Professional Solutions Insurance Company v. Giolas et al

Filing 29

MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 11/8/2017:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

PROFESSIONAL SOLUTION
INSURANCE COMPANY,
Plaintiff,

Case No.

16 C 9868

v.
Judge Harry D. Leinenweber
DALE GIOLAS, M.D. and
STACI FERGUSON,
Defendants.
MEMORANDUM OPINION AND ORDER
This

is

an

insurance

coverage

dispute

arising

out

of

a

psychiatrist’s alleged sexual misconduct with a patient.
Before the Court are Cross Motions for Summary Judgment [ECF
Nos.

18-19,

22].

For

the

reasons

stated

herein,

the

Court

grants Defendant Giolas’ Motion and denies Plaintiff’s Motion.
I. FACTUAL BACKGROUND
Plaintiff Professional Solutions Insurance Company (“PSIC”)
brought a declaratory action seeking a declaration that it does
not have a duty to defend Defendant Dale Giolas, M.D. (“Giolas”)
in an Illinois state court lawsuit.

For the purposes of the

coverage dispute and the cross motions before the Court, the
facts

are

undisputed.

Both

parties

filed

Rule

56.1(a)(3)

statements, but neither filed a Local Rule 56.1(b) response.
See, N.D. Ill. L.R. 56.1(a)(3)(C) (“All material facts set forth

in the statement required of the moving party will be deemed to
be admitted unless controverted by the [L.R. 56.1(b)] statement
of the opposing party.”).

As such, the Court considers the

facts contained in both parties’ statements admitted.
does not deem any legal conclusions admitted.

The Court

The facts of the

underlying state court action are as follows.
Giolas,

a

(“Ferguson”)
PSIC’s

licensed

as

a

patient

56.1(a)(3)

Statement”)

¶

psychiatrist,

4.)

from

Statement,
On

August

treated

2011

until

ECF

No.

25,

2016,

Staci

early

Ferguson
(See,

(“PSIC’s

20

2016.

Fact

Ferguson

brought

a

lawsuit in Illinois state court alleging that Giolas repeatedly
engaged

in

improper

treating her.

sexual

activity

with

her

while

he

was

(See, Giolas’ 56.1(a)(3) Statement, ECF No. 21

(“Giolas’ Fact Statement”) ¶¶ 1-2; PSIC’s Fact Statement ¶¶ 34.)

Ferguson

alleged

that

Giolas’

improper

sexual

activity

violated the Sexual Exploitation in Psychotherapy, Professional
Health Services, and Professional Mental Health Services Act,
740 ILCS 140/1 et seq., the Gender Violence Act, 740 ILCS 82/1
et seq., and constituted common law battery.

(See, Complaint,

Ex. A to “Complaint for Declaratory Judgment,” ECF No. 1 (the
“Underlying Complaint”); see also, Giolas’ Fact Statement ¶ 1.)
Both

parties

acknowledge

that

Giolas

sexual activity with Ferguson.
- 2 -

denies

engaging

in

any

(See, Giolas’ Fact Statement

¶ 3; PSIC’s Fact Statement ¶ 5.)
Underlying

Complaint,

Giolas

professional liability insurer.
remains pending.
The
Surgeon

tendered

it

to

PSIC,

his

The underlying state court case

(See, Giolas’ Fact Statement ¶ 4.)

insurance
Medical

After receiving notice of the

policy

at

Professional

issue,

entitled

Liability

Physician

Insurance

Policy

and
(the

“Policy”), was issued by PSIC to Giolas and was in effect when
Ferguson filed the Underlying Complaint.

(See, Policy, Ex. B to

Complaint, ECF No. 1 (the “Policy”); PSIC’s Fact Statement ¶ 12;
Giolas’ Fact Statement ¶ 5.)

The policy states, in relevant

part:
Section II. Coverage Agreement
Within
the
Declarations:

limit

of

liability

shown

on

the

In return for payment of premium and subject to all
the terms of this Policy and the exclusions stated in
Section VIII. Exclusions, We will pay on behalf of an
Insured all sums in excess of the Deductible to which
this insurance applies and for which an Insured
becomes legally obligated to pay as Damages because of
an Injury caused by an Incident in the performance of
Professional Services by You or someone for whom You
are legally responsible as provided in this Policy.
The Injury must occur on or after the Retroactive Date
shown on the Declarations and before this Policy or
coverage for an Insured terminates.
Any Claim
associated with an Injury caused by an Incident must
be first reported to Us in writing during the Policy
Period or the Automatic Extended Reporting Period.
The Injury must also be caused by an Insured under
this Policy. (See, Policy § II.)

