## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 08

- 1997 H EA LT H C ARE I ND USTRY L IAB IL ITY I NSURANCE P R OGRAM, P la intif f-A pp ellee, v.
M OM ENCE M EAD O W S N UR S I NG C ENTE R, I NC ., an d J ACO B G RAFF, D efend a nts-A pp ella nts.

Appeal from the United States District Court fo r the C entral D istricto f Illino is. No . 07 C02005

—David G . Bernth al, Magis trate Judg e.
A RG UE D J AN UA RY 9, 2009

— D ECI DE D M AY 20, 2009

Befo re M A NI ON, R OV NER, a nd S YKES, C ircu it Judges. M A NI ON, C ircu it Judge. Va ne s s a Ab s he ra nd Ly nd a M itc h ell su ed M om en c e M ea d ow s N u rs in g C en te r, Inc ., an d its ow n er an d op er at or, Jac ob G ra ff (co llec tiv ely “Mom en ce ”)
. The y so ug htda m ag es f o rthe m se l ve s an d on be h alf ofth e U n ite d Sta te s a n d th e St at e o fIl lin ois f oral l ege d vi ol ati ons ofthe fed eralFa l se Clai m s Act2 N o. 08

- 1997 ( “FCA ”) , 31 U
. S. C. § 3 729 et seq. , and the I l l i noi s W hi stl eb l o we r R e wa r d a n d P r o t e c t i o n Ac t ( “ I WR P A” ) , 74 0 I LCS 175/ 1 e t s eq. The H eal th Care Ind ustr y Li abi l i ty I nsurance Pro gr am ( “H eal thcap”) fi l ed thi s a cti on s eek i ng a decl ar at i o n th a ti th a d n o d u t y t o d e fe n d Mo me n c e i n th a t l a wsui t under a com m er ci alge nera ll i abi l i ty pol i cy i t had iss u ed to M om ence. The di str i ct c ourtf ound that H ea l th ca p ha d no duty t o de fend M om en ce , a nd Mo me n c e a p p e a l s . We a ffi r m.

I. V a n e s s a A b s h e ra n d L y n d a Mi t c h e l la r e f o r me re mp loyees at M om en ce’s nu rsing cen ter. In t h e ir th ird am ended com pla i n t ( w hi ch w e wil lr eferto her eafteras th e “u nde r l y i ng co m pl aint ”) , Absh er an d M i tc he l ls o ug ht tr ebl e dam age s forexposing tho usands off al se charg es M om en c e su b m itt ed to M ed ica re an d M ed ica id . Th eir theo ryo fr eco ver y was pre dica ted o n the sta tu to ry r eq uir em ent that M edi car e a nd M edi cai d provi ders m ay not subm i t c lai m s forse rv i ces that f ai l ed to m eet“pro fess i o na l l y r e c o g ni z e d s tanda r ds o fh e a l th c a r e . ” 4 2 U. S
. C. § 1 320c

- 5( a) ( 2)
. A ccor ding to A bsherand M i l l er, M om ence vi ol ate d that r equi re m ent by cer ti fyi ng o n i ts annual cos t re port s that i t was m ee ting the r equi re d standard o f car e when, i n f act, M om ence’ s m anage m ent knew that i t was not
. The unde r l y i ngc o m pl aintpr o vi des de ta i l ed al l eg at i o ns of how M om en ce w as no t m eeting th e s tan d ard of care f orM edi car e a nd M edi cai d. I t a l l eges, for i nstance , that M om en c e fa iled to m ain ta i n t h e m in im u m st affin g lev elsN o. 08

- 1997 3 f ornurse and nurse as sistants, f ai l ed to ensur e i ts re si dents r ecei ved thei r m edi cati ons as presc rib ed by thei r physi ci ans, f ai l ed to ensur e r esi dents r ecei ved adequate nutr i ti on a nd as si sta nce with m eal s, and f ai l ed to provi de the re si dents w i th cl ean and dr y bed s, clo thes, and regu lar baths. The underl yi ng co m pla i nt devo tes s e v e r a lp a g e s t o fu r th e re l ab o r a t i ngthe s e a l l e g e d s t a nd a r dof

- c a r e f a i l ur e s . Inc l ud e d in tho s e p a g e s i s a de t a i l ed descri pti on o fth e re sul ti ng i nj uri es pati ents suffer ed fro m M om ence’ s s ubsta nd ar d care , such a s s cabi es, se psi s, s ei zu r es , a nd de ath. T h e u n d er lyin g c om p lain t s et s fo rt h fou r c ou n ts . In c ou n t on e, th e pla in tiffs se ek st at u to ry a n d t r eb le dama g e s un de r the F CA f o r M o men c e ’ s s ub mi s s i o n of f al se cl ai m s to the U ni ted St ate s. I n count tw o, they seek sta tutory a n d t re bl e dam age s under the IW RPA f or M om en c e’s subm i ssi on o ff al se cl ai m s t o the s tat e o f I l l i noi s. In counts thre e a nd f our, A bsherand M i tchel lse ek dam ages unde rthe a nt i

- r et al i at i o n pr o vi si o ns o fthe FCA and I W RPA , r espect i vel y. M i tchel l cl ai m s that M o m en ce t er m i na te d he ri n r et al i at i o n fo rc o m pl aini ng t o Mo men c e ’ s ma na g e men tabout th e f a i l ur e s t o p r o v i de adequate ca re . A bsheral l ege s co nstr ucti ve disc harg e f o rthe s ame r ea so n. A s Absher and M i tchel l ’ s s u i t pr oce eded, H eal thcap br o ug htthi s ac ti o n s ee k i nga de cl ar at i o n tha t i t ha d no d ut y to de fe n d or ind em nify M om en ce in th e un d erl yi ng sui t ba sed o n a c om m er ci algen er all i abi l i ty pol i cy H eal thcap i ssued to M om en c e in 2004
. That pol i cy provi des M o m en ce wi thm ultipl e l i ne s o fc o ve r ag e. Re l ev an t4 N o. 08

