National Fire & Marine Insurance Company v. Glencrest Healthcare & Rehabilitation Centre, Ltd. et al

Filing 44

MEMORANDUM Opinion and Order signed by the Honorable Virginia M. Kendall on 8/1/2022. GlenCrest's Motion to Dismiss 26 is denied. Hays's Motion to Dismiss 29 is stricken as moot for the reasons set forth in his Motion to Withdraw 41 . See Opinion for further details. Mailed notice(lk, )

Case: 1:21-cv-03653 Document #: 44 Filed: 08/01/22 Page 1 of 17 PageID #:257

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
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NATIONAL FIRE & MARINE
INSURANCE COMPANY,
Plaintiff,
v.
GLENCREST HEALTHCARE &
REHABILITATION CENTRE, LTD., and
FRANK HAYS, as Administrator of the
Estate of Sarah Quinn, Deceased,
Defendants.

No. 21 C 3653
Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER
Plaintiff National Fire & Marine Insurance Company seeks a declaratory judgment against
GlenCrest Healthcare & Rehabilitation Centre, Ltd. (“GlenCrest”) and Frank Hays, Administrator
of Sarah Quinn’s Estate (together, “Defendants”), under the Declaratory Judgment Act, 28 U.S.C.
§ 2201. (Dkt. 23). In relevant part, Plaintiff seeks a declaratory judgment that it owes no duty to
defend or indemnify GlenCrest with respect to an underlying lawsuit (“Hays” or the “Hays
Lawsuit”). 1 (Id. ¶¶ 1, 59). Now before the Court is GlenCrest’s Motion to Dismiss Plaintiff’s
First Amended Complaint (“FAC”) for failing to state a claim. (See Dkt. 26). For the reasons set
forth below, GlenCrest’s motion [26] is denied. 2

1

See Frank Hays, as Administrator of the Estate of Sarah Quinn v. GlenCrest Healthcare & Rehabilitation Centre,
Ltd., No. 17 L 011002.
2
Hays filed a Motion to Dismiss the FAC on March 3, 2022. (Dkt. 29). However, on July 15, 2022, Hays filed an
unopposed Motion to Withdraw that motion and sought leave to file an Answer to Plaintiff’s Complaint. (Dkt. 41).
Accordingly, Hays’s Motion to Withdraw [41] is granted, and his Motion to Dismiss [29] is hereby stricken as moot.

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BACKGROUND
On a motion to dismiss under Rule 12(b)(6), the Court accepts the complaint’s wellpleaded factual allegations, with all reasonable inferences drawn in the non-moving party’s favor,
but not its legal conclusions. See Smoke Shop, LLC v. United States, 761 F.3d 779, 785 (7th Cir.
2014). Unless otherwise noted, the following factual allegations are taken from Plaintiff’s FAC,
(Dkt. 23) and are assumed true for purposes of this motion. W. Bend Mut. Ins. Co. v. Schumacher,
844 F.3d 670, 675 (7th Cir. 2016).
A. The Senior Care Primary Liability Policy
Plaintiff insured GlenCrest with a Senior Care Primary Liability policy (the “Policy”),
which remained in force from June 1, 2015, until June 1, 2016. (Dkt. 23 ¶ 8). As relevant to this
case, the Policy contained provisions concerning Professional Liability Senior Care Coverage,
Commercial General Liability Senior Care Coverage, and a Self-Insured Retention Endorsement
(“SIR”). (Id.). Each section required GlenCrest to cooperate with Plaintiff when defending against
third-party legal actions (cumulatively, the “Cooperation Clause”). (Id. ¶ 8 at 3 (“You and any
other involved ‘insured’ must . . . . [c]ooperate with us in the investigation, settlement or defense
of the ‘claim’ or ‘suit.’ ”)), 4 (mandating GlenCrest to “fully cooperate with” Plaintiff in the
investigation or defense of a legal claim); see also id. ¶ 12). In addition, the SIR obligated
GlenCrest to cover its own legal costs until such expenditures exceeded $100,000, as applicable
here. (Id. ¶ 8 at 3–5 (“We shall have no obligation for, or any responsibility to pay, any amounts
owed by any ‘insured’ within the [SIR]. . . . You are obligated to provide for the defense . . . of
any . . . ‘claim’ or ‘suit’ that may be covered by this policy and is within the [SIR].”); see also id.
¶ 9). In turn, the Policy required Plaintiff to pay for legal costs beyond the SIR threshold. (Id. ¶
8 at 4 (“Our obligations under this policy shall only attached once you have . . . have paid the [SIR]