- 3 -

The term “Injury” is defined as:
[B]odily injury, sickness, disease or death sustained
by any one person. (Id. § I.14.)
The term “incident” is defined as:
[A]ny negligent omission, act or error in the
providing
of
Professional
Services.
All
such
omissions, errors or acts causally related to the
rendering
of
or
failure
to
render
Professional
Services to one person shall be considered one
Incident.
Causally related acts, errors or omissions
that have a common cause or form a causal chain of
events shall be considered one Incident.
An Incident
shall be deemed to have occurred at the time of the
earliest act, error or omission comprising that
Incident. (Id. § I.13.)
The term “Professional Services” is defined as:
[T]he diagnosis of, treatment or medical care for or
medical consultation regarding a patient’s medical
condition. (Id. § I.23.)
Relevant exclusions to coverage, as amended, are described as
follows:
Sexual impropriety, sexual intimacy, sexual assault,
sexual harassment or any other similarly defined act.
However, notwithstanding the foregoing, the Insured
shall be protected under the terms of this Policy as
to any Claim and or allegation which may be covered by
the Policy upon which any Claim or Suit may be brought
against the Insured, for any such alleged behavior by
an Insured unless a judgment or a final adjudication
adverse to the Insured shall establish that such
behavior occurred as an essential element of the cause
of action so adjudicated.
(Id., Illinois Amendatory
Endorsement at 1.)
*

*

*

The intentional infliction of Injury. (Id. § VIII.10.)

- 4 -

*

*

*

This Policy does not apply to punitive or exemplary
Damages, fines, penalties imposed by law, or matters
uninsurable under the law pursuant to which this
Policy is construed, unless the law of the state in
which the Insured is licensed to practice prohibits
such an exclusion. (Id. § VIII.13.)
II.
A.

DISCUSSION

Legal Standard

Summary judgment is appropriate when there are no genuine
issues of material fact and the moving party is entitled to
judgment as a matter of law.

See, FED. R. CIV. P. 56(a).

As both

parties cite to Illinois law and the Court finds Illinois law
proper,

the

Court

dispenses

with

an

extensive

choice-of-law

analysis and applies Illinois law.
To determine whether PSIC has a duty to defend Giolas in
the Ferguson lawsuit, the Court compares the facts alleged in
the Underlying Complaint with the provisions of the PSIC Policy
and, if the facts alleged potentially fall within the Policy’s
coverage, the duty to defend is triggered.

See, Amerisure Mut.

Ins. Co. v. Microplastics, Inc., 622 F.3d 806, 810 (7th Cir.
2010). “Refusal to defend is unjustifiable unless it is clear
from the face of the underlying complaint that the facts alleged
do not fall potentially within the policy’s coverage.”

Outboard

Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212

- 5 -

(Ill. 1992).

“In construing the language of the policy, the

court’s primary objective is to ascertain and give effect to the
intent of the parties to the contract.

In order to ascertain

the meaning of the policy’s language and the parties’ intent,
the court must construe the policy as a whole and take into
account the type of insurance purchased, the nature of the risks
involved, and the overall purpose of the contract.”
Ins.

Co.

v.

Eljer

Mfg.,

757

N.E.2d

481,

491

(internal citations and quotations omitted).
terms

and

the

allegations

in

the

Traveler’s
(Ill.

2001)

“Both the policy

underlying

complaint

are

liberally construed in favor of the insured, and any doubts and
ambiguities are resolved against the insurer.”

Microplastics,

622 F.3d at 811 (quoting State Farm Fire and Casualty Co. v.
Perez, 899 N.E.2d 1231, 1235 (Ill. App. Ct. 2008)).

However,

the “general rules that favor the insured must yield to the
paramount

rule

of

reasonable

contract interpretations.”

construction

which

guides

all

Ibid. (quoting Western States Ins.

