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Illinois Insurance Guaranty Fund v. Chicago Insurance Co.

Court of Appeals of Illinois, Fifth District

January 29, 2015

ILLINOIS INSURANCE GUARANTY FUND, Plaintiff-Appellee,
v.
CHICAGO INSURANCE COMPANY, Defendant-Appellant Protestant Memorial Medical Center, d/b/a Memorial Hospital, Women's Care of Southern Illinois, P.C., Debra Schell, as Mother and Next Friend of J.L., a Disabled Minor, and John A. Hucker, M.D., Defendants.

Rule 23 Order filed December 12, 2014.

Motion to publish granted January 29, 2015.

Held [*]

Where the Illinois Insurance Guaranty Fund filed a declaratory judgment action against defendant insurer for a determination of whether a “claims-made” policy issued to a women’s clinic for claims made between July 1, 2001, through July 1, 2002, provided coverage for a physician formerly employed at the clinic, even though the physician was not expressly named as an insured in the claims-made policy issued by defendant after the physician’s employment relationship ended, the trial court’s entry of summary judgment for plaintiff requiring defendant to pay for the defense of the physician in an underlying malpractice claim was reversed and the cause was remanded, since defendant’s policy was not “coverage provided by another insurance policy” that had to be exhausted under section 546(a) of the Insurance Code, the physician did not qualify as an insured under the plain language of the policy, and defendant insurer only agreed to pay on behalf of the clinic as a result of the physician’s acts for which it was legally responsible.

Appeal from the Circuit Court of St. Clair County, No. 10-MR-255; the Hon. Stephen P. McGlynn, Judge, presiding.

Madelyn J. Lamb, of Hinshaw & Culbertson, LLP, of Belleville, William P. Hardy, of Hinshaw & Culbertson, LLP, of Springfield, and Jennifer K. Gust, of Hinshaw & Culbertson, LLP, of Chicago, for appellant.

James F. Best and Adam M. Stefancic, both of Best, Vanderlaan & Harrington, of Chicago, and Ted Harvey, of Freeark, Harvey & Mendillo, P.C, of Belleville, for appellee.

Panel JUSTICE STEWART delivered the judgment of the court, with opinion. Justices Welch and Goldenhersh concurred in the judgment and opinion.

OPINION

STEWART, JUSTICE.

¶ 1 The plaintiff, Illinois Insurance Guaranty Fund (the Fund), filed a declaratory judgment action against the defendant, Chicago Insurance Company (Chicago Insurance), for the court to determine whether a "claims-made" insurance policy issued to Women's Care of Southern Illinois, P.C. (Women's Care), for claims made between July 1, 2001, through July 1, 2002, provided insurance coverage for a former employee of Women's Care, Dr. John Hucker. Chicago Insurance issued the policy. This insurance dispute stems from a separate lawsuit for medical malpractice filed against Women's Care and Dr. Hucker on January 22, 2002, during the effective date of coverage of the claims-made policy. The lawsuit alleged that Dr. Hucker committed medical malpractice on March 25, 2000, while he was employed by Women's Care. However, Dr. Hucker's employment with Women's Care ended on December 31, 2000, and he was not expressly named as an insured in the claims-made policy that was issued by Chicago Insurance after the employment relationship ended.

¶ 2 Both the Fund and Chicago Insurance filed cross-motions for summary judgment on the issue of Chicago Insurance's duty to defend Dr. Hucker in the malpractice lawsuit. The circuit court ruled in favor of the Fund and found that Chicago Insurance was obligated to pay for Dr. Hucker's defense against the malpractice claim. The court entered a final order requiring Chicago Insurance to pay $98, 694.64 for costs to defend Dr. Hucker. Chicago Insurance filed a timely notice of appeal. For the following reasons, we reverse and remand with instructions to enter a summary judgment in favor of Chicago Insurance.

¶ 3 BACKGROUND

¶ 4 The policy at the center of this insurance dispute is a claims-made policy. A "claims-made" insurance policy is distinguishable from a conventional "occurrence-based" insurance policy with respect to the type of risks each policy insures. Uhlich Children's Advantage Network v. National Union Fire Co. of Pittsburgh, 398 Ill.App.3d 710, 715, 929 N.E.2d 531, 537 (2010). An occurrence-based policy insures against an insurable act or omission that occurs during the policy period regardless of when a legal claim arising out of the act or omission is made against the insured. A claims-made policy, however, insures against the risk of a claim being made against the insured during the policy period. Id. The claims-made policy allows an insurance company to easily identify risks which, in turn, allows the company to know in advance the extent of its claims exposure and compute its premiums with greater certainty. Id. The coverage under a claims-made policy is less than a conventional occurrence-based policy, but so are its costs to the insured. Id.

¶ 5 The facts alleged in the underlying malpractice complaint establish that on March 25, 2000, Dr. Hucker was an employee of Women's Care, and he delivered a baby, J.L., at Protestant Memorial Medical Center. The baby's mother is Debra Schell. Schell alleged that Dr. Hucker committed malpractice in delivering her baby.

¶ 6 Dr. Hucker's employment agreement with Women's Care required Women's Care to provide for and maintain medical malpractice insurance coverage on a "claims-made basis" during his employment with respect to any duties or services that he performed as an employee of Women's Care. At the end of 2000, Dr. Hucker and another physician left Women's Care to form their own practice. The employment agreement did not require Women's Care to continue to provide Dr. Hucker with claims-made malpractice insurance coverage after the termination of the employer-employee relationship. Instead, the employment agreement required Dr. Hucker to "obtain at his own expense professional liability 'tail coverage' or 'prior acts coverage' covering [him] for professional liability while he was employed by [Women's Care], " and he was required to furnish evidence of such tail coverage or prior acts coverage to Women's Care. Upon leaving his employment with Women's Care, Dr. Hucker obtained his own medical malpractice coverage through MIIX Insurance Company.

ΒΆ 7 On January 28, 2002, Schell filed her medical malpractice lawsuit against the hospital, Women's Care, and Dr. Hucker. Dr. Hucker first became aware of Schell's malpractice claim when he received the complaint sometime after January 28, 2002. Schell sought damages against Dr. Hucker for his alleged malpractice and against both the hospital and Women's Care under a vicarious liability ...


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