Court Opinion

ID: 3001098
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:12:46.685641+00
Date Added: 2024-06-11T13:22:59.175883
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

Nos. 05-2038 & 05-2416
MEDICAL PROTECTIVE COMPANY,
                                           Plaintiff-Appellant,
                               v.

HYUN KIM, TERRY JENNINGS, EARL H. JENNINGS,
and ILLINOIS INSURANCE GUARANTY FUND,
                                        Defendants-Appellees.
                        ____________
          Appeals from the United States District Court
               for the Southern District of Illinois.
          No. 02 C 4121—G. Patrick Murphy, Judge.
                        ____________
ARGUED NOVEMBER 8, 2006—DECIDED NOVEMBER 13, 2007
                   ____________

  Before CUDAHY, KANNE, and SYKES, Circuit Judges.
  SYKES, Circuit Judge. This insurance-coverage dispute
involves back-to-back claims-made medical malpractice
liability policies issued by two different insurers. A
malpractice suit was filed against the insured doctor
during the term of the second policy based on an alleged
surgical error committed and reported during the term of
the first. After the first insurer became insolvent, the
second insurer, Medical Protective Company (“MedPro”),
brought this action against its insured seeking a declara-
tion that its policy does not cover the risk.
   The MedPro policy provides coverage for claims “first
filed” within its policy term arising from acts or omissions
2                                  Nos. 05-2038 & 05-2416

that occurred during a retroactive period that includes
the date of the surgery at issue in this case. MedPro
contended that because the error was reported to the
predecessor insurer, the claim was not “first filed” within
the term of its policy. In the alternative, MedPro sought
rescission or reformation of its policy because the insured
doctor did not disclose the surgery when asked about
potential claims or suits on his application for insurance.
The insured doctor counterclaimed for a declaration of
coverage, breach of contract, and also sought statutory
penalties for vexatious and unreasonable denial of an
insurance claim under Illinois law. See 215 ILL. COMP.
STAT. 5/155. After a jury found for the doctor on the
misrepresentation claim, the district court entered a
declaration that MedPro had a duty to defend and indem-
nify the doctor. The court awarded breach-of-contract
damages and statutory penalties under section 5/155.
  We affirm the judgment except for the imposition of
statutory penalties. We see no reason in this record to
disturb the jury’s verdict on MedPro’s misrepresentation
claim. As to coverage, the doctor’s receipt of the malprac-
tice complaint, which he promptly sent to MedPro, was
the first “filing” of the claim as that term is defined in
the policy, and it occurred during MedPro’s policy term.
That the prior insurer was given notice of the potential for
liability does not take this claim outside MedPro’s
coverages. The district court’s award of statutory penalties,
however, was improper under section 5/155; an insurer’s
conduct is not considered vexatious and unreasonable
under the statute if there is a bona fide dispute about
coverage, as there was here.

                     I. Background
 On January 9, 2001, Terry Jennings was admitted to
Wabash General Hospital in Mt. Carmel, Illinois, after
Nos. 05-2038 & 05-2416                                   3

complaining of severe abdominal pain. The next day
Dr. Hyun Kim removed her gallbladder in a procedure
known as a laparoscopic cholecystectomy. Before the
procedure, Dr. Kim met with Jennings and her husband to
discuss complications associated with the surgery, includ-
ing certain unique risks posed by Jennings’s prior surger-
ies and the presence of preexisting scar tissue.
  Jennings was discharged from Wabash Hospital a few
days after her procedure but returned within a day or
so, again complaining of severe abdominal pain. This
readmission, within 15 days of Jennings’s initial discharge
from the hospital, triggered automatic peer review, a
process in which the hospital’s medical staff discuss and
evaluate the appropriateness of a patient’s course of
treatment.
  During Jennings’s second admission, Dr. Kim performed
another procedure and discovered that bile was seeping
into her abdominal cavity, though he could not pinpoint
the source of the leak. To alleviate this problem, he
inserted a device to drain the bile from the cavity. This
leakage was not the patient’s only complication; she also
developed aspiration pneumonia after her second proce-
dure. She was discharged about two weeks later, but
all was not well.
  When Dr. Kim examined Jennings during a follow-up
visit at the end of January 2001, he found that her bile
leak had not resolved; he referred her to a hospital
in Evansville, Indiana, to be examined by a gastroenter-
ologist, Dr. Bello. Further testing revealed a surgical
injury—a nick or cut—to Jennings’s common bile duct.
Dr. Bello told Dr. Kim of his findings, and a decision was
made to send Jennings to Indiana University Hospital
and Clinics to receive treatment from Dr. Howard, a
specialist in hepatobiliary surgery. Dr. Howard agreed
with Dr. Bello’s assessment that Jennings’s injury oc-
4                                  Nos. 05-2038 & 05-2416

