Alden Estates of Shorewood, Inc. v. Arch Specialty Insurance Company
Filing
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MEMORANDUM Opinion and Order Signed by the Honorable Ronald A. Guzman on 11/6/2018: Defendant's motion for summary judgment 19 is granted. Plaintiff's motion for summary judgment 24 is denied. Summary judgment is entered in favor of defendant, Arch Specialty Insurance Company, and against plaintiff, Alden Estates of Shorewood, Inc. Civil case terminated. [For further details see Memorandum Opinion and Order]. Mailed notice (is, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ALDEN ESTATES OF SHOREWOOD, INC.,
Plaintiff,
v.
ARCH SPECIALTY INSURANCE COMPANY,
Defendant.
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No. 18 C 3826
Judge Ronald A. Guzmán
MEMORANDUM OPINION AND ORDER
This is an insurance-coverage dispute brought by Alden Estates of Shorewood, Inc.
(“Alden”) in which it seeks declaratory relief regarding the obligations of Arch Specialty
Insurance Company (“Arch”) under an insurance policy Arch issued to a third party, Kurtz
Ambulance Service, Inc. (“Kurtz”). The issue is whether Alden is entitled to coverage under the
“Blanket Additional Protected Persons” provision of that policy. The parties move for summary
judgment under Federal Rule of Civil Procedure 56. For the reasons explained below, Alden’s
motion for summary judgment is denied and Arch’s motion for summary judgment is granted.
MATERIAL FACTS
The material facts are undisputed. Alden operates a nursing home in Shorewood, Illinois.
On October 13, 2011, Alden entered into a contract with Kurtz titled “Kurtz Ambulance Service,
Inc. Agreement” (the “Kurtz-Alden Agreement”), pursuant to which Kurtz agreed to provide
medical transportation services for Alden’s patients. (ECF No. 19-7, Ex. E to Def.’s SMF.)
Under the Kurtz-Alden Agreement, Kurtz was required to, among other things, “produce and
maintain in effect” during the contract term “general and professional liability insurance
covering services rendered pursuant to this Agreement.” (Id. at 3.) The Kurtz-Alden Agreement
further provided that Kurtz agreed to “cause Alden . . . to be covered as additional insured as
[sic] respect to liability arising out of activities of the insured under the applicable liability
insurance with respect to the transport vehicle(s) supplied by [Kurtz].” (Id. at 4.) The KurtzAlden Agreement was a one-year contract that automatically renewed for successive one-year
periods unless sooner terminated. (Id. at 2.)
Kurtz obtained a healthcare professional liability policy (the “Policy”) from Arch for the
relevant time period, with limits of $1,000,000.00 for each occurrence and $3,000,000.00 in the
aggregate. (ECF No. 23-1, Pl.’s Resp. Def.’s SMF ¶ 5.) Specific relevant provisions of the
Policy are set out below in the Court’s discussion of the parties’ motions.
On April 6, 2016, Patricia D. Sistek, the Independent Administrator of the Estate of
Patricia L. Terry, filed a wrongful-death and survival action (the “Underlying Action”) in the
Circuit Court of Will County, Illinois. In pertinent part, the alleged facts of the Underlying
Action are as follows. Patricia L. Terry was a resident at Alden. On October 31, 2015, Alden
requested Kurtz to transport Mrs. Terry from Alden to her appointment for dialysis treatment at
DaVita Renal Center (“DaVita”) in West Joliet. Kurtz employees picked up Mrs. Terry at 2:10
p.m. and dropped her off at DaVita for treatment at 2:55 p.m. At approximately 7:00 p.m., when
Mrs. Terry’s treatment was complete, DaVita employees escorted her to a waiting room. DaVita
employees subsequently closed the facility for the day and left Mrs. Terry in the waiting room,
locked in the building. Later that evening, Alden discovered that Mrs. Terry was not back at the
nursing home. Sistek subsequently found her mother locked in the DaVita building. The police
were called, and the building was unlocked at 11:45 p.m. Mrs. Terry was transported to
Presence St. Joseph Medical Center, where she was pronounced dead at some point after
midnight.
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Kurtz and Alden, along with DaVita-affiliated entities and agents, are defendants in the
Underlying Action. With respect to Alden, Sistek asserts wrongful-death and survival claims, as
well as a claim for violation of the Illinois Nursing Home Care Act, 210 ILCS 45/1-101. On
March 24, 2017, Alden sent a letter to Kurtz’s counsel requesting that Kurtz provide a defense
and indemnification in the Underlying Action, pursuant to the Policy.
In a letter dated
November 7, 2017, Arch denied Alden’s request. When Alden asked Arch to reconsider its
decision, Arch reaffirmed its denial of coverage.
Alden subsequently filed the instant action against Arch in the Circuit Court of Will
County. Arch, asserting diversity jurisdiction, removed the suit to this court. In its complaint,
Alden seeks a declaratory judgment that it qualifies as an insured under the terms of the Policy;
that the allegations of the Underlying Action fall within the Policy’s scope of coverage; that
Arch owes Alden a duty to defend and indemnify it with respect to the Underlying Action; and
that Arch must reimburse Alden for its costs of defense and attorneys’ fees incurred in defending
the Underlying Action. (ECF No. 2-1, Compl.) The parties cross-move for summary judgment.
DISCUSSION
The parties do not call the Court’s attention to any choice-of-law provision of the Policy,
and they both rely on Illinois law. Therefore, the Court will apply the substantive law of Illinois.
See Harter v. Iowa Grain Co., 220 F.3d 544, 559 n.13 (7th Cir. 2000) (a court will not perform
an independent choice-of-law analysis where the parties agree on the governing law and the
choice bears a reasonable relation to their dispute).
“Under Illinois law, ‘the construction of an insurance policy and a determination of the
rights and obligations thereunder are questions of law for the court which are appropriate
subjects for disposition by way of summary judgment.’”
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Hurst-Rosche Eng’rs, Inc. v.
Commercial Union Ins. Co., 51 F.3d 1336, 1342 (7th Cir. 1995) (brackets omitted) (quoting
Crum & Forster Managers Corp. v. Resolution Tr. Corp., 620 N.E.2d 1073, 1077 (Ill. 1993)).
“The court shall grant summary judgment if the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). “A factual dispute is ‘genuine’ only if a reasonable jury could find for either party.”
Nichols v. Mich. City Plant Planning Dep’t, 755 F.3d 594, 599 (7th Cir. 2014) (citation and
internal quotation marks omitted).
On cross-motions for summary judgment, the Court
construes all inferences in favor of the party against whom the motion under consideration is
made. Westfield Ins. Co. v. Nat’l Decorating Serv., Inc., 863 F.3d 690, 695 (7th Cir. 2017).
An insurer has an obligation under Illinois law to defend its insured in an underlying
lawsuit if the allegations of the underlying lawsuit are potentially within the coverage of the
insurance policy, even if the allegations are groundless, false or fraudulent. BASF AG v. Great
Am. Assurance Co., 522 F.3d 813, 819 (7th Cir. 2008). “[A]n insurer may justifiably refuse to
defend only where it is apparent from such a comparison that the allegations fail to state any
claim within, or potentially within, the scope of policy coverage.” Int’l Minerals & Chem. Corp.
v. Liberty Mut. Ins. Co., 522 N.E.2d 758, 762 (Ill. App. Ct. 1988). “‘The insurer’s duty to
defend its insured arises from the undertaking to defend as stated in the contract of insurance.’”
James River Ins. Co. v. Keyes2Safety, Inc., No. 11 C 901, 2012 WL 3023334, at *2 (N.D. Ill.
July 24, 2012) (quoting Zurich Ins. Co. v. Raymark Indus., 514 N.E.2d 150, 161 (Ill. 1987)).
Thus, “[t]he extent of an insurer’s duty to defend is determined by the language in the
contract/policy.” Lifschultz Fast Freight, Inc. v. Transcon. Freight Sys., Inc., No. 91 C 688,
1993 WL 787511, at *4 (N.D. Ill. Aug. 24, 1993). When the terms of the policy are clear, the
court must construe them according to their plain and ordinary meaning, but if any policy
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language is ambiguous, it must be interpreted against the insurer. Valley Forge Ins. Co. v.
Swiderski Elecs., Inc., 860 N.E.2d 307, 314 (Ill. 2006). Generally, the insured bears the burden
of proving that its claim falls within the policy’s grant of coverage, and the insurer bears the
burden of proving that a limitation or exclusion applies. Addison Ins. Co. v. Fay, 905 N.E.2d
747, 752 (Ill. 2009).
The Policy states that the words “we,” “us,” and “our” refer to Arch, and the words “you”
and “your” refer to Kurtz. (ECF No. 19-6, Ex. D to Def.’s SMF, Policy at 2.)1 The “Insuring
Agreement” subsection of the “Healthcare Professional Liability Coverage Form” of the Policy
provides as follows:
We will pay those amounts that the insured becomes legally required to pay as
damages because of “medical professional injury” that results from acts or
omissions in the providing of or failure to provide “health care professional
services” by or for an insured.
(Id. at 26.)2 The word “insured” is defined as “any person or organization qualifying as such
under Section II - Who Is An Insured.” (Id.) It is undisputed that Kurtz is an insured. The
Policy also has a “Coverage Change Endorsement” that modifies the Healthcare Professional
Liability Coverage Form. (Id. at 14.) In pertinent part, the Coverage Change Endorsement adds
the following provision to the “Who Is An Insured” section of the Policy:
Blanket Additional Protected Persons. Other individuals or organizations when
required to be covered by written contract, agreement, or permit, provided the
written contract, agreement or permit is executed prior to the “claim” being made
1
For ease of reference, citations to page numbers of the Policy are drawn from the CM/ECF
header placed at the top of filings.
2
The terms that appear in quotation marks are defined in the Policy, but the definitions are
not material for purposes of deciding the present motions. Furthermore, the parties do not discuss
the Insuring Agreements that are contained in other sections of the Policy (the “Healthcare General
Liability Coverage Form” or the “Healthcare Umbrella Coverage Form”).
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or the “suit” being brought. Coverage is provided for them only for the work you
performed or should have performed on their behalf. They will share in your
limit of liability for any covered “claim” or “suit.” Damages paid on their behalf
will reduce and may exhaust your limit of liability under this policy.
(Id.)
Thus, the Policy provides coverage for other organizations, such as Alden, when those
organizations are required to be covered under a previous written contract or agreement and only
for the work Kurtz “performed or should have performed” on the organization’s behalf. The
parties dispute whether Alden is entitled to coverage for the Underlying Action under this
provision.
Arch contends that the claims asserted against Alden in the Underlying Action fall
outside the scope of the Blanket Additional Protected Persons provision because they are
unrelated to the performance of Kurtz’s duties under the Kurtz-Alden Agreement. (ECF No. 191, Def.’s Mem. Supp. Mot. at 11.) Alden argues that it is entitled to coverage because the
complaint in the Underlying Action “charges Alden with fault as a direct result of [Kurtz’s]
failure to pick up Mrs. Terry from her dialysis treatment.” (ECF No. 23, Pl.’s Mem. Supp. Mot.
at 10.) Neither party cites any decision applying Illinois law that considers language identical or
similar to that of the Blanket Additional Protected Persons provision, but neither party asserts
that the provision or any part of it is ambiguous.
The Court agrees with Arch. In the Underlying Action, Sistek alleges in each of her three
claims against Alden that Alden was negligent in two ways: (1) it failed to follow up on Mrs.
Terry’s whereabouts when it knew that Mrs. Terry was taken from its facility three times a week
to dialysis and brought back around 7:00 p.m.; and (2) it “[a]bandoned” Mrs. Terry by not
questioning her failure to return to its facility. (ECF No. 5-1, 3d Am. Compl. at 23-30.) Sistek’s
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complaint contains separate claims against Kurtz, and the claims against Alden are not premised
on Kurtz’s alleged omissions or the relationship between Alden and Kurtz. Under the plain
language of the Blanket Additional Protected Persons provision, coverage is provided for Alden
only for the work Kurtz performed or should have performed on Alden’s behalf. Alden, who has
the burden of demonstrating that it falls within the provision’s grant of coverage, has not
submitted any evidence that it was Kurtz’s responsibility to take the actions Sistek alleges that
Alden should have taken: follow up on the whereabouts of a nursing-home resident and/or
investigate the fact that she had not returned to the nursing home. To the contrary, the evidence
is that while Kurtz had several responsibilities under its agreement with Alden, which largely
entailed providing transportation services with medically-appropriate vehicles, those contractual
responsibilities did not include tracking patients’ whereabouts or arranging transportation.
(Kurtz-Alden Agreement at 1-2.)
The Court is unpersuaded by Alden’s contention that Alden’s alleged negligence is
“directly based on Kurtz’s failure to pick up Mrs. Terry.” (ECF No. 27, Pl.’s Reply at 2.) Alden
mischaracterizes the nature of the claims Sistek asserts against it. Alden’s alleged omission may
have occurred at a point in time after that of Kurtz, but it is simply not the case that Sistek’s
claims against Alden are premised on an omission by Kurtz. The claims against Alden are
premised on Alden’s independent alleged omissions, not on the work Kurtz performed or should
have performed on Alden’s behalf.
In other words, Alden’s alleged negligence is wholly
independent of Kurtz’s activities.
Alden fails to show that its claim falls within the Policy’s grant of coverage. Summary
judgment in favor of Arch and against Alden is therefore appropriate.
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CONCLUSION
Defendant’s motion for summary judgment [19] is granted.
Plaintiff’s motion for
summary judgment [24] is denied. Summary judgment is entered in favor of defendant, Arch
Specialty Insurance Company, and against plaintiff, Alden Estates of Shorewood, Inc. Civil case
terminated.
DATE: November 6, 2018
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Ronald A. Guzmán
United States District Judge
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