St. John's Hospital Sisters of the Third Order of St. Francis v. National Guardian Risk Retention Group, Inc. et al
Filing
94
OPINION Entered by Judge Richard Mills on 05/17/2018. SEE WRITTEN OPINION. the motion to dismiss pursuant to Rule 12(b)(6) of Defendants Emergency Consultants, Inc., Central Illinois Emergency Physicians, P.C., James A. Johnson, M.D., Robert M. Wi lliams, M.D., and Derik K. King, M.D., will be allowed. The motion to dismiss pursuant to Rule 12(b)(6) of Defendant National Guardian Risk Retention Group, Inc., will be allowed in part and denied in part. Ergo, the motion to dismiss Counts I, II , III and V of Defendants Emergency Consultants, Inc., Central Illinois Emergency Consultants, P.C., James A. Johnson, M.D., Robert M. Williams, M.D., and Derik K. King, M.D. (d/e 87 ) is ALLOWED. Those parties shall be, and hereby are, terminat ed as Defendants. The motion to dismiss of Defendant National Guardian Risk Retention Group, Inc. (d/e 89 ) is ALLOWED in part and DENIED in part. The motion is DENIED as to the breach of contract claims in Count IV. It is ALLOWED as to the fraud claims asserted in Count I and the conspiracy claims of Count II. This matter is referred to United States Magistrate Judge Tom Schanzle-Haskins for the purpose of scheduling a discovery conference. (DM, ilcd)
E-FILED
Thursday, 17 May, 2018 04:54:10 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
ST. JOHN’S HOSPITAL OF THE
HOSPITAL SISTERS OF THE THIRD
ORDER OF ST. FRANCIS, PATRICIA
FUGATE, and ROBERT FUGATE,
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Plaintiffs,
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v.
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NATIONAL GUARDIAN RISK
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RETENTION GROUP, INC.,
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EMERGENCY CONSULTANTS, INC., )
CENTRAL ILLINOIS EMERGENCY )
PHYSICIANS, P.C., a/k/a CENTRAL
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ILLINOIS EMERGENCY
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PHYSICIANS, LLP, JAMES M.
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JOHNSON, M.D., ROBERT M.
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WILLIAMS, M.D., and DERIK K.
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KING, M.D.,
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Defendants.
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NO. 15-3292
OPINION
RICHARD MILLS, U.S. District Judge:
This is a diversity of citizenship case.
Plaintiffs assert five state law counts against the Defendants.
Pending are two motions to dismiss filed by the Defendants pursuant to
1
Federal Rule of Civil Procedure 12(b)(6).
At the end of the day, one of the motions is granted in its entirety.
I.
FACTS
In their Third Amended Complaint, the Plaintiffs state that on March
22, 2011, Plaintiffs Patricia and Robert Fugate filed a medical malpractice
complaint in Madison County, IL, 11-L-270, alleging negligence against
several Defendants, including St. John’s Hospital, Emergency Consultants,
Inc., and three doctors affiliated with Emergency Consultants: Elizabeth
McDaniel, D.O.; Aamir Banday, M.D.; and John Byrnes, M.D.
At all times relevant to the underlying medical malpractice case,
namely on May 3, 4 and 11 of 2009, there was in effect an Agreement for
Emergency Department Management Services between St. John’s Hospital
and Central Illinois Emergency Physicians which provided, inter alia, as
follows:
Liability Insurance. Partnership, at no cost to Hospital, shall
ensure that personnel provided by it shall maintain professional
liability insurance coverage (primary and excess) in an amount
not less than $2,000,000 per occurrence and $4,000,000 annual
aggregate (only $1,000,000 per occurrence and $3,000,000
annual aggregate will be provided until 11/1/01, at which time
the full coverage will commence), subject to the terms and
conditions of the individual policies.
2
This paragraph (paragraph 9) was subsequently amended to require
professional liability insurance coverage (primary and excess) in an amount
not less than $1,000,000 per occurrence and $3,000,000 annual aggregate.
The Plaintiffs allege that for purposes of this action, “personnel provided”
include Drs. McDaniel, Banday and Byrnes.
All medical staff at St. John’s Hospital were required to have
professional liability insurance in the amount of $1,000,000 per occurrence
and $3,000,000 annual aggregate.
On November 1, 2004, Defendant Central Illinois Emergency
Physicians and St. John’s Hospital executed an Amendment to Agreement for
Emergency Department Services, paragraph 9 of which provided that St.
