, 1995




Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 93 C 1210 -- Ann Claire Williams, Judge.

Before WOOD, COFFEY, and KANNE, Circuit Judges.

COFFEY, Circuit Judge.



In 1990, Sheila and Peter Hall received marriage and family counseling from Steven H. Stone, a psychotherapist, for a period of four months. Sheila and Peter Hall and their children later brought three separate malpractice lawsuits in Illinois state court against Stone, alleging that Stone engaged in a sexual relationship with Sheila while she was receiving professional treatment and therapy. Stone's insurer, American Home Assurance Company (Amerif1w Home), brought this diversity action seeking a declaration of policy limit. The insurance company argues that a special provision in the professional insurance policy limiting American Home's obligation to indemnify Stone to $25,000 for malpractice lawsuits involving allegations of sexual misconduct is applicable to the lawsuits filed by the Halls against Stone. The district court agreed, and granted summary judgment in favor of American Home. The Halls appeal. We affirm.

I. Background

Stone was a social worker licensed by the State of Illinois. He was employed as a psychotherapist *fn1 and insured by American Home under its Mental Health Counselor's Professional Liability Policy. In June 1990, Sheila and Peter Hall began seeing Stone for marriage counseling. Their children, Devin and Brandon Hall, also participated in several family counseling sessions with Stone. After several weekly joint sessions, Stone commenced individual therapy sessions with Sheila Hall, the wife and mother, in July 1990. The Halls separated in October 1990, and the wife continued individual therapy sessions. In October 1990, Stone began having sexual contact and later sexual intercourse with Sheila, and their relationship continued until December of 1991. At the time Sheila Hall terminated her relationship with Stone, she also reported Stone to the Illinois Department of Professional Regulation (IDPR). IDPR conducted an investigation and discovered allegations of Stone's other patients having had sexual intercourse with him. Stone voluntarily relinquished his social worker's license in June 1992.

The husband and wife filed separate lawsuits against Stone on March 18 and June 9, 1992, respectively, in the Circuit Court of DuPage County, alleging malpractice and intentional or negligent infliction of emotional harm. Specifically, Sheila Hall alleged that:

In the course of treatment and therapy, Stone so aroused Plaintiff's emotions by the manipulation of the transference phenomenon that she fell in love with him. Stone brought about this result by wrongfully and negligently manipulating the psychotherapeutic situation to the point where plaintiff's feelings were no longer transferred feeling for him as a psychotherapist, but direct feelings of love for him as a person, beyond the phenomenon of transference. As a result of this manipulation of the transference phenomenon, Plaintiff began a sexual relationship with Stone. . . .

As a result of the control STONE exercised over the Plaintiff, he failed to employ counseling techniques commonly used which would have improved marital relationship between Plaintiff and her husband. . . .

That as a direct and proximate cause of Stone's sexual contact with the Plaintiff . . . Plaintiff has experienced extreme pain and suffering, as well as emotional distress of a continuing and permanent nature, including an attempted suicide. . .

Also focusing on the sexual relationship between Sheila Hall and Stone, Peter Hall alleged in his separately filed complaint:

That during the aforedescribed counseling of this plaintiff, and the counseling of Plaintiff's wife, this defendant, contrary to his fiduciary obligations to this plaintiff, engaged in a course of sexual conduct with Plaintiff's wife when Defendant Stone knew, or reasonably should have known, that said conduct would make it impossible to dissolve [sic] the aforereferenced marital discord . . . and would cause severe emotional distress to Plaintiff, Peter Hall . . . .

Additionally, the Halls' children, Devin and Brandon Hall, alleged in a separate action that Stone negligently caused them emotional harm and distress by engaging in a sexual relationship with their mother and causing their parents' marriage to be irretrievably damaged. The negligent acts or omissions allegedly committed by Stone include failing to "employ counseling techniques . . . that would have improved the marital relationship between Peter Hall and Sheila Hall and the Hall family relationship," mishandling "the transference ...

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