2018 IL App (1st) 171670
SIXTH DIVISION
July 27, 2018
No. 1-17-1670
SOUTHWEST DISABILITIES SERVICES AND SUPPORT, ) Appeal from the Circuit
REUBEN GOODWIN, and KIMBERLY GOODWIN, ) Court of Cook County.
)
Plaintiffs-Appellants, )
)
v. ) No. 16 CH 11078
)
PROASSURANCE SPECIALTY INSURANCE COMPANY, )
INC., ) Honorable
) Diane J. Larsen,
Defendant-Appellee. ) Judge Presiding.
JUSTICE DELORT delivered the judgment of the court, with opinion.
Justices Cunningham and Connors concurred in the judgment and opinion.
OPINION
¶1 This case presents the issue of whether an insurance company has a duty to defend under
a claims-made and reported insurance policy when the insured made the claim outside the
reporting period and after the cancellation of the policy. Plaintiffs, Southwest Disabilities
Services and Support (Southwest), Reuben Goodwin, and Kimberly Goodwin, sought a
declaratory judgment against defendant, ProAssurance Specialty Insurance Company
(ProAssurance), for coverage regarding an underlying personal injury lawsuit. ProAssurance
moved for judgment on the pleadings and plaintiffs filed a cross-motion for judgment on the
pleadings. The circuit court granted ProAssurance’s motion and denied plaintiffs’ motion. We
affirm.
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¶2 BACKGROUND
¶3 Southwest, formerly an Illinois not-for-profit corporation, operated as a community
integrated living arrangement for developmentally disabled adults. Reuben Goodwin served as
the executive director of Southwest and Kimberly Goodwin served as an employee.
¶4 The underlying complaint, filed on February 24, 2014 and captioned Moran v. Southwest
Disability Services & Support, NFP, No. 2014 L 01819 (Cir. Ct. Cook County), alleged Randy
Lebron suffered injuries while residing at one of Southwest’s facilities. The complaint alleged
three counts of negligence for failure to supervise Lebron, the underlying plaintiff’s son. The
complaint alleged that on November 25, 2012 at 5:00 p.m., Lebron was observed to have choked
on a piece of food. At 11:00 p.m., Lebron was observed to be drooling and have labored
breathing. He was transferred to the hospital the next day, where the medical staff found a large
foreign body lodged in his pharynx and diagnosed him with acute respiratory failure. In addition
to the negligence claims, the complaint alleged Southwest failed to respond to requests for health
care records under section 8-2001 of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/8
2001 (West 2012)).
¶5 ProAssurance issued a Social Services Entity Liability Policy to Southwest for the policy
period beginning September 26, 2012 and ending September 26, 2013, with a retroactive date of
September 26, 2012. Subject to the applicable limit of liability, the claims-made policy provided
coverage for “damages because of bodily injury or property damage which (i) occurs on or after
the retroactive date and before the end of the policy period, (ii) is caused by an occurrence, and
(iii) is first reported during the policy period or any extended reporting period which may apply.”
The policy defined “reported” as:
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“[T]he receipt by our Claims Department, from an insured or its representative, of
written notice of a claim or suit which has been made or filed, or which an insured
reasonably expects to be made or filed, under any Coverage Part providing
coverage on a claims-made basis, specifying (1) the date, time, and place of the
professional incident, occurrence, or medical payment to which this insurance
applies, (2) a description of the professional incident, occurrence, or medical
payment to which this insurance applies, (3) the name, address, and age of the
patient or claimant, (4) the names of witnesses, including treating physicians, and
(5) the circumstances resulting in the professional incident, occurrence, or
medical payment to which this insurance applies.”
¶6 The policy stated that when an insured “becomes aware of any claim or suit to which this
policy applies, or any incident which is likely to result in such a claim or suit, such insured or his
or her representative must report such incident, claim or suit as soon as practicable.” No
reporting endorsement extending the coverage period was available under the policy, which also
stated that “[t]he coverage provided herein shall terminate at the end of the policy period.”
ProAssurance provided Southwest with a cancellation endorsement effective on May 26, 2013
for non-payment of the premium.
¶7 Southwest first reported the incident alleged in the Moran complaint when it submitted a
claims form to ProAssurance on March 17, 2014, more than nine months after the cancellation of
the policy. Southwest attached a copy of the Moran complaint to the claims form. ProAssurance
informed Southwest in a letter dated March 20, 2016 that, because the Moran lawsuit “was
reported to us after the policy period had expired, there is no coverage for this matter.”
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¶8 On August 23, 2016, plaintiffs filed their complaint for declaratory judgment against
ProAssurance seeking a declaration that ProAssurance breached its duty to defend the Moran
lawsuit and was estopped from asserting any coverage defenses. ProAssurance filed its answer
and counterclaim for declaratory judgment seeking a finding that ProAssurance was not
obligated to defend or indemnify plaintiffs in the Moran lawsuit.