John’s Hospital agreed to pay any incremental increases in the professional
liability insurance during the term of the Agreement and that Central Illinois
Emergency Physicians would invoice St. John’s Hospital for any incremental
increases.
Drs. McDaniel, Banday and Byrnes each submitted Certificates of
Insurance to St. John’s Hospital, reflecting that they were additional insureds
covered by a policy issued by National Guardian to Central Illinois
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Emergency Physicians which provides coverage in the amount of $1,000,000
per occurrence and $3,000,000 annual aggregate. The policy (PL1021)
defines an “Additional Named Insured” as “a physician or physician
extender, employee, physician partner or independent contractor physician or
physician extender specifically listed as Additional Named Insured in the
schedule of Additional Named Insureds.” Drs. McDaniel, Banday and
Byrnes were Additional Named Insureds.
The Plaintiffs allege the per occurrence limit of liability listed in the
Policy declarations applied separately to each Additional Named Insured, so
each Additional Named Insured had a separate per occurrence limit of
liability of $1,000,000 for each occurrence, up to the annual aggregate of
$3,000,000.
Central Illinois Emergency Physicians entered into separate “Physician
Partnership Agreements” with Drs. McDaniel, Banday and Byrnes. Each
Agreement between Central Illinois Emergency Physicians and each
individual doctor stated, at paragraph 11, that Central Illinois Emergency
Physicians agreed to provide each doctor with professional liability insurance
through National Guardian Risk Retention Group which would provide
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coverage with limits of $1,000,000 per occurrence and $3,000,000 annual
aggregate. The Physician Partnership Agreements, paragraphs 11 in
particular, do not reference “shared limits.”
The Plaintiffs allege that Defendants National Guardian, Emergency
Consultants and Central Illinois Emergency Physicians have taken the
position that the applicable coverage to the underlying Fugate litigation is the
shared amount of $1,000,000 rather than $1,000,000 per individual
Defendant physician. Therefore National Guardian, Emergency Consultants,
Central Illinois Emergency Physicians and Defendants Dr. Johnson, Dr.
Williams and Dr. King each agreed to deny the hospital its full insurance
coverage and, in furtherance of that position, each affirmatively took the
position that only $1 million in coverage applied to the Fugate case.
The Plaintiffs claim that the Defendants’ position is contrary to the
plain language of both the Insurance Policy and Services Agreement, both of
which were signed by Defendant Dr. Johnson. Drs. McDaniel, Banday and
Byrnes, through their counsel, have joined in St. John’s position that each
doctor is entitled to $1,000,000 in individual coverage and that the three do
not share $1,000,000 in coverage.
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St. John’s Hospital litigated the underlying Fugate case and negotiated
a settlement without the benefit of the full $3,000,000 coverage. Drs.
McDaniel, Banday and Byrnes litigated the underlying Fugate case and
negotiated a settlement without the benefit of the full $1,000,000 per doctor
coverage. St. John’s Hospital settled the underlying Fugate case.
Defendants Emergency Consultants, Inc., Central Illinois Emergency
Physicians, P.C. a/k/a Central Illinois Emergency Physicians, LLP, James A.
Johnson, M.D., Robert M. Williams, M.D. and Derik K. King, M.D. have
moved to dismiss the Plaintiffs’ Third Amended Complaint.
Defendant National Guardian Risk Retention Group, Inc. has moved to
dismiss Counts I, II and IV.
II.
DISCUSSION
A. Legal standard
At this stage, the Court accepts as true all of the facts alleged in
the complaint and draws all reasonable inferences therefrom. See Virnich v.
Vorwald, 664 F.3d 206, 212 (7th Cir. 2011). “[A] complaint must provide a
short and plain statement of the claim showing that the pleader is entitled to
relief, which is sufficient to provide the defendant with fair notice of the
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claim and its basis.” Maddox v. Love, 655 F.3d 709, 718 (7th Cir. 2011)
(internal quotation marks omitted). Courts must consider whether the
complaint states a “plausible” claim for relief. See id. The complaint must
do more than assert a right to relief that is “speculative.” See id. However,
the claim need not be probable: “a well-pleaded complaint may proceed even
if it strikes a savvy judge that actual proof of those facts is improbable, and
that a recovery is very remote and unlikely.” See Independent Trust Corp. v.