- 1997

T he p art o f the PL cov era g e relev an t to this ap p eal p ro v id es: 1 W e wil l pay thos e s um s thatthe i ns ur ed be c om es l eg al ly obligate d to pay as “dam ages” because ofi njur y t o w hich thi s i ns ur anc e appl i es . . . . The i nj ur y m u st b e cause d by a “m ed i c al i nc i dent

. ” .
. . The “m edi c al i nc i dent ” m us taris e outofthe pr ovi di ng o r w ithho l di ng o fthe f ol l owin g pro fes s i ona l s er vi c es : M edi c al, s ur gical, den t al, or nur s i ng t re at me n t t o a p e r s o n . . . . W e wi l l h a v e th e r i g ht an d d u ty to d efe n d an y “s u it” see k in g th o se “d a m a g es ”
. . . . C G L cov era g e A states in relev an t pa rt: 2 W e w ill pa y tho se sum s that th e insu r e d b eco m es lega lly obl i gat ed t o pa y a s dam ag es be c aus e of“bo di l y i nj ur y” or “pr ope rty dam age ” to w hich th is insur an ce ap p lies. W e w ill have the r i ghtan d duty t o de fen d th e i ns ur ed a gai ns tan y “su it” seek ing tho se d am ag es. The pol i c y fur the r defi ne s “bo di l y i nj ur y” as “b od ily i nj ur y, sickn e ss or d isease su staine d b y a p erso n, inclu d ing d eath re su lti n g fro m an y o f th es e a t a n y tim e.” T he p ertin en t pa rt of C G L cov era g e B states: 3 W e wil l pay thos e s um s thatthe i ns ur ed be c om es l eg ally obli gat ed t o pa y a s dam age s be c aus e of“pe rs ona l an d ad v ertising injur y ” to w hich th is in sur an ce ap p lies. W e w ill have the ri ghtan d duty t o de fen d the i ns ur ed a gai ns tan y “su it” seek ing tho se d am ag es. (co n tin u ed ...) to thi s a pp eal ar e the c om m er ci alge nera ll i abi l i ty cove ra ge ( “CG L cove ra ge” ) and the profess i onall i abi l i ty covera ge ( “PL cove ra ge” )
. The CG L cov er ag e has two se parat e 1 cove ra ge sect i ons , CG L cove ra ge A , wh i ch pro vi des 2 c o v e r a g e fo rb o di l y i nj ur y an d pr o pe r t y da mag e , a nd CG L co ve r ag e B, whi cha ddr es se s per son ala nd a dve r ti sing 3N o. 08

- 1997 5

(
. . . c on t i nu e d) 3 The p oli cy defines “pers onal and ad verti si ng inj ury” to m ean an i nj ur y, i nc l udi ng c ons equen t i al “bodi l y i nj ur y, ” ar i s i ng o ut of on e or m or e of the follow ing offen ses:

. . . . O ral o r w ritten p u b lication of m ater ial tha t sla nd ers or libels a p erso n or o rg an iza tion o r d ispa rag es a p erso n’s or org an iza tion ’ s go od s, p ro d u cts or serv ices.

. . . . O ral o r w ritten p u b lication of m ater ial tha t vio lates a per s on’ s r i ghtofpr i vac y. T ha t exclu sion p ro v id es: 4 Thi s i ns ur anc e does no tappl y t o a ny c l ai m or “ s ui t ” by or on b eh a lf o f: A per s on ar i s i ng o utofan y: Refus al t o e m pl oy thatpe rs on; Ter m i nat i on ofthatpe rs on’ s e m pl oym en t ; or E m p loy m e n t -related p rac tices, p olicies, acts or o m issions, suc h a s co ercio n, d em otio n, ev alu atio n, reassig nm en t, d iscipline , defam ati on, ha ra s s m en t, hu m iliation or d iscrim in a tio n d ir ec te d at th a t p er so n . . . . i nj ur y l i ab i l i ty
. In a ddi ti o n, the C G L c o ve r ag e co nt ains an em plo ym ent- re l ate d practi ces excl usi on appli cable to 4 b o th CGL c o v e r a g e A a nd CG L c o v e r a g e B. A pp ro xi m ate l y a yearafterfi l i ng sui t, H eal thcap m ove d f orsum m ar y j ud gm ent, ar gui ng tha t i t had no du ty to defe nd o r i nd em ni fy M om ence. In a c om prehensi ve6 N o. 08

- 1997

T he p arties con sente d to p ro ceed ing b efore th e m ag istrate 5 ju d g e. S ee 2 8 U .S.C . § 6 3 6 (c). opi ni on, the m agi str ate j u d ge hel d that Heal thcap had 5 no du ty to defe nd M om ence. The cour t further h eld that the i ssue ofin d em n i fi cati on was notr i pe f orco nsi deratio n be c au se M om en c e h ad ye t t o in c u r an y liab ility in the und er l yi ng acti on. I t ther ef or e dism i sse d th e acti on w i thout prej ud i ce with l eave f or M om ence to re i nstat e the s uitafterthe und er l yi ng pro ceedi ngs bec am e fi nal and l i abi l i ty had been dete rm i ned. M om ence appeal s.