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amount.”); see also id. ¶ 11 (explaining same)). Finally, the Policy gave Plaintiff “the right, but
not the duty” to assume control over the defense of a lawsuit and required GlenCrest to “tender
such portion of the [SIR] as [Plaintiff] consider[ed] necessary to complete the settlement or
defense” of the suit upon written request. (Id. ¶ 8 at 5; see also id. ¶ 46).
B. The Hays Lawsuit
On or about October 30, 2017, Hays filed a lawsuit concerning the death of Sarah Quinn
in the Circuit Court of Cook County. (Id. ¶¶ 1, 14). Hays named GlenCrest as a defendant for
allegedly breaching the standard of care expected of nursing homes. (Id. ¶ 14). Per the terms of
the SIR, GlenCrest was required to fund its legal defense in the Hays Lawsuit up to the SIR
threshold of $100,000, (id. ¶ 15), and it retained the law firm of Langhenry Gillen Lundquist
(“Langhenry”) as defense counsel, (id. ¶¶ 16–17). Langhenry regularly communicated with
Plaintiff regarding the status of the Hays Lawsuit. (Id. ¶ 20; see also id. ¶ 29 (explaining that
GlenCrest’s attorney and duly authorized agent, Jonathan Lubin, also communicated with Plaintiff
concerning Hays)). In addition, through its counsel, GlenCrest filed its Appearance and Jury
Demand on November 30, 2017; filed an Answer to the underlying Complaint; issued more than
200 interrogatories to Hays; and identified numerous fact and independent expert witnesses
relevant to the case. (Id. ¶¶ 17–19, 21). On January 28, 2020, the state court ordered Hays and
GlenCrest to disclose controlled expert witnesses by June 10, 2020 and July 10, 2020, respectively.
(Id. ¶ 24; see also id. ¶ 25). Langhenry ultimately retained an expert witness to provide testimony
about Sarah Quinn’s end-of-life health status and the care she received from GlenCrest. (Id. ¶¶
22–23). By contrast, Hays allegedly failed to disclose controlled expert witnesses by his June 10,
2020, deadline and never formally sought an extension of time to do so. (Id. ¶¶ 24, 41–45; see

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also id. ¶ 19 (noting that Hays identified an independent expert witness on May 7, 2019 but did
not identify any controlled expert witnesses)).
On or about September 29, 2020, attorney Charles Silverman filed an appearance for
GlenCrest in the Hays Lawsuit. (Id. ¶ 26 (adding that “[a]t all times alleged herein, Silverman was
acting as a duly authorized agent for GlenCrest”)). Then, on or about October 27, 2020, Langhenry
moved the court to allow Silverman to substitute Langhenry as GlenCrest’s counsel. (Id.).
Plaintiff objected to this replacement “given [Silverman’s] lack of experience in handling” cases
like Hays. (Id. ¶ 27). Nevertheless, the state court granted Langhenry’s motion on November 5,
2020. (Id. ¶ 26). Plaintiff alleges that it subsequently received “no reports from [Silverman] or
anyone else on behalf of GlenCrest [for many months] as to what had happened in the [Hays] case,
what actions [Silverman] had taken to protect GlenCrest and [Plaintiff’s] interests, or how
[Silverman] would plan to defend the case at trial.” (Id. ¶ 28).
C. Silverman’s Performance as Defense Counsel in Hays
The state court held a settlement conference for the Hays Lawsuit on or about March 31,
2021. (Id. ¶ 30). The parties failed to reach a settlement agreement at that time, but Silverman –
without consulting Plaintiff – agreed to waive GlenCrest’s jury demand and proceed to a bench
trial set for May 12, 2021. (Id. ¶¶ 30, 34; cf. id. ¶ 17 (stating that Langhenry initially filed a jury
demand in Hays)). On or about April 15, 2021, Plaintiff emailed Silverman requesting a “case
assessment report” by April 20, 2021, still unaware that Silverman waived GlenCrest’s jury
demand. (Id. ¶ 31). More specifically, Plaintiff sought information concerning witnesses expected
to be called at trial (including expert witnesses), an evaluation of potential settlement values, and
a projected range of adverse jury verdicts. (Id.). Although Silverman failed to respond to this
request, (id.), Lubin provided the report on April 21, 2021, (id. ¶ 33). Lubin’s report merely