Stewart Information Services Corp., 665 F.3d 930, 935 (7th Cir. 2012)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). “To
meet this plausibility standard, the complaint must supply ‘enough fact to
raise a reasonable expectation that discovery will reveal evidence’ supporting
the plaintiff’s allegations.” Id.
B. Fraud Claims
Count I is a fraud claim asserted by all Plaintiffs against all Defendants.
Rule 9(b) of the Federal Rules of Civil Procedure requires allegations of
fraud to be pled with particularity. See Cincinnati Life Ins. Co. v. Beyrer, 722
F.3d 939, 950 (7th Cir. 2013). This means describing the “who, what, when,
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where, and how of the fraud.” Id. (internal quotation marks and citation
omitted).
“Illinois does not provide a remedy for fraudulent promises unless the
promises are part of a scheme to defraud.” Weeks v. Samsung Heavy
Industries Co., 126 F.3d 926, 942 (7th Cir. 1997). “[P]romissory fraud is
actionable only if it either is particularly egregious or, what may amount to
the same thing, it is embedded in a larger pattern of deceptions or
enticements that reasonably induces reliance and against which the law ought
to provide a remedy.” Desnick v. American Broadcasting Cos., 44 F.3d
1345, 1354 (7th Cir. 1997).
For a number of reasons, the Court finds that Plaintiffs have failed to
state a claim for fraud. Some of the Defendants are not alleged to have made
any specific misrepresentations of fact. Additionally, the Plaintiffs have
failed to allege a scheme to defraud as to any Defendant.
In their Third Amended Complaint, the Plaintiffs allege that
Defendants represented that Plaintiffs would have $1,000,000 coverage per
doctor per medical malpractice occurrence with a $3,000,000 aggregate in
medical malpractice insurance for Drs. McDaniel, Banday and Byrnes.
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Defendant Dr. Johnson, as Managing Partner for Defendant Central Illinois
Emergency Physicians, and Richard Carlson, Executive Vice-President and
CEO of St. John’s Hospital, signed contracts regarding the coverage amounts.
In September 2002, Dr. Johnson signed a Physician Partnership Agreement
with each of Drs. McDaniel, Banday and Byrnes, which provided that each
individual doctor would receive through National Guardian Risk Group, Inc.,
professional liability insurance coverage with a $1,000,000 per occurrence
limit and $3,000,000 annual aggregate. Subsequently, Dr. Johnson signed an
Amendment to Agreement for Emergency Department Management Services
contract with St. John’s Hospital, wherein the hospital agreed to pay Central
Illinois Emergency Physicians for any incremental increases in professional
liability insurance for provided personnel and Central Illinois Emergency
Physicians agreed to ensure that personnel provided by it to St. John’s
Hospital shall maintain professional liability insurance coverage in an amount
not less than $1,000,000 per occurrence with $3,000,000 annual aggregate.
The Plaintiffs further assert that on January 1, 2009 Dr. Johnson, in his
capacity as Chief Executive Officer for Defendant National Guardian Risk
Retention Group, signed an endorsement to the policy certifying that Central
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Illinois Emergency Physicians was insured under the policy. Dr. Johnson
also signed an endorsement certifying that Drs. McDaniel, Banday and
Byrnes were additional named-insured doctors and were insured under a
policy which provided $1,000,000 in coverage per doctor per occurrence,
with an annual liability coverage limit of $3,000,000.
The Plaintiffs further assert that under section 3A of the Policy, the per
occurrence limit of liability listed in the Policy declaration applied separately
to each Additional Named Insured, so each Additional Named Insured had a
separate per occurrence limit of liability of $1,000,000 for each occurrence,
up to the annual aggregate of $3,000,000.
The Plaintiffs claim the Defendants knowingly made false
representations of material fact in a scheme to induce the Plaintiffs to pay for
services from physicians of Central Illinois Emergency Physicians, as
covered by National Guardian Risk Retention Group. These false
representations were also made to induce Drs. McDaniel, Banday and Byrnes
to practice at St. John’s Hospital under the impression they were satisfying
their obligations to St. John’s to practice with individual coverage of at least
$1,000,000.
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The Plaintiffs allege they justifiably relied on Defendants’ false
representations that each Central Illinois Emergency Physicians doctor had
individual malpractice coverage of $1,000,000, as Drs. McDaniel, Banday
and Byrnes performed services as Central Illinois Emergency Physicians
personnel for St. John’s Hospital, each believing he or she was individually
covered by a medical malpractice limit of $1,000,000. The Plaintiffs say they
justifiably relied on these representations regarding malpractice coverage. St.