II. On app ea l, M om ence ass er ts that the m agi str ate j ud ge er re d i n concl ud i ng tha t Heal thcap had no duty to defen d i t i n the unde r l y ing li ti g at i o n. W e r ev i ew the l ower co urt’ s g ra nt o fsum m ar y j ud gm ent, a s w el las i ts const ructi on o fthe com m er ci alg en er all i abi l i ty pol i cy, d e n ov o. Lye r l a v. AM CO Ins . Co. , 5 3 6 F
. 3 d 6 8 4 , 6 87 ( 7th Cir
. 2008 )
. Since thi s i s a dive rs i ty acti on, st at e la w ap p lies

. R LI Ins. Co
. v. Co nse co, Inc. , 543 F .3d 3 84, 39 0 ( 7th Cir. 2 008)
. The part i es proce ed und erthe ass um pti on that I l l i noi s l aw appli es; so wil lwe. M om en ce fi r sta r g ue s th atthe magi st r at e j udg e’ s o pi nion “con tain[s] an inh eren t incon sisten cy req uiring reversa l

. ” Ac c o r d i n g t o Mo me n c e , th e i n c o n s i s t e n c y i s the l ower co urt ’s gra nti ng o fsum m ar y j ud gm ent o n the du ty to defe nd wh i l e pos tponi ng j u dgm ent o n the du ty to i nd e mni fy. I fthe r e r e a l l y we r e n o du t y t o de fe nd , M om en c e p oin t s ou t, th en th e m ag ist ra te j u d ge w ou ldN o. 08

- 1997 7 have hel d that ther e w as no d uty to i nd em ni fy e i ther, since the duty to defe nd i s br oaderthan the duty to i nd em ni fy. BA SF AG v. Gr e atAm
. As s ur . Co. , 522 F.3d 813 , 819 (7th C ir. 2008 ) (app lyi ng I ll inois l aw ). Bu t b e cau se th e low er cou rt l e fto pe n the que s t i o n o fi nd e mni fi c a t i o n, M o men c e r e a ds the m agi str ate j ud ge’ s acti on as adm i tting tha t a poss ibi l i ty st i l le xi st s that the po l i cyc o ve r s th e unde r l y i ngs ui t. And because the possibi l i ty ofco ver age tr i gge rs t h e duty to d efe n d , s e e, e . g. , Gib r al t ar Cas. Co. v. Sa rge nt& Lu ndy, 574 N
. E
. 2d 664, 673 (I ll

. A p p . Ct
. 1991), M o m en ce th erefore ar gues that the l ower co urt w ro ngl y hel d that Heal thcap ha d n o du t y t o de fe nd

. T h e “ in h er en t i n c on sis te n c y” M om en c e b elie ve s is prese nt i n the m agi str ate ’ s deci si on i s o fno m om ent t o us. W here , as her e, the du ty to defe nd i s br oader than th e duty t o i nde m ni fy, a fi ndi ngo fno duty t o de fen d ne c es sa rily pr ecl ud es a fi nd i ng o fa du ty to i nd em ni fy. As the I l l i nois S upr eme Co ur t st at ed i n Cru m & Fo rs t e rv. Res ol ut i on Tru s tCorp. : I n case s s uch as the instant case wh ere no duty t o d efe n d ex ist s a n d th e fa c ts alleg ed d o n otev en fall potenti ally w ithi n the i nsurance cove ra ge, such f acts all eged cou ld obv iously neve r ac t ually f al lwi th i n the sco pe ofco ver age . U nd erno scenar i o coul d a duty t o i n d em n i fy a ri se. Cl ear l y, wh er e there i s no duty t o d efe n d , th er e w ill be n o d u ty to ind em n ify . .

. . 620 N
. E.2 d 1073, 10 81 ( I l l

. 19 93) ( i nter n al c itat i ons om i tt e d ) ; s e eal s o S okol & Co. v. At l
. M ut
. Ins . Co. , 43 0 F
. 3d 417, 42 1 (7th C ir. 20 05 ) ( “S i nc e th e cl ai m a t i ss ue i n C r u m &8 N o. 08

- 1997

T h e ca se c ite d b y t h e m a g ist ra te ju d g e t o su p p o rt h o ld in g o ff 6 o n d ec id in g t h e d u ty to in d em n ify , PremcorUS A , Inc. v. A m er i can H ome A ss uranceC o. , 40 0 F .3d 523 ( 7th C ir. 20 05 ), is no t ap p licab le he re be c aus e i t i s one of the r ar e c as es wher e the dut y t o de fen d and the dut y t o i ndem ni fy a re ind epe nden tofe ac h o the r. The um bre l l a i ns ur anc e pol i c y a ti s s ue i n Premcord id no t ob liga te the um brell a i nsurer to d efend the i nsured because the prim ary in su re r ’s p o lic y p ro v id ed u n lim ite d d efe n se co sts
. Id

. at 529. H o w e v e r , th e u mb r e l l a i n s u r e r w a s s t i l l o n t h e h o o k t o i n d e mn i fy th e in su r e d fo r a n y li a b i l i t y p a s t t h e p r i m a r y in su r e r ’s in su ra n ce lim its
. S e e id

. at52 5. Thus , the c our ti n Premcor c ould o nly rul e on the dut y t o i ndem ni fy a ft erl i abi l i t y i n the u n d er ly in g su it h a d d efi n iti v el y b ee n d ec id ed

. Id

. at 530. Fo rsterdi d no t ev en pot e nt i al l y f al lwithi n th e scope of c ov er ag e fo r p u rp os es of th e d u ty to d efe n d , i t log ica lly f ol l owed thatthe cl ai m would not actuallyfall w ith in th e s c o p e o fc o v e r a g e f o rp u r p o s e s o fth e d u t y t o i n d e mnify. ”). I n thi s ca se , j us t as i n C rum & Fo rster, the du ty to defe nd subsum es the du ty to i nd em ni fy. H ol ding that 6 a n i n s u r e rh a s n o d u t y t o i nd e mn i fy th e r e f o r e f o l l o ws i nexor abl y fro m hol ding that an i nsurer ha s n o du ty to d efe n d . A c c or d in g l y , if th e m ag ist ra te j u d ge p ro p er ly r ul e d tha tHe a l thc a p di d n o th a v e a du t y t o def en d, H eal thcap w as l i kewis e e nti tl ed to sum m ar y j ud gm ent o n th e i ss ue of i nde m ni fi ca ti o n. W e ne ed no t co ns i derthe i ssue an y fu rther, however, bec ause H eal thcap has not c ro ss -ap p ea led