curred during the removal of her gallbladder. Dr. Howard
provided Dr. Kim with periodic updates of Jennings’s
condition until she was discharged in the middle of
March. At some point after Jennings left the Indiana
facility, Dr. Kim discussed with Wabash Hospital’s CEO,
Jim Farris, whether Jennings should be charged for the
services leading to her complications.
   Wabash Hospital’s Quality and Risk Department also
became involved. During Jennings’s postoperative care, her
husband requested her medical records—a possible sign
the Jenningses were contemplating legal action. At this
point, Cynthia Delancy, Wabash Hospital’s Quality and
Risk Manager, thought there were sufficient indicia of risk
to notify the hospital’s insurer. On April 6, 2001, Delancy
submitted a notice of claim form to the hospital’s insurer,
Phico Insurance Company (“Phico”). The hospital’s Phico
policy covered the period from July 6, 2000, through July
6, 2001, and provided claims-made liability coverage for
the hospital and Dr. Kim as an additional insured. In the
notice Delancy indicated that while no claim had yet been
filed, Dr. Kim might have injured Jennings during her
gallbladder procedure. Delancy also informed Phico of Mr.
Jennings’s request for his wife’s medical records as well as
the complications that arose after the second procedure.
Notably, Dr. Kim was unaware of both Delancy’s submis-
sion to Phico and Mr. Jennings’s request for his wife’s
medical records. Phico acknowledged receipt of the notice
of claim on April 11, 2001.
  On June 19, 2001, Dr. Kim applied for a claims-made
policy from MedPro in anticipation of changing his status
from an employee of Wabash Hospital to that of an inde-
pendent provider. Section VI of the MedPro application
required disclosure of known loss information; there, Dr.
Kim noted a potential claim related to a 1999 laparoscopic
cholecystectomy that resulted in a common bile duct
injury. In that matter the patient and her family had
Nos. 05-2038 & 05-2416                                        5

expressed dissatisfaction with the complications result-
ing from her procedure; the patient’s attorney also sent
Dr. Kim a letter threatening legal action. After listing this
1999 surgery as a possible claim, Dr. Kim checked a box
indicating that he had no knowledge of any other claims,
potential claims, or suits, “including without limitation,
knowledge of any alleged injury arising out of the ren-
dering or failing to render professional services which
may give rise to a claim.”
  A MedPro underwriter, David Hoagland, reviewed and
eventually accepted Dr. Kim’s application.1 MedPro issued
a policy covering claims made during the policy term of
July 6, 2001 to July 6, 2002, with a retroactive date of
July 1, 1997.2 The policy requires MedPro to indemnify and
defend:
      A. IN ANY CLAIM FOR DAMAGES, FIRST FILED
    DURING THE TERM OF THIS POLICY, BASED ON
    PROFESSIONAL SERVICES RENDERED OR WHICH
    SHOULD HAVE BEEN RENDERED AFTER THE
    RETROACTIVE DATE, BY THE INSURED OR ANY
    OTHER PERSON FOR WHOSE ACTS OR OMIS-
    SIONS THE INSURED IS LEGALLY RESPONSIBLE,
    IN THE PRACTICE OF THE INSURED’S PROFES-
    SION AS HEREINAFTER LIMITED AND DEFINED.
    IF REPORTED TO THE COMPANY, THE FOLLOW-
    ING SHALL BE DEEMED TO BE A CLAIM
    FILED DURING THE TERM OF THIS POLICY:

1
  The exact issuance date of the policy is not contained in the
record.
2
  The original listed retroactive date was November 1, 1997, but
was later changed to July 1, 1997. Pending approval of his
application, Dr. Kim was covered under binders of insurance
issued by MedPro. Kim was covered under such a binder when
the Jenningses filed suit.
6                                 Nos. 05-2038 & 05-2416