John’s credentialed, accorded staff privileges to and permitted Central Illinois
Emergency Physicians personnel—covered by the National Guardian
Policy—to practice medicine at St. John’s.
As a result of their justifiable reliance, the Plaintiffs allege they have
been damaged by having to litigate the underlying Fugate case and negotiate
settlement without the benefit of the promised $1,000,000 per
doctor/$3,000,000 aggregate coverage.
Upon reviewing the allegations of the Third Amended Complaint, the
Court concludes that Plaintiffs have failed to state a claim for fraud.
The Plaintiffs have not alleged how or when Emergency Consultants,
Dr. Williams or Dr. King made misrepresentations of fact that were
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justifiably relied on by the hospital or the assignor doctors. Count I does not
reference what statements of fact these Defendants made to constitute
misrepresentations. Each Defendant is alleged to have agreed to deny the
hospital its full insurance coverage and “knowingly participated in the
scheme to commit fraud.” Because the Plaintiffs have failed to reference any
statements made by Emergency Consultants, Dr. Williams or Dr. King, the
fraud claims as to those Defendants will be dismissed.
Similarly, the Third Amended Complaint does not contain any
allegations that Central Illinois Emergency Physicians, Dr. Johnson or
National Guardian made any misrepresentations of fact that were justifiably
relied on by the Hospital. Paragraphs 36 through 42 address contracts or
other legal documents regarding the terms of the insurance policy. The
Plaintiffs allege these documents were signed by Dr. Johnson, in his capacity
as Managing Partner for Central Illinois Emergency Physicians or as Chief
Executive Officer of National Guardian Risk Retention Group. In paragraphs
36 through 41, the Plaintiffs summarize the hospital’s understanding of the
contract provisions. Paragraph 42 provides that Defendants made knowingly
false representations of material fact in a scheme to induce Plaintiff to pay for
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services from physicians of Central Illinois Emergency Physicians, as
covered by National Guardian Risk Retention Group, in order to induce Drs.
McDaniel, Banday and Byrnes to practice at St. John’s Hospital under the
impression they were satisfying their obligations to St. John’s to practice with
individual coverage of at least $1,000,000.
Paragraphs 36 through 42 reflect nothing more than that the parties
apparently have very different views of the amount of individual malpractice
coverage for the doctors performing services at St. John’s Hospital. In sum,
the Plaintiffs have not alleged any misrepresentations of fact. Accordingly,
these statements cannot serve as the basis for a fraud claim.
In discussing the Hospital’s interpretation of contracts and other legal
documents, the Plaintiffs have also failed to allege that Defendants engaged
in a scheme to defraud. There are no facts suggesting the Defendants had the
requisite intent to defraud the Hospital.
Additionally, there are no allegations that Defendants were damaged
due to justifiable reliance on any misrepresentations by Dr. Johnson or any
other Defendant. There is no allegation of a judgment or settlement in excess
of coverage.
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The Plaintiffs have failed to plead fraud or promissory fraud with
particularity. Because the Plaintiffs are unable to meet this heightened
pleading standard, the Court will allow the motions to dismiss as to Count I.
C. Conspiracy claims
Count II consists of civil conspiracy claims asserted by all Plaintiffs
against all Defendants. “In order to state a claim for civil conspiracy, a
plaintiff must plead a combination of two or more persons for the purpose of
accomplishing by concerted action either an unlawful purpose or a lawful
purpose by unlawful means.” Buckner v. Atlantic Plant Maintenance, Inc.,
182 Ill.2d 12, 23 (1998). To assert a viable claim, “a plaintiff must plead the
facts essential to his cause of action.” Id. at 24. One of the parties to the
agreement must commit some act in furtherance of the agreement, which is
itself a tort. See Adcock v. Brakegate, 164 Ill.2d 54, 63 (1994).
The Plaintiffs claim that the Defendants conspired and entered into an
agreement to accomplish an unlawful purpose—to breach both the insurance
and bylaw coverage agreements and to defraud Plaintiffs. The Defendants
did this by agreeing to represent that each Central Illinois Emergency
Physicians doctor would have individual malpractice coverage of $1,000,000
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with annual aggregate coverage of $3,000,000, in a scheme to induce the
Plaintiffs to serve and to pay for services from physicians of Central Illinois
Emergency Physicians, as covered by National Guardian Risk Retention
Group.
