Prof'l Solution Ins. Co. v. Giolas
297 F. Supp. 3d 805
E.D. Ill.2017Background
- Plaintiff PSIC seeks a declaration that it has no duty to defend psychiatrist Dr. Dale Giolas in an Illinois suit by former patient Staci Ferguson alleging repeated sexual misconduct during treatment.
- Ferguson's underlying complaint alleges sexual intercourse, oral sex, touching of private areas, coercion while medicating/treating her, statutory violations (Sexual Exploitation and Gender Violence Acts) and common-law battery with $750,000 in actual damages and punitive damages requested.
- PSIC's Physician & Surgeon Professional Liability Policy covers ‘‘Injury’’ caused by a negligent act or omission in the performance of ‘‘Professional Services’’ and contains a sexual-misconduct exclusion with an Illinois amendatory endorsement preserving coverage until a final adjudication establishes the misconduct.
- PSIC moves for summary judgment arguing (1) the complaint does not allege negligence in providing professional services and (2) it alleges only emotional injury, not ‘‘bodily injury’’ as defined by the policy.
- Giolas moves for summary judgment seeking a declaration that PSIC has a duty to defend and also requests independent counsel due to an insurer/insured conflict arising from the sexual-misconduct exclusion and punitive-damages exclusion.
- The court applies Illinois law, construes policy terms and underlying allegations liberally in favor of the insured, and finds (i) the sexual misconduct allegations against a psychiatrist can implicate professional malpractice (transference/countertransference), (ii) the complaint alleges bodily injury (battery), and (iii) Giolas is entitled to independent counsel (PSIC waived opposition to that argument).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the complaint alleges negligent professional services covered by the Policy | Complaint asserts statutory and battery claims, not negligence, so no malpractice coverage | Sexual misconduct by a psychiatrist may arise from mishandling transference and thus can be an error in professional treatment, triggering coverage | Held for Giolas: allegations potentially fall within professional services coverage |
| Whether the complaint alleges "bodily injury" under the Policy | Underlying suit alleges emotional distress only, which is not "bodily injury" | Sexual contact and battery allegations constitute bodily injury (physical contact inherent) | Held for Giolas: complaint alleges battery and bodily injury, so coverage potentially applies |
| Whether the sexual-misconduct exclusion defeats duty to defend | Exclusion bars sexual misconduct; PSIC relies on exclusion to deny defense | Exception in Illinois amendatory endorsement preserves coverage until final adjudication; but insurer must first show no potential coverage | Court did not decide exclusion application; PSIC did not prove exclusion applies and court did not reach exceptions |
| Whether insured is entitled to independent counsel because of insurer conflict | PSIC controls defense under policy | Conflict exists because finding of sexual misconduct could relieve insurer of indemnity and punitive damages are excluded; insurer failed to oppose independent-counsel argument | Held for Giolas: PSIC waived opposition; Giolas entitled to independent counsel |
Key Cases Cited
- Amerisure Mut. Ins. Co. v. Microplastics, Inc., 622 F.3d 806 (7th Cir. 2010) (duty-to-defend analysis: compare underlying facts to policy and construe liberally for insured)
- Corgan v. Muehling, 143 Ill.2d 296 (Ill. 1991) (transference phenomenon: therapist sexual relations can constitute malpractice)
- Illinois State Medical Ins. Servs. v. Cichon, 258 Ill.App.3d 803 (Ill. App. Ct. 1994) (sexual assault in medical exams can be bodily injury under malpractice policy)
- Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing Ctr., 566 F.3d 689 (7th Cir. 2009) (use underlying factual allegations, not labels, to assess duty to defend; emotional distress alone may not be bodily injury)
- Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611 F.3d 339 (7th Cir. 2010) (insurer bears burden to prove exclusions apply; insured bears burden to show exceptions restore coverage)