Lloyd's Syndicate 3624 (Hiscox) v. Biological Resource Center of Illinois, LLC et al

Filing 55

MEMORANDUM Opinion and Order Signed by the Honorable John Robert Blakey on 9/19/2018. Mailed notice (cn).

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LLOYD’S SYNDICATE 3624,
Plaintiff,

Case No. 18-cv-115

v.

Judge John Robert Blakey

BIOLOGICAL RESOURCE CENTER
OF ILLINOIS, LLC, et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
This is an insurance coverage dispute between Plaintiff Lloyd’s Syndicate 3624
(Hiscox) and Biological Resource Center of Illinois, LLC (BRCI). Hiscox is funding
BRCI’s defense in ten underlying cases in various state courts, all involving the
alleged unlawful mishandling and/or sale of human body parts. Hiscox brought this
suit seeking a declaratory judgment as to the scope of BRCI’s liability coverage and
asserting different theories to limit that coverage. [1]. Hiscox has now moved for
partial judgment on the pleadings on Count I of its complaint, seeking a declaratory
judgment that the Policy’s $2 million single “Claim” limit applies to all ten underlying
cases, and that it is therefore no longer obligated to provide coverage. For the reasons
explained below, this Court grants Hiscox’s motion.
I.

Background
A.

The Underlying Cases

The ten underlying cases all arise from BRCI’s alleged mishandling and/or sale
of human remains. See [1] ¶¶ 22–29. BRCI operated a non-transplant anatomical
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donation business from 2007 to 2015, during which time it received over 1,000
anatomical donations. [13] at 43.
Hiscox alleges that, in December 2013, the FBI executed a search warrant on
an entity named “International Biological, Inc.” (ICI), and, based upon that search,
discovered that BRCI was ICI’s primary body parts supplier. [1] ¶¶ 23–24. Then, in
January 2015, the FBI executed a search warrant on BRCI. Id. ¶ 25.
After the FBI’s raid on BRCI, between 2015 and 2017, various individuals sued
BRCI in Illinois and Arizona state courts. Id. ¶¶ 29–79. The ten underlying cases
are:
● Dixon, et al. v. Biological Resource Center of Illinois, LLC, et al., 2015
CH 8513 (Circuit Court of Cook County, Illinois) [1-1];
● Senderak, et al. Biological Resource Center of Illinois, LLC, et al., 2015
L 007143 (Circuit Court of Cook County, Illinois) [1-2];
● Hayes, et al. v. Biological Resource Center of Illinois, LLC, et al., 2015 L
007144 (Circuit Court of Cook County, Illinois) [1-3];
● Banas, et al. v. Biological Resource Center of Illinois, LLC, et al., 2015 L
00574 (Circuit Court of Will County, Illinois) [1-4];
● Beecher, et al. v. Biological Resource Center Inc., et al., CV2015-013391
(Superior Court of Maricopa County, Arizona) [1-5];
● Sisemore v. Biological Resource Center of Illinois, LLC, 2016 L 001330
(Circuit Court of Cook County, Illinois) [1-6];
● Rasinski v. Biological Resource Center of Illinois, LLC, et al., 2016 L
007040 (Circuit Court of Cook County, Illinois) [1-7];
● Berman, et al. v. Biological Resource Center, Inc., et al., 2016-010273
(Superior Court of Maricopa County, Arizona) [1-8];
● Daniels, et al. v. Biological Resource Center of Illinois, LLC, 2017 L
001696 (Circuit Court of Cook County, Illinois) [1-9];
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● Van Damme v. Biological Resource Center of Illinois, LLC, 2017 L
009793 (Circuit Court of Cook County, Illinois) [1-10].
Each complaint in the underlying cases alleges that BRCI induced the
plaintiffs (or their decedents) to agree to donate the decedents’ remains for medical
or scientific uses, but that BRCI instead sold, mishandled, and/or desecrated the
remains. [1] ¶ 27. Each complaint also alleges that BRCI breached its duties to the
underlying plaintiffs to handle the decedents’ bodies with respect and to use the
remains only for medical or scientific purposes. Id. ¶ 28. Each complaint additionally
references the FBI’s January 2015 raid on BRCI and alleges that the underlying
plaintiffs discovered BRCI’s purported mishandling of their loved ones’ body parts
following the raid. [1-1] ¶¶ 11–12; [1-2] ¶¶ 30, 45–46; [1-3] ¶¶ 30, 44; [1-4] ¶¶ 26, 38;
[1-5] ¶¶ 43, 52; [1-6] ¶¶ 8, 10; [1-7] ¶¶ 30, 43; [1-8] ¶¶ 3–5; [1-9] ¶¶ 8, 10; [1-10] ¶¶ 8,
17.
B.

