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Fred Geisler, M.D v. Everest National Insurance Company and

November 16, 2012

FRED GEISLER, M.D.,
PLAINTIFF-APPELLANT,
v.
EVEREST NATIONAL INSURANCE COMPANY AND WESTERN LITIGATION, INC.,
DEFENDANT-APPELLEES.



Appeal from the Circuit Court of Cook County. No. 08 CH 47262 Honorable Nancy J. Arnold, Judge Presiding.

The opinion of the court was delivered by: Justice R. Gordon

JUSTICE R. GORDON delivered the judgment of the court, with opinion. Presiding Justice Lampkin and Justice Garcia specially concurred, with opinion.

OPINION

¶ 1 Plaintiff Fred Geisler, M.D., filed this suit claiming that defendants Everest National Insurance Company (Everest) and Western Litigation, Inc. (Western) breached its duties under the Everest insurance policy (Everest Policy) regarding two medical malpractice lawsuits in which plaintiff was a named defendant (Townsley Lawsuit and Lalicata Lawsuit). Defendants responded claiming that plaintiff failed to state a claim for breach of the Everest Policy regarding its defense of the Townsley Lawsuit, and that the Everest Policy did not provide plaintiff with coverage for the Lalicata Lawsuit.

¶ 2 In this appeal, plaintiff seeks to reverse the circuit court's orders granting summary judgment in favor of defendants. Specifically, plaintiff appeals the trial court's orders: (1) denying plaintiff's motion for partial summary judgment; (2) granting summary judgment in favor of defendants; and (3) denying plaintiff's motion to reconsider and for leave to file a second amended complaint.

¶ 3 Defendants additionally challenge this court's jurisdiction to review the trial court's summary judgment orders, arguing that plaintiff's notice of appeal was untimely filed. Defendants argue that plaintiff's motion to reconsider and for leave to file a second amended complaint was not a proper posttrial motion and thus did not toll the time to appeal. Defendants also challenge this court's jurisdiction to review the trial court's order denying plaintiff's motion, arguing that the order was not a final judgment. We affirm.

¶ 4 BACKGROUND

¶ 5 I. The Parties

¶ 6 Plaintiff was formerly employed as a neurosurgeon with the Chicago Institute of Neurosurgery and Neuroscience, Inc. (Chicago Institute), from September 1, 1992, until his employment was terminated allegedly "for cause" on January 4, 2004. On January 1, 2003, the Chicago Institute began providing its employees medical liability insurance under the Everest Policy. Plaintiff was an insured under the Everest Policy during his employment with the Chicago Institute, and the Everest Policy listed his coverage as effective from September 1, 1992, through December 31, 2003. Defendant Western, a liability claims and risk management company, was contracted by defendant Everest to administer the claims made under the Everest Policy.

¶ 7 In January 2003 and March 2004, plaintiff was added as a defendant in two medical malpractice lawsuits: the Townsley Lawsuit and the Lalicata Lawsuit, respectively. Defendant Everest reimbursed plaintiff's defense costs in the Townsley Lawsuit, which was settled without plaintiff's consent, but did not defend him in the Lalicata Lawsuit.

¶ 8 As a result, plaintiff brought the instant litigation, claiming that defendants Everest and Western breached their duties under the Everest Policy by: (1) failing to timely reimburse his defense costs in the Townsley Lawsuit; (2) settling the Townsley Lawsuit without his consent; and (3) failing to tender plaintiff a defense in the Lalicata Lawsuit. Plaintiff additionally sought damages under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2004)), claiming Everest acted in bad faith. Defendants filed affirmative defenses claiming that: (1) defense costs for the Townsley Lawsuit were timely paid; (2) plaintiff's consent was not required to settle the Townsley Lawsuit; (3) the Everest Policy did not provide plaintiff with coverage in the Lalicata Lawsuit; and (4) defendants alternatively had no duty to defend plaintiff in the Lalicata Lawsuit under the provisions of the Everest Policy.

