American Family Mutual Insurance v. Enright

JUSTICE O’MALLEY,

specially concurring in part and dissenting in part:

I agree with the majority’s conclusions that American owes a duty to defend the claim against NSU for negligent hiring and that Ace does not owe a duty to defend or indemnify Burnett. However, I must dissent from the majority’s resolution that Ace owes no duty to defend NSU under Ace’s supplemental professional liability coverage part.

In this case, NSU paid Ace for not only professional liability coverage but also supplemental liability coverage. When an insured pays an additional premium for supplemental liability insurance coverage, the law presumes that the insured intended to obtain broader liability coverage. See International Surplus Lines Insurance Co. v. Pioneer Life Insurance Co. of Illinois, 209 Ill. App. 3d 144, 149-50 (1990). During its review of whether there is potential coverage under the policy that triggers a duty to defend, the court should consider that the insured purchased the supplemental professional liability coverage to expand its professional liability coverage. See Pekin Insurance, 291 Ill. App. 3d at 895. The majority’s reading of the supplemental liability coverage part not only ignores the policy’s plain language but also renders any expanded liability coverage under that part illusory.

Contrary to the majority, I would hold that the “Supplemental Liability Coverage” part, at the very least, potentially grants coverage for the negligent hiring claim against NSU. In reaching this conclusion, I am guided by the rule of insurance contract interpretation that the entire document is to be examined to determine the parties’ intentions with consideration given to the contract’s subject matter and purpose as well as the policy’s language. Hannigan v. Country Mutual Insurance Co., 264 Ill. App. 3d 336, 339 (1994). I find it significant that Ace’s policy consists of three “Coverage Part[s]”: professional liability coverage, supplemental professional liability coverage, and personal injury coverage.

The Ace policy’s “Professional Liability Coverage” is triggered only when an injury or damage is caused by a “medical incident arising out of professional services” by the insured. The “Supplemental Liability Coverage” covers an injury or damage that occurs in the course of NSU’s professional services, but, unlike the “Professional Liability Coverage” part, it does not require that the injury or damage stem from a medical incident.

The main difference between the supplemental and primary professional liability coverage parts is that the requirement that the injury or damage be caused by a “medical incident” is deleted from the supplemental coverage part. The Ace policy defines a “medical incident” as “any negligent act, error or omission in the rendering of or failure to render professional services that results in damages.” This is a broad definition that encompasses any negligent acts or omissions arising from the insured’s performance of or failure to perform its professional services. Thus, before coverage will be found under the primary professional liability coverage part, the complaint must allege negligent acts or omissions that satisfy the definition of a “medical incident.”

The supplemental liability coverage part, however, requires that the “injury or damage must occur in the course of providing your professional services.” (Emphasis added.) Therefore, if Enright’s complaint alleges facts indicating that Jane Doe’s injury occurred in the course of NSU’s professional services, there is potential coverage under Ace’s supplemental liability coverage part. I believe that En-right’s complaint alleges such facts.

Enright states in her complaint that Jane Doe was injured while NSU’s employee, Burnett, was performing ultrasound procedures on her. Because NSU’s business was to furnish licensed ultrasound technicians to various health care facilities, Burnett’s administration of the ultrasound procedures to Jane Doe was providing NSU’s “professional services,” as defined by the Ace policy (334 Ill. App. 3d at 1028).

The majority concludes that the professional services requirements of each section of the policy preclude coverage for NSU in the underlying action. I cannot agree. The majority focuses exclusively on NSU’s allegedly negligent actions in hiring and training and whether these acts satisfy the Ace policy’s definition of “professional services.” However, coverage under the supplemental liability coverage part is not triggered by the negligent acts alleged in the complaint. Unlike the “Professional Liability Coverage” part, the supplemental liability coverage part provides coverage depending upon when (i.e., “in the course of NSU’s professional services”) the alleged injury or damage occurred. This policy language is different from the language used in the cases cited by the majority that only consider whether a complaint’s allegations were “due to” or “arise from” professional services, as opposed to whether the injury occurred “in the course of’ the professional services. See Pekin Insurance, 291 Ill. App. 3d at 890-91 (construing whether a complaint’s allegations were “due to” the rendering or failure to render professional services and thus falling within the professional services exclusion of a “Businessowners Policy”); see also Mork Clinic, 575 N.W.2d at 603-04 (holding that “victim’s injuries [from sexual abuse] were not a consequence of the delivery of professional services”); Community Hospital, 171 A.D.2d at 639, 567 N.Y.S.2d at 122-23 (negligent hiring claim did not “arise out of’ rendering of professional services). I conclude that the damage alleged in Enright’s complaint occurred in the course of the professional services of the ultrasound procedures administered by NSU’s technician and, thus, is at least potentially covered by the plain language of the supplemental liability coverage part.

