United States District Court, N.D. Illinois, Eastern Division
THE SURGERY CENTER at 900 NORTH MICHIGAN AVENUE, LLC, Plaintiff,
AMERICAN PHYSICIANS ASSURANCE CORPORATION, INC., and AMERICAN PHYSICIANS CAPITAL, INC., Defendants.
Sharon Johnson Coleman
DEFENDANTS' MOTION FOR JUDGMENT AS A MATTER OF
Neumann One of the Attorneys for Defendants
Neumann (admitted pro hac vice)
P. Bienstock (admitted pro hac vice)
to Federal Rule of Civil Procedure 50, APAC moves for
judgment as a matter of law because no reasonable jury could
find that TSC has met its burdens of proof on any claim. APAC
therefore requests judgment on the entirety of
Plaintiff's Second Amended Complaint or, alternatively,
on Counts II and III, which, respectively, allege
“Institutional Liability Punitive Damages” and
“Concert of Action.”
Illinois Supreme Court has narrowly defined the common-law
cause of action for “bad faith.” As this Court
has recognized, “to sustain a successful claim for bad
faith, TSC must prove that: (1) a duty to settle existed; (2)
the insurer breached that duty; and (3) the breach caused
injury to the insured.” (Doc. 304 at 5.) “The
duty [to settle] does not arise at the time the parties enter
into the insurance contract, nor does it depend on whether or
not a lawsuit has been filed.” Haddick ex rel.
Griffith v. Valor Ins., 763 N.E.2d 299, 304 (Ill. 2001).
The duty also does not arise until a third party demands
settlement within limits. Id. at 305. Even when a
demand is made, the duty arises only if there is “a
reasonable probability of a finding of liability
against the insured.” Id. at 304 (emphasis
added). Consistent with its plain meaning, a
“reasonable probability” means “at
least more likely than not.” Powell v. Am.
Serv. Ins. Co., 2014 IL App (1st) 123643, ¶ 36, 7
N.E.3d 11 (emphasis added); Hana v. Illinois State Med.
Inter-insurance Exch. Mut. Ins. Co., 2018 IL App (1st)
162166, ¶ 35, - N.E.3d - (affirming these standards for
a failure-to-settle claim).
an objective assessment of the probability of an
adverse verdict. See, e.g., Ill. Pattern Jury Instr.
- Civil § 710.00 (“The conduct of the insurer is
tested against an objective - not a subjective -
standard”). Again, this inquiry “applies at the
time of the settlement demand, ” and after-the-fact
evidence cannot be used retrospectively to decide whether
there was a “reasonable probability” of a finding
of liability against the insured. Powell, ¶ 42.
trial, this Court denied APAC's Motion for Summary
Judgment based on a finding of disputed facts as to the
likelihood that TSC would be found liable and the amount of
potential damages to which TSC would be exposed. (Doc. 304 at
6.) To the extent any such fact issue previously precluded
judgment as a matter of law, it has now been resolved. There
is no dispute that the Tate case presented - and
that TSC knew - from the outset that the likely damages would
exceed TSC's policy limit if the jury were to
find liability. And TSC has offered no evidence whatsoever
that, at the time of Ms. Tate's settlement demands, it
was objectively more likely than not that TSC would lose at
trial on liability. Instead, TSC has endeavored to confuse
the jury with unfounded assertions about collateral issues,
such as APAC's reserving and reinsurance information, a
New Mexico meeting with no nexus to the Tate claim,
and nonexistent conflicts of interests. Even if the jury were
to believe those assertions, they are irrelevant to TSC's
failure-to-settle claim. What Plaintiff's case-in-chief
at this trial has demonstrated, however, is that everyone -
Ms. Griffiths, TSC's clinical staff, all of the lawyers,
and APAC - thought the Tate case was highly
defensible as to both standard of care and causation. As
such, the Tate case simply never triggered a duty
for APAC to settle within TSC's policy limit.
punitive damages are only a derivative penalty, and TSC's
prayer for such an award falls with its untenable bad-faith
claim. However, even if TSC's bad faith claim is
permitted to continue to the jury, judgment should be granted
on its punitive damages claim because it has failed to show
that APAC engaged in the kind of outrageous conduct and
reckless disregard that is required for the jury to consider
the imposition of punitive damages, which is the only relief
requested under TSC's Count II.
TSC's concert-of-action claim in Count III cannot survive
independently of its bad-faith claim unless APAC knowingly
and substantially assisted defense counsel in breaching their
professional obligations to TSC. Again, however, even if
TSC's bad faith claim is permitted to continue, judgment
should be entered on TSC's concert-of-action claim
because TSC has failed to show that the lawyers at Lowis
& Gellen breached any duty in defending TSC, much less
that APAC knowingly and substantially assisted in such a
breach. Indeed, defense counsel are presumptively independent
contractors, and TSC faces a high bar in imposing liability
on APAC for the conduct of these third parties.
the core purposes of judgment as a matter of law is to speed
up litigation and avoid unnecessary trials. Weisgram v.