¶ 9 II. The Everest Policy

¶ 10 Plaintiff's employer, the Chicago Institute, was obligated under its employment agreement to provide its employees with medical malpractice insurance. From January 1, 2003, through December 31, 2003, the Chicago Institute contracted with defendant Everest to cover its employees under the Everest Policy. The Everest Policy was a "claims made" medical liability insurance, covering "loss events," including "medical professional services," or services rendered to a patient for care and treatment in the practice of medicine. Defendant Everest reserved "the right but not the duty or obligation to defend any 'claim' or suit against an 'Insured.' " The claims made provision provided coverage for claims that were first made and reported to defendant Everest during the policy period or during an "extended reporting period." An extended reporting period extends the time for reporting claims after the policy period ends.

¶ 11 The Everest Policy contained several endorsements that periodically amended the terms of the policy's coverage. One such endorsement was a "schedule of medical insureds" that amended the Everest Policy on November 30, 2003, to list the physicians who were provided coverage (Original Schedule). Plaintiff was listed as an insured on the Original Schedule with a retroactive effective date of September 1, 1992. The Original Schedule did not have a termination date. However, the policy period ended on December 31, 2003. The Everest Policy states that a retroactive date provides an insured with coverage for claims that predate the inception of the Everest Policy.

¶ 12 On December 31, 2003, plaintiff was sent correspondence from defendant Everest informing him that he was no longer insured and would not receive any future coverage. On August 10, 2004, the Everest Policy was amended by an endorsement to list December 31, 2003, on the Original Schedule as the date of termination of plaintiff's coverage (General Change Endorsement). On September 9, 2004, the Everest Policy was amended by an endorsement to replace and supersede the Original Schedule with a new schedule of medical insureds that no longer listed plaintiff as an Insured (Revised Schedule). Also on that day, the Everest Policy was amended by endorsement to include an extended reporting period that extended the period to file claims indefinitely, with an effective date of January 1, 2004. The appellate record does not indicate that plaintiff received any notice of the foregoing endorsements.

¶ 13 The Everest Policy contained a $2,500,000 self-insured retention clause (SIR). Similar to a deductable, the SIR required the Chicago Institute to pay for the first $2,500,000 of costs incurred to defend, settle, or otherwise resolve the claims covered under the Everest Policy. On December 15, 2008, the Chicago Institute and defendant Everest entered into a confidential settlement agreement, release and covenant not to Sue (Settlement Agreement). The Settlement Agreement rendered the SIR exhausted on that day, with respect to all existing and future claims under the Everest Policy.

¶ 14 Under the provisions of its policy, defendant Everest had the right to "[s]ettle, or participate in the settlement of, any 'claim first made' that is settled with the consent of the general counsel of the named insured shown in the 'Declarations.' " The Everest Policy contained no explicit language conferring settlement consent rights to any insured other than the general counsel of the named insured. Effective January 1, 2004, the Everest Policy was amended to identify the Chicago Institute as a named insured. The Everest Policy did not identify the general counsel of the named insured, but it designated Michael Kelly, a partner with the firm Hinshaw & Culbertson (Hinshaw), as the defense counsel by the Named Insured. The Chicago Institute later waived, effective December 15, 2008, the right to consent provision pursuant to the Settlement Agreement.

¶ 15 III. The Townsley Lawsuit

¶ 16 The Townsley lawsuit arose from patient Peter Townsley's spinal surgery, which was performed by plaintiff on September 18, 2001, resulting in Townsley's loss of use and function of his right arm. These complications led Townsley to later sue plaintiff for medical malpractice on January 30, 2003. Defendant Everest retained Hinshaw, designated by the named insured under the Everest Policy as defense counsel, to defend plaintiff in the Townsley Lawsuit. In December 2003, Hinshaw separately advised the Chicago Institute on matters related to the termination of plaintiff's employment. In March 2004, plaintiff personally retained Hickey, Malia and Associates (Hickey Malia) to represent him in the Townsley Lawsuit. Under the terms of the Everest Policy's coverage, the Chicago Institute reimbursed Hickey Malia for the costs and attorney fees in defending the Townsley Lawsuit since the SIR had yet to be exhausted.