¶9 On February 7, 2017, ProAssurance moved for judgment on the pleadings under section
2-615(e) of the Code (735 ILCS 5/2-615(e) (West 2016)). Plaintiffs responded and filed a cross-
motion for judgment on the pleadings.
¶ 10 On May 24, 2017, after full briefing and a hearing on the parties’ cross-motions, the
circuit court granted judgment in favor of ProAssurance and against plaintiffs, finding that
ProAssurance was not obligated to defend or indemnify plaintiffs. This appeal followed.
¶ 11 ANALYSIS
¶ 12 Plaintiffs argue the circuit court erred when it granted ProAssurance’s motion for
judgment on the pleadings and denied their cross-motion because ProAssurance failed to defend
the Moran lawsuit under a reservation of rights or file a declaratory judgment action. Plaintiffs
contend that the duty to defend is broader than the duty to indemnify, and that when the
allegations of the Moran complaint are compared to the insuring provision of the ProAssurance
policy, the duty to defend was triggered when ProAssurance received notice that an “occurrence”
happened within the policy period. Finally, plaintiffs argue the policy was ambiguous because it
referred to “occurrence” and, therefore, was subject to a reasonable interpretation that the policy
covered certain occurrences under its insuring provision.
¶ 13 Under the Code, “[a]ny party may seasonably move for judgment on the pleadings.” Id.
“The purpose of a motion for judgment on the pleadings is to test the sufficiency of the pleadings
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by determining whether the plaintiff is entitled to the relief sought by its complaint.”
Continental Casualty Co. v. Cuda, 306 Ill. App. 3d 340, 346 (1999). Alternatively, the purpose
of the motion is to determine whether the defendant’s answer has provided a defense that would
entitle him to a hearing on the merits. Id.
¶ 14 A court properly enters a judgment on the pleadings when no genuine issue of material
fact exists and the movant is entitled to judgment as a matter of law. H&M Commercial Driver
Leasing, Inc. v. Fox Valley Containers, Inc., 209 Ill. 2d 52, 56 (2004). “Only those facts
apparent from the face of the pleadings, matters subject to judicial notice, and judicial
admissions in the record may be considered.” Id. at 56-57. “Moreover all well-pleaded facts and
all reasonable inferences from those facts are taken as true.” Id. at 57. “On appeal, the
reviewing court must determine whether any issues of material fact exist and, if not, whether the
movant was, in fact, entitled to judgment as a matter of law.” Id. We review the entry of a
judgment on the pleadings de novo. Id.
¶ 15 Plaintiffs argue the circuit court should have denied ProAssurance’s motion for judgment
on the pleadings because it failed to defend under a reservation of rights or file a timely
declaratory judgment action to determine coverage issues. Essentially, plaintiffs seek to invoke
the “estoppel doctrine” set forth in Employers Insurance of Wausau v. Ehlco Liquidating Trust,
186 Ill. 2d 127, 150-54 (1999). “The general rule of estoppel provides that an insurer which takes
the position that a complaint potentially alleging coverage is not covered under a policy that
includes a duty to defend may not simply refuse to defend the insured.” Id. at 150. Rather, the
insurer must either defend the suit under a reservation of rights or seek a declaratory judgment
that there is no coverage. Id. “If the insurer fails to take either of these steps and later is found to
have wrongfully denied coverage, the insurer is estopped from raising policy defenses to
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coverage.” Id. at 150-51. However, “[a]pplication of the estoppel doctrine is not appropriate if
the insurer had no duty to defend, or if the insurer’s duty to defend was not properly triggered.”
Id. at 151.
¶ 16 In this case, the insuring agreement in the policy triggered coverage only if the
occurrence was “first reported during the policy period.” Southwest reported the incident at issue
in March 2014, nine months after the cancellation of the policy. In other words, the incident was
not “first reported during the policy period” as required by the insuring agreement.
ProAssurance’s duty to defend was never properly triggered and, therefore, the estoppel doctrine
does not apply here. See id. (application of the estoppel doctrine is not appropriate “where there
was no insurance policy in existence”).
¶ 17 Plaintiffs improperly attempt to conflate a “late-notice defense” normally associated with
occurrence policies with the coverage triggering requirements for a claims-made policy. Unlike
Ehlco, ProAssurance did not rely on a breach of notice condition. Instead, ProAssurance relied
upon Southwest to fulfill its reporting duties to trigger coverage.