. See G reenl a w v . U nited Sta tes , 12 8 S
. Ct. 2559 , 25 64 ( 2008) (“ [I] t t ake s a cr oss - appeal to j usti fy a rem ed y i n favor of an ap p ell ee.”).N o. 08

- 1997 9 T h at br in gs u s b ac k t o th e d u ty to d efe n d , th e s ole issue on ap p eal. I ll inois courts de term ine an i n s u rer’s d ut y to de fend by com p aring th e all egation s in the u nd erlyi ng com p lai nt to the relevan t p rovisi ons of th e insu rance pol i cy. O ut b oar d M ar i ne, 6 0 7N. E
. 2 d a t1 2 1 2
. “ An insu rer i s o b lig ated to defen d i ts insu red i f th e un d erlyin g c om p lain t c o n t a in s a lleg at ion s t h at p ot en tia lly fall w i thi n the sco pe ofco ver age . ” Lyer la , 5 36 F
. 3d at6 88 ( ci ting Gen
. Age nts Ins . Co. of Am
. , Inc . v. M i dw est S port i ng Goods C o. , 828 N
. E.2 d 1 092, 1098 ( I l l

. 2005 ) )
. I n othe r w or d s, if anyp o r t i o n o fthe sui tp o t e nt i a l l y f a l l s wi thin the s c o pe o fthe c o v e r a g e , the insur e ri s o b l i g a t e d t o de fe nd

. V a lley Forge Ins. Co. v. Swiders ki Elecs
. , Inc. , 86 0 N
. E.2 d 307, 31 5 (Ill. 20 06 ) (n ot in g t h at ins u r e r h a s d u ty to d efe n d “e ve n if o nl y o ne o fs ev er althe o r i es o fr ecov ery a l l eg ed i n the c om pla i nt f al l s withi n the potenti alco ver age o fthe p oli cy”)
. A n i nsurerm ay r efu se to defe nd o nl y i f“i t i s cl ear fro m th e fa c e o f t h e u n d er lyin g c om p lain t t h at th e a ll ega ti ons setf or th in the com pla i nt f ai lto st ate f acts th atbr i ngthe c as e wi th i n, o rpo te nt i al l y wi th i n, the cove ra ge ofthe pol i cy. ” Id

. M om en c e a rg u es th at th e a lleg at ion s c o n ta in ed in co unt s o ne and two o fthe unde r l y i ngc o m pl aint

— the F CA cl ai m s a nd thei r I W RPA co unterpar ts

— p ot e n t ially fall w ithin th e scop e of th e PL coverage and the C G L coverage . A s quot ed abov e, the PL cover age o bl i gat es H eal thcap to de fe nd a nys ui ts e e k i ngda mag e s “ b e c a us e o f ” an “inj ury” t ha t i s “c au se d b y a ‘ m edi ca li nc i den t’ ” ar i sing out of the pr ovi ding orwithhol ding ofvar i ous pr ofess i onal serv ice s, in c lu d in g m ed ica l or nursing tr eatm ent. M om ence poi nts to the al l ega ti ons of physi cal harm to th e re si dents10 N o. 08

- 1997 i ncor pora ted i n counts one and tw o a s th e “i nj ury. ” That physi cal harm to the re si dents ar ose out of a m ed ical i nc i den t, M o m en ce a sse r ts, b ec au se ( ac co r di ngt o the und er l yi ng co m pla i nt) i t r esul te d from the provi si on o f sh od d y m ed ical an d nu rsing trea t m e n t . M o m e n c e th e refore concl ud es that the underl yi ng com p laint see ks dam age s
“ b e c a u s e o f ” th e p h y s i c a lh a r m t o the r e s i d e n t s . As M om en c e p u ts it, “ [ b ] utf orthe i na dequa te c ar e an d re sul ti ng bo dil y inj ury, ther e wo u ld h ave been no l ost se rv ice s a n d n o fa lse cla im [s].” M om ence uses a s i m i l archai n ofl ogi c to p lace counts o ne a nd t wo p o t e nt i a l l y u nd e rthe u m bre l l a o fCG L cove ra ge A , wh i ch co ver s bo dily inj ury and p ro p er ty dam age . CG L cove ra ge A obl i gat es H eal thcap to pay tho se sum s M om ence beco m es “l ega l l y oblig ate d to pay as dam age s b e ca us eof

‘b o di l y i nj ur y ’ ” an d t o de fen d M om en c e “ ag ain st an y ‘s u it’ s ee kin g t h os e d am ag es .” ( em phasi s a dd ed). A s with i ts P L cove ra ge ar gum ent, M o m en ce c l ai m s th atthe i njury to the r es i den ts i s th e ess enti al f oundati on of counts one and tw o ofthe und er l yi ng co m pla i nt. W i thout such i nj ury, M om ence conte nd s, th e F CA c l ai m s an d the c o m pan i o n s ta te
- l aw I W RPA cl ai m s wou ld n ot have been bro ught. M om ence ass er ts th ata ny da m ag es tha t m ayr esu l t fr o m c o unt s o ne a nd tw o ar e ther ef or e “beca use of” the “bodi l y inj ury” suffer ed by M om ence re sidents, thus t ri gge ring H eal thcap’ s duty t o de fe nd

. Ra th e rth a n t r i g g e r i n gth e d u t y, th a tl i n e o fa r g um en t effecti vel y bypasse s i t. The i nj uri es to the re si dents as al l ege d by the pl ai nti ff s r el ate bac k t o M om ence’ s co stN o. 08

- 1997 11

M om en c e c ont en ds thatthe under l yi ng co m pl ai ntis rea l l y no t 7 a qui t am ac t i on bec aus e the FC A an d I W RPA c l ai m s i n the und erl ying sui t ar e without m eri t. Sp ec ifi cal ly, M om ence ar gue s that the unde rl yi ng c om pl ai ntf ai l s t o s etf or th the s p ecific f al s e c l ai m s thatwer e s ubm i t t ed. W e t ake no pos i t i on on the m erits of the u n d e r l y i n g suit’s FC A an d IW R P A claim s. W e m erel y note that e ven ifthos e c la im s w ere m eri tl es s, that w o u l d n o t a ffec t th e a n a ly sis o f th e d u ty to d efe n d