The Plaintiffs cite the endorsement Dr. Johnson signed on January 1,
2009. This certified that Drs. McDaniel, Banday and Byrnes were additional
named-insured doctors and were insured under a policy which provided
$1,000,000 in coverage per doctor per occurrence, with an annual liability
coverage limit of $3,000,000. Each Defendant knowingly participated in the
scheme. The Plaintiffs further contend that National Guardian, Emergency
Consultants, Central Illinois Physicians, Dr. Johnson, Dr. Williams and Dr.
King each affirmatively denied that Plaintiffs had $1,000,000 in coverage per
doctor per occurrence with an annual liability coverage limit of $3,000,000 in
the underlying Fugate case, despite the language of the agreements and
policies and despite the Defendants’ previous representations.
Accordingly, the Plaintiffs litigated the underlying Fugate case and
negotiated a settlement without the benefit of the promised coverage.
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The Court concludes that Plaintiffs are unable to assert a claim for civil
conspiracy. To the extent the Plaintiffs are asserting that Defendants engaged
in a civil conspiracy to defraud the Plaintiffs, the Court has already
determined that Plaintiffs’ fraud claims are without merit. “[T]he conspiracy
claim fails if the independent cause of action underlying the conspiracy
allegation fails.” See Coghlan v. Beck, 984 N.E.2d 132, 151 (1st Dist. 2013).
Because the fraud claims have failed, the civil conspiracy claims asserting
fraud also fail.
To the extent that Plaintiffs base their civil conspiracy claim on an
alleged breach of contract, a breach of contract is not a tort. A cause of
action for civil conspiracy only exists if a party to the agreement commits a
tort in furtherance of the agreement. See Adcock, 164 Ill.2d at 62-63.
Because the Plaintiffs have not pled facts demonstrating how each Defendant
committed tortious acts in agreement with each other for an unlawful
purpose, their civil conspiracy claims which relate to breach of contract must
be dismissed.
Accordingly, the Court will allow the motions to dismiss as to Count II.
D. Breach of contract claims
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(1)
The first breach of contract claim is asserted as Count III by Plaintiff
St. John’s against Defendant Central Illinois Emergency Physicians and
relates to the agreement for Emergency Department Management Services.
St. John’s alleges the agreement was a valid contract. Although St. John’s
performed its obligations under the agreement, Central Illinois Emergency
Physicians did not—in the underlying Fugate case, when three provided
doctors were named, the policy only provided $1,000,000 total coverage and
not the $1,000,000 per doctor as Central Illinois Emergency Physicians was
contracted to secure. St. John’s claims this constituted a breach of the
agreement.
St. John’s alleges it was damaged by having to litigate the underlying
Fugate case and negotiate a settlement without the benefit of the promised
$1,000,000 per doctor/$3,000,000 aggregate coverage.
Central Illinois Emergency Physicians asserts that Plaintiffs’ breach of
contract claim, which was first asserted in the Second Amended Complaint
filed on March 4, 2016, must be dismissed as to it because the claim “arises
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out of patient care” and is barred by the statute of repose contained in 735
ILCS 5/13-212, which provides in pertinent part:
[N]o action for damages for injury or death against any
physician, dentist, registered nurse or hospital duly licensed
under the laws of this State, whether based upon tort, or breach
of contract, or otherwise, arising out of patient care shall be
brought more than 2 years after the date on which the claimant
knew, or through the use of reasonable diligence should
have known, or received notice in writing of the existence of
the injury or death for which damages are sought in the action,
whichever of such date occurs first, but in no event shall such
action be brought more than 4 years after the date on which
occurred the action or omission or occurrence alleged in such
action to have been the cause of such injury or death.
735 ILCS 5/13-212(a). Central Illinois Emergency Physicians notes that the
Fugates filed their lawsuit in Madison County, Illinois on March 22, 2011
alleging negligent patient care by Doctors Banday, McDaniel and Byrne;
Central Illinois Emergency Physicians and St. John’s. This alleged negligent
patient care occurred between May 3 and 11, 2009. Accordingly, Central
Illinois Emergency Physicians contends the four-year statute of repose
contained in section 13-212 bars St. John’s, given that the breach of contract
action was filed more than four years (and almost seven years) after the
patient care at issue.
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The phrase “arising out of patient care” has been broadly interpreted.