The Policy

Hiscox issued a renewal professional liability and general liability policy to
BRCI with effective dates of June 6, 2014 to August 5, 2017 (the Policy). [1] ¶ 80; [111] at 1, 13. The Policy provides coverage on a claims-made basis. [1] ¶ 81.1
The Policy states that the limit of liability for professional liability is $2 million
for “Each Claim” and $3 million “in the Aggregate for all Claims.” [1-11] at 1. The
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Claims-made liability policies “limit coverage to claims made during the policy period.” Nat’l Union
Fire Ins. Co. of Pittsburgh v. Baker & McKenzie, 997 F.2d 305, 306 (7th Cir. 1993). Because the first
of the underlying cases was filed May 27, 2015, [1] ¶ 30, the 2014-2017 policy is the only one at issue
here. [1-11]. While BRCI references other earlier claims-made policies Hiscox issued to it in its
Answer, see [13] at 43, none of them are relevant to this dispute because their effective dates precede
2015, see [26-1]–[26-6].

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limit of liability includes “Damages, Claim Expenses, and Supplemental Payments.”
Id. The Policy provides that Hiscox “shall not be obligated to settle any Claim, pay
any Damages or Claim Expenses, or continue to defend any Claim after the applicable
Limit of Liability has been exhausted.” Id. at 16.
The Policy contains the following relevant definitions:
E. Claim means any notice received by the Insured of a demand
for Damages or for non-monetary relief based on any actual or alleged
Wrongful Act. . . .
F. Claim Expenses means all reasonable and necessary fees, costs
and expenses, including the fees of attorneys and experts, incurred by
or on behalf of [Hiscox] in the investigation, defense, appeal and
settlement of a Claim against the Insured. . . .
Z. Wrongful Act means any actual or alleged negligent act, error,
omission, breach of duty, Bodily Injury or Personal Injury committed or
alleged to have been committed by the Insured, but solely in the
performance of the Professional Services as shown in Item 3 of the
Declarations. . . .
Id. at 19, 22.
The Policy additionally provides that “All Claims based upon or arising out of
any and all continuous, repeated or related Wrongful Acts or Accidents committed or
allegedly committed by one or more of the Insureds shall be considered a single Claim.
. . .” Id. at 23.
C.

The Coverage Dispute

Hiscox is currently funding BRCI’s defense in the underlying cases under a
reservation of rights. [1] ¶ 22. The parties agree that Hiscox has paid more than $2
million in “Claim Expenses.” Id. ¶ 114.

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In January 2018, Hiscox filed a three-count complaint in this Court. [1]. In
Count I of its complaint, Hiscox seeks a declaratory judgment that it has no
continuing obligation to defend or indemnify BRCI because it has already spent more
than $2 million in defense costs.

See id. ¶¶ 101–15.

Hiscox asserts that the

underlying cases constitute a single “Claim” under the terms of the Policy, and thus
are subject to the policy’s $2 million “Each Claim” limit of liability, rather than only
the Policy’s $3 million aggregate liability limit. See id. ¶ 112.
Count II seeks a declaration that BRCI has waived its right to assert that
multiple “Each Claim” limits of liability apply based upon BRCI’s alleged
acquiescence to Hiscox’s classification of the complaints as a single “Claim.” Id. ¶¶
116–28. Similarly, Count III seeks a declaration that BRCI should be estopped from
asserting multiple “Each Claim” limits of liability, and further requests that this
Court award Hiscox the amount it has expended in excess of $2 million. Id. ¶¶ 129–
43.
In March 2018, Hiscox moved for partial judgment on the pleadings as to Count
I [15].
II.

Legal Standard
Rule 12(c) permits a party to move for judgment solely upon the pleadings.