. See, e . g. , (co n tin u ed ...) re port s t o the g ove rnm ent where i t ce rt i fi ed t h at i t pr ovi ded qual i ty ser vi ces and c ar e. Pl ai nti ff s cl ai m M om ence knew that was f al se. T he st atuto rydam age s they s eek r e s ul tfr o m t ho s e a l l e g e dl y f a l s e fi l i ng s , a nd notfro m an y a l l eg ed bo di l y i nj ur y t o the r es i den ts
. Al th ou g h the al l eg at i o ns i n the unde r l y i ngc o m pl aintde ta i l i ngthe i nj uries suffer ed by M om ence re si dents put a hum an touch o n the othe rwis e a dm i ni str ativ e a ct o ff al se bi l l i ng, the y ne e d no t b e pr o v e n b y the pl a i nt i ff s t o p revail. U nd er th e FC A an d th e I W R PA , th e plaintiff s do no t ha ve t o s ho w tha t an y da m ag es r es ul te d fr o m the sh od d y c ar e. Se eHor izon W . In c. v . St
. Paul Fi r e& M ar i ne Ins . Co. , 21 4 F
. S up p . 2 d 1074, 10 77- 79 ( E.D. Cal

. 20 02) (c itin g 3 1 U .S.C
. § 3 72 9(a )) (“L iab ility u n d er th e F C A is base d sol el y upon the cr eat ion o r prese ntati on o ff al se cl ai m s to the g o ve r nm en t, no t upo n the unde r l y i ngc o nd u c t u se d to es ta b lish th e fa lsit y of s u c h a c laim .”), aff’d, 45 F ed. Appx. 7 52 ( 9th Ci r . 2 00 2)
. Ins te ad, a l lthe pl ainti ff s ne ed to s ho w i s t ha t M o m en ce b i l l ed th e g o ve r nm ent forse rv i ces and a l eve lo fcar e that i t knew it w as not provi ding. See U nited St a t e s ex rel. Fo w ler v. C a rem a rk 712 N o. 08

- 1997

(
. . . c on t i nu e d) 7 V al l ey ForgeIns. C o. , 86 0 N .E.2d at 31 5 (no tin g t h a t gro u nd less, f al s e, or fra udul en t a ll eg at i ons i n the unde rl yi ng s ui tdo n ot a ffec t th e d u ty to d efe n d ). See, e . g. , Zur i ch A m. Ins . Co. v. O’Har a Reg’ l Ct r . f o rRe ha b. , 529 8 F .3d 916 , 92 1-22 ( 10 th C ir. 20 08 ) (notin g in a sim ilar F C A case that“[ t ] he gove rn m en t ’ s i nj ur y was not c aus ed by [ the nur s i ng hom e’ s] f ail ure t o prov ide prof es si onal s ervic es , but ins tead re s ul t ed fro m [ the nur s i ng h om e’ s ] s ubm i s s i on offal s e and f raud ulent cl aim s f or re im bu rs em ent.
. . . [ T]he problem w as notthe ac t ual l eve l ofs er vi c es pr ovi ded .

. . butr athe r that[ the nu r s i ngh ome ] bi l l e d f orse r vi c e s i tdi d n otpr ov i de

— nam el y, en h a n ce d ser v ic es .”); Hor izon W . Inc . v. St
. Pau l Fi r e & M a r i ne Ins. C o. , 4 5 F e d. App x . 7 5 2 , 7 5 4 ( 9 th Ci r . 2 0 0 2 ) ( un pu bl i s he d) (affirm ing the d istrict cou rt’ s ho ld i n g t h at insu rer h ad no d u ty to d efe n d insu red in F C A suit u nd er p ro fessi on al liab ility (co n tin u ed ...) R X, L
. L
. C. , 4 96 F
. 3d 73 0, 740

- 41 ( 7th Ci r . 2 00 7) ( pr o vi di ng ele m en ts of FC A cla im ); see also Sca ch itti v. U B S F in. Serv s. , 831 N
. E.2 d 544, 55 7 ( I l l . 2 005) ( noting the si m i l ar i ty betw een th e FC A and the I W RPA and fi nd i ng ca se l aw o n th e F CA “ i ns truct i ve ” r eg ar di ngthe i nt er pr et at i o n o fthe I W R PA ). Other cour ts have re cogni zed thi s di stincti on be tw een the pr oo fr equi re d fo r the F CA cl ai m and the conduct unde r l y i ng the f a l s e c l a i ms. Th e y un i f o r ml y ho l d that an in su re r is n otob liga te d to d efe n d a q u i ta m su it m er ely because the i ns u rer w oul d have t o defe nd the i nsured agains t a suit for d a m a ges resu lti ng from the insu red ’s conduct und er l yi ng the qui ta m act ion
. T he cas e upon 8N o. 08

- 1997 13

(
. . . c on t i nu e d) 8 p o lic y ); Je nki ns v. S t
. P aul Fi re& M ar i ne Ins. C o. , 8 Fed. Ap px. 573, 5 7 4 (8t h C ir . 2 0 0 1 ) (u n p u b lis h ed ) (sam e); M / G Trans p. Servs. , Inc. v . WaterQ u ality In s. S y n d icate , 234 F .3d 9 7 4 , 978 ( 6th Cir

. 2000) ( ho l di ng, i n sui tt o de t e r m i ne i ns ur e r ’ s du t y t o de fe nd F CA s ui ts ee ki ng r ec ove ry ofgove rn m en tfunds p aid af t erthe ins ured all egedly subm it te d fa lse rec ords ofClean W aterAct com p l i a nc e, that insu red ’ s arg u m en ts in f av or of a d u ty to d efend w ere “ thin ly d isgu ised attem p ts to b oo tstrap liab ility f or FCA vi ol at i ons i nt o the c ove rage pr ovi ded by the e nvi ro nm en ta l p o llu tio n p o lic ie s” ). w h ich M om en c e p rin c ip ally relie s, Wat t s Ind us t r i e s , Inc
. v. Zur i ch Am e r i ca n Ins uranc eCo. , 18 Cal