       (a) the receipt, by the Insured, of a written notice
       of legal action for damages as described above, or
       (b) the receipt, by the Insured, of a written notifi-
       cation of an intention to hold the Insured responsi-
       ble for damages as described above, or
       (c) the receipt, by the Company during the term of
       the policy, of written notice of a medical incident
       from which the Insured reasonably believes al-
       legations of liability may result. In order to be
       deemed a claim, notice of a medical incident
       shall include all reasonably obtainable informa-
       tion with respect to the time, place, and circum-
       stances of the professional services from which
       liability may result and the nature and the extent
       of the injury, including the names and addresses
       of the injured and of available witnesses. (Empha-
       sis added.)
  The Jenningses filed and served a malpractice suit
against Wabash Hospital and Dr. Kim on August 22, 2001.
Dr. Kim’s office faxed part of the complaint to MedPro
the following day. William Meadows, a senior claims
specialist in MedPro’s legal department, received the fax
and spoke by telephone to Dr. Kim. After receiving a copy
of the complete complaint and summons, Meadows re-
viewed Dr. Kim’s underwriting file and assigned an
attorney, Paul Lynch, to defend him. Phico, believing it
was responsible for Dr. Kim’s defense as well as the
hospital’s, likewise assigned counsel. Not wanting to
unnecessarily duplicate each other’s efforts, the insurers
communicated among themselves and resolved that Phico
should defend Dr. Kim.
  In February 2002 Phico was declared insolvent and
placed in liquidation. Dr. Kim then looked to MedPro,
which initially accepted his defense but then backpedaled
all the way to federal court. MedPro filed this diversity
Nos. 05-2038 & 05-2416                                    7

action against Dr. Kim and the Jenningses seeking a
declaration that it had no duty to defend or indemnify;
the insurer argued that because Wabash Hospital noti-
fied Phico of the possibility of a claim stemming from Terry
Jennings’s surgery, the claim was not “first filed” during
MedPro’s policy term and therefore was not covered.
Alternatively, MedPro sought rescission or reformation of
its policy because Dr. Kim had not disclosed Terry
Jennings’s surgery as a “potential claim or suit” on his
MedPro insurance application.
  Dr. Kim counterclaimed against MedPro and the Illinois
Insurance Guaranty Fund (“the Guaranty Fund”), alleging
MedPro owed primary coverage and had breached its
policy by failing to defend. Dr. Kim also sought statutory
penalties under Illinois law for vexatious and unreasonable
denial of an insurance claim. See 215 ILL. COMP.
STAT. 5/155. As against the Guaranty Fund, Dr. Kim
alleged that it owed him excess coverage. The Guaranty
Fund cross-claimed against MedPro, and MedPro eventu-
ally agreed to pay the Fund’s attorney’s fees and costs
in the underlying malpractice case if the court determined
that MedPro did, in fact, have a duty to defend and
indemnify Dr. Kim.
  A jury trial was held on MedPro’s claim that Dr. Kim
misrepresented on his insurance application that he had
no knowledge of any potential claims during the retroac-
tive period (other than the 1999 claim not at issue here).
Dr. Kim testified that when he was filling out the insur-
ance application, he did not think Jennings’s treatment
and complications were likely to produce a claim. Dr. Kim
explained that the Jenningses had never expressed
dissatisfaction with Mrs. Jennings’s care, and he had
no knowledge of Mr. Jennings’s request for his wife’s
medical records or that Delancy had reported these
events to Phico. Dr. Kim contrasted these circumstances
with those surrounding the only other potential claim
8                                  Nos. 05-2038 & 05-2416

against him—the 1999 surgery he disclosed on the in-
surance application. The patient in that surgery had ex-
hibited outright hostility and threatened to sue Dr. Kim.
MedPro’s underwriter testified he would not have ap-
proved Dr. Kim’s application if he had been aware of
the potential Jennings claim.
  After the close of evidence, MedPro moved for judgment
as a matter of law pursuant to Rule 50 of the Federal
Rules of Civil Procedure. In support of its motion, MedPro
cited Dr. Kim’s testimony about Jennings’s injury—
specifically his explanation of a mental checklist he uses
when determining whether particular treatment might
give rise to a claim—as well as Hoagland’s testimony
that he would not have approved the policy application if
Dr. Kim had disclosed a potential claim by the Jenningses.
The district court denied MedPro’s motion. After closing
arguments, the Jenningses moved for judgment as a
matter of law based on the evidence that MedPro issued
its policy after it was notified of the filing of the
Jenningses’ lawsuit. Dr. Kim joined in that motion. The
court took these motions under advisement pending the
jury’s verdict.
  The jury found Dr. Kim did not knowingly make any
misstatement or omission on his MedPro application.
MedPro then renewed its motion for judgment as a mat-
ter of law on the misrepresentation claim and, in the
alternative, asked for a new trial. MedPro also filed a
motion for a declaratory judgment that its policy did not
cover the Jennings claim. Dr. Kim, in turn, moved for
judgment on his counterclaim for a declaration of coverage,
breach of contract damages, and statutory penalties.
  The district court denied MedPro’s motion for judg-
ment as a matter of law or for a new trial on the misrepre-
sentation claim. The court likewise denied MedPro’s
motion for judgment on its claim for declaratory relief. The
Nos. 05-2038 & 05-2416                                     9