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regurgitated the statement of facts contained in Hays’s pretrial memorandum, lacked any factual
analysis from Silverman, and contradicted Langhenry’s prior analysis of the case. (Id. ¶ 33; cf. id.
¶ 20 (“Langhenry advised [Plaintiff] that GlenCrest provided proper care to Quinn and that
Hays’[s] claims against GlenCrest were defensible.”)). Additionally, Lubin’s report stated that
Hays intended to call an expert witness – contrary to Plaintiff’s understanding that Hays failed to
disclose expert witnesses prior to the court-ordered deadline. (Id. ¶ 33).
Plaintiff responded to Lubin by letter on May 6, 2021, with copy to Silverman, raising
several concerns about the Hays proceedings. (Id. ¶ 34). Among other things, Plaintiff objected
to Silverman’s decision to waive the Hays jury demand without first consulting Plaintiff, and
despite the fact that discovery was ongoing and no experts had been disclosed. (Id.). Plaintiff also
questioned whether GlenCrest timely disclosed expert witnesses and whether GlenCrest had
waived the state court’s deadline for Hays’s expert disclosures. (Id.). Plaintiff further explained
that Lubin’s case assessment report “was woefully deficient in numerous other respects.” (Id.
(specifying, for example, that Plaintiff “had no idea how Silverman planned to defend the case at
trial, including witnesses he planned to call”)). Plaintiff asserted that “the failure to provide these
details was a . . . breach of the Policy provisions, including the cooperation provision, and
[Plaintiff] reserved its rights to decline coverage.” (Id.). Finally, Plaintiff demanded the balance
of money owed under the SIR and stated that it would assume the defense of the Hays suit upon
receipt of those funds. (Id.). Plaintiff sent Silverman a second letter on May 6, 2021, reiterating
its concerns over his handling of the underlying suit. (Id. ¶ 35).
The Hays bench trial was postponed on or around May 10, 2021, and so Plaintiff emailed
Silverman “asking for next steps in the lawsuit.” (Id. ¶ 36). Plaintiff received no response. (Id.).
Plaintiff next contacted Silverman on May 13, 2021 “seeking his trial strategy in the Hays Lawsuit,

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and again asked him about the status of experts.” (Id. ¶ 38). Silverman still offered no response
to Plaintiff’s correspondence. (Id.).
Having heard nothing from Silverman, Plaintiff emailed Lubin on May 24, 2021
“specifically request[ing] clarification on the status of the expert disclosures and whether there
was an agreement to waive the timing of expert disclosures.” (Id. ¶ 39). During a telephone
conference on that date, Lubin confirmed that he “was going to look into that issue.” (Id. ¶ 40).
Plaintiff also raised concerns about Silverman’s repeated failures to communicate with Plaintiff
about the Hays suit “and other cases” during the May 24 phone call with Lubin. (Id. ¶ 39). Plaintiff
followed-up with Lubin by letter on June 3, 2021, stating that it “was not aware of any experts
being disclosed by Hays” and explaining that “the time to do so had expired, assuming there was
no waiver of that deadline.” (Id. ¶ 40).
Silverman emailed Plaintiff on June 18, 2021 with a case assessment and the pretrial
reports. (Id. ¶ 41). Silverman therein disclosed – for the first time – that Hays retained expert
witnesses to support his claims. (Id. (adding that per Silverman, “evidence depositions of experts
was ongoing”)). Plaintiff responded by email on June 22, 2021, asking when Hays’s expert
witnesses were disclosed. (Id. ¶ 42). Silverman responded to Plaintiff’s email by providing copies
of Hays’s expert disclosures, which were undated. (Id. ¶ 44). The following day, on June 23,
2021, the Hays litigants attended a pretrial conference where Silverman reported that the defense
would call no witnesses at trial. (Id. ¶ 43). Plaintiff contacted Silverman on the same date to
inquire about GlenCrest’s defense experts. (Id.; cf. id. ¶¶ 22 (alleging that “expert witnesses were
critical” to defend against Hays’s claims), 23 (describing an expert witness retained by Langhenry
prior to Silverman’s substitution as counsel)).