¶ 18 “Claims-made and occurrence-based policies insure different risks.” Uhlich Children’s
Advantage Network v. National Union Fire Company of Pittsburgh, PA, 398 Ill. App. 3d 710,
715 (2010). In an occurrence policy, the risk is the occurrence itself. Id. In a claims-made policy,
the risk insured is the claim brought by a third party against an insured. Id. “The purpose of a
claims-made policy is to allow the insurance company to easily identify risks, allowing it to
know in advance the extent of its claims exposure and compute its premiums with greater
certainty.” Id. “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.” Id. In contrast, “ ‘[c]onventional liability insurance policies are “occurrence” policies;
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they insure against a negligent or other liability-causing act or omission that occurs during the
policy period regardless of when a legal claim arising out of the act or omission is made against
the insured.’ ” Id. (quoting National Union Fire Insurance Co. v. Baker & McKenzie, 997 F.2d
305, 306 (7th Cir. 1993)). Due to the indefinite future liability to which an occurrence policy can
expose the insurance company, insurers instead offer “claims made” policies which cost less, but
also provide less coverage. Id. Here, Southwest neither made the claim nor reported it to
ProAssurance during the policy period as required by the insuring agreement.
¶ 19 While plaintiffs correctly note that the duty to defend is broader than the duty to
indemnify, the duty to defend analysis is not applicable here because Southwest failed to trigger
coverage by not reporting the Moran lawsuit during the policy period. Illinois law is clear that
“the burden is on the insured to prove that its claim falls within the coverage of an insurance
policy.” Addison Insurance Co. v. Fay, 232 Ill. 2d 446, 453 (2009). The insured must establish
that its claim falls within the insuring agreement. Reedy Industries, Inc. v. Hartford Insurance
Co. of Illinois, 306 Ill. App. 3d 989, 994 (1999).
¶ 20 Here, the ProAssurance policy required Southwest to provide within the policy period
“written notice of a claim or suit which has been made or filed, or which an insured reasonably
expects to be made or filed.” (Emphasis added.) Indeed, Southwest could have reported the
potential claim before the policy was cancelled on May 26, 2013 or procured a reporting
endorsement, which would have provided an extended reporting period, but chose not to do so.
The cancellation meant that the policy was no longer in existence at the time Southwest
submitted its claim on March 17, 2014. As the policy had already expired when the claim was
first reported, we find Southwest failed to trigger coverage for the Moran lawsuit under the
insuring agreement of the policy. Further, Uhlich, upon which plaintiffs also rely, is likewise
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inapplicable because the insureds in that case first made their claims during the period when
concurrent policies were still in effect. Uhlich, 398 Ill. App. 3d at 717, 721.
¶ 21 Plaintiffs also argue that the ProAssurance policy was ambiguous because it refers to
“occurrence” and, therefore, is subject to a reasonable interpretation that the policy was an
occurrence policy instead of a claims-made policy. In construing an insurance policy, the court
determines the intent of the parties to the contract by construing the policy as a whole, with due
regard to the risk undertaken, the subject matter that is insured, and the purposes of the entire
contract. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 108 (1992).
Where the words in the policy are clear and unambiguous, “a court must afford them their plain,
ordinary, and popular meaning.” (Emphasis omitted.) Id. However, if the words in the policy are
susceptible to more than one reasonable interpretation, they will be considered ambiguous and
will be strictly construed in favor of the insured and against the insurer that drafted the policy. Id.
at 108-09. Nonetheless, courts will not strain to find an ambiguity where none exists. Hobbs v.
Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11, 17 (2005). “The construction of an
insurance policy and a determination of the rights and obligations thereunder are questions of
law ***.” Konami (America), Inc. v. Hartford Insurance Co. of Illinois, 326 Ill. App. 3d 874,
877 (2002).
¶ 22 The term, “occurrence,” is included in the insuring agreement and defined in the policy.
However, the first page of the policy, labeled “Social Services Entity Liability Policy
Information Page,” states in bold, capitalized lettering, “THIS POLICY CONTAINS
COVERAGES WRITTEN ON A ‘MODIFIED CLAIMS-MADE’ BASIS.” The policy
makes reference to the claims-made basis throughout the policy. For example, the definition of
“reported” requires the insured to submit written notice of a claim or suit which has been made
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or filed “under any Coverage Part providing coverage on a claims-made basis.” (Emphasis
added.) Additionally, a large, bold heading above the insuring agreement states “GENERAL
LIABILITY COVERAGE PART (CLAIMS-MADE FORM).”
¶ 23 In this case, plaintiffs have not explained how the simple mention of the term,
“occurrence,” within the policy creates an ambiguity as to whether the ProAssurance policy was
occurrence-based rather than claims-made based. We will not “ ‘torture ordinary words until they
confess to ambiguity.’ ” Hobbs, 214 Ill. 2d at 31 (quoting Western States Insurance Co. v.
Wisconsin Wholesale Tire, Inc., 184 F.2d 699, 702 (7th Cir. 1999)). We find the language of the
ProAssurance policy is not susceptible to more than one reasonable interpretation. The policy’s
insuring agreement required Southwest to report a claim within the policy period to trigger
coverage.
¶ 24 CONCLUSION
¶ 25 The circuit court properly granted ProAssurance’s motion for judgment on the pleadings
and denied plaintiff’s motion for judgment on the pleadings. We affirm the judgment of the
circuit court of Cook County.
¶ 26 Affirmed.
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