See Brucker v. Mercola, 227 Ill.2d 502, 521-22 (2007). The language
“clearly covers any injuries that have their origin in, or are incidental to, a
patient’s medical care and treatment.” Id. at 523-24. The language is
sufficiently broad to include a third-party action for contribution. See
Uldrych v. VHS of Illinois, Inc., 239 Ill.2d 532, 536 (2011). The legislature
intended that “all actions for damages ‘arising out of patient care’ to be
subject to the limitations of section 13-212.” Id.at 544 (emphasis in original).
Central Illinois Emergency Physicians asserts that because this is a breach of
contract action which “arises out of patient care” and was not timely filed,
Count III should be dismissed with prejudice pursuant to section 13-212.
St. John’s alleges the claim is timely because the applicable statute of
limitation/repose is the ten year limitation on written contracts of 735 ILCS
5/13-206. It asserts section 13-212 does not apply because Central Illinois
Emergency Physicians is a physician service provider, not a licensed medical
corporation or physician employer. Section 13-212 “affords protection only
to the specific health care providers listed therein and, in certain
circumstances, to employees of such providers when acting within the scope
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of their employment.” See Solich v. George Anna Portes Cancer Prevention
Center of Chicago, 158 Ill.2d 76, 82 (1994).
The court in Solich determined that a not-for-profit corporation that
provided screening examinations could not avail itself of the section 13-212
limitations period, given that the statute is “applicable to actions against four
specific categories of health care providers, namely, those physicians,
dentists, registered nurses and hospitals ‘duly licensed under the laws of this
State.’” Id. at 82. St. John’s contends that Central Illinois Emergency
Physicians is not protected by section 13-212 because it is not among the
specific health care providers enumerated in the statute.
Central Illinois Emergency Physicians notes that St. John’s has
previously alleged that Central Illinois Emergency Physicians is a physician
employer. In a Memorandum Pursuant to Court Order of April 6, 2017 [d/e
82], the Plaintiffs described the relationship between “CIEP and the
individual emergency room physicians” as a “typical employer-employee
relationship” and, further, “the Agreement is tantamount to an employment
agreement rather than a Partnership.” In that Memorandum, St. John’s
claimed that various exhibits “further demonstrate that the nature of the
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relationship is that of employment rather than partnerships.” Additionally,
“Dr. Schwartz is not a partner, but rather an employee, of CIEP” and “Dr.
Byrnes’ testimony demonstrates that . . . they have an employee, rather than
partnership, status with CIEP.” Finally, St. John’s Memorandum states that
“the emergency room physicians are not true partners but rather simply
employees cloaked with the appearance of being a partner.”
Based on the Plaintiffs’ previous representations, the Court concludes
that Central Illinois Emergency Physicians is a physician employer. In
Uldrych, by affirming the appellate court’s dismissal, the Illinois Supreme
Court implicitly recognized that a physician employer, Suburban Surgical
Associates, Ltd., is covered by the medical malpractice statute of repose. See
id. at 540-43. This Court similarly concludes that Central Illinois Emergency
Physicians is covered by section 13-212.
St. John’s further asserts that the action does not “arise out of patient
care” so as to invoke section 13-212. The Plaintiffs are not seeking damages
from a party who is alleged to have been negligent and whose negligence was
alleged to have resulted in injury or death by reason of medical malpractice.
The statute of repose is meant “to prevent extended exposure of physicians
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and other hospital personnel to potential liability for their care and treatment
of patients.” Uldrych, 239 Ill.2d at 542. There is no danger here that an
allegedly negligent doctor or hospital will be subject to an extended period of
liability for acts of medical malpractice. The dispute relating to the doctors’
and hospital’s malpractice liability has settled. In this breach of contract
action, the hospital is the Plaintiff and the doctors have assigned their
interests to the Plaintiffs.
St. John’s alleges that even if this contractual dispute would not have
resulted but for the medical care given to Patricia Fugate, the dispute does not
“arise out of patient care” as required for application of Illinois’s section 13212 statute of limitations.
The Court disagrees and concludes that Count III is governed by the
statute of limitations of section 13-212(a). The statute explicitly provides
that it covers breach of contract, the claim asserted by the Hospital against
Central Illinois Emergency Physicians. The origin of this case is a patient’s
medical care and treatment—specifically the medical care provided to
Patricia Fugate by Drs. McDaniel, Banday and Byrnes on May 3, 4 and 11,
2009. Because the dispute concerns the amount of insurance coverage for
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Ms. Fugate’s medical care, the Court concludes that it unquestionably “arises
out of patient care” as set forth in section 13-212. Because Count III was not
filed within four years of May 11, 2009, it was not timely filed and must be
dismissed.