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On June 24, 2021, Plaintiff emailed Silverman again with several questions about his
handling of the Hays Lawsuit. (Id. ¶ 44). Specifically, Plaintiff inquired as to (1) what fact and
expert witnesses GlenCrest planned to call at trial, (2) the dates on which Hays disclosed his expert
witnesses, (3) whether Silverman planned to object to the admission of those experts’ testimony if
they were not timely disclosed, and (4) Silverman’s strategy for rebutting Hays’s fact and expert
witnesses. (Id.). Silverman responded to Plaintiff’s email that day – falsely asserting that Hays’s
experts were disclosed to prior counsel (i.e., Langhenry) and that the relevant paperwork was
“buried somewhere in the file that was sent to [Plaintiff].” (Id. ¶ 45 (further noting Silverman’s
claim that he “d[id] not have time to dig [the requested files] up”)). In response, Plaintiff
demanded “the email or notices served with [Hays’s expert] disclosures to show when they were
served. (Id.). Silverman maintained that Hays’s experts were initially disclosed to GlenCrest’s
prior counsel and that he “did not have time to find” the information requested by Plaintiff. (Id.).
Silverman added: “I have asked [Hays’s] counsel to forward the prior disclosures to me. If they
cannot, I will make the objection and it will be overruled. There was no prejudice in the timeliness
of the disclosures, and the Court will not strike their testimony.” (Id.).
D. Plaintiff Assumes Control Over the Hays Lawsuit
On June 28, 2021, Plaintiff exercised its right under the Policy to assume control over the
Hays Lawsuit. (Id. ¶¶ 46–47). In keeping with this, Plaintiff demanded the remaining balance of
the SIR from GlenCrest and informed GlenCrest that attorney John Patton would replace
Silverman as defense counsel moving forward. (Id. ¶ 47; see also id. ¶¶ 32 (explaining that as of
April 15, 2021, GlenCrest’s legal fees defending the Hays action amounted to $93,567.39,
approximately $6,500 under the SIR obligation)). GlenCrest has yet to tender the remaining
amount owed under the SIR despite Plaintiff’s demand. (Id. ¶¶ 46, 54).

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On June 29, 2021, Patton filed a motion for substitution of judge as a matter of right
pursuant to state law. (Id. ¶ 48 (citing 735 ILCS 5/2-1001(a)(2))). Hays’s counsel privately
emailed Patton and Silverman arguing that the motion for substitution was improperly noticed.
(Id.). While Patton responded in defense GlenCrest’s motion, Silverman sided with Hays – thus
arguing against GlenCrest’s interests – and copied the state court judge on his email. (Id.).
Plaintiff contacted Lubin and Silverman “noting the impropriety of Silverman’s actions” and
asserting that Silverman must not further undermine GlenCrest or Plaintiff’s interests in the Hays
case. (Id.). In response, Lubin confirmed his understanding that Silverman was no longer serving
as GlenCrest’s counsel in Hays. (Id.).
Hays went to trial on June 30, 2021. (Id. ¶ 49). Patton moved to bar Hays’s experts arguing
that they had not been timely disclosed. (Id.). Hays countered that Silverman “agreed to the late
disclosure” on GlenCrest’s behalf. (Id.). Silverman argued against GlenCrest’s position, and in
support of Hays, by informing the state court that “he in fact had agreed to the late disclosure,
despite never informing [Plaintiff] of that agreement.” (Id. (adding that “if in fact there was such
an agreement, it was directly contrary to GlenCrest and [Plaintiff’s] interests”)). The state court
judge denied GlenCrest’s motion to bar Hays’s experts “[o]n the basis of Silverman’s
representation that he . . . agreed to the late expert disclosure.” (Id.). Patton then moved to
postpone the trial so that GlenCrest could have an opportunity to disclose its own expert witnesses.
(Id. ¶ 50). On this point, too, Silverman argued against Patton. (Id.). Silverman conceded that
while it would have been “very useful” for GlenCrest to retain an expert, GlenCrest should not be
allowed to proffer an expert because Plaintiff “knew months ago that no expert witness would be
called and did nothing in response.” (Id.). Given Silverman’s statement – which Plaintiff frames
as a misrepresentation to the court – the judge denied GlenCrest’s motion for a continuance as well

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as its motion for identify an expert witness. (Id.). On December 10, 2021, the court entered a final
judgment order in the Hays Lawsuit. (Id. ¶ 51). Hays prevailed on all three counts in his Complaint
against GlenCrest and was awarded $225,000 in damages, $666,000 in attorneys’ fees, and
$43,232.13 in expenses. (Id.). In total, Hays was awarded $934,232.12. (Id.).
LEGAL STANDARD
When considering a motion to dismiss under Rule 12(b)(6), the Court must “accept as true
all factual allegations in the amended complaint and draw all permissible inferences in [the
plaintiff]’s favor.” Bible v. United Student Aid Funds, Inc., 799 F.3d 633, 639 (7th Cir. 2015). To
state a claim upon which relief may be granted, a complaint must contain a “short and plain
statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2).
Detailed factual allegations are not required, but the plaintiff must allege facts that when “accepted
as true . . . ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A pleading that
offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will
not do.’” Iqbal, 556 U.S. at 678. In analyzing whether a complaint meets this standard, the
“reviewing court [must] draw on its judicial experience and common sense.” Id. at 679. When
there are well-pleaded factual allegations, the Court assumes their veracity and then determines
whether they plausibly give rise to an entitlement to relief. Id.
DISCUSSION
I. Cooperation Clause
Under Illinois law, “[a]ny condition in [an insurance contract or] policy requiring
cooperation on the part of the insured is one of great importance . . . and its purpose should be
observed.” Piser v. State Farm Mut. Auto. Ins. Co., 938 N.E.2d 640 (Ill. App. Ct. 1st Dist. 2010)

