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Philadelphia Indemnity Insurance Company v. Behavioral Health Alternatives, Inc.

United States District Court, S.D. Illinois

December 13, 2017

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff,
v.
BEHAVIORAL HEALTH ALTERNATIVES, INC., EARL TIMMERMEIER, Individually and as Special Representatives of the Estate of Gayla Timmermeier, Deceased, SHELLY TIMMERMEIER and RAYMOND TIMMERMEIER, Defendants.

          MEMORANDUM AND ORDER

          J. PHIL GILBERT, DISTRICT JUDGE

         In this case, plaintiff Philadelphia Indemnity Insurance Company (“PIIC”) seeks rescission of an insurance policy it issued to defendant Behavioral Health Alternatives, Inc. (“BHA”) or, in the alternative, a declaratory judgment stating that the insurance policy it issued to BHA does not cover the defense of or indemnity for the underlying suit brought in state court by the estate and family of Gayla Timmermeier. BHA has moved to dismiss this case under Federal Rule of Civil Procedure 12(b)(6) on the grounds that PIIC should be estopped from rescinding the policy or claiming it does not cover the underlying lawsuit (Doc. 26). PIIC has responded to the motion (Doc. 31).

         I. Standard for Dismissal

         When reviewing a Rule 12(b)(6) motion to dismiss, the Court accepts as true all allegations in the complaint. Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To avoid dismissal under Rule 12(b)(6) for failure to state a claim, a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). This requirement is satisfied if the complaint (1) describes the claim in sufficient detail to give the defendant fair notice of what the claim is and the grounds upon which it rests and (2) plausibly suggests that the plaintiff has a right to relief above a speculative level. Bell Atl., 550 U.S. at 555; see Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); EEOC v. Concentra Health Servs., 496 F.3d 773, 776 (7th Cir. 2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl., 550 U.S. at 556).

         In Bell Atlantic, the Supreme Court rejected the more expansive interpretation of Rule 8(a)(2) that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief, ” Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Bell Atlantic, 550 U.S. at 561-63; Concentra Health Servs., 496 F.3d at 777. Now “it is not enough for a complaint to avoid foreclosing possible bases for relief; it must actually suggest that the plaintiff has a right to relief . . . by providing allegations that ‘raise a right to relief above the speculative level.'” Concentra Health Servs., 496 F.3d at 777 (quoting Bell Atl., 550 U.S. at 555).

         Nevertheless, Bell Atlantic did not do away with the liberal federal notice pleading standard. Airborne Beepers & Video, Inc. v. AT&T Mobility LLC, 499 F.3d 663, 667 (7th Cir. 2007). A complaint still need not contain detailed factual allegations, Bell Atl., 550 U.S. at 555, and it remains true that “[a]ny district judge (for that matter, any defendant) tempted to write ‘this complaint is deficient because it does not contain . . .' should stop and think: What rule of law requires a complaint to contain that allegation?” Doe v. Smith, 429 F.3d 706, 708 (7th Cir. 2005) (emphasis in original). Nevertheless, a complaint must contain “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl., 550 U.S. at 555. If the factual detail of a complaint is “so sketchy that the complaint does not provide the type of notice of the claim to which the defendant is entitled under Rule 8, ” it is subject to dismissal. Airborne Beepers, 499 F.3d at 667.

         II. Facts Alleged

         As a preliminary matter, PIIC has referenced in its response material outside and not attached to the Amended Complaint. When such material is presented in connection with a Rule 12(b)(6) motion to dismiss, the Court may treat the motion to dismiss as a motion for summary judgment or it may exclude the additional material from consideration. See Fed. R. Civ. P. 12(d). In this case, the Court declines to consider the additional material and will consider this motion as it was captioned, under Rule 12(b)(6).

         The allegations in the Amended Complaint and the reasonable inferences that can be drawn from them establish the following relevant facts for the purposes of this motion.

         In August 2013, Gayla Timmermeier sought services from BHA, an organization that provides comprehensive outpatient mental health services. After a subsequent visit to BHA, Timmermeier committed suicide. On September 9, 2013, Gayla Timmermeier's brother Earl Timmermeier telephoned BHA to inform it of Gayla Timmermeier's death. In that phone call, Earl Timmermeier said that Gayla Timmermeier's family planned to sue BHA.

         More than a year later, BHA applied to PIIC for commercial insurance coverage. BHA Executive Director Belinda Gunning completed the application. In the application, she stated that no BHA client had committed suicide in the prior four years and that BHA did not know of any circumstances that could reasonably give rise to a lawsuit or an insurance claim.

         Relying on these representations, PIIC issued Policy No. PHPK1264138, effective December 1, 2014, to December 1, 2015 (“Policy”). The Policy covered claims made within the effective period for incidents occurring as far back as December 1, 1986. A claim was considered to be made when BHA first received and recorded notice of the claim. The Policy also expressly excluded coverage for incidents about which BHA knew on the date the Policy went into effect that could reasonably be expected to generate a claim for damages.

         On September 4, 2015, Earl Timmermeier and other family members filed a negligence action against BHA in the Circuit Court for the Third Judicial Circuit, Madison County, Illinois. The complaint in the underlying lawsuit did not plead that Earl Timmermeier had alerted BHA to Gayla Timmermeier's suicide or to a potential lawsuit on or around September 9, 2013. BHA tendered the defense of the lawsuit to PIIC, which agreed to defend BHA in the underlying suit.

         PIIC filed this lawsuit on June 30, 2017. As noted above, PIIC seeks to rescind the Policy based on material misrepresentations made in BHA's application for insurance (Count 1). Alternatively, PIIC seeks a declaration that the Policy does not cover the underlying lawsuit because Earl Timmermeier first made his claim to BHA on September 9, 2013, outside the Policy's effective dates (Count 2). It also seeks a declaration that the underlying lawsuit falls within an exclusion for incidents about which BHA knew on December 1, 2014, and could reasonably ...


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