. Rptr. 3d 61 ( Cal. Ct. App. 2 00 4) , do es no t ho l d t o the c o nt r ary . Al th o ug h the unde r l y i ngs ui t i n Watts beg an as a qui tam ac tio n on behal fo fso uthern Cali forn ia m u n icip alit ies , th e m u n icip alitie s t h em se lve s s oo n int er ve n ed

. Id

. at64
. They a sse rt ed cl ai m s fordam age s on thei r own behal fag ai nst wat ers y st ems manuf ac tu r er s who al l eg edl ys o l d the m uni ci pal i ti es b el o w-g r ade pa r ts
. In decidi ngtha t th e m an u fac tu re rs ’ in su re r h ad a d u ty to d efe n d th e s u it und erthe “pro pertydam age ” p or ti on o fthe CG L pol i cy, the c ourt fo c u sed excl usi vel y o n the dam age s the m unici

pa lities so ught: the cos t ofr epl acing the subst andard parts an d th e c os ts of fu tu re w at er qu alit y m on ito ri n g. Id

. at 68. N o m en tion w as m ade ofthe qui tam cl ai m s; they did notente r i nto the c ourt ’ s a nal ysi s. Des pi te the l ac k o f su ppo r ting pr ec ede nta nd a l o ngl i ne ofcas es hol din g to the c ontr ar y, M om ence never thel ess per si st s i n pres singi ts po si ti o n tha t th e F CA a nd I W RPA14 N o. 08

- 1997 cl ai m s a re atl eas t pot enti al l y c ove re d. M om ence poi nts o u t th a t th e f a c t u a l a l l e g a t i o n s o f th e u n d e r l y i n g c o mp lai nt cont ro l, not th e legaltheory alleged

. Th e un d erl y i ngc o m pl aintc o nt ains a pl etho ra of f ac tu ala l l eg at i o ns detai l i ng the r esi dents’ per sonali nj uri es. Base d o n tho se al l ega ti ons, M om ence asser ts that the s uitm ust be cove re d by Heal thcap’ s pol i cy. M o m en ce is c o r r ec t th atthe f ac tu ala l l eg at i o ns i n the c om p lain t, an d n otth e le ga l lab els a p lain tiff u se s, co n tr ol. Se e, e . g. , Lexm ark Int ’ l, In c. v. Tr ans p. Ins . Co. , 76 1 N
. E.2 d 1214 , 1221 (I ll

. A p p . Ct
. 2001). B ut f act u a l a ll egation s are onl y i m port ant i n so faras theypoint to a theo ryo fr eco ver y. Se e, e . g. , U SF&G v. Wi l ki n Insula t i on Co. , 57 8 N
. E.2 d 926, 93 2 (I l l

. 19 91) ( “[ A ] n i nsurerhas a duty t o defe nd i ts in s u r ed i f any th eo ry of r ecov ery all eges p oten tial cove rage.” (seco nd em p ha sis add ed )) ; Il l
. Em c as c o In s . Co. v. Nw. Na t’l C a s. , 7 85 N. E. 2d 90 5, 9 08 ( I l l

. App. C t. 20 03 ) ( no ting th atduty t o de fen d a r i se s “ifthe i ns ur an ce c o ve r s th e l i abi l i ty on a ny se t o ff acts co n sist ent with the al l ega ti o ns ne ede d to su ppo r t r ec overy on any theory raise d in t hec om pl ai nt ”) (e m p h as e s a d d ed ). A n d it is im p os sib le to co ns true th e unde r l y i ng co m pl aint as r ai sing an y th eo r y o fr ec o ve r y b as ed o n b o di l y i nj ury. Nei th ero fthe pl a i nt i ff s i n the un de r l y i ng s ui t s e e k s da mag e s f or pers o na li nj ur y c a us e d b y s ub s t a nd a r d me di c a lc a r e . Nor coul d they

— A bsherand M i tchel lwere em plo yee s o f M om ence, notr esi dents, and they l ack sta nd i ng to sue onN o. 08

- 1997 15

M o m ence suggest s thatAb sher“ m ay ha v e stan d ing ” to 9 bri ng a c l ai m ag ai ns tM om en ce on beh al fofhe r m othe r, who w as a r es id en t ofM om ence and died there a few w eeks bef ore Absher l eftM om en c e’ s e m pl oy. ( Em phas i s adde d. ) Butthe und erl ying com plainti s absolute ly devoid ofany f actual a lle g a tio n s su g g es tin g su ch a c la im
. Se e E. E. O. C. v . Le e ’s Log C abi n, Inc. , 5 4 6 F
. 3 d 4 3 8 , 4 4 3

- 4 4 ( 7 th Ci r . 2 0 0 8 ) ( “ Fe de r a l pl e a ding rul es requi re the plai nti ffto ‘ giv e th e d efendan t f airnoti ce o f w h a tth e . . . c l a i m is a n d th e g r o u n d s u p o n w h i c h it r e st s. ’” ( quo t i ng B ell A tl. C o rp . v . Tw o m b ly, 1 2 7S . C t. 1 9 5 5 , 1 9 6 4 (20 0 7 )). The un derlying com plaintdoes not m enti on A bshe r’s m other. N or does i t c ontai n any al le gati on suggest ing thatM om ence w as atf aul tf or h er d eath