¶ 17 Defendant Western made the payments on behalf of the Chicago Institute. Specifically, Western sent five checks to the attorneys totaling $27,350.25 from September 2005 through June 2007. From July 2007 through November 2008, Hickey Malia sent to defendant Western six additional invoices totaling $43,533.68 in defense costs. Plaintiff requested an explanation from defendants Everest and Western as to why these defense reimbursement payments were not made. Defendant Western responded that the payments were subject to the SIR and that the Chicago Institute, not defendant Everest, was obligated to pay. Defendant Everest later reimbursed plaintiff for these defense costs, after the SIR was exhausted on December 15, 2008. Specifically, defendant Western, on behalf of defendant Everest, sent Hickey Malia a $45,007.98 check for defense payments on December 29, 2008.

¶ 18 On March 17, 2009, plaintiff learned that defendant Western proposed to enter into a settlement agreement with Townsley, and plaintiff notified defendant Western the next day that he did not consent to the proposed $150,000 settlement. Despite his requests to review the settlement proposal and for additional time to discuss the matter with counsel, plaintiff did not receive copies of the settlement papers until the matter was settled without his consent on March 27, 2009.

¶ 19 On June 24, 2009, plaintiff advised defendant Western that he had no additional invoices. Defendant Western, on behalf of Everest, made a final defense reimbursement to Hickey Malia in the amount of $3,917 on July 16, 2009. Plaintiff concedes that defendants Everest and Western paid the defense costs and attorney fees for the Townsley suit.

¶ 20 IV. The Lalicata Lawsuit

¶ 21 The Lalicata Lawsuit arose from spinal surgery performed on March 12, 2002, on patient Caterina Lalicata by plaintiff and Dr. Mark Connolly, a physician who was not employed by the Chicago Institute. Lalicata died from complications that day. After the surgery, defendant Everest retained Hinshaw to advise plaintiff on potential legal matters related to Lalicata's surgery. Lalicata's estate sued Dr. Connolly in October 2003. In March 2004, plaintiff and the Chicago Institute were added as defendants to the Lalicata Lawsuit, and plaintiff personally hired Hickey Malia as his defense counsel. That month, on March 29, the Chicago Institute sent a letter to defendant Everest informing it of the litigation and requesting that it not defend plaintiff due to the termination of his employment. Defendant Everest acceded to the request and tendered a defense to the Chicago Institute but not to plaintiff, believing plaintiff was no longer covered under the Everest Policy. Plaintiff was eventually nonsuited from the Lalicata Lawsuit on November 26, 2007.

¶ 22 In his complaint, plaintiff alleges that he incurred "significant" attorney fees and costs defending the Lalicata Lawsuit. Defendants Everest and Western provided no reimbursement for these fees. However, Cynthia Rendon, a claims attorney for defendant Western, stated in a sworn affidavit that plaintiff never submitted any defense cost invoices to defendant Western regarding the Lalicata Lawsuit.

¶ 23 V. Procedural History

¶ 24 Plaintiff filed this action on December 18, 2008, seeking a declaratory judgment to determine the rights and responsibilities of the respective parties under the terms of the Everest Policy. On March 27, 2009, plaintiff filed a "Verified Motion for a Temporary Restraining Order," seeking to enjoin defendants from settling the Townsley suit without plaintiff's consent. The trial court denied the motion three days later. On March 31, 2009, the Chicago Institute filed a "Motion to Compel Mediation/Arbitration," which was later granted. Plaintiff and the Chicago Institute arbitrated their rights under the physician employment agreement, which is not an issue in this appeal.

¶ 25 On April 28, 2009, plaintiff filed a "First Amended Complaint for Declaratory Judgment," alleging breach of contract against defendant Everest, the Chicago Institute, and defendant Western, and for a declaratory judgment as to the rights and responsibilities of the respective parties under the terms of the Everest Policy, and for damages against defendant Everest for its bad faith in violation of section155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2004)).

¶ 26 In count I, plaintiff alleged that defendant Everest breached the Everest Policy when it:

(1) failed to make timely defense payments to plaintiff in the Townsley Lawsuit; (2) did not respond promptly to plaintiff's inquiries regarding the extent of the Everest Policy's coverage; (3) failed to provide plaintiff an opportunity to discuss the settlement of the Townsley Lawsuit with his counsel and belatedly delivered the settlement papers; (4) settled the Townsley Lawsuit without the consent of plaintiff or his counsel; and (5) failed to reimburse plaintiff for his costs defending the Lalicata Lawsuit.