Co. v. Bobo, 644 N.E.2d 486, 488 (Ill. App. Ct. 1994)) (internal
quotation omitted).
B.
Under
issue.

this
The

Insurance Coverage

framework,

Policy

the

provides

Court

turns

coverage

for

to

the

Policy

“[bodily

at

injury,

sickness, disease or death sustained by any one person] caused
- 6 -

by a[] [negligent omission, act or error] in the performance of
[the

diagnosis

of,

treatment

consultation

regarding

[Giolas].”

(See,

a

Giolas’

Complaint

performance

of

§§

care

for

medical

I-II,

or

medical

condition]

VIII

(quoted

by

policy

PSIC argues that the Policy does not

alleged

Underlying

medical

patient’s

Policy,

definitions inserted).)
cover

or

conduct
does

for

not

professional

two

reasons:

allege

services,

(1)
in

negligence

and

(2)

the

the
the

Underlying

Complaint does not allege bodily injury.
Giolas contends that the sexual misconduct exception in the
Policy

provides

underlying
occurred

coverage

action
in

the

until

establishes
underlying

a

that

final

adjudication

sexual

action.

misconduct

(See,

Illinois Amendatory Endorsement at 1.)

supra,

in

the

actually
Policy,

PSIC is correct that an

exception to an exclusion in an insurance policy does not create
coverage.

See, Cont’l Cas. Co. v. Donald T. Bertucci, Ltd., 926

N.E.2d 833, 846 (Ill. App. Ct. 2010) (“[A]n exception to an
exclusion

does

not

create

coverage

or

provide

an

additional

basis for coverage, it only preserves coverage granted in the
insuring agreement.”).
the

factual

coverage.
exclusions

The Court must first determine whether

allegations
If
bar

so,

potentially

then

coverage.

the

fall

Court

considers

Accordingly,
- 7 -

within

the

the

Policy’s

whether

Court

any

considers

whether

the

factual

allegations

recited

in

the

Underlying

Complaint potentially fall within coverage by turning to the
first of PSIC’s arguments.
1.
PSIC
because

argues
the

Professional Malpractice

that

the

Underlying

Policy

does

not

provide

Complaint

does

not

allege

performance of professional services.

coverage
negligent

PSIC correctly notes that

the Underlying Complaint does not assert a negligence claim.
However, when considering whether an insurance company has a
duty

to

defend,

particular

legal

a

court

“should

theories

pursued

not
by

simply
the

look

to
[in

claimant

the
the

underlying action], but must focus on the allegedly tortious
conduct on which the lawsuit is based.”

Medmarc Cas. Ins. Co.

v.

613

Avent

America,

Inc.,

612

F.3d

607,

(7th

Cir.

2010)

(applying Illinois law) (internal quotations omitted); see also,
Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing
Ctr., Inc., 566 F.3d 689, 696 (7th Cir. 2009) (“[T]he factual
allegations

in

the

complaint,

and

not

the

legal

labels

a

plaintiff uses, control.”) (citation omitted) (applying Illinois
law).
the

This is because the duty to defend “should not hinge on

draftsmanship

underlying

skills

action.”

or

Int’l

whims
Ins.

of

Co.

the
v.

plaintiff

Rollprint

the

Packaging

Prods., Inc., 728 N.E.2d 680, 688 (Ill. App. Ct. 2000).
- 8 -

in

Thus,

Ferguson’s failure to assert a separate count for negligence is
not dispositive.
Giolas argues that Ferguson’s allegations of improper drug
treatment and poor recordkeeping bring the Underlying Complaint
within

potential

Specifically,

coverage

Giolas

for

points

to

professional
Ferguson’s

negligence.

allegation

that

“medical records were not carefully kept and that the mixture of
drugs

[Giolas]

had

prescribed

for

[Ferguson]

dangerous.”

(Underlying Complaint, ¶ 14.)

allegations

could

potentially

could

be

Though these factual

constitute

medical

malpractice,

“factual allegations are only important insofar as they point to
a

theory

Ferguson

of

does

prescription
failure
recovery

recovery.”

to
in

of

not

keep
the

a

Momence

seek

to

potentially
proper

recover

for

dangerous

records.

Underlying

Meadows,

all

sexual misconduct while treating Ferguson.