court granted Dr. Kim’s motion, declared that Medpro
had a duty to defend and indemnify Dr. Kim, and awarded
breach of contract damages. The court also granted
Dr. Kim’s motion for statutory penalties—including costs
and attorney’s fees—for vexatious or unreasonable denial
of an insurance claim under section 5/155. The Guaranty
Fund then moved for its costs and attorney’s fees in the
underlying malpractice suit as well as its costs and fees
in the declaratory judgment action. The district court
granted the motion. MedPro appealed.

                     II. Discussion
A. Medpro’s Defense and Indemnity Coverages
  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 ex-
plained 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 ques-
tion 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 evid-
ence conclusively demonstrates that the Medical Protec-
tive Policy . . . does not provide coverage for the Jennings’
10                                  Nos. 05-2038 & 05-2416

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 (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 indem-
nify 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-estab-
lished rules of contract interpretation. See Valley Forge
Ins. Co. v. Swiderski Elecs., Inc., 860 N.E.2d 307, 314 (Ill.
2006); Hobbs v. Hartford Ins. Co. of the Midwest, 823
N.E.2d 561, 564 (Ill. 2005). That is, the policy should be
construed as a whole and every provision given effect.
Valley Forge, 860 N.E.2d at 314; Country Mut. Ins. Co. v.
Livorsi Marine, Inc., 856 N.E.2d 338, 342-43 (Ill. 2006);
Cent. Ill. Light Co. v. Home Ins. Co., 821 N.E.2d 206, 213
(Ill. 2004). We will interpret and apply policy language
as written, assuming the policy is unambiguous and does
not contravene public policy. Hobbs, 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
Nos. 05-2038 & 05-2416                                    11

the insured.” Cont’l Cas. Co. v. Coregis Ins. Co., 738 N.E.2d
509, 518 (Ill. App. Ct. 2000). “A typical claims-made policy
covers acts and omissions occurring either before or dur-
ing the policy period; for prior acts, the policy may pro-
vide 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 re-
ported’ 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 incep-
tion 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
12                                 Nos. 05-2038 & 05-2416

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 respon-
sible for damages, Dr. Kim received a copy of their sum-
mons 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 Hos-
pital 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 com-
Nos. 05-2038 & 05-2416                                    13

plaint, and he timely reported that action to MedPro. The
third definition of “filed” is not implicated here.
   MedPro argues that this straightforward interpreta-
tion 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 read-
ing 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 Continen-
tal’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 subse-
14                                 Nos. 05-2038 & 05-2416

quently 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, 738 N.E.2d
at 512. Continental’s policy, in turn, excluded coverage
for “[a]ny wrongful act which happened prior to the ‘effec-
tive 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 wrong-
ful 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
Nos. 05-2038 & 05-2416                                   15

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 proposi-
tion 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.

B. Misrepresentation Claim
  MedPro also appeals the district court’s denial of its
Rule 50 motion for judgment as a matter of law on the
issue of misrepresentation. Our review of the district
court’s ruling is de novo, and we limit ourselves to asking
whether any rational jury could have found for Dr. Kim.
See Byrd v. Ill. Dep’t of Pub. Health, 423 F.3d 696, 712 (7th
Cir. 2005); Harvey v. Office of Banks & Real Estate, 377
F.3d 698, 707 (7th Cir. 2004). We draw all inferences in
favor of the nonmoving party, see Tart v. Ill. Power Co.,
366 F.3d 461, 472 (7th Cir. 2004), and will affirm the
district court’s ruling if the jury was presented with
sufficient evidence from which it reasonably could have
reached its verdict. See Honaker v. Smith, 256 F.3d 477,
484 (7th Cir. 2001); Massey v. Blue Cross-Blue Shield of
Ill., 226 F.3d 922, 924 (7th Cir. 2000). We do not reweigh
the evidence or make credibility determinations. See
Sarkes Tarzian, Inc. v. U.S. Trust Co. of Fla. Sav. Bank,
397 F.3d 577, 581 (7th Cir. 2005).
16                                  Nos. 05-2038 & 05-2416