Fed. R. Civ. P. 12(c); Moss v. Martin, 473 F.3d 694, 698 (7th Cir. 2007). A motion for
judgment on the pleadings “is designed to provide a means of disposing of cases when
the material facts are not in dispute and a judgment on the merits can be achieved
by focusing on the content of the pleadings and any facts of which the court may take
judicial notice.” Archer Daniels Midland Co. v. Burlington Ins. Co. Grp., No. 10-cv5

1533, 2011 WL 1196894, at *2 (N.D. Ill. Mar. 29, 2011) (quoting Cincinnati Ins. Co v.
Contemporary Distrib., Inc., 2010 No. 09-cv-2250, 2010 WL 338943, at *2 (N.D. Ill.
Jan. 26, 2010)). The pleadings consist of the complaint, the answer, and any written
instruments attached as exhibits. Hous. Auth. Risk Retention Grp., Inc. v. Chicago
Hous. Auth., 378 F.3d 596, 600 (7th Cir. 2004).
This Court reviews Rule 12(c) motions under the same standards as a motion
to dismiss under Rule 12(b)(6). Lodholtz v. York Risk Servs. Grp., Inc., 778 F.3d 635,
639 (7th Cir. 2015). As such, this Court is required to “draw all reasonable inferences
and facts in favor of the non-movant,” but “need not accept as true any legal
assertions.” Id.
III.

Analysis
A.

Illinois Contract Law

The parties agree that Illinois law governs the interpretation of the Policy. [16]
at 10; [21] at 9–10.
In Illinois, the interpretation of an insurance contract is a matter of law. Ace
Am. Ins. Co. v. RC2 Corp., 600 F.3d 763, 767 (7th Cir. 2010). This Court’s primary
objective “is to ascertain and give effect to the intention of the parties, as expressed
in the policy language.” Westfield Ins. Co. v. Vandenberg, 796 F.3d 773, 777–78 (7th
Cir. 2015) (quoting Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d 561, 564
(Ill. 2005)).
If policy provisions “are clear and unambiguous there is no need for
construction and the provisions will be applied as written.” Wehrle v. Cincinnati Ins.
Co., 719 F.3d 840, 843 (7th Cir. 2013) (quoting U.S. Fire Ins. Co. v. Schnackenberg,
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429 N.E.2d 1203, 1205 (Ill. 1981)). The provisions in a “clear and unambiguous”
policy “must be given their plain, ordinary, and popular meaning, and the policy will
be applied as written, unless it contravenes public policy.”

Id. (quoting Rich v.

Principal Life Ins. Co., 875 N.E.2d 1082, 1090 (Ill. 2007)).
B.

The Underlying Cases Constitute A Single “Claim”

The issue before this Court is whether the underlying cases constitute a single
“Claim” under the Policy. If so, they are subject to the Policy’s $2 million “Each
Claim” limit, rather than the Policy’s $3 million aggregate limit.
The relevant language in the Policy provides that “All Claims based upon or
arising out of any and all continuous, repeated or related Wrongful Acts or Accidents
committed or allegedly committed by one or more of the Insureds shall be considered
a single Claim.” [1-11] at 23. The Policy defines “Wrongful Act” as “any actual or
alleged negligent act, error, omission, breach of duty, Bodily Injury or Personal Injury
committed or alleged to have been committed by the Insured, but solely in the
performance of the Professional Services.” Id. at 22.
In its motion, Hiscox argues that the underlying cases should be treated as a
single “Claim” under the Policy because they all originate from BRCI’s allegedly
negligent acts and breaches of duty, and are thus “based upon or aris[e] out of” BRCI’s
“continuous, repeated, or related Wrongful Acts.” [16] at 13–15. BRCI disputes that
its alleged conduct was “continuous, repeated or related.” [21] at 9–16.
This Court’s analysis focuses on the meaning of the word “related.”

The

Seventh Circuit in Gregory v. Home Insurance Company addressed whether claims

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are “related” for the purpose of applying either a single claim or aggregate policy
limit.

876 F.2d 602 (7th Cir. 1989).

There, the court noted that the common

understanding of the term “related” covers a “a very broad range of connections, both
causal and logical.” Id. at 606. It then instructed that, although “[a]t some point” a
“logical connection may be too tenuous reasonably to be called a relationship,” it
needed not impose “such a drastic restriction of the natural scope” of the term. Id.
While Gregory involved Indiana law, the Illinois Court of Appeals has also embraced
a concept of relatedness that incorporates both logical and causal connections. See
Cont’l Cas. Co. v. Howard Hoffman & Assocs., 955 N.E.2d 151, 162–63 (Ill. App. Ct.
2011).
Given the breadth of the term “related,” as interpreted in Illinois and by the
Seventh Circuit, this Court agrees with Hiscox that the underlying cases here arise
out of BRCI’s alleged acts of mishandling decedents’ bodies, and that these alleged
acts are “related” under the Policy. The underlying complaints vary in their precise
wording, but all allege that: (1) BRCI promised to use the decedents’ bodies for
education and/or scientific research; (2) BRCI made false representations and
breached the duty it undertook when it mishandled and/or sold the bodies; and (3)
the plaintiffs discovered BRCI’s allegedly wrongful conduct following a January 2015
FBI raid. See [1-1]–[1-10]. Thus, the underlying cases are all based upon allegations
of the same specific course of conduct. This Court finds the underlying cases plainly
“related” under the policy terms.

