Illinois Insurance Guaranty Fund v. Chicago Insurance Company
2015 IL App (5th) 140033
Ill. App. Ct.2015Background
- Women’s Care of Southern Illinois purchased a claims-made professional liability policy from Chicago Insurance effective July 1, 2001–July 1, 2002; Dr. John Hucker had left Women’s Care on December 31, 2000 and was not listed as a named insured or in endorsements.
- A medical-malpractice suit by Debra Schell was filed January 28, 2002 alleging malpractice by Hucker on March 25, 2000 while he was employed by Women’s Care; Schell also pleaded vicarious liability against Women’s Care and the hospital.
- Hucker initially was defended by his own carrier (MIIX), which later became insolvent; the Illinois Insurance Guaranty Fund (the Fund) assumed defense obligations and demanded Chicago Insurance defend Hucker under Women’s Care’s claims-made policy.
- Chicago Insurance refused, contending Hucker was not an insured under the policy; the Fund sued for declaratory relief and recovery of defense costs incurred ($98,694.64).
- The trial court granted summary judgment for the Fund ordering Chicago Insurance to pay Hucker’s defense costs; Chicago Insurance appealed. The appellate court reversed and directed entry of summary judgment for Chicago Insurance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chicago Insurance had a duty to defend Hucker under the claims-made policy | Fund: Policy language covers "any person whose acts the Insured is legally responsible for," so vicarious liability of Women’s Care makes Hucker covered; alternatively, policy ambiguous and construed for coverage | Chicago Ins.: Hucker is not a listed or qualifying insured; policy covers only defined "Insureds," so no duty to defend noninsureds | No duty to defend; Hucker is not an insured under the policy; judgment for Chicago Insurance |
| Whether policy language is ambiguous | Fund: Insuring clause and "persons insured" create ambiguity that should be construed for coverage | Chicago Ins.: Language is plain — coverage limited to those qualifying under "Persons Insured"; no reasonable interpretation extends coverage to noninsureds | Not ambiguous; plain terms limit coverage to defined insureds |
| Whether §546(a) (exhaustion of other insurance) required Fund to exhaust Chicago Insurance first | Fund: Policy constitutes "other insurance" that must be exhausted before Fund pays | Chicago Ins.: Policy is not "coverage provided by another insurance policy" with respect to claim against Hucker, so §546(a) inapplicable | §546(a) inapplicable; Chicago Insurance is not "other insurance" for Hucker’s claim |
| Whether insurer estopped from asserting coverage defenses for failing to defend under reservation of rights | Fund: Chicago Ins. should have defended under reservation or sued for declaratory relief, otherwise estopped | Chicago Ins.: Estoppel applies only if insurer wrongfully denied a duty to defend; here no duty existed | No estoppel; insurer had no duty to defend, so estoppel doctrine does not apply |
Key Cases Cited
- Uhlich Children’s Advantage Network v. National Union Fire Co. of Pittsburgh, 398 Ill. App. 3d 710 (explains distinction between claims-made and occurrence policies and duty-to-defend analysis)
- Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90 (1992) (policy construction principles; ascertain parties’ intent and construe unambiguous terms by plain meaning)
- Abrams v. State Farm Fire & Casualty Co., 306 Ill. App. 3d 545 (summary judgment standard and that duty to defend is broader than duty to indemnify)
- Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11 (2005) (ambiguity exists only if more than one reasonable interpretation)
- Employers Ins. of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127 (estoppel doctrine applies only when insurer wrongfully denies duty to defend)
- Federal Insurance Co. v. Economy Fire & Casualty Co., 189 Ill. App. 3d 732 (two requirements for duty to defend: action against an insured and complaint disclosing potential coverage)
- Transcontinental Insurance Co. v. National Union Fire Insurance Co. of Pittsburgh, 278 Ill. App. 3d 357 (no duty to defend when plaintiff is not an insured)
- American Country Insurance Co. v. James McHugh Construction Co., 344 Ill. App. 3d 960 (policy construction cannot create coverage where none reasonably exists)