F.3d

at

Giolas’

mixture

Rather,

Complaint

566

the

696.

alleged

of

drugs

or

theories

of

relate

to

Giolas’

The duty to defend

is not triggered by “a free-standing reference to a fact … not
attached to any particular theory of recovery. . . .”

Westfield

Ins. Co. v. W. Van Buren, LLC, 59 N.E.3d 877, 885 (Ill. App. Ct.
2016); see also, Ill. Emcasco Ins. Co. v. Northwestern Nat’l
Cas. Co., 785 N.E.2d 905, 908 (Ill. App. Ct. 2003) (noting that
a duty to defend arises “if the insurance covers the liability
- 9 -

on any set of facts consistent with the allegations needed to
support

recovery

on

any

theory

raised

in

the

complaint”).

Accordingly, tangential allegations of fact regarding drugs and
records do not potentially bring the Underlying Complaint within
the Policy’s coverage.
The

crux

of

this

coverage

dispute

is

whether

improper

sexual activity with a patient can constitute medical negligence
in the field of psychiatry.

Generally, improper sexual activity

between a medical doctor and his or her patient does not fall
within “professional services” because improper sexual activity
does

not

experience.

involve

professional

medical

training,

skill,

or

See, e.g., B.A. v. Bohlmann, No. 09 C 346, 2010

U.S. Dist. LEXIS 13284, at *8 (W.D. Wis. Feb. 16, 2010) (finding
no professional liability coverage for medical doctor’s alleged
sexual assault of patients). However, there is a distinction
between medical doctors and psychiatrists.

“The fiduciary duty

owed by a psychotherapist exists due to the very nature of the
therapist-patient relationship which gives rise to a clear duty
on the therapist’s part to engage only in activity or conduct
which is calculated to improve the patient’s mental or emotional
well-being, and to refrain from any activity or conduct which
carries with it a foreseeable and unreasonable risk of mental or
emotional harm to the patient.”

St. Paul Fire & Marine Ins. Co.

- 10 -

v. Downs, 617 N.E.2d 338, 344 (Ill. App. Ct. 1993) (alterations
and

quotation

doctor

and

omitted).

a

The

patient

is

relationship

different

between

from

that

a

medical

between

a

psychiatrist and a patient due to the recognized phenomenon of
transference.

See,

9A,

§ 131:12 (3d ed. 2017).

Steven

Plitt

et

al.,

Couch

on

Ins.

The Illinois Supreme Court discussed

transference as follows:
The “transference phenomenon” . . . has been defined
in psychiatric practice as a phenomenon . . . by which
the patient transfers feelings toward everyone else to
the doctor, who then must react with a proper
response, the countertransference, in order to avoid
emotional involvement and assist the patient in
overcoming
problems.
The
mishandling
of
this
phenomenon,
which
generally
results
in
sexual
relations or involvement between the psychiatrist or
therapist
and
the
patient,
has
uniformly
been
considered as malpractice or gross negligence in other
jurisdictions, whether the sexual relations were
prescribed by the doctor as part of the therapy, or
occurred outside the scope of treatment.
Corgan v. Muehling, 574 N.E.2d 602, 607 (Ill. 1991) (internal
quotations and citations omitted).

The Corgan Court went on to

hold that a former patient did state a cause of action where she
alleged, among other things, “that the defendant [psychologist]
was . . . negligent by having sexual relations with her during
the

course

of

her

treatment;

and

that

the

defendant

[psychologist] failed to recognize or properly deal with the
psychotherapeutic

phenomenon

- 11 -

of

transference

and

countertransference.”
dealt

with

phenomenon

Id. at 606-07.

therapists’
and

the

“Indeed, courts that have

mishandling

concomitant

of

the

transference

therapist-patient

sexual

relationship have recognized that the sexual relationship simply
cannot

be

viewed

therapist’s

separately

malpractice

developed

between

the

Assurance

Co.

or

Stone,

v.

from
the

therapist
61

aspects

therapeutic

and

F.3d

other

the

1321,

the

relationship

patient.”
1330

of

(7th

Am.
Cir.