(2)
The second breach of contract claim is asserted as Count IV by the
Plaintiffs against Defendant National Guardian Risk Retention Group.
Because the Defendant is an insurance company and not a physician, nurse,
dentist or hospital, the limitations period of 735 ILCS 5/13-212 does not
apply.
The Plaintiffs allege that Drs. McDaniel, Banday and Byrnes have
assigned their interests in these causes of action to Plaintiffs St. John’s
Hospital, Patricia Fugate and Robert Fugate. Drs. McDaniel, Bandy and
Byrnes were at all times relevant Additional Named Insureds on the National
Guardian Risk Retention Group Policy, Policy Number PL 1021.
Although neither Plaintiff is a party to the insurance policy, the Court
assumes that the assignment of interests of Drs. McDaniel, Banday and
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Byrnes to St. John’s, Patricia Fugate and Robert Fugate provides the
Plaintiffs with standing to allege a breach of contract action against National
Guardian.
The Plaintiffs allege the policy was a valid contract. The Plaintiffs and
the assignors performed their obligations under the policy. By refusing to
cover each Additional Named Insured at $1,000,000 each and refusing to
provide $3,000,000 in aggregate coverage in violation of Section 3A of the
policy, the Plaintiffs claim that National Guardian Risk Retention Group
breached the policy.
The parties dispute whether the National Guardian policy is a per
occurrence policy or per doctor per occurrence. At this stage of the case, the
Court concludes that the language of the policy is susceptible to more than
one meaning. Accordingly, the Plaintiffs have asserted a plausible claim.
In an exhibit [d/e 70] to their Third Amended Complaint, St. John’s
alleges that it did incur damages in executing a settlement in the Fugate
litigation. St. John’s further asserts that by denying insurance coverage,
National Guardian breached the insurance policy. Accordingly, the Court
concludes that Plaintiff’s breach of contract claim is ripe.
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Based on the foregoing, National Guardian’s motion to dismiss the
Plaintiff’s breach of contract claim is denied.
E. Breach of fiduciary duty claims
In Count V, the Plaintiffs assert breach of fiduciary claims against
Defendant Central Illinois Emergency Physicians. The Plaintiffs claim they
were damaged by having to litigate the Fugate case.
In the Third Amended Complaint, the Plaintiffs alleged in paragraphs
72 through 75 that Central Illinois Emergency Physicians entered into
partnership agreements with each of Drs. McDaniel, Banday and Byrnes, to
supply professional medical services to medical facilities, benefitting both
Central Illinois Emergency Physicians and its individual physician partners.
The Plaintiffs allege Central Illinois Emergency Physicians were to manage
and control business and affairs, while the individual physician partners
practiced medicine for medical facility customers. Central Illinois
Emergency Physicians and its physician partners would share interest in the
profits and losses of the partnership. In an Opinion and Order entered on
September 19, 2017, the Court struck paragraphs 72-75, to the extent they
suggested that the allegations suggest a partnership relationship existed
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between Central Illinois Emergency Physicians and Drs. McDaniel, Banday
and Byrnes.
In paragraph 75 which has been stricken, the Plaintiffs asserted that,
because of their partnership, Central Illinois Emergency Physicians owed a
fiduciary duty to Drs. McDaniel, Banday and Byrnes, and owed a specific
fiduciary duty to Drs. McDaniel, Banday and Byrnes to provide professional
liability insurance in the coverage amount represented.
Defendants Emergency Consultants, Central Illinois Emergency
Physicians, Dr. Johnson, Dr. Williams and Dr. King contend that, based on
the law of the case doctrine, the Plaintiffs can no longer allege a fiduciary
relationship existed between Central Illinois Emergency Physicians and Drs.
Banday, McDaniel and Byrnes because of their “partnership.” Accordingly,
those Defendants claim the Court should dismiss Count V pursuant to Rule
12(b)(6).