¶ 27 In count III, plaintiff further alleged defendant Western breached the Everest Policy when it: (1) failed to make timely defense payments to plaintiff in the Townsley Lawsuit; (2) failed to provide plaintiff an opportunity to discuss the settlement of the Townsley Lawsuit with his counsel and belatedly delivered the settlement papers; (3) settled the Townsley Lawsuit without the consent of plaintiff or his counsel; (4) failed to reimburse plaintiff for his costs defending the Lalicata Lawsuit; (5) purposely interfered with plaintiff's rights under the Everest Policy; (6) purposely interfered with plaintiff's right to have his counsel draft the settlement agreement in the Townsley Lawsuit; (7) purposefully interfered with plaintiff's representation by counsel in the Townsley Lawsuit; and (8) acted with willful and wanton disregard of plaintiff's rights as a litigant represented by counsel.

¶ 28 In count V, plaintiff further sought a claim under the Illinois Insurance Code (215 ILCS 5/155 (West 2004)) for bad faith arising out of defendant Everest's unreasonable and vexatious conduct when it: (1) failed to make timely defense payments to plaintiff in the Townsley Lawsuit; (2) did not respond promptly to plaintiff's inquiries regarding the extent of the Everest Policy's coverage; (3) failed to provide plaintiff an opportunity to discuss the settlement of the Townsley Lawsuit with his counsel and belatedly delivered the settlement papers; (4) allowed defendant Western to settle the Townsley Lawsuit without the consent of plaintiff or his counsel;

(5) failed to reimburse plaintiff for his costs defending the Lalicata Lawsuit; and (6) conspired with the Chicago Institute and defendant Western to deny plaintiff benefits owed under the Everest Policy.

¶ 29 Plaintiff and the Chicago Institute entered into arbitration pursuant to the provisions of plaintiff's employment contract with the Chicago Institute. The arbitration proceedings were bifurcated into two phases: liability and damages. In the first phase, the liability issues were decided in the Chicago Institute's favor. On May 19, 2009, the Chicago Institute filed a "Motion to Stay or Dismiss Based on Mediation/Arbitration Agreement and/or Pending Arbitration." The Chicago Institute argued that the allegations in plaintiff's first amended complaint were subject to arbitration and were currently being arbitrated. The trial court granted the Chicago Institute's motion to compel arbitration on September 11, 2009, which removed the Chicago Institute from the lawsuit. The appellate record does not indicate the outcome of the arbitration proceedings.

¶ 30 Defendants filed their answer, affirmative defenses, and counterclaim for declaratory judgment on June 5, 2009, alleging that: (1) plaintiff no longer qualified as an insured at the time of the Lalicata Lawsuit; (2) there was no untimely payment of defense costs in the Lalicata Lawsuit; (3) defendants made timely payments for defense costs in the Townsley Lawsuit; and (4) plaintiff's consent was not required for settlement of the Townsley Lawsuit.

¶ 31 On January 27, 2010, plaintiff filed a motion for partial summary judgment against defendants on issues regarding the Lalicata Lawsuit in counts I, III, and IV. Plaintiff claimed that he was insured under the Everest Policy at the time the claim was filed, which entitled him to receive reimbursements for his costs in defending the Lalicata Lawsuit. Plaintiff further argued that, by law and under the terms of the policy, defendant Everest was not allowed to retroactively cancel plaintiff's coverage. In his brief in support of his motion for partial summary judgment, plaintiff argued that the Everest Policy provided defendants with a duty to defend in the Lalicata Lawsuit, and that judicial estoppel barred defendants from asserting any defenses to coverage.

¶ 32 Defendants filed their response and cross-motions for summary judgment on March 4, 2010. In their response, defendants argued that plaintiff was not insured under the Everest Policy when he filed his claim reporting the Lalicata Lawsuit, and, alternatively, that defendants did not have a duty to defend. In their cross-motion, defendants sought summary judgment as to counts I, III, IV, and V of plaintiff's complaint, in addition to all counts of defendants' counterclaim. Defendants argued that their payments to plaintiff for the defense of the Townsley Lawsuit were not untimely and that plaintiff's consent was not required to settle the Townsley Lawsuit.