Home
1995)

(citations omitted); see also, St. Paul Fire & Marine Ins. Co.
v. Love, 459 N.W.2d 698, 702 (Minn. 1990) (“When . . . the
transference

phenomenon

pervades

the

therapeutic

alliance,

we

believe the sexual conduct between therapist and patient arising
from

the

phenomenon

may

be

viewed

as

the

consequence

of

a

failure to provide proper treatment of the transference.”); L.L.
v. Med. Protective Co., 362 N.W.2d 174, 178 (Wis. Ct. App. 1984)
(“[A] sexual relationship between therapist and patient cannot
be viewed separately from the therapeutic relationship that has
developed between them”).
The Underlying Complaint alleges that Giolas was treating
Ferguson

for

depression
posttraumatic

“attention
disorder,
stress

deficit
generalized

disorder.”

disorder,

recurrent

anxiety

(Underlying

major

disorder

Complaint,

¶

and
10.)

Further, it states that “[Giolas] repeatedly touched and invaded
- 12 -

[Ferguson] sexually.

The conditions under which he did so were

coercive because he was treating and medicating her for various
psychiatric conditions at the time, giving him undue influence
over her.” (Id. at ¶ 25.)
Complaint

constitute

The facts alleged in the Underlying

improper

patient by a psychiatrist.

sexual

activity

with

a

current

As noted by the Illinois Supreme

Court, the mishandling of transference and countertransference
has

“uniformly

been

negligence. . . .”

considered

as

malpractice

or

gross

Corgan, 574 N.E.2d at 607 (quoting Horak v.

Biris, 474 N.E.2d 13, 18 (Ill. App. Ct. 1985)); see also, L.L.,
362 N.W.2d at 176 (“Medical authorities are nearly unanimous in
considering sexual contact between therapist and patient to be
malpractice.”).

Giolas’

failure

to

handle

the

phenomenon

properly may constitute an error of professional skill in the
treatment

of

Ferguson’s

psychiatric

conditions.

Accordingly,

based on the facts here, the sexual misconduct alleged in the
Underlying

Complaint

potentially

falls

within

the

Policy’s

coverage.
Due to the recognized distinction between psychiatrists and
other

medical

professionals,

the

case

involving

sexual

misconduct relied on by PSIC, American Family Insurance Co. v.
Enright, 781 N.E.2d 394 (Ill. App. Ct 2002), is inapplicable
because

it

involved

an

ultrasound
- 13 -

technician

rather

than

a

psychiatrist.

Three additional cases cited by Plaintiff are

inapposite because they hinge on errors that did not arise from
a lack of professional skill.
Donald

T.

Bertucci,

926

In Continental Casualty Co. v.

N.E.2d

833

(Ill.

App.

Ct.

2010),

a

lawyer was not covered under his legal malpractice insurance for
a billing dispute because billing practices are contingent to
any

business

and

do

not

involve

any

special

legal

skill.

Similarly, in Illinois State Bar Association Mutual Insurance
Co. v. Mondo, 911 N.E.2d 1144 (Ill. App. Ct. 2009), a lawyer was
accused of impropriety based on his insurance recommendations.
He was not covered under his legal malpractice policy because
the omission was not related in any way to his legal skill.
Finally, in ISMIE Mutual Insurance Co. v. Michaelis Jackson &
Associates, LLC, 921 N.E.2d 1156, 1165 (Ill. App. Ct. 2009), a
False Claims Act case, the court held that the misconduct at
issue related to inaccuracies in Medicare claims, not improper
treatment.
relate

to

Conversely, the sexual misconduct alleged here may
Giolas’

professional

misconduct

as

a

psychiatrist,

and, as such, these cases do not apply.
This is not to say that a psychiatrist’s sexual misconduct
must be covered by insurance.
limit

coverage

for

a

An insurance company is free to

psychiatrist’s

sexually

behavior in a professional liability policy.
- 14 -

inappropriate
See, Stone, 61

F.3d

at

1330

(upholding

limit

on

insurance

coverage

allegations involved counselor’s sexual misconduct).

where

However,

the Policy must do so clearly and explicitly.
Accordingly, construing the Policy and facts liberally, the
Court finds that the facts alleged suggest an error in Giolas’
professional

treatment

Policy’s coverage.

and

thus

fall

potentially

within

the

See, Microplastics, 622 F.3d at 811 (“Both

the policy terms and the allegations in the underlying complaint
are liberally construed in favor of the insured.”).
2.