The Plaintiffs allege there is an alternative basis for a breach of
fiduciary duty claim. The Third Amended Complaint contains an allegation
that Central Illinois Emergency Physicians agreed to obtain professional
liability insurance for Drs. McDaniel, Banday and Byrnes, thereby asserting
26
the existence of a principal-agency relationship between the doctors and
CIEP, where CIEP acted as the doctors’ agent for the purpose of procuring
liability insurance. Under Illinois law, an agent and principal have a
fiduciary relationship as a matter of law. See Khan v. BDO Seidman, 408 Ill.
App.3d 564, 592 (4th Dist. 2011).
The Plaintiffs further assert that, in addition to the clearly pleaded
agent-principal relationship which created a fiduciary duty, the Plaintiffs
have pleaded that Central Illinois Emergency Physicians agreed to procure
professional liability insurance for the doctors, thereby acting as their
insurance broker. An insurance broker has been defined as:
One who procures insurance and acts as a middleman between
the insured and the insurer, and solicits insurance business from
the public under no employment from any special company, but,
having secured an order, places the insurance with the company
selected by the insured, or, in the absence of any selection by him,
with the company selected by such broker.
Lazzara v. Howard A. Esser, Inc., 802 F.2d 260, 264 (7th Cir. 1986)
(citations omitted). The Plaintiffs contend that Central Illinois Emergency
Physicians functioned as an insurance broker for the doctors and breached its
duty to faithfully procure professional liability insurance which should have
covered each individual doctor for $1,000,000.
27
Even assuming the Plaintiffs alleged an agent-principal relationship
and/or that Central Illinois Emergency Physicians acted as an insurance
broker in agreeing to obtain professional liability insurance, the Plaintiffs
have not asserted a viable breach of fiduciary claim under Illinois law.
Section 2-2201 applies to an “insurance producer, registered firm and limited
insurance representative” and states that each shall exercise “ordinary care
and skill” in procuring coverage. See 735 ILCS 5/2-2201(a). Section 22201(b) limits the right of an insured to assert a cause of action against an
“insurance producer, registered firm, or limited insurance representative”
concerning, among other things, the procurement or failure to procure any
policy of insurance. See 735 ILCS 5/2-2201(b). Specifically, it limits the
right to allege breach of fiduciary duty unless the “conduct upon which the
cause of action is based involves the wrongful retention or misappropriation”
of money that was received as insurance premiums by the insurance broker or
producer. Section 2201(b) narrowly defines the scope of a breach of
fiduciary duty claim against and insurance producer or broker and is limited
to claims involving wrongful retention or misappropriation of premiums. See
28
M.G. Skinner and Associates Insurance Agency, Inc. v. Norman-Spencer
Agency, Inc., 845 F.3d 313, 321 (7th Cir. 2017).
The dispute here concerning the insurance coverage is whether it is per
individual doctor per occurrence or simply per occurrence. Even assuming
the Plaintiffs’ position is correct and their factual allegations are true, the
Plaintiffs’ claims simply do not involve the wrongful retention or
misappropriation of premiums. Accordingly, the Plaintiffs are unable to
assert a plausible claim for breach of fiduciary duty against Central Illinois
Emergency Physicians.
III.
CONCLUSION
Based on the foregoing, the motion to dismiss pursuant to Rule
12(b)(6) of Defendants Emergency Consultants, Inc., Central Illinois
Emergency Physicians, P.C., James A. Johnson, M.D., Robert M. Williams,
M.D., and Derik K. King, M.D., will be allowed. The motion to dismiss
pursuant to Rule 12(b)(6) of Defendant National Guardian Risk Retention
Group, Inc., will be allowed in part and denied in part.
Ergo, the motion to dismiss Counts I, II, III and V of Defendants
Emergency Consultants, Inc., Central Illinois Emergency Consultants, P.C.,
29
James A. Johnson, M.D., Robert M. Williams, M.D., and Derik K. King,
M.D. [d/e 87] is ALLOWED. Those parties shall be, and hereby are,
terminated as Defendants.
The motion to dismiss of Defendant National Guardian Risk Retention
Group, Inc. [d/e 89] is ALLOWED in part and DENIED in part.
The motion is DENIED as to the breach of contract claims in Count IV.
It is ALLOWED as to the fraud claims asserted in Count I and the conspiracy
claims of Count II.
This matter is referred to United States Magistrate Judge Tom
Schanzle-Haskins for the purpose of scheduling a discovery conference.
ENTER: May 17, 2018
FOR THE COURT:
/s/ Richard Mills
Richard Mills
United States District Judge
30
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