Padilla v. Norwegian-American Hosp., Inc.

• Decision Date: 01 August 1994
• Docket Number: NORWEGIAN-AMERICAN,No. 1-92-1411,RWEGIAN-AMERICAN,1-92-1411
• Citation: 641 N.E.2d 572,266 Ill.App.3d 829,204 Ill.Dec. 348
• Parties: , 204 Ill.Dec. 348 Diocelina Teresa PADILLA et al., Individually, and as Parents and Next Friends of Fernando Padilla, a minor, Plaintiffs, v.HOSPITAL, INC., et al., Defendants (Norwegian-American Hospital, Inc., et al., Intervenors-Appellees; Illinois State Medical Inter-Insurance Exchange, Respondent- Appellant).
• Court: United States Appellate Court of Illinois

Page 572

641 N.E.2d 572

266 Ill.App.3d 829, 204 Ill.Dec. 348

Diocelina Teresa PADILLA et al., Individually, and as Parents and Next Friends of Fernando Padilla, a minor, Plaintiffs, v. NORWEGIAN-AMERICAN HOSPITAL, INC., et al., Defendants (Norwegian-American Hospital, Inc., et al Intervenors-Appellees; Illinois State Medical Inter-Insurance Exchange Respondent- Appellant).

No. 1-92-1411.

Appellate Court of Illinois,

First District, First Division.

Aug. 1, 1994.

Rehearing Denied Sept. 29, 1994.

Hopkins & Sutter, Chicago (William E. Rattner, Richard A. Ifft, Julie Gage Palmer, and Michael Mishlov, of counsel), for appellant.

Bates & Meckler, Chicago (Michael M. Marick, of counsel), for appellees.

Presiding Justice CAMPBELL delivered the opinion of the court:

Respondent Illinois State Medical Inter-Insurance Exchange ("ISMIE") appeals an order of the circuit court of Cook County permitting intervenor Chicago Hospital Risk Pooling Program ("CHRPP") to intervene in this action between plaintiffs Diocelina Teresa Padilla and J. Amparo Padilla, individually and as parents and next friends of Fernando Padilla, a minor, and defendants Norwegian-American Hospital ("Hospital") and Dr. Honorato Abadilla. ISMIE also appeals the trial court's order granting judgment on the pleadings to CHRPP; the order is based on the determination that ISMIE is the primary insurer of Dr. Abadilla in this medical malpractice case.

The record on appeal indicates the following facts. On May 30, 1985, the Padillas filed a medical malpractice action against the Hospital, Dr. Abadilla and other defendants who are not named in this appeal. The medical malpractice action appears to relate to the birth and delivery of Fernando Padilla on January 22, 1985. Dr. Abadilla was insured by ISMIE up to a limit of $1,000,000 per occurrence. ISMIE provided Dr. Abadilla with a defense at the inception of the lawsuit.

CHRPP is a trust established to insure certain non-profit hospitals against the risks of legal liability of providing health care to patients. The Hospital participates in CHRPP, which provides up to $5,000,000 of protection per occurrence. It is undisputed that Dr. Abadilla is also a "covered person" under the trust agreement in this case.

Throughout pretrial proceedings in this case, ISMIE took the position that Dr. Abadilla was not liable and refused to offer any money in settlement of the suit. Norwegian and other defendants, however, settled the claims against them for a sum in excess of $4,000,000 (at a time apparently left unspecified in the record).

The record includes a letter dated October 1, 1990, in which the counsel retained by ISMIE tenders the defense of Dr. Abadilla to CHRPP, contending that the CHRPP agreement provides primary coverage and the ISMIE policy provides excess coverage in this matter. This contention was based on counsel's interpretation of "other insurance" clauses that were part of the ISMIE policy and the CHRPP trust agreement. The record also includes response correspondence from CHRPP's counsel, dated December 26, 1990, indicating that CHRPP disagreed on the coverage issue and that CHRPP would protect its interests in this matter, possibly by filing for a declaratory judgment.

