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Southwest Disabilities Services and Support v. Proassurance Specialty Insurance Company, Inc.

Court of Appeals of Illinois, First District, Sixth Division

July 27, 2018

SOUTHWEST DISABILITIES SERVICES AND SUPPORT, REUBEN GOODWIN, and KIMBERLY GOODWIN, Plaintiffs-Appellants,
v.
PROASSURANCE SPECIALTY INSURANCE COMPANY, INC., Defendant-Appellee.

          Appeal from the Circuit Court of Cook County. No. 16 CH 11078 Honorable Diane J. Larsen, Judge Presiding.

          JUSTICE DELORT delivered the judgment of the court, with opinion. Justices Cunningham and Connors concurred in the judgment and opinion.

          OPINION

          DELORT JUSTICE

         ¶ 1 This case presents the issue of whether an insurance company has a duty to defend under a claims-made and reported insurance policy when the insured made the claim outside the reporting period and after the cancellation of the policy. Plaintiffs, Southwest Disabilities Services and Support (Southwest), Reuben Goodwin, and Kimberly Goodwin, sought a declaratory judgment against defendant, ProAssurance Specialty Insurance Company (ProAssurance), for coverage regarding an underlying personal injury lawsuit. ProAssurance moved for judgment on the pleadings and plaintiffs filed a cross-motion for judgment on the pleadings. The circuit court granted ProAssurance's motion and denied plaintiffs' motion. We affirm.

         ¶ 2 BACKGROUND

         ¶ 3 Southwest, formerly an Illinois not-for-profit corporation, operated as a community integrated living arrangement for developmentally disabled adults. Reuben Goodwin served as the executive director of Southwest and Kimberly Goodwin served as an employee.

         ¶ 4 The underlying complaint, filed on February 24, 2014 and captioned Moran v. Southwest Disability Services & Support, NFP, No. 2014 L 01819 (Cir. Ct. Cook County), alleged Randy Lebron suffered injuries while residing at one of Southwest's facilities. The complaint alleged three counts of negligence for failure to supervise Lebron, the underlying plaintiff's son. The complaint alleged that on November 25, 2012 at 5:00 p.m., Lebron was observed to have choked on a piece of food. At 11:00 p.m., Lebron was observed to be drooling and have labored breathing. He was transferred to the hospital the next day, where the medical staff found a large foreign body lodged in his pharynx and diagnosed him with acute respiratory failure. In addition to the negligence claims, the complaint alleged Southwest failed to respond to requests for health care records under section 8-2001 of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/8-2001 (West 2012)).

         ¶ 5 ProAssurance issued a Social Services Entity Liability Policy to Southwest for the policy period beginning September 26, 2012 and ending September 26, 2013, with a retroactive date of September 26, 2012. Subject to the applicable limit of liability, the claims-made policy provided coverage for "damages because of bodily injury or property damage which (i) occurs on or after the retroactive date and before the end of the policy period, (ii) is caused by an occurrence, and (iii) is first reported during the policy period or any extended reporting period which may apply." The policy defined "reported" as:

"[T]he receipt by our Claims Department, from an insured or its representative, of written notice of a claim or suit which has been made or filed, or which an insured reasonably expects to be made or filed, under any Coverage Part providing coverage on a claims-made basis, specifying (1) the date, time, and place of the professional incident, occurrence, or medical payment to which this insurance applies, (2) a description of the professional incident, occurrence, or medical payment to which this insurance applies, (3) the name, address, and age of the patient or claimant, (4) the names of witnesses, including treating physicians, and (5) the circumstances resulting in the professional incident, occurrence, or medical payment to which this insurance applies."

         ¶ 6 The policy stated that when an insured "becomes aware of any claim or suit to which this policy applies, or any incident which is likely to result in such a claim or suit, such insured or his or her representative must report such incident, claim or suit as soon as practicable." No reporting endorsement extending the coverage period was available under the policy, which also stated that "[t]he coverage provided herein shall terminate at the end of the policy period." ProAssurance provided Southwest with a cancellation endorsement effective on May 26, 2013 for non-payment of the premium.

         ¶ 7 Southwest first reported the incident alleged in the Moran complaint when it submitted a claims form to ProAssurance on March 17, 2014, more than nine months after the cancellation of the policy. Southwest attached a copy of the Moran complaint to the claims form. ProAssurance informed Southwest in a letter dated March 20, 2016 that, because the Moran lawsuit "was reported to us after the policy period had expired, there is no coverage for this matter."

         ¶ 8 On August 23, 2016, plaintiffs filed their complaint for declaratory judgment against ProAssurance seeking a declaration that ProAssurance breached its duty to defend the Moran lawsuit and was estopped from asserting any coverage defenses. ProAssurance filed its answer and counterclaim for declaratory judgment seeking a finding that ProAssurance was not obligated to defend or indemnify plaintiffs in the Moran lawsuit.

         ¶ 9 On February 7, 2017, ProAssurance moved for judgment on the pleadings under section 2-615(e) of the Code (735 ILCS 5/2-615(e) (West 2016)). Plaintiffs responded and filed a cross-motion for judgment on the pleadings.

         ¶ 10 On May 24, 2017, after full briefing and a hearing on the parties' cross-motions, the circuit court granted judgment in favor of ProAssurance and against plaintiffs, finding that ProAssurance was not ...


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