¶ 33 On July 13, 2010, the trial court heard arguments and denied plaintiff's motion. During the hearing, the trial court cited Continental Casualty Co. v. Cuda, 306 Ill. App. 3d 340 (1999), and indicated that plaintiff's argument was making the mistake of turning the Everest Policy into an occurrence policy, rather than a claims made policy. The trial court held that defendants had "no obligation whatsoever" to defend plaintiff in the Lalicata Lawsuit because he was not an insured when the claim was first made. In its written order, the trial court found that, pursuant to the Revised Schedule, effective January 1, 2004, "plaintiff was not an 'insured' under the Everest Policy, and that the claim was first made on March 29, 2004."

¶ 34 On August 25, 2010, the trial court heard arguments and granted defendants' cross-motion for summary judgment. During the hearing, the trial court repeatedly questioned plaintiff about whether he had alleged any specific damages. At the end of the hearing, the trial court granted summary judgment in favor of defendants and found that plaintiff had not alleged damages to support a bad-faith claim under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2004)). The trial court also found that the Everest Policy did not provide plaintiff with a right to consent to settlement. In its written order, the trial court stated: (1) that the reimbursements of plaintiff's defense costs of the Townsley Lawsuit were timely paid; (2) that plaintiff had no claim for damages regarding the defense reimbursements for the Townsley Lawsuit; and (3) that plaintiff's consent was not required to settle the Townsley Lawsuit.

¶ 35 Plaintiff then filed a "Motion to Reconsider, For Leave to File Second-Amended Complaint, and to Set Aside and Vacate Orders Entered July 13, 2010 and August 25, 2010." Plaintiff's motion sought to remedy errors of fact and law by including new and more fully developed allegations of damages regarding the Townsley Lawsuit. Plaintiff also argued that the estoppel doctrine barred defendants from raising affirmative defenses as to coverage of the Lalicata Lawsuit. On November 30, 2010, the motion to reconsider was denied.

¶ 36 On this appeal, defendants argue that plaintiff's September 24, 2010, motion was not a proper posttrial motion that tolled the time to appeal because it did not challenge the trial court's July 13, 2010, and August 25, 2010, orders on summary judgment. As a result, we quote the relevant part of plaintiff's September 24, 2010, motion:

"The plaintiff, Fred Geisler, M.D., by and through his attorneys, the Law Offices of Patrick J. McGuire, hereby submits his motion for leave to file a second-amended complaint and to set aside and vacate orders entered on July 13, 2010, and August 25, 2010, stating as follows:

1. On July 13, 2010, the court entered an order denying plaintiff's motion for partial summary judgment. (Exhibit 1).

2. On August 25, 2010, the court entered an order granting defendants' motion for summary judgment. (Exhibit 2).

6. The proposed second-amended complaint contains new and more fully developed allegations that render erroneous the factual and legal bases on which the court relied in support of its prior orders. For example, the proposed second-amended complaint contains more specific allegations and exhibits to support plaintiff's position that defendants should be estopped under cases such as Employers Ins. of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127 (1999) from asserting the defenses to coverage for the Lalicata lawsuit on which the court based its summary judgment orders.

7. The proposed second-amended complaint also contains new and specific allegations that plaintiff incurred damages in the form of additional attorney's fees as a result of the 18-month delay in defendants' payment of defense costs relative to the Townsley lawsuit. Such allegations cure the perceived defect that plaintiff had not alleged any contract damages related to the Townsley lawsuit and, therefore, could not sustain a cause of action under § 155 of the Insurance Code for such delay.

WHEREFORE, for the reasons set forth herein, plaintiff requests that he be granted leave to file within 14 days a brief in support of this motion to reconsider which points out the errors in this court's interpretation of the subject policy of insurance and further supports his claim that the court's prior orders should be vacated, and that he be granted leave to file a second-amended complaint in substantially the same form as the pleading attached hereto."

¶ 37 In denying plaintiff's motion to reconsider the trial court stated the following: "For the reasons stated by the Court in open court, the plaintiff's motion is DENIED." Neither a transcript nor a bystander's report of the hearing on the motion was provided in the appellate record. On December 22, 2010, plaintiff filed a notice of appeal, seeking reversal of the trial court's orders:

(1) denying plaintiff's motion for partial summary judgment, (2) granting summary judgment in favor of defendants, and (3) denying plaintiff's motion to reconsider and ...


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