This matter was scheduled to come to trial on May 15, 1991. The record contains a letter dated May 15, 1991, from CHRPP's counsel to Dr. Abadilla's counsel indicating a willingness to settle, subject to a reservation of rights, if ISMIE would contribute fifty percent of a reasonable settlement. A settlement conference was held before Judge Walter Kowalski in the circuit court of Cook County the same day. CHRPP expressed a willingness to reach a settlement of the entire suit, including the claims against Dr. Abadilla. A claims representative of ISMIE attended this conference. ISMIE did not offer any sum in settlement of the claims against Dr. Abadilla. CHRPP then submitted a written motion for leave to intervene in the suit, which was granted by Judge Kowalski.

On May 16, 1991, the parties reached an overall settlement of the case; CHRPP agreed to pay plaintiffs $525,000 on behalf of Dr. Abadilla. The same day, CHRPP filed a complaint in intervention against ISMIE seeking a declaration that ISMIE was the primary insurer and that CHRPP provided coverage in excess of the $1,000,000 limit of the ISMIE policy. The complaint also sought contribution from ISMIE in the event that CHRPP had paid the settlement prior to judgment on the coverage issue. CHRPP amended this complaint on May 21, 1991.

ISMIE filed a motion to dismiss the complaint in intervention on June 6, 1991. ISMIE contended that the dispute between CHRPP and ISMIE lacked issues of law or fact in common with the medical malpractice suit and should have been brought as a separate action. ISMIE further contended that CHRPP was not a proper party to intervene in this case. After considering legal memoranda and oral argument, the trial court denied the motion to dismiss on July 9, 1991.

Although the date is not entirely legible, it appears that ISMIE filed a motion to return the case to the motion call on August 27, 1991. ISMIE filed its answer to the amended complaint in intervention on September 5, 1991. ISMIE notified CHRPP that it would present its motion to return the case to the motion call on September 6, 1991. Both parties filed motions for judgment on the pleadings, pursuant to section 2-615(e) of the Illinois Code of Civil Procedure (Ill.Rev.Stat.1991, ch. 110, par. 2-615(e)), on November 1, 1991. ISMIE's motion for judgment on the pleadings indicates that the cross-motions were filed by agreement of the parties, in consultation with Judge Sullivan, on September 6, 1991.

On March 25, 1992, Judge Sullivan entered an order granting judgment on the pleadings in favor of CHRPP. Judge Sullivan indicated in the order that the ISMIE policy provides primary coverage and that CHRPP trust agreement did not trigger an excess clause in the ISMIE policy. ISMIE timely filed its notice of appeal to this court.

I.

Initially, ISMIE contends that the trial court erred in allowing CHRPP to intervene and litigate an insurance coverage issue in a tort action. The purposes of intervention are to expedite litigation and to prevent a multiplicity of lawsuits. (Serio v. Equitable Life Assur. Co. (1989), 184 Ill.App.3d 432, 435, 132 Ill.Dec. 878, 880, 540 N.E.2d 800, 802.) The decision to permit or deny intervention generally rests within the discretion of the trial court. See, e.g., Maiter v. Chicago Board of Education (1981), 82 Ill.2d 373, 382, 47 Ill.Dec. 721, 725, 415 N.E.2d 1034, 1038.

ISMIE argues that CHRPP should not have been allowed to intervene as an insurance company is never a necessary or proper party in an action against the insured. (Valente v. Maida (1960), 24 Ill.App.2d 144, 150, 164 N.E.2d 538, 541; Hurley v. Finley (1955), 6 Ill.App.2d 23, 27, 126 N.E.2d 513, 516.) CHRPP responds that Hurley was decided before the precursor to section 2-408 of the Code of Civil Procedure (Ill.Rev.Stat.1991, ch. 110, par. 2-408) became effective in 1955, and that Valente, decided after 1955, merely cited Hurley without analyzing the effect of the new provision for intervention. CHRPP contends that more recent cases have permitted intervention by insurers. (See, e.g., Johnson v. Cape Industries, Ltd. (1981), 91 Ill.App.3d 192, 195, 46 Ill.Dec. 586, 589, 414 N.E.2d 470, 473.) ISMIE responds that the insurer in Johnson sought to intervene to stay a personal injury action pending the resolution of insurance issues in a separate declaratory judgment action. ISMIE notes that unlike Johnson, the intervention here attempts to eliminate the need to file a separate declaratory judgment action.

In Johnson, the insurer that sought to intervene was apparently instructed not to appear on behalf of its insured, resulting in a default judgment against the insured. (See Johnson, 91 Ill.App.3d at 193-94, 46 Ill