United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Honorable Edmond E. Chang United States District Judge.
plaintiff in this insurance-coverage dispute, Arch Insurance
Company, seeks a declaration that it has no duty to defend
the PCH Defendants from a lawsuit brought by the Aetna
Defendants.. R. 1, Compl. PCH also filed counterclaims
for breach of contract and damages under 215 ILCS 5/155. R.
33, Am. Counterclaim. The parties have now cross-moved for
judgment on the pleadings. R. 34, Pl.'s Mot. J.
Pleadings; R. 56, Def.'s Resp. and Cross-Mot. Arch has
also moved to dismiss PCH's Counterclaim 2. R. 35, Mot.
Dismiss. For the reasons explained below, Arch's motions
for judgment on the pleadings and to dismiss are granted, and
PCH's motion for judgment on the pleadings is denied.
deciding each party's motion for judgment on the
pleadings, the Court takes all well-pled allegations as true
and draws all reasonable inferences in the non-movant's
favor. Hayes v. City of Chi., 670 F.3d 810, 813 (7th
Cir. 2012). So when the Court evaluates PCH's motion,
Arch gets the benefit of reasonable inferences; conversely,
when evaluating Arch's motion, the Court gives PCH the
benefit of the doubt.
The Underlying Complaint
September 2017, Aetna filed a complaint against the PCH
Defendants in the United States District Court for the
Eastern District of Pennsylvania. See R. 1-2, Compl.
Exh. 2, Underlying Compl. The complaint included claims under
the Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U.S.C. § 1962, et seq., as well as
common law fraud, negligent misrepresentation, unjust
enrichment, civil conspiracy, tortious interference, and
equitable accounting. See generally, id.
underlying complaint, Aetna alleged that the PCH Defendants
created “an extensive health care billing fraud scheme
through which they bilked Aetna, employers that sponsor
health plans, and Aetna members out of more than $21
million.” Underlying Compl. ¶ 1. Aetna's
theory is that the PCH Defendants caused Aetna to overpay for
laboratory tests and services at hospitals that PCH managed.
Id. ¶ 2. PCH allegedly did this by taking
advantage of the hospitals' agreements with Aetna, under
which Aetna had agreed to pay higher-than-usual prices for
laboratory services conducted at the hospital.
Id. But instead of having the hospitals conduct the
tests (as required for the higher prices Aetna had agreed
to), PCH had the tests performed at out-of-network
laboratories that would usually have commanded a lower rate
from Aetna. Id. PCH then billed Aetna at the higher
rate without disclosing the fact that the tests had been
Aetna is not the only entity that has sued PCH for damages
incurred as a result of the alleged scheme. One of the
hospitals that PCH managed, and which was implicated in the
scheme Aetna alleges, was Newman Memorial Hospital.
Underlying Compl. ¶ 2. Before Aetna filed its lawsuit,
Newman Memorial Hospital had also sued the very same set of
defendants, “relating to the same alleged fraudulent
billing scheme.” Compl. ¶¶ 3, 37-47
(“Newman claimed, among other things, that the
defendants submitted claims to private payors, including
Aetna, under Newman's national provider identifier number
for laboratory tests in violation of Newman's provider
agreements with payors.”); see generally also
R. 1-3, Compl. Exh. 3, Second Am. Pet. in Newman Lawsuit. The
Newman lawsuit was first filed on June 30, 2017. Compl.
¶ 37. The Second Amended petition in that case was
served on PCH on August 7, 2017. Id. ¶ 38.
Aetna specifically mentioned the Newman lawsuit in the
underlying complaint in its own case against PCH. Underlying
Compl. ¶¶ 141-143 (explaining that “Newman
recently filed suit against many of the Defendants” and
describing many of the allegations in the Newman lawsuit).
The Insurance Policy
purchased the Arch policy at issue here for the policy period
of September 11, 2017 to September 11, 2018. Compl. ¶
21; R. 1-1, Compl. Exh. 1, Policy at 1. The Policy does not
cover “claims arising from, based upon, or attributable
to the same wrongful act” as claims that were first
made before the policy period began. See Policy at
Also, the policy contains an explicit exclusion of any claim
“arising from, based upon, or attributable to any
… Wrongful Act specified in [a] prior demand, suit or
proceeding or any Interrelated Wrongful Acts thereof.”
Policy at 30, 41.
other exclusions, the Policy also bars coverage for claims
resulting from “healthcare services.” Endorsement
16 to the Policy states: “The Insurer shall not pay
Loss for any Claim against an Insured arising from, based
upon, or attributable to any Healthcare Services.”
Policy at 86. “Healthcare services, ” is defined
as “all healthcare and related services, including,
without limitation, any … (b) laboratory, imagining
and diagnostic services; (c) billing for services rendered or
products provided; or (d) advice given in connection with any
of the above.” Id.
Motion for Judgment on the Pleadings
may move for judgment on the pleadings after the pleadings
are closed. Fed.R.Civ.P. 12(c). A motion for judgment on the
pleadings is subject to the same standard as a motion to
dismiss under Rule 12(b)(6). Hayes, 670 F.3d at 813.
In deciding a motion for judgment on the pleadings, the Court
must accept all well-pled allegations as true and view the
alleged facts in the light most favorable to the non-moving
party. Id. Judgment on the pleadings is proper
“if it appears beyond doubt that the [non-moving party]
cannot prove any set of facts” sufficient to support
his claim for relief. Id. (cleaned
The Court considers the pleadings alone, which consist of the
complaint, the answer, and any documents attached as
exhibits. N. Ind. Gun & Outdoor Shows, Inc. v. City
of South Bend, 163 F.3d 449, 452 (7th Cir. 1998).
evaluating an insurance-coverage dispute, the Court must
“look to the allegations of the underlying
complaint” to determine whether it “allege[s]
facts within or potentially within policy
coverage.” U.S. Fid. & Guar. Co. v. Wilkin
Insulation Co., 578 N.E.2d 926, 930 (Ill. 1991)
(emphasis in original). The insurer is liable to pay whenever
the allegations in the complaint match the policy's
coverage: “An insurer may not justifiably refuse to
defend an action against its insured unless it is
clear from the face of the underlying complaint
that the allegations fail to state facts which bring the case
within, or potentially within, the policy's
coverage.” Id. Both the insurance policy and
the underlying complaint “must be liberally construed
in favor of the insured, ” and “all doubts and
ambiguities must be resolved in favor of the insured.”