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(quoting Waste Mgmt., Inc. v. Int’l Surplus Lines Ins. Co., 144 Ill. 2d 178, 191 (1991)).
Cooperation clauses serve to ensure that insurers receive “fair and complete disclosure” from their
insureds, given that insurers otherwise “possess little to no knowledge of the facts surrounding a
claim.” E.g., K&S Inv. Prop. Grp. v. Westfield Ins. Co., No. 20-cv-2426, 2021 WL 148876, at *3
(N.D. Ill. Jan. 15, 2021) (citing Piser, 938 N.E.2d at 647) (internal quotation marks omitted).
To establish a breach of a cooperation clause, the insurer must allege that “(1) the insured
breached the duty to cooperate; and (2) the insurer was ‘substantially prejudiced’ by that failure.”
E.g., id. at *3 (citing Xtreme Prot. Servs., LLC v. Steadfast Ins. Co., 143 N.E.3d 128, 138 (Ill. App.
Ct. 1st Dist. 2019)); see also, e.g., Homeland Ins. Co. of N.Y. v. Health Care Serv. Corp., No. 18cv-6306, 2022 WL 2828752, at *11 (N.D. Ill. July 19, 2022); Nautilus Ins. Co. v. Russell, No. 20cv-50008, 2020 WL 8339361, at *2 (N.D. Ill. Nov. 23, 2020); Direct Auto. Ins. Co. v. Zaidan,
2016 IL App (1st) 160538-U, ¶¶ 40–41 (Ill. App. Ct. 1st Dist. 2016); United Auto. Ins. Co. v.
Buckley, 962 N.E.2d 548, 557 (Ill. App. Ct. 1st Dist. 2011). Critically, whether an insured has
breached an insurance policy’s cooperation clause is regarded as a question of fact. See, e.g., Remy
v. Travelers Home & Marine Ins. Co., No. 11-cv-2564, 2013 WL 2573952, at *8 (N.D. Ill. June
11, 2013); Buckley, 962 N.E.2d at 556–57 (explaining that breach of cooperation clause
determinations “are made by examining the particular facts of the case at hand”); Piser, 938 N.E.2d
at 649 (citing State Farm Fire & Cas. Co. v. First Nat’l Bank & Tr. Co. of Pekin, 277 N.E.2d 536,
539 (1972)); see also, e.g., Purze v. Am. All. Ins. Co., 781 F. Supp. 1289 (N.D. Ill. 1991); Zaidan,
2016 IL App (1st) 160538-U, at ¶ 40 (stating that whether there was a breach “depends on the
particular facts of each case”); Smolinksi v. Allamerica Fin. All. Ins. Co., No. 1–13–2029, 2014 IL
App (1st) 132029-U, ¶ 17 (Ill. App. Ct. 1st Dist. 2014) (reversing dismissal where there existed a
genuine issue of material fact as to violation of the cooperation clause).

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The Policy required GlenCrest to “[c]ooperate with [Plaintiff] in the investigation,
settlement or defense of [a] ‘claim’ or ‘suit.’ ” (Dkt. 23 ¶ 8 at 3). In addition, it set forth that if
Plaintiff invoked its right to “participate” in the defense, investigation, or settlement of any claim
to which the Policy might apply, GlenCrest was required to “fully cooperate” with those efforts.
(Id. ¶ 8 at 4). Plaintiff claims that GlenCrest’s failure to cooperate with its participation in the
Hays Lawsuit precludes coverage under the Policy. (Id. ¶ 52). GlenCrest moves to dismiss this
claim in part because the Policy does not “explain what ‘fully cooperate’ means.” (Dkt. 26 at 7).
The absence of a particular definition of that phrase is immaterial, however, since courts use the
usual tools of contract interpretation in analyzing contracts of insurance – including by assessing
the plain meaning of the terms at issue. Piser, 938 N.E.2d at 648 (citing Waste Mgmt., 144 Ill. 2d
at 191); see also, e.g., Homeland Ins. Co., 2022 WL 2828752, at *6 (“Under Illinois law, an
insurance policy, like any contract, is to be construed as a whole, giving effect to every provision.”)
(internal quotation marks omitted); Casas v. Am. Serv. Ins. Co., 2012 IL App (1st) 113473, ¶ 32
(Ill. App. Ct. 1st Dist. 2012) (explaining same).
GlenCrest otherwise raises several factual and policy arguments that are unsuitable for this
early stage of the case. Among other things, GlenCrest asserts that Plaintiff never advised against
waiving trial by jury and claims that “there is nothing inherently suspect about a trial by judge over
a jury.” (Dkt. 26 at 7 (adding that “defendants frequently find themselves questioning the extent
of a runaway jury’s judgment”)). GlenCrest further argues that its decision to “stem the bleed” of
attorneys’ fees “was likely the right decision.” (Id.). It also claims that the Policy does not
contemplate Plaintiff “pull[ing] coverage altogether” in the event of noncooperation, (id.), and that
“GlenCrest was as open and honest with National Fire as it could be” in any event, (id. at 8). None
of these arguments warrant dismissal because they ultimately require an “examin[ation of] the