. I ndee d, i tdoe s no te venl i s tthe e s t at e of A b sher ’ s m oth er as a p arty to the suit. W hile an insu rer cer tain ly has a du ty t o d efend its i nsured agains t any c om plaintthat le a v es o p en t h e p o ssi b ili ty o f co v er a g e, Il l
. E m casco Ins. C o. , 785 N .E.2d at 90 7, that d u ty is p rem ised on the fa c t s th e p arties to th e u n de r l y i n gc om pl ai ntac t ual l y a l l eg ed i n the i r c om pl ai nt, no t on thos e f act s thata nonparty to th e suit cou l d ha ve al l eged ha d it d ecid ed to su e as w ell. th e residen ts’ beh alf

. S e eBAS FAG , 5 22 F .3d at82 0- 21; 9 Kit t ay v . Al l stat eIns . Co. , 39 7 N
. E.2 d 200, 20 3 ( I l l

. A pp . Ct. 1979 ). M om en ce m akes tw o other argum en ts in favor ofcoverage , bo th o fwh i ch l ack m er i t. M om ence m ai ntai ns that A b sh er ’s a n d M itc h ell’s cla im s o f em ot ion al d ist re ss in c ou n ts th re e a n d fou r (th e re ta liat ion cla im s) a re p ro p er ly c l a s s i fi e d a s c l a i ms f o r“ b o di l y i nj ury” u nd e rCG L c ov er ag e A , w h ich d efin es “b od ily inj u ry ” a s “ b od ily inj u ry , sick n es s o r d ise as e s u st ain ed by a p er so n .” M om en c e a tt em p ts to s id es te p Il lin ois ca se law cle ar ly16 N o. 08

- 1997

S ee SCR M e d. Tr a ns p. Ser vs . , Inc . v. Br o w ne, 781 N
. E.2d 564, 571 10 (Ill

. A p p . C t. 20 02 ) (collectin g cases restrictin g term “b od ily inj ury” in i n su ra nce poli cy to “actual physic al inj ury,” as oppos ed t o br oade ni ng i tt o i nclud e m en t al an gui s h a nd m en ta l d ist re ss). hol ding to the c ontr ar y byc onte nd i ng tha t the pol i cy 10 i tse l f cl ass i fi es such cl ai m s as “bodi l y i nj ury. ” W e nee d not describe in detai lthe tor ture d i nterp re ta ti on o fthe pol i cy M om ence prese nts to supp or t that ass er ti on. For ev en ifM om ence i s co rr ect that the pol i cy counts em oti onal dist re ss as “bodi l y inj ury”

— and i t does not

— th e em p loym en t-rel ated prac tic e s exc lusion forecloses coverage o fa n y c lai m s fordam age s a ri si ng fro m co unts thre e a nd f our ofthe und er l yi ng co m pla i nt. S pe c i fi c a l l y, tha te xc l us i o n pr o v i de s that the CG L cove ra ge do es n ot exte nd to “a ny cl ai m ” bya “pers on ar isin g ou t o f an y . . . [ t] er m i nat i on of thatpe rs on’s e m pl oym e nt [ ] or [e]m plo ym ent-rela ted p rac tices , pol i ci es, act s o r om i ssi ons, such a s co er ci on, . . . def am ati on, haras s m e nt, hu m il iation or di s cr i m ina ti on d ire c te d atth at p er so n .” ( Em pha se s adde d. ) In co unt s th r ee a nd f o ur, M i tc he l la nd A b sh er al l ege thatM om ence re tal i ate d against them because t h ey h ad at tem pted to cal lto the att enti on o f M om en c e’s m an ag em en t t h e fa ilu r e to p ro vid e t h e re q u isi te l eve l of car e. They al so al l ege that th e re tal i ati on cul m i nated i n M om ence ter m i nating M i tchel l ’ s e m plo ym ent a nd constr ucti vel y di schar ging Absher. Those al l ega ti ons f al lsquar el y withi n the em plo ym ent- re l ate d pr ac ti ce s ex cl us i o n.N o. 08

- 1997 17

A bsher s tat ed in the l ett er that s he w as “taking an em ergency 11 m en ta l h ea lth le a v e o f ab se n ce .” M o m en ce ’ s ar g um en ts a g ains t th e a ppl i ca ti o n o fthe excl usi on a re unc on vinci ng. M om ence conte nd s that A bsher ’ s a l l ega ti ons ofco nstr ucti ve disc harg e do not am ou nt to an “em p loym en t pra ctice” be cau se sh e left M om en c e o n h er ow n . B u t a co n st r u c t ive d isc h ar ge is th e le ga l eq u iva l e n t o f a for m al t er m in at ion, P a. State P o lice v. Su ders , 54 2 U.S
. 12 9, 141 ( 2004 ) , and a t er m i nati on i s una m bi g uous l y wi th i n the e m pl o y m en t ex cl us i o n. M o r eo ve r, c o ns truct i ve di sc ha r g e i s a n a l l eg at i o n c o ncerni ng an em plo yer ’ s “ [ e] m plo ym ent- re l ate d practi ces, po l i ci es , a ct s o ro m i ssi ons ” an d thus f al l s wi th i n the ambi t o fthe e m pl o y m en t- r el at ed pr ac ti ce s ex cl us i o n. M om ence al so ar gues that the fol l owing al l ega ti on i n count thre e f al l s o utsi de o fthe em plo ym ent- re l ate d pr ac ti ce s e xc l us i o n: “M o m en ce M ea do ws[ ’ s] mana g ement f axed Pl ai nti ff A bsher ’ s l ett er of re si gnati on to p ote nti al em plo yer s in an e ff or t t o p re vent her fro m fi nd i ng o ther em plo ym ent. ” The excl usi on does notco ver that al l ega 11 ti on, M om ence ass er ts, bec ause A bsherwas no l onge r a Mo men c e e mpl o y e e wh e n the a l l ege d f a xingo c c ur r e d. The excl usi on, however, i s no t l i m i ted t o al l ege d w ro ngs occu rri ng du ring the em p loym en t r elationsh ip. R ath er, th e ex cl us i o n b ar s an y c l ai m “ ar i sing outo f ” an y “[ e] m plo ym ent- re l ate d .