Bodily Injury

PSIC also argues that the Policy does not provide coverage
because the Underlying Complaint does not allege an injury as
defined by the Policy.

The Policy defines “Injury” as “bodily

injury, sickness, disease or death sustained by any one person.”
PSIC contends that the Underlying Complaint complains only of
emotional

distress,

disease or death.”

which

is

not

“bodily

injury,

sickness,

The dispute thus centers on whether claims

for bodily injury are alleged in the Underlying Complaint.
Claims of emotional distress are not claims for “bodily
injury” under Illinois law.

See, Momence Meadows, 566 F.3d at

697

noting

n.

10.

It

is

worth

that

injuries

caused

by

malpractice in the field of psychiatry would intuitively include
claims of emotional distress as opposed to physical injuries
- 15 -

anticipated in the case of malpractice in a traditional doctor’s
office.

The

liability

insurance

cover

Court

emotional

notes

the

incongruity

policy

for

a

distress,

which

of

psychiatrist
seems

the

a

professional

that

not

likely

and

most

does

anticipated form of damages in the event of such a doctor’s
malpractice.

“Judges need not check their common sense at the

door when interpreting insurance policies and the plain language
within

them.

Relevant

terms

and

provisions

are

not

to

be

construed in a vacuum, and terms must be read in conjunction
with the insured’s reasonable expectations, the public policy
behind

the

provisions.”

provisions,

and

the

intended

coverage

of

those

Frendreis v. Blue Cross Blue Shield of Michigan,

873 F.Supp. 1153, 1157 (N.D. Ill. 1995); cf. State Farm Mut.
Auto. Ins. Co. v. Progressive N. Ins. Co., 30 N.E.3d 440, 457
n. 7

(Ill.

App.

Ct.

2015)

(describing

applicability

of

reasonable expectations doctrine under Illinois law); but, cf.
Landmark Am. Ins. Co. v. NIP Grp., Inc., 962 N.E.2d 562, 571
(Ill. App. Ct. 2011) (noting disagreement in Illinois case law
regarding reasonable expectations doctrine).

However, the Court

need not address this incongruity here, because the Underlying
Complaint alleges more than emotional injury.
The Underlying Complaint does not solely allege injuries of
emotional distress, but also asserts that Giolas committed a
- 16 -

common law battery against Ferguson to the tune of $750,000 in
actual

damages.

(See,

Underlying

Complaint,

¶¶

36-39.)

An

allegation of battery is sufficient to allege “bodily injury.”
Further, in Count II, Ferguson pleads actual damages of $750,000
separate

from

the

$750,000

damages. (Id. at ¶ 35.)

she

claims

in

emotional

distress

Thus, the Underlying Complaint does not

solely allege emotional injuries, distinguishing this case from
the cases cited by PSIC.
97

(allegations

injury

by

of

former

insufficient

to

See, Momence Meadows. 566 F.3d at 696-

emotional
employees

allege

distress
in

bodily

without

False

Claims

injury

under

any
Act

physical
case

Illinois

were
law);

Commercial Union Ins. Co. v. Image Control Prop. Mgmt., Inc. 918
F.Supp. 1165, 1170-71 (N.D. Ill. 1996) (allegations of mental
anguish

and

distress

without

physical

injury

in

housing

discrimination case were insufficient to allege bodily injury
under

Illinois

law);

Univ.

of

Ill.

v.

Cont’l

Cas.

Co.,

599

N.E.2d 1338, 1353 (Ill. App. Ct. 1992) (holding that coverage
exists

and

finding

the

bodily

injury

exclusion

inapplicable

where no physical injury was present); see also, United States
Liab. Ins. Co. v. Sigmatek, Inc., No. 14 C 1747, 2015 U.S. Dist.
LEXIS 21925, at *20-22 (N.D. Ill. Feb. 20, 2015) (distinguishing
Momence

Meadows).

The

facts

alleged

- 17 -

here

are

sufficient

to

allege

bodily

injury

and

thus

bring

the

allegations

of

the

Underlying Complaint potentially within the Policy’s coverage.
Furthermore, the term “bodily injury” does include injuries
from rape and sexual abuse.