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Various persuasive authorities support this Court’s finding that a single course
of conduct can provide the basis to deem multiple claims “related.” See Am. Med.
Sec., Inc. v. Exec. Risk Specialty Ins. Co., 393 F. Supp. 2d 693, 707 (E.D. Wis. 2005)
(finding 39 underlying suits “clearly ‘related’” where they were all based upon the
insured’s underwriting practice of marketing and selling certain policies as group
health insurance); Cont’l Casualty Co. v. Wendt, 205 F.3d 1258, 1263–64 (11th Cir.
2000) (multiple suits were “related” because they all alleged a certain course of
conduct by an attorney; even though that course of conduct “involved different types
of acts,” the acts “were tied together because all were aimed at a single particular
goal”); Liberty Ins. Underwriters, Inc. v. Davies Lemmis Raphaely Law Corp., 162 F.
Supp. 3d 1068, 1078 (C.D. Cal. 2016) (seven different underlying cases constituted a
single “claim” where they all arose from a “single course of conduct, a unified policy
of making alleged affirmative misrepresentations to investors in order to induce them
to invest in commercial real estate.”), aff’d, 708 F. App’x 374 (9th Cir. 2017).
In its response, BRCI disputes that the underlying cases can be considered a
single “Claim” because some variation exists among them. BRCI argues that the
underlying cases “challenge different anatomical donations involving different gifting
documents executed at different times by different persons involving different
witnesses and made under different circumstances.”

[21] at 1, 13–14.

BRCI,

however, cites no case law to support its argument that any of these differences (or a
combination of some or all of them) means the underlying cases are not “related.”

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This Court rejects BRCI’s reasoning. That BRCI may have sold different
decedents’ body parts at different times, or that it may have executed different gifting
agreements with different witnesses under different circumstances, does not make
the claims unrelated.

Each of the underlying cases alleges a specific course of

wrongdoing: BRCI’s unauthorized mishandling and/or sale of body parts. In any
meaningful sense of the word, these alleged acts of wrongdoing are “related.”
BRCI’s other argument—that the underlying cases assert different theories of
liability—is equally unavailing. See id. at 10–11. Again, BRCI cites no authority to
support the notion that underlying complaints must assert the exact same legal
theories of liability to be considered a single “Claim.” Nor could it, as courts have
found that claims can be “related” even if they assert different causes of action and
arise from different bad acts. See, e.g., Gregory, 876 F.2d at 602–06 (class action suit
alleging violations of securities laws, RICO, and common law fraud, and another suit
alleging professional negligence, were “related”); In re DBSI, Inc., No. 08-12687 PJW,
2011 WL 3022177, at *4 (Bankr. D. Del. July 22, 2011) (“Claims may be related even
if they allege different types of causes of action and arise from different acts.”); WFS
Fin., Inc. v. Progressive Cas. Ins. Co., 232 F. App’x 624, 625 (9th Cir. 2007) (suits
alleged “interrelated wrongful acts” where they had a “common basis,” even though
they were “filed by two different sets of plaintiffs in two different fora under two
different legal theories”). Likewise, this Court will not stretch the reading of the word
“related” to require the underlying cases to allege the exact same theories of liability.

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C.

The Policy’s Limit Has Been Exhausted

The single “Claim” limit in the Policy is $2 million. [1-1] at 1. And, “Claim
Expenses,” which include “all reasonable and necessary fees, costs and expenses,
including the fees of attorneys and experts, incurred by or on behalf of [Hiscox] in the
investigation, defense, appeal and settlement of a Claim against the Insured,” erode
the Policy’s limit. [1-11] at 19.
BRCI admits that Hiscox has paid more than $2 million in “Claim Expenses”
in defending the underlying cases. [13] ¶¶ 8, 114. Therefore, because this Court finds
that the underlying cases constitute a single “Claim” under the Policy, it also
concludes that the Policy’s limit is exhausted. Hiscox thus has no further duty to
defend or indemnify BRCI under the Policy as to the underlying cases.
IV.

Conclusion
For the reasons explained above, this Court grants Hiscox’s motion for partial

judgment on the pleadings [15].
Dated: September 19, 2018
Entered:

_______________________________
John Robert Blakey
United States District Judge

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