. . act s,” i ncl ud i ng di scr i m i natio n . Cf
. Am. Al l i an c e In s . Co. v. 12 12 Re s t
. Gr ou p, L. L
. C. , 794 N
. E.2 d 892, 90 0 ( I l l

. A p p. Ct. 20 03) ( “Post ter m i nati on acts o fdef am ati on o r othe r em plo ym ent- re l ate d practi ces18 N o. 08

- 1997

The un derlying com plaintal le ges thatM om ence “fil ed 12 fab ricate d cha rg es a g a i n st bo th P lain tiffs w ith th e Illino is D ep a rt m en t o f P ro fes sio n a l R eg u la tio n .” ca n r ea so nabl y a r i se di r ectl y a nd pr o xi m at ely fr o m the term ination.”). T h e ret alia tio n alle ge d h er e is u n eq u ivo c ally

“ e mpl o y men t
- r e l a t e d. ” I t wa s M o men c e ’ s a l l e g e d a t t e mpt to “se ttl e the sc or e” w i th A bsherf oract i ons she too k d u rin g t h eir em p lo ym en t re lat ion sh ip . In d ee d , th e o n ly re aso n M om ence w as i n posse ssi on o fA bsher ’ s r esi gnatio n let te r w as by virt u e o f its em p l oy m en t re lat ion sh ip w i th her

. The excl usi on there f or e a pp l i es to that al l ega ti o n o fr et al i at i o n. That br i ngs us to M om ence’ s fi nalar gu m en t in f avo r o fa duty t o de fen d. M o m en ce c l ai m s th atthe al l eg at i o ns ofr eta l i ati on ba sed o n i ts u se o fA bsher ’ s r esi gnati on l ett e r, i t s t e r mi na t i o n o fMi t c he l lf o rs pe a k i ngo uta g ai nst th e defi ci en ci es i n r es i den t ca r e, a nd i ts wro ng ful re p or tin g of b ot h A b sh er an d M itc h ell to th e Il l i n ois D ep ar tm en t o f P ro fes sio n al R eg u lat ion are p ot e n tia lly 12 cove re d und er the PL cover age . The PL cove ra ge conta i ns no excl usi on f orem ploym ent- re l ate d practi ces, so th e o n ly iss u e is w h et h er th os e a lleg at ion s p ot en t i a l ly f al lwithi n the sco pe of the PL co ver age . To show that they potenti al l y a re withi n the sco pe of that cove ra ge, M om ence turns to the PL co ver age ’ s defi ni ti on o f“inj ury. ” Th at defini ti on incl ud es “p er sonali nj ury. ” Because “per sonal i nj ury” i s no t s peci fi cal l y defi ned in the PL cover age , M o men c e i mpo r t s the de fi ni t i o n o f“per s o na la nd a d-N o. 08

- 1997 19

ver ti si ng i nj ury” fro m CG L cove ra ge B . Th e defi ni ti on o f “pers onal and a dvert i si ng i nj ury” f ound there inc l ud es pu b l i s hingo r a lo rwr i t t e n s t a t e men t s tha te i the r dispar age a perso n’s se rv i ces orvi ol ate a perso n’s r i ght t o pr i va cy . Acco r di ngto M o m en ce , the abo ve a l l eg at i o ns con cern either d isp aragem en t (in th e case of M itche ll ’s te r m i na ti o n a nd the wro ng fulr epo r tingo fM it ch el la nd A bsherto the I l l i noi s nurs i ng r egu lat ors) o r i nvasi on o f pri vacy( i n the case o fA bsher ’ s r esi gnati on l ett er, wh i ch conta i ned detai l s about her m othe r’s d eath). There f or e, M o m en ce c o nc ludes , tho se a l l eg at i o ns f al lwi th i n the sco pe ofthe PL cover age . A g lar in g p ro b lem w ith th is a rg u m en t is th at inju ry is defined i n the PL cover age to incl ud e “perso nali nj ury, ” not “p er so n al and adve r t i s i ng i nj ur y . ” Bu te v e n i fwe e xc e pt M o m en ce ’ s g r afti ng of “a dve r ti singi nj ur y ” i nt o the PL c ov er ag e’s d efin itio n of “inj u ry ,” M om en c e’s arg u m en t is s t i l la l ose r

— it runs a g r o und o n the pl ain t ex t o fthe PL cove ra ge. Th e P L co ver age does notco verj ust any p erson al injury. I t states that an inj ur y , p erson al orotherwi se , “m us t be ca us ed bya ‘ m edi ca li nc i den t. ’ ” The “m ed i cali nci dent, ” in turn, “m ust a ri se out ofthe provi ding orwithhol ding ofthe f ol l owing profess i onal se r vi ce s: [ m ] edi ca l, s ur g i ca l, de nt al, o rnur singt r ea tment to a per son. ” N owh er e has M om ence expla i ned how M i tc he l l ’ s a nd A bs he r ’ s al l eg ed i nj ur i es a r i se fr o m the “p roviding or w ithh olding” of “p rofessional services.” So ev en if it is t ru e t h at th e re ta liat ion A b sh er an d M itc h ell experi enced w as an “inj ury” as the PL cover age defi nes that ter m , i t was notan inj u ry caused by a “m edi cal i nci dent”

— and thus not cove re d und erthe PL cover age .20 N o. 08

- 1997 III
. The w ro ngdoi ngs forwh i ch the pla i nti ff s in the und er l yi ngs ui t attem pt to ho l d M o m en ce l i ab l e ar e th e fi l i ng o ffal se c l ai m s an d the unl awfule m pl o y m en t ac ti o ns tak en ag ai nst Absher and M i tche ll, notthe i nj uri es su ffer ed bythe M om ence r es i den ts
. Be ca us e no ne o fthe pol i cy provi si ons cove r such cla i m s, H eal thcap does not have a duty t o defe nd M om en ce in the und er l yi ng sui t. W e A FFIRM .

5- 20- 09