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particular facts at hand.” 3 E.g., Buckley, 962 N.E.2d at 556–57. By contrast, a motion to dismiss
tests only the sufficiency, and not the merits, of a complaint. E.g., Iqbal, 556 U.S. at 678; Totty v.
Anderson Funeral Home, Ltd., 448 F. Supp. 3d 928, 933 (N.D. Ill. 2020) (citing Gibson v. City of
Chi., 910 F.2d 1510, 1520 (7th Cir. 1990)); Nautilus Ins. Co., 2020 WL 8339361, at *3 (denying
motion to dismiss breach of cooperation clause claim where defendant’s argument “[went] to
factual matters and defenses better addresses at a later point in the case”).
Finally, the FAC contains facts that allow a plausible inference that GlenCrest breached
the terms of the Cooperation Clause. E.g., K&S Inv. Prop. Grp., 2021 WL 148876, at *3 (citing
Xtreme Prot. Servs., 143 N.E.3d at 138). Specifically, Plaintiff highlights that GlenCrest (1)
“fail[ed] to present a competent defense to Hays’[s] claims;” (2) waived its jury demand without
first consulting Plaintiff; (3) consented to Hays’s untimely disclosure of expert witnesses; (4) failed
to identify expert witnesses to support of its defense; (5) failed to “timely and competently” report
on the status of the underlying case upon Plaintiff’s request; (6) undermined Plaintiff’s position
before the state court in Hays; and (7) made misrepresentations to the state court. (E.g., id. ¶ 52).
Plaintiff claims that it was substantially prejudiced in that GlenCrest’s unilateral actions prevented
Plaintiff from proceeding to a jury trial; compelled it to confront Hays’s expert witnesses “that
should have been barred;” and foreclosed it from presenting its own expert testimony at trial. (Id.
¶ 53). Together, these allegations suffice to “raise a reasonable expectation that discovery will

GlenCrest also supplied the Court with a letter sent to Plaintiff regarding GlenCrest’s alleged insolvency and thus its
lack of funds to defend the Hays suit in the manner desired by Plaintiff. (Dkt. 38; see also Dkt. 26 at 2 (referring to
the letter as “Exhibit A”)). Documents that “a defendant attaches to a motion to dismiss are considered part of the
pleadings if they are referred to in the plaintiff’s complaint and are central to her claim.” E.g., Pine Top Receivables
of Ill., LLC v. Banco De Seguros del Estado, No. 12-cv-6357, 2013 WL 677986, at *2 (N.D. Ill. Feb. 25, 2013) (citing
Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)) (emphasis added). Here, the
letter adduced by GlenCrest is not referenced in Plaintiff’s FAC, nor are its contents “central to” Plaintiff’s claims.
The Court therefore will not consider GlenCrest’s Exhibit A at this stage of the litigation.

