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St. John's Hospital of Hospital Sisters of the Third of St. Francis v. National Guardian Risk Retention Group, Inc.

United States District Court, C.D. Illinois, Springfield Division

May 17, 2018

ST. JOHN'S HOSPITAL OF THE HOSPITAL SISTERS OF THE THIRD ORDER OF ST. FRANCIS, PATRICIA FUGATE, and ROBERT FUGATE, Plaintiffs,
v.
NATIONAL GUARDIAN RISK RETENTION GROUP, INC., EMERGENCY CONSULTANTS, INC., CENTRAL ILLINOIS EMERGENCY PHYSICIANS, P.C., a/k/a CENTRAL ILLINOIS EMERGENCY PHYSICIANS, LLP, JAMES M. JOHNSON, M.D., ROBERT M. WILLIAMS, M.D., and DERIK K. KING, M.D., Defendants.

          ORDER

          Richard Mills United States District Judge

         This is a diversity of citizenship case.

         Plaintiffs assert five state law counts against the Defendants.

         Pending are two motions to dismiss filed by the Defendants pursuant to

         Federal Rule of Civil Procedure 12(b)(6).

         At the end of the day, one of the motions is granted in its entirety.

         I. FACTS

         In their Third Amended Complaint, the Plaintiffs state that on March 22, 2011, Plaintiffs Patricia and Robert Fugate filed a medical malpractice complaint in Madison County, IL, 11-L-270, alleging negligence against several Defendants, including St. John's Hospital, Emergency Consultants, Inc., and three doctors affiliated with Emergency Consultants: Elizabeth McDaniel, D.O.; Aamir Banday, M.D.; and John Byrnes, M.D.

         At all times relevant to the underlying medical malpractice case, namely on May 3, 4 and 11 of 2009, there was in effect an Agreement for Emergency Department Management Services between St. John's Hospital and Central Illinois Emergency Physicians which provided, inter alia, as follows:

Liability Insurance. Partnership, at no cost to Hospital, shall ensure that personnel provided by it shall maintain professional liability insurance coverage (primary and excess) in an amount not less than $2, 000, 000 per occurrence and $4, 000, 000 annual aggregate (only $1, 000, 000 per occurrence and $3, 000, 000 annual aggregate will be provided until 11/1/01, at which time the full coverage will commence), subject to the terms and conditions of the individual policies.

         This paragraph (paragraph 9) was subsequently amended to require professional liability insurance coverage (primary and excess) in an amount not less than $1, 000, 000 per occurrence and $3, 000, 000 annual aggregate. The Plaintiffs allege that for purposes of this action, “personnel provided” include Drs. McDaniel, Banday and Byrnes.

         All medical staff at St. John's Hospital were required to have professional liability insurance in the amount of $1, 000, 000 per occurrence and $3, 000, 000 annual aggregate.

         On November 1, 2004, Defendant Central Illinois Emergency Physicians and St. John's Hospital executed an Amendment to Agreement for Emergency Department Services, paragraph 9 of which provided that St. John's Hospital agreed to pay any incremental increases in the professional liability insurance during the term of the Agreement and that Central Illinois Emergency Physicians would invoice St. John's Hospital for any incremental increases.

         Drs. McDaniel, Banday and Byrnes each submitted Certificates of Insurance to St. John's Hospital, reflecting that they were additional insureds covered by a policy issued by National Guardian to Central Illinois Emergency Physicians which provides coverage in the amount of $1, 000, 000 per occurrence and $3, 000, 000 annual aggregate. The policy (PL1021) defines an “Additional Named Insured” as “a physician or physician extender, employee, physician partner or independent contractor physician or physician extender specifically listed as Additional Named Insured in the schedule of Additional Named Insureds.” Drs. McDaniel, Banday and Byrnes were Additional Named Insureds.

         The Plaintiffs allege the per occurrence limit of liability listed in the Policy declarations applied separately to each Additional Named Insured, so each Additional Named Insured had a separate per occurrence limit of liability of $1, 000, 000 for each occurrence, up to the annual aggregate of $3, 000, 000.

         Central Illinois Emergency Physicians entered into separate “Physician Partnership Agreements” with Drs. McDaniel, Banday and Byrnes. Each Agreement between Central Illinois Emergency Physicians and each individual doctor stated, at paragraph 11, that Central Illinois Emergency Physicians agreed to provide each doctor with professional liability insurance through National Guardian Risk Retention Group which would provide coverage with limits of $1, 000, 000 per occurrence and $3, 000, 000 annual aggregate. The Physician Partnership Agreements, paragraphs 11 in particular, do not reference “shared limits.”

         The Plaintiffs allege that Defendants National Guardian, Emergency Consultants and Central Illinois Emergency Physicians have taken the position that the applicable coverage to the underlying Fugate litigation is the shared amount of $1, 000, 000 rather than $1, 000, 000 per individual Defendant physician. Therefore National Guardian, Emergency Consultants, Central Illinois Emergency Physicians and Defendants Dr. Johnson, Dr. Williams and Dr. King each agreed to deny the hospital its full insurance coverage and, in furtherance of that position, each affirmatively took the position that only $1 million in coverage applied to the Fugate case.

         The Plaintiffs claim that the Defendants' position is contrary to the plain language of both the Insurance Policy and Services Agreement, both of which were signed by Defendant Dr. Johnson. Drs. McDaniel, Banday and Byrnes, through their counsel, have joined in St. John's position that each doctor is entitled to $1, 000, 000 in individual coverage and that the three do not share $1, 000, 000 in coverage.

         St. John's Hospital litigated the underlying Fugate case and negotiated a settlement without the benefit of the full $3, 000, 000 coverage. Drs. McDaniel, Banday and Byrnes litigated the underlying Fugate case and negotiated a settlement without the benefit of the full $1, 000, 000 per doctor coverage. St. John's Hospital settled the underlying Fugate case.

         Defendants Emergency Consultants, Inc., Central Illinois Emergency Physicians, P.C. a/k/a Central Illinois Emergency Physicians, LLP, James A. Johnson, M.D., Robert M. Williams, M.D. and Derik K. King, M.D. have moved to dismiss the Plaintiffs' Third Amended Complaint.

         Defendant National Guardian Risk Retention Group, Inc. has moved to dismiss Counts I, II and IV.

         II. DISCUSSION

         A. Legal standard

         At this stage, the Court accepts as true all of the facts alleged in the complaint and draws all reasonable inferences therefrom. See Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011). “[A] complaint must provide a short and plain statement of the claim showing that the pleader is entitled to relief, which is sufficient to provide the defendant with fair notice of the claim and its basis.” Maddox v. Love, 655 F.3d 709, 718 (7th Cir. 2011) (internal quotation marks omitted). Courts must consider whether the complaint states a “plausible” claim for relief. See Id. The complaint must do more than assert a right to relief that is “speculative.” See Id. However, the claim need not be probable: “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” See Independent Trust Corp. v. Stewart Information Services Corp., 665 F.3d 930, 935 (7th Cir. 2012) (quoting Bell ...


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