Marley Co., 528 U.S. 440, 451 (2000). Given TSC's
failure to carry its burdens in its case-in-chief, and the
likely jury confusion caused by TSC's introduction of
collateral issues into this case, this Court should grant
judgment as a matter of law to save the parties, the jury,
and itself the time and expense of trying this unsupported
case to a verdict. APAC requests that the Court enter
judgment as a matter of law in its favor.
as a matter of law is appropriate because TSC has been fully
heard and the jury lacks “a legally sufficient
evidentiary basis to find for [TSC].” Fed.R.Civ.P.
50(a). The standard for judgment as a matter of law
“mirrors” summary judgment under Rule 56.
Reeves v. Sanderson Plumbing Prod., Inc., 530 U.S.
133, 150 (2000). As such, a “mere scintilla” of
evidence does not suffice; rather, TSC must come forward with
enough evidence for a reasonable jury to derive a verdict in
TSC's favor. Massey v. Blue Cross-Blue Shield of
Illinois, 226 F.3d 922, 924 (7th Cir. 2000). TSC has
failed to do so.
The Tate case never triggered the Haddick
duty to settle within TSC's policy limit.
At the time of Ms. Tate's pretrial settlement
demands, it was objectively more
likely than not that TSC would
Illinois Supreme Court established in 2001 through
Haddick, TSC may not recover against APAC for
failing to settle the Tate case unless it proves
that: “(i) the duty to settle arose; (ii) the insurer
breached the duty; and (iii) the breach caused injury to the
insured.” Powell, 2014 IL App (1st) 123643,
¶ 18, 7 N.E.3d 11. TSC cannot satisfy these elements
because it has not even attempted to show that there was ever
“a reasonable probability of a finding of
liability against the insured.” Haddick,
763 N.E.2d at 304 (emphasis added). Again, a
“reasonable probability” means “at least
more likely than not.” Powell, ¶ 36;
Hana, ¶ 35. This standard “applies at the
time of the settlement demand, ” and the fact that TSC
ultimately lost the Tate case cannot be used
retrospectively to conclude that, at the time of the pretrial
demands, there was a “reasonable probability” of
liability. Powell ¶ 42; see Kavanaugh v.
Interstate Fire & Cas., 342 N.E.2d 116, 121
(Ill.App. 1975) (ultimate adverse outcome does not establish
bad faith refusal to settle).
Court previously ruled that summary judgment was not
appropriate “because APAC's true assessment of the
likelihood that TSC would be found liable and the amount of
potential damages to which TSC would be exposed remain
disputed material issues of fact.” (Doc. 304 at 6.)
Specifically, the Court found that “[t]he purpose
behind APAC's decision to increase the Reserve amount
before trial, and the meaning behind the figures used to
calculate the Reserve amount, remain in dispute.”
(Id.) There is no longer any factual dispute about
APAC's reserve calculations or why it increased the
reserve amount on the Tate case.
Shutack explained, APAC's 2004 Reserve Evaluation Form
factored into its damages analysis a “chance of
losing.” (Ex. A, Tr. 389:11-25.) Without that
“chance of losing” in the reserve calculation,
APAC's reserve would have been set at $1 million - the
same reserve APAC later set after the Tate case had
been remanded by the appellate court. (Tr. 390:1-8.) Ms.
Shutack further explained that there was a “change in
the methodology, ” and that APAC “took out the
liability portion” on the reserve form - meaning the
“chance of losing” - because the old form made it
“too difficult to get an accurate number” and
APAC “wanted to be more conservative.” (Tr.
391:9-17.) Correspondingly, APAC's updated Reserve
Evaluation Worksheet does not have a place to factor
“chance of losing” into the analysis. (Pltf. Ex.
38.) The change in reserve on the Tate case was a
result of this change in methodology, not in APAC's
assessment of any chance of loss, which was not part of the
reserving methodology in 2010.
addition, Ms. Oblak, APAC's claims representative,
testified in detail to each of the categories of damages that
APAC used in setting its reserve in 2010. (Tr.
126:25-132:11.) Like Ms. Shutack, she explained that the
“million-dollar reserve is just what we put aside in
the event of an adverse verdict.” (Tr. 189:16-19).
Because of the potential damages and the fact that Dr. Hasson
was no longer in the case, the reserve was set at TSC's
policy limit. (Tr. 189:1-22 (Oblak)). Mr. Reed, APAC's
former claims litigation manager, also confirmed that the
reserve form he and Ms. Oblak used in 2010 to reset
APAC's reserve amount (referring to the copy at Dfdt. Ex.
185) “does not take into account chance of loss
… it's simply a damages
assessment.” (Tr. 546:6-16 (emphasis added).) As
Mr. Reed made clear, “Liability is not assessed on
this form.” (Tr. 546:16 (emphasis added).)
APAC increased its reserve on the Tate case after
remand because it had, by then, adopted a more conservative
methodology for setting reserves, and TSC was then the sole
defendant. The reserve increase had nothing to do with
APAC's assessment of the reasonable probability of a
finding of liability against TSC. No. witness has
offered a contrary view of APAC's 2010 reserve setting
and Reserve Evaluation Worksheet.
evidence before this jury, therefore, is that TSC was
objectively more likely than not to win the
Tate case when Ms. Tate demanded settlement. For
example, the jury heard that:
• “There was nothing that would warrant us
settling the case…. The case only got stronger as the