See, 9, Steven Plitt et al., Couch

on Ins. § 126:33 (3d ed. 2017).

The very nature of a sexual

violation requires bodily contact that is injurious, even if it
is not as apparent as a wound or laceration.

Illinois State

Medical Insurance Services v. Cichon, 629 N.E.2d 822 (Ill. App.
Ct. 1994), is illustrative.

There, a doctor was accused of

sexually assaulting minors and adults during medical exams. Id.
at 824-25.
doctor’s

In a declaratory judgment action brought by the

malpractice

coverage

existed

insurer,
because

the
the

insurer

argued

claimants

only

that

no

alleged

psychological injuries and did not allege any bodily injuries.
Id. at 829.

The Illinois Appellate Court affirmed the district

court’s denial of summary judgment to the insurer on the issue,
holding

that

“[g]iven

the

physical

nature

of

this

alleged

malpractice, the trial court could not rule, as a matter of law,
that no bodily injury or invasion of privacy occurred within the
meaning of the policy.” Ibid.
of

a

similar

explaining

that

New

Jersey

“the

The court followed the reasoning

case

emotional

involving
and

sexual

psychological

harassment,
effects

of

repeated acts of sexual harassment by offensively touching an
- 18 -

employee’s
injury]

breasts

even

and

though

‘rear
the

end’

were

complaint

covered

alleged

[as

only

bodily

‘serious

emotional distress and disruption of her personal life.’” Ibid.
(quoting NPS Corp. v. Insurance Co. of North America, 517 A.2d
1211, 1212 (N.J. 1986)).
The

Seventh

Circuit

applying Indiana law.
Through

Norris,

107

has

held

similarly,

albeit

when

See, Nat’l Fire & Cas. Co. v. West By &
F.3d

531,

535

(7th

Cir.

1997)(finding

allegations of child molestation sufficient to constitute bodily
injury, although the court found no coverage for other reasons);
see also, Gen. Acc. Ins. Co. of Am. v. Gastineau, 990 F.Supp.
631, 633-35 (S.D. Ind. 1998) (allegations of sexual harassment
which

included

physical

contact

were

sufficient

to

allege

“bodily injury”); Wayne Twp. Bd. of Sch. Comm’rs v. Ind. Ins.
Co.,

650

touching

N.E.2d
is

1205,

inherent

1210

to

child

(Ind.

Ct.

App.

molestation

and

1995)

(“Bodily

the

resulting

emotional injury suffered by the victim of child molestation is
bodily injury.”).

Additionally, the physical nature of sexual

misconduct has been recognized to constitute bodily injury in
other jurisdictions.

See, e.g., E.E.O.C. v. S. Pub. Co., 894

F.2d

Cir.

785,

789

(5th

1990)

(affirming

district

court’s

determination that allegations stemming from assault and battery
in sexual harassment case were sufficient to constitute “bodily
- 19 -

injury” under Mississippi law); Allstate Ins. Co. v. McCranie,
716

F.Supp.

1440,

1443

(S.D.

Fla.

1989)(finding

that

sexual

molestation constitutes bodily injury, although the court denied
coverage on other grounds), aff’d sub nom. Allstate Ins. Co. v.
Manning, 904 F.2d 713 (11th Cir. 1990).
SCR Medical Transportation Services, Inc. v. Browne, 781
N.E.2d

564,

571

(Ill.

App.

outcome of this case.

Ct.

2002),

does

not

dictate

the

Browne involved application of an auto

insurance policy to a driver who sexually assaulted a passenger.
First, the court found that allegations of negligent driving
were tangential to the heart of the complaint, which centered on
the sexual assault rather than the driver’s method of driving.
Id. at 569.

Second, it found that the auto insurance policy did

not provide coverage because no physical injuries, only fear and
anxiety, were caused by the allegedly negligent driving.
570.

Id. at

Browne does not run parallel to this case because the

sexual misconduct is at the heart of the Underlying Complaint
and

the

injuries

were

allegedly

caused

by

that

misconduct.

Further, Browne’s discussion of bodily injury was dicta.

The

Appellate Court had already held that the victim’s “injuries
from

the

sexual

assaults

did

not

arise

out

of

the

use,

operation, or maintenance of the vehicle,” precluding automobile
insurance

coverage.

