Opinion ID: 1434546
Heading Depth: 2
Heading Rank: 1

Heading: MedPro's Defense and Indemnity Coverages

Text: MedPro first challenges the district court's denial of its motion for a declaration of noncoverage. Substantively, this motion concerned whether Dr. Kim's claim came within the purview of MedPro's coverages, apart from the issue of any misrepresentation on the insurance application. It is not clear, however, what type of motion this was. MedPro's motion does not invoke any rule of civil procedure, and neither party on appeal has explained how it should be treated. The district court's memorandum order sets forth the standards for motions brought under Rules 50 and 59 of the Federal Rules of Civil Procedure, though neither applies. Only the issue of misrepresentation was submitted to the jury; the question of the applicability of MedPro's policy was not. MedPro's motion might be read as inviting the district court to find facts and draw legal conclusions, as though the matter had been tried to the court; MedPro argued that [r]egardless of whether or not Dr. Kim made a material misrepresentation in his application, the evidence conclusively demonstrates that the Medical Protective Policy . . . does not provide coverage for the Jennings' claim. The district court's opinion, however, does not comport with the requirements of Rule 52. At oral argument, the parties agreed that no issue of material fact existed regarding the question of coverage and characterized the issue to be resolved as one of law. We will take the parties at their word. Because there is no issue of fact to be resolved, we treat MedPro's appeal on this issue as if the district court rendered summary judgment, see FED.R.CIV.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Hicks v. Midwest Transit, Inc., 479 F.3d 468, 470 (7th Cir.2007), and apply de novo review, see Massey v. Johnson, 457 F.3d 711, 716 (7th Cir.2006). MedPro maintains that its duty to defend and indemnify Dr. Kim was not triggered because the Jenningses' lawsuit was not a claim first filed under its policy. The resolution of MedPro's argument requires us to interpret and apply the policy language, which the parties agree is controlled by Illinois law. Illinois courts construe the language of an insurance policy according to well-established rules of contract interpretation. See Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 223 Ill.2d 352, 307 Ill.Dec. 653, 860 N.E.2d 307, 314 (Ill.2006); Hobbs v. Hartford Ins. Co. of the Midwest, 214 Ill.2d 11, 291 Ill.Dec. 269, 823 N.E.2d 561, 564 (2005). That is, the policy should be construed as a whole and every provision given effect. Valley Forge, 307 Ill.Dec. 653, 860 N.E.2d at 314; Country Mut. Ins. Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 305 Ill.Dec. 533, 856 N.E.2d 338, 342-43 (2006); Cent. Ill. Light Co. v. Home Ins. Co., 213 Ill.2d 141, 290 Ill.Dec. 155, 821 N.E.2d 206, 213 (2004). We will interpret and apply policy language as written, assuming the policy is unambiguous and does not contravene public policy. Hobbs, 291 Ill.Dec. 269, 823 N.E.2d at 564. Claims-made and occurrence-based insurance policies insure different risks. In the occurrence policy, the risk is the occurrence itself. In the claims made policy, the risk insured is the claim brought by a third party against the insured. Cont'l Cas. Co. v. Coregis Ins. Co., 316 Ill.App.3d 1052, 250 Ill.Dec. 293, 738 N.E.2d 509, 518 (2000). A typical claims-made policy covers acts and omissions occurring either before or during the policy period; for prior acts, the policy may provide full retroactive coverage or it may only cover claims arising out of acts and omissions after the `retroactive date' specified in the declarations. BARRY R. OSTRAGER & THOMAS R. NEWMAN, HANDBOOK ON INSURANCE COVERAGE DISPUTES (Aspen Publishers 13th ed.2006), Vol. 1, § 4.02[b], p. 129; see also ERIC MILLS HOLMES, HOLMES'S APPLEMAN ON INSURANCE, 2d (Lexis Law Publishing 1998), Vol. 3, Ch. 16, § 16.4, p. 315. Insurers issuing claims-made policies protect themselves against liability for old occurrences by including a `retroactive date' specifying the earliest occurrence to be covered, no matter when the claim is made. Nat'l Cycle, Inc. v. Savoy Reins. Co., Ltd., 938 F.2d 61,62 (7th Cir.1991). A `claims-made and reported' policy requires not only that the claim be first made during the policy period, but also that it be reported to the insurer during the policy period. INSURANCE COVERAGE DISPUTES, Vol. 1, § 4.02[b], p. 130. A very restrictive type of claims-made insurance will require not only that the claim be both made and reported to the insurer during the policy period, but also that the claim arise out of wrongful acts that take place after the inception of the policy and during the policy period. Id. The claims-made policy MedPro issued to Dr. Kim is a claims-made and reported policy retroactive to July 1, 1997. That is, it covers acts or omissions occurring any time after the July 1, 1997 retroactive date for which a claim is first filed and reported to the insurer during the term of the policy  July 6, 2001 to July 6, 2002. Terry Jennings's surgery occurred on January 9, 2001, well within the policy's retroactive period; the dispute here is about whether the Jennings claim was first filed during the term of the policy. The policy identifies three ways a claim is filed for purposes of MedPro's duty to defend and indemnify. The first is receipt, by the Insured, of a written notice of legal action for damages. The second is receipt, by the Insured, of a written notification of an intention to hold the Insured responsible for damages. In either case, the insured must report the receipt of notice to MedPro in order to trigger coverage. The third way a claim is considered filed is receipt by [MedPro] during the term of the policy, of written notice of a medical incident from which the Insured reasonably believes allegations of liability may result. The first of these possibilities is fully satisfied