  MedPro claims Dr. Kim made a material misrepresenta-
tion on his policy application when responding to the
question: “Do you have knowledge of any claims, potential
claims, or suits in which you may become involved,
including without limitation, knowledge of any alleged
injury arising out of the rendering or failing to render
professional services which may give rise to a claim?” Dr.
Kim checked the “no” box. MedPro argues this answer
was a material misrepresentation because Dr. Kim did
not disclose his treatment of Terry Jennings as a poten-
tial claim, and it would not have issued the policy had it
known of this potential claim.
  Under Illinois law, only misrepresentations made with
an intent to deceive or that materially affected the insur-
ance company’s decision to accept an insured’s risks may
defeat a duty to defend. See 215 ILL. COMP. STAT. ANN.
5/154 (West 2007); see also TIG Ins. Co. v. Reliable Re-
search Co., 334 F.3d 630, 635 (7th Cir. 2003); Golden Rule
Ins. Co. v. Schwartz, 786 N.E.2d 1010, 1015 (Ill. 2003)
(“The statute [215 ILL. COMP. STAT. 5/154] establishes a
two-prong test to be used in situations where insurance
policies may be voided: the statement must be false and
the false statement must have been made with an intent
to deceive or must materially affect the acceptance of the
risk or hazard assumed by the insurer.”). The district
court’s jury instructions and the jury verdict form, how-
ever, do not precisely track the Illinois statute. The
court instructed the jury:
     The Medical Protective Company has the burden of
     proving each of the following propositions: First, that
     Dr. Kim knowingly made a misstatement or omission
     on his application for professional liability insurance;
     and second, that the misstatement or omission was
     material to the Medical Protective Company’s accep-
     tance of the risk; and third, that the policy of profes-
     sional liability insurance would not have been issued
Nos. 05-2038 & 05-2416                                   17

    to Dr. Kim if the Medical Protective Company had
    been informed of a potential claim by Terr[y] and
    Earl Jennings.
  This instruction likely was intended to reflect the policy
application’s language, which inquired into Dr. Kim’s
knowledge of potential claims against him. The special
verdict form likewise asked whether Dr. Kim “knowingly”
made a misstatement or omission on his application for
insurance. This adaptation of the instructions and special
verdict form is consistent with the Illinois Supreme
Court’s decision in Golden Rule. In that case, the court
considered an alleged misrepresentation on an insurance
policy application that contained an attestation that the
insured’s answers were provided to the best of his “knowl-
edge and belief.” The court held that this language
“shift[ed] the focus” to what the applicant knew and
believed to be true in determining whether the applica-
tion contained a misrepresentation for purposes of the
statute. Golden Rule, 786 N.E.2d at 1016-17.
  Here, the question MedPro claims Dr. Kim answered
falsely inquired into his knowledge of injuries that may
give rise to claims. Although the instruction and special
verdict could have been clearer, the jury’s focus was
essentially directed to what Dr. Kim knew, and this was
appropriate under Golden Rule. MedPro argues that
Dr. Kim’s knowledge of Terry Jennings’s injury and course
of treatment, including her stay in Evansville, suggests
that Dr. Kim knew a lawsuit was highly likely. MedPro
also points to Dr. Kim’s participation in a peer review
session triggered by Jennings’s second admission to
Wabash Hospital and Dr. Kim’s meeting with the hospi-
tal’s CEO to discuss whether Jennings should be
billed—events which, according to MedPro, demonstrate
that Dr. Kim knew a lawsuit was in the offing.
  But the jury also heard testimony that laparoscopic
cholecystectomies entail known surgical risks, Dr. Kim
18                                 Nos. 05-2038 & 05-2416

informed the Jenningses of these risks, and the Jenningses
never voiced dissatisfaction to Dr. Kim. In addition, at
the time he completed the MedPro application, Dr. Kim did
not know Mr. Jennings had requested his wife’s medical
records or that Delancy had filed a notice of potential claim
with Phico. MedPro’s underwriter, Hoagland, and a
MedPro attorney, Meadows, also testified that they had no
reason to think Dr. Kim knew of a potential claim by the
Jenningses prior to their filing suit. Finally, it was undis-
puted that the MedPro policy was issued after Dr. Kim
notified the insurer about the Jenningses’ lawsuit. The
jury was entitled to sift and weigh this evidence; the
evidence was sufficient to support its verdict in Dr. Kim’s
favor.