Id.

at

568.
- 20 -

To

the

extent

Browne

is

relevant, the Court finds that Cichon, supra, is more factually
analogous to the case at hand, as it involved a professional
liability policy and a doctor-patient relationship.

Following

Cichon’s reasoning, the Court finds that the facts alleged in
the

Underlying

reading

both

Complaint

liberally

required to do.

to

activity

of

the

within

the

insured,

as

Policy,
we

are

bodily

allegations

injury.

of

The

sexual

misconduct

Underlying

Complaint

Giolas “repeatedly engaged in improper sexual

with

including

favor

Ferguson’s

allege

alleges that:

in

fall

See, id.; Microplastics, 622 F.3d at 811.

Accordingly,
suffice

potentially

[Ferguson]”

“sexual

(see,

intercourse,”

Underlying
“oral

sex”

Complaint
and

¶

“kissing

8),
or

intentional touching” of private areas (id. ¶ 20); “[Giolas]
repeatedly touched and invaded [Ferguson] sexually” (id. ¶ 25);
“[Giolas] subjected [Ferguson] to frequent, regular and varied
sexual

contact,”

[Ferguson]

(id.

sexually,

¶

30);

[and]

“[Giolas]

encouraged

repeatedly

others

to

touched

touch

her

sexually,” (id. ¶ 33); and Giolas “coerced [Ferguson] into …
sexual

acts

conditions,”
Complaint

while
(id.

alleges

she
¶

was

33).

facts

under
As

that

treatment

such,

we

for

find

potentially

the

fall

psychiatric
Underlying
within

the

Policy’s coverage, imposing on PSIC a duty to defend Giolas in

- 21 -

the underlying action.

See, Corgan, 574 N.E.2d at 607; Cichon,

629 N.E.2d at 829.
3.
Giolas

argues

Sexual Conduct Exclusion
that

an

exclusion is applicable.

exception

to

the

sexual

conduct

“Insurers have the burden of proving

that an exclusion applies.

Insureds, in turn, have the burden

to prove that an exception to an exclusion restores coverage.”
Santa’s Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611
F.3d 339, 347 (7th Cir. 2010) (citations omitted).

As PSIC has

not argued that the sexual misconduct exception applies, the
Court does not reach the question and expresses no opinion on
the application to the Underlying Complaint of exclusions, or
exceptions to exclusions, in the Policy.
4.

Independent Counsel

Giolas contends in his Motion for Summary Judgment that
PSIC has an irreparable conflict, requiring it to provide him
with independent counsel.

Where there is an “insurmountable

conflict” between insured and insurer, the insurer does not have
a right to control the insured’s defense.

Illinois Mun. League

Risk Mgmt. Ass’n v. Siebert, 585 N.E.2d 1130, 1135 (Ill. App.
Ct. 1992).

It is true that the Policy excludes coverage for

punitive damages and the Underlying Complaint requests punitive
damages.

(See, Policy, § VIII.13; Underlying Complaint, ¶¶ 26,
- 22 -

35.)

Additionally, the sexual misconduct exception may place

the insured and the insurer in conflict where a factual finding
of sexual misconduct may relieve the insurer of its duty to
indemnify.
PSIC

fails

(See, Policy, Illinois Amendatory Endorsement at 1.)
to

address

the

merits

of

Giolas’

argument

for

independent counsel.

(See, PSIC’s Resp. to Mot. Summ. J., ECF

No. 24, at 4 n. 1.)

By doing so, PSIC waives any argument in

opposition.

See, C & N Corp. v. Kane, 756 F.3d 1024, 1026 (7th

Cir. 2014) (finding failure to make an argument in response to a
summary judgment motion constituted a waiver of that argument);
Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010)
(“Failure to respond to an argument . . . results in waiver.”).
Accordingly,

the

Court

finds

that

Giolas

is

entitled

to

independent counsel.
III.

CONCLUSION

For the reasons stated herein, Defendant Giolas’ Motion for
Summary Judgment [ECF No. 22] is granted and Plaintiff’s Motion
for Summary Judgment [ECF No. 18] is denied.
IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
Dated: November 8, 2017
- 23 -