here: Having never before received written notice of the Jenningses' lawsuit or their intent to hold him responsible for damages, Dr. Kim received a copy of their summons and complaint on August 22, 2001, and reported it to MedPro the next day. Although this occurred within MedPro's policy term, MedPro argues this was not the first filing of the Jennings claim. MedPro takes the position that Delancy's April 6, 2001 notice to Phico was the first filing of the Jennings claim, and argues at length that only Phico's policy covers the claim. This shift in focus is understandable but misplaced. Whether MedPro has a duty to defend and indemnify is determined by the language of its own policy, not Phico's. Delancy's notice to Phico was not a filing of the Jennings claim under any of the three definitions of that term in MedPro's policy. The first two definitions of filed involve receipt, by the Insured,  of written notice of an action for damages or an intent to seek damages. Wabash Hospital is not MedPro's insured, Dr. Kim is. Whatever the hospital might have known or suspected about the Jenningses' intentions, the first time Dr. Kim received written notice of an action for damages or any intention to hold him responsible for damages was August 22, 2001, when he received the Jenningses' summons and complaint, and he timely reported that action to MedPro. The third definition of filed is not implicated here. MedPro argues that this straightforward interpretation of the policy language renders the word first in the phrase first filed surplusage, and removes any distinction between a claim filed during the policy term and a claim first filed during the policy term. This argument is unpersuasive. Dr. Kim might have received written notice from the Jenningses of their intent to file a claim against him before his MedPro policy term commenced, and then later received and transmitted the complaint after the term commenced. Under this scenario, Dr. Kim's receipt and reporting of the complaint during the policy term would constitute a filing, but not a first filing, because of his prior receipt of written notice of the intent to hold him responsible for damages. The first filed language in the policy appears to deny coverage if one of the methods of filing a claim is performed before the policy term commences and another method afterward, even though both pertain to the same matter. We need not exhaust all the possible ways in which a claim may be filed without being first filed. Suffice it to say that our reading of the policy does not necessarily render the word first in first filed superfluous. These interpretive arguments aside, the centerpiece of MedPro's argument is the Illinois Appellate Court's decision in Coregis. That case involved a dispute between two insurance companies, Continental and Coregis, over which one was responsible for paying the settlement of an insured's claim. Both insurers had issued claims-made policies to the insured, an accounting firm, with Continental's beginning when Coregis's terminated. Coregis's policy provided that if during the policy period the insured first becomes aware of any potential claim, the insured must give immediate written notice of such act, error or omission to the insurer, and that any claims subsequently made against the insured arising out of that act, error or omission shall be considered to have been made and reported during the policy period. Coregis, 250 Ill.Dec. 293, 738 N.E.2d at 512. Continental's policy, in turn, excluded coverage for [a]ny wrongful act which happened prior to the `effective date' of the policy, if on such date [the insured] knew or could reasonably foresee that such wrongful act might be the basis for a claim. Id. The insured accounting firm in Coregis became aware of a potential claim and reported it to Coregis the day before its policy expired. Later, during Continental's policy period, the accounting firm was sued for the wrongful act which formed the basis of the potential claim previously reported to Coregis. Continental paid to settle the claim and sued Coregis for contribution. In a lengthy opinion, the Illinois Appellate Court affirmed the trial court's grant of summary judgment for Continental. Because the wrongful act or omission occurred during Coregis's policy period and the insured gave Coregis notice of the potential claim before that period expired, the Court held that Coregis's coverage was triggered and the lawsuit later filed fell within the Coregis policy language. Id. at 519-20. Because Continental's policy specifically excluded coverage for wrongful acts occurring before its effective date, however, the court held that Coregis's policy alone covered the loss. Id. at 522. We find Coregis distinguishable from this case. The Continental policy there, unlike MedPro's here, was a restrictive form of claims-made coverage: it limited coverage to claims made and reported during the policy period arising from acts that also occurred during the policy period; wrongful acts occurring before the policy's effective date were specifically excluded, unless the insured did not know or have reason to foresee they might form the basis of a claim. MedPro's policy, in contrast, does not exclude coverage for wrongful acts occurring before the policy period; to the contrary, it provides retroactive coverage for acts or omissions occurring after July 1, 1997, which includes the Jennings claim. MedPro maintains that Coregis stands for the proposition that consecutive claims-made policies cannot cover the same loss. But the Coregis court itself discouraged such a broad reading of its holding. Id. at 523, n. 3 (nowhere in this court's opinion do we state that two claims made policies can never cover the same loss). Because Dr. Kim first received written notice of the Jennings claim when he received the summons and complaint on August 22, 2001, and because he timely reported that claim to MedPro, the claim was first filed during the policy's term and its coverages apply.