C. Statutory Fees and Costs under Section 5/155
  MedPro’s final issue on appeal is a challenge to the
district court’s imposition of statutory penalties in the
form of attorney’s fees and costs. We review the district
court’s award for abuse of discretion. See Citizens First
Nat’l Bank of Princeton v. Cincinnati Ins. Co., 200 F.3d
1102, 1109 (7th Cir. 2000).
  The Illinois insurance code allows courts to award costs
and attorney’s fees to an insured when an insurer’s action
is deemed “vexatious and unreasonable.” 215 ILL. COMP.
STAT. ANN. 5/155 (West 1997). Whether an insurer acted
unreasonably or vexatiously presents an issue of fact, see
Boyd v. United Farm Mut. Reins. Co., 596 N.E.2d 1344,
1349 (Ill. App. Ct. 1992); Bernstein v. Genesis Ins. Co., 90
F. Supp. 2d 932, 940 (N.D. Ill. 2000), requiring courts to
consider the totality of circumstances, see Smith v. Equita-
ble Life Assurance Soc’y of U.S., 67 F.3d 611, 618 (7th Cir.
1995); Knoll Pharm. Co. v. Auto. Ins. Co. of Hartford, 210
F. Supp. 2d 1017, 1028 (N.D. Ill. 2002); Fassola v. Mont-
gomery Ward Ins. Co., 433 N.E.2d 378, 383 (Ill. App. Ct.
1982). If there is a bona fide dispute regarding cover-
Nos. 05-2038 & 05-2416                                   19

age—meaning a dispute that is “[r]eal, genuine, and not
feigned,” see McGee v. State Farm Fire & Cas. Co., 734
N.E.2d 144, 153 (Ill. App. Ct. 2000) (citing BLACK’S LAW
DICTIONARY 177 (6th ed. 1990))—statutory sanctions are
inappropriate, see State Farm Mut. Auto. Ins. Co. v. Smith,
757 N.E.2d 881, 887 (Ill. 2000).
  The district court’s ruling on the issue of statutory
penalties is conclusory; the court did not address
whether MedPro’s arguments against coverage raised a
bona fide dispute—i.e., one that is real, genuine, and not
feigned—notwithstanding that the arguments failed.
Although MedPro has not convinced us to reverse the
judgment on the merits, we cannot agree that MedPro’s
conduct was vexatious or unreasonable. Its arguments
were “presented with reasoned support,” Citizens First
Nat’l Bank, 200 F.3d at 1110, and the coverage question
was a difficult one; although MedPro was unsuccessful,
this was a bona fide dispute regarding coverage, and
that is all Illinois law requires to avoid the imposition of
section 5/155 penalties. The district court abused its
discretion by awarding statutory penalties, and that
aspect of the judgment must be vacated.
   The district court also awarded the Guaranty Fund’s
attorney’s fees and costs in the underlying Jennings
litigation, which is not challenged on appeal as it was
the product of the parties’ pretrial agreement. But the
district court went further and granted the Fund’s mo-
tion for its attorney’s fees incurred in defending the
declaratory judgment action. Neither the Fund nor the
district court expressly identified the authority for this
award, although it appears to be based on the court’s
finding that MedPro’s conduct was vexatious and unrea-
sonable. It is unclear whether the Fund, as a noninsured,
is entitled to make a claim under section 5/155. But
because section 5/155 penalties were unwarranted here,
20                                Nos. 05-2038 & 05-2416

the order granting the Fund’s motion for attorney’s fees
in the present action must also be vacated.
  For the foregoing reasons, the judgment of the district
court is AFFIRMED, with the exception of the award of
costs and attorney’s fees under section 5/155; we VACATE
that aspect of the judgment and remand for entry of an
amended judgment consistent with this opinion.

A true Copy:
      Teste:

                      ________________________________
                      Clerk of the United States Court of
                        Appeals for the Seventh Circuit

                 USCA-02-C-0072—11-13-07