Ace’s policy additionally states that the supplemental professional liability is “occurrence” coverage and defines an “occurrence” as an “accident *** which results in injury neither expected or intended by you.” The policy does not define “accident.” The “occurrence” definition in the Ace policy is similar to the American policy’s “occurrence” definition, and I determine that the majority’s reasoning that the En-right complaint sufficiently alleged an “occurrence” under American’s policy results in the same outcome under Ace’s policy. 334 Ill. App. 3d at 1030-34. Simply stated, “[t]here are no allegations in the underlying complaint that NSU intended to injure Jane Doe” (334 Ill. App. 3d at 1031); therefore, under Illinois law, Jane Doe’s injury is considered an accident.

Although I find that Ace’s supplemental professional liability policy potentially grants coverage for Enright’s negligent hiring, investigation, and supervision claim, I also recognize that the “Supplemental Liability Coverage” part of the policy, like the “Professional Liability Coverage” part, specifically excludes “injury or damage caused by or resulting from non-professional services activities,” which arguably might preclude coverage. However, immediately following this exclusion, the supplemental coverage part contains an exception to that exclusion. The exception states that the nonprofessional services exclusion does not apply to “activities which are ordinarily incidental to your professional services activities.” Thus, coverage is intended for those activities that are not “professional services” as defined by the Ace policy but are “ordinarily incidental” to performing those services.

The majority’s analysis of the meaning of “professional services” under the policy is fine. I have no quarrel with the cases cited and quoted by the majority in arriving at the definition of professional services, but those cases did not deal with a policy that has separate “Coverage Part[s]” entitled “Professional Liability Coverage” followed by “Supplemental Liability Coverage.” See Pekin Insurance, 291 Ill. App. 3d at 890-91 (construing professional services exclusion in “Businessowners Policy”). In addition, the foreign cases cited by the majority that found no coverage for negligent hiring as professional services contain no mention of coverage for activities ordinarily incidental to professional services. See Mork Clinic, 575 N.W.2d at 603-04 (determining that negligent hiring claim was not covered as a professional service by the clinic’s professional liability policy); Community Hospital, 171 A.D.2d at 639, 567 N.Y.S.2d at 122-23 (under professional liability policy, negligent hiring was not a covered medical incident). Through its exception to the exclusion, the Ace policy’s supplemental coverage part does not limit professional liability coverage only to injury or damage occurring in the course of providing the professional services but, rather, supplements it to include injury or damage caused by activities ordinarily incidental to professional services. Consequently, I find the majority’s discussion of professional services insufficient without including an inquiry into whether NSU’s administrative activities in hiring, investigating, and supervising its employees are activities that are ordinarily incidental to performing its professional services. That inquiry follows.

The Ace policy does not define what activities are ordinarily incidental to professional services. When words are not defined by an insurance policy, courts give them their plain and popular meaning. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 115 (1992). The word “ordinary” is defined as “usual; normal,” and “incidental” means “something necessary, appertaining to, or depending upon another.” Black’s Law Dictionary 762, 1097 (6th ed. 1990). Applying these definitions shows that the hiring, investigating, and supervising of the employees who actually perform the professional services covered under this policy are clearly incidental and necessary to those professional services. Thus, I see the policy as unambiguously providing coverage.

At a minimum, that which I see as unambiguous is at least a reasonable interpretation of the policy. If an insurance policy’s language is capable of more than one reasonable interpretation, then the interpretation that favors coverage prevails. Outboard Marine Corp., 154 Ill. 2d at 119. In fact, if such activities are not incidental to providing ultrasounds, then I find it difficult to envision what activities would be considered incidental under the policy. Both Ace and the majority fail to identify any. If we cannot envision what would be considered incidental, then that language is ambiguous and needs to be construed against Ace. All doubts and uncertainties in an insurance policy’s language must be construed strictly against the drafter and in favor of coverage. Outboard Marine Corp., 154 Ill. 2d at 121. Consequently, I conclude that the facts alleged by Enright in the underlying complaint are, at the very minimum, potentially within the policy’s coverage.

In summary, NSU purchased not only professional liability coverage from Ace but also coverage that was supplemental to the professional liability coverage and expressly included coverage for activities ordinarily incidental to professional services. The supplemental coverage part was intended to expand NSU’s professional liability coverage, as evidenced by the coverage part’s title, the “Coverage Agreements” under Roman numeral I of the policy, and the fact that it covers an injury or damage not stemming from a medical incident. Given that this coverage part provides NSU supplemental and expanded liability coverage, I believe that the parties intended for the facts alleged in Enright’s complaint to be covered and that Ace is required to defend NSU. Moreover, even if Ace did not intend to cover this risk, courts cannot rely on an insurer’s intentions to defeat coverage for an insured. Marshall v. Metropolitan Life Insurance Co., 337 Ill. App. 498, 509 (1949) (“[I]f the language of the insurance policy is susceptible to two interpretations, the question of intention is not germane, and that interpretation which will not defeat the insured’s claim will be adopted”). If Ace had wanted to limit the definition of “ordinarily incidental” so that the term would not cover NSU’s hiring and supervising activities, it could have done so. I would affirm the trial court’s ruling that Ace owes a duty to defend NSU for the reasons expressly stated above and would then find it unnecessary to address the merits of the parties’ other contentions concerning the Ace policy. On this basis, I dissent from the majority’s determination that Ace does not owe a duty to defend NSU.