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reveal evidence” to support Plaintiff’s claims. E.g., Nautilus Ins. Co., 2020 WL 8339361, at *2–
3 (citing Twombly, 550 U.S. at 555). As such, GlenCrest’s motion is denied on this ground.
II. Duty of Good Faith and Fair Dealing
The duty of good faith and fair dealing exists in every contract as “an implied promise
between the parties that they will not do anything to injure the other party’s right to enjoy the
benefits of the contract.” E.B. Harper & Co. v. Nortek, Inc., 104 F.3d 913, 919 (7th Cir. 1997);
see also, e.g., N. Am. Elite Ins. Co. v. Menard Inc., 491 F. Supp. 3d 333, 339 (N.D. Ill. 2020)
(stating that the duty “ensure[s] that parties do not take advantage of each other in a way that could
not have been contemplated at the time the contract was drafted”); Wausau Underwriters Ins. Co.
v. Pronto Staffing Servs., Inc., No. 11-cv-928, 2011 WL 6016284, at *2–3 (N.D. Ill. Dec. 2, 2011).
However, Illinois law generally does not recognize an independent cause of action for breach of
the duty of good faith and fair dealing – and applies it, instead, “as an aid in construing a contract
under Illinois law.” McArdle v. Peoria Sch. Dist. No. 150, 705 F.3d 751, 755 (7th Cir. 2013); see
also, e.g., Acheron Med. Supp., LLC v. Cook Med. Inc., 958 F.3d 637, 643–44 (7th Cir. 2020)
(citing McArdle, 705 F.3d at 755); MSPPR, LLC v. W. Bend Mut. Ins. Co., No. 21-cv-5362, 2022
WL 1129221, at *5 (N.D. Ill. Apr. 15, 2022) (citing McArdle, 705 F.3d at 755) (dismissing claim
for breach of good faith and fair dealing); JTH Tax LLC v. Rocci, No. 19-cv-8123, 2021 WL
4844099, at *2 (N.D. Ill. Oct. 17, 2021) (citing McArdle, 705 F.3d at 755) (stating that the duty
“does not provide a basis for an affirmative claim”); Heard v. Trax Recs., Inc., No. 20-cv-3678,
2021 WL 3077668, at *4 (N.D. Ill. July 21, 2021) (dismissing affirmative claim for breach of good
faith and fair dealing with prejudice); Page v. Alliant Credit Union, No. 19-cv-5965, 2020 WL
5076690, at *5 (N.D. Ill. Aug. 26, 2020) (same); Raquet v. Allstate Corp., 348 F. Supp. 3d 775,

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782 (N.D. Ill. 2018) (same); Cohn v. Guaranteed Rate Inc., 130 F. Supp. 3d 1198, 1210 (N.D. Ill.
2015) (same).
However, while the duty of good faith and fair dealing cannot stand as an independent
cause of action, it nonetheless “applies generally . . . to the performance . . . of every contract . . .
so that a failure to perform . . . a specific duty or obligation under the contract [in good faith]
constitutes breach of that contract.” Acheron, 958 F.3d at 643 (citing Comment to U.C.C. § 1203) (emphasis added); see also, e.g., N. Am. Elite Ins. Co., 491 F. Supp. 3d at 338–40 (denying
motion to dismiss where plaintiff’s breach of contract action “relie[d] on an implied duty of good
faith”); LaSalle Bank, 588 F. Supp. 2d at 858 (denying motion to dismiss breach of contract action
based on breach of duty of good faith and fair dealing; explaining that “the Court [must] restrict[]
[its] analysis to those facially viable allegations which relate to explicit contract terms”). To
establish such a breach, Plaintiff must show that the contract “[1] gave [GlenCrest] discretion in
performing an obligation under the contract and [2] [GlenCrest] exercised that discretion in bad
faith, unreasonably, or in a manner inconsistent with the parties’ reasonable expectations.” E.g.,
N. Am. Elite Ins. Co., 491 F. Supp. 3d at 338–40 (citing LaSalle Bank, 588 F. Supp. 2d at 857).
Plaintiff asserts that it owes no duty to defend or indemnify GlenCrest in Hays because
GlenCrest breached its duty of good faith and fair dealing to Plaintiff. (Dkt. 23 ¶ 52). Plaintiff
clarified in its Opposition brief that the FAC pleads no “independent claim” for breach of this duty
– but that it instead “alleged GlenCrest’s breach of its duty of good faith and fair dealing within
its declaratory judgment claim on the Policy, which is appropriate.” (Dkt. 31 at 9 (emphasis
added)). Plaintiff provides no further discussion on this issue and simply concludes that it “in fact
alleges that GlenCrest failed to meet its contractual obligations in good faith and fair dealing to
Plaintiff.” (Id.).

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Nonetheless, viewing the FAC in a light most favorable to Plaintiff, see Bible, 799 F.3d at
639, it contains sufficient facts to allege a breach of the implied duty as to the Cooperation Clause
for similar reasons as set forth above. Specifically, Plaintiff alleges that GlenCrest had discretion
over the handling of the legal defense in Hays in that it selected a defense attorney (Silverman),
(Dkt. 23 ¶ 26), agreed to a bench trial, (id. ¶ 30), and developed its own trial strategy without
Plaintiff’s input, (id. ¶¶ 28, 34, 38, 44), among other things. Plaintiff also plausibly alleges that
that GlenCrest exercised its discretion unreasonably or “in a manner inconsistent with the parties’
reasonable expectations.” E.g., N. Am. Elite Ins. Co., 491 F. Supp. 3d at 338–40. For example,
Plaintiff pleaded that Silverman advocated against Plaintiff’s positions in state court when Plaintiff
took over as defense counsel – including by misrepresenting the facts surrounding the litigation.
(Dkt. 23 ¶¶ 49–50, 52). Plaintiff also set forth that Silverman illogically failed to retain an expert
witness and failed to object to Hays’s untimely disclosure of his experts, further undermining
Plaintiff’s expectations in the underlying litigation. (See, e.g., id. ¶¶ 49–50). Because the FAC
adequately pleads that GlenCrest breached its implied duty of good faith and fair dealing as to the
Cooperation Clause, GlenCrest’s motion is denied on this ground.
III. Costs, Fees, and Punitive Damages
The Nursing Home Care Act (“Act”) is “a comprehensive statute which established
standards for the treatment and care of nursing home residents; created minimum occupational
requirements for nurses[’] aides; and expanded the power of the Illinois Department of Public
Health to enforce the provisions of the Act.” Childs v. Pinnacle Health Care, LLC, 926 N.E.2d
807, 818 (Ill. App. Ct. 2d Dist. 2010) (citing Harris v. Manor Healthcare Corp., 111 Ill.2d 350,
358 (1986)). Nursing home residents may file suit against the owners and operators of their
facilities who violate any provision of the Act. Id. (citing 210 ILCS 45/3-601). The Act specifies

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that entities found liable under the Act “shall pay the [plaintiff’s] actual damages and costs and
attorney’s fees.” 210 ILCS 45/3-602.
According to Plaintiff, the Policy expressly excludes coverage for “attorneys’ fees or
attorneys’ expenses taxed against [GlenCrest]” as well as for “exemplary and punitive awards.”
(Dkt. 23 ¶¶ 55–56). As such, Plaintiff seeks a declaration that the Policy excludes all such coverage
in relation to the Hays Lawsuit. (Id.). GlenCrest does not dispute that the Policy contains these
exclusionary terms. (See generally Dkts. 26, 34). Still, it moves to dismiss the FAC on the grounds
that “[a]ttorneys’ fees are part of the damages that are owed to a successful plaintiff in . . . actions
[brought under the Act].” (Dkt. 26 at 11). GlenCrest’s argument elides the point, however,
because “[t]he only defendants [directly] liable for damages, costs, and attorney fees under the Act
. . . are the owners and licensees of the nursing home.” Eads v. Heritage Enters., Inc., 787 N.E.2d
771, 780 (2003) (citing 210 ILCS 45/3-601, 3-602). While GlenCrest might be held liable for the
award in Hays, the Act says nothing about GlenCrest’s insurers, like Plaintiff. Relatedly, Plaintiff
does not argue that the Policy exclusion extinguishes Hays’s ability to demand payment from
GlenCrest in the state court action. Instead, Plaintiff merely contends that the plain terms of the
Policy disclaim its own liability for attorneys’ costs, fees, and punitive damages arising from the
Hays Lawsuit.
Finally, GlenCrest asserts that “Plaintiff’s interpretation of the contract is against public
policy and would lead to unjust results.” (Dkt. 26 at 12–13; see also Dkt. 34 at 10). Again, such
arguments are inapt at this juncture, where the Plaintiff’s burden is to establish the sufficiency of
the FAC rather than prevail on issues of fact. E.g., Iqbal, 556 U.S. at 678; Totty, 448 F. Supp. 3d
at 933 (citing Gibson, 910 F.2d at 1520) (“A motion to dismiss tests the sufficiency of a complaint,
not the merits of the case.”); Chubb Indem. Ins. Co. v. 21 E. Cedar, LLC, No. 10-cv-7111, 2014

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WL 2619469, at *9 (N.D. Ill. June 12, 2014) (affirming denial of motion to dismiss despite
defendants’ public policy concerns, because there existed issues of fact). GlenCrest ultimately
provides no cognizable reason to dismiss the FAC’s allegations concerning the Policy’s scope of
coverage for costs, fees, and punitive damages.
CONCLUSION
GlenCrest’s Motion to Dismiss [26] is denied. Hays’s Motion to Dismiss [29] is stricken
as moot for the reasons set forth in his Motion to Withdraw, (Dkt. 41).

Date: August 1, 2022

____________________________________
Virginia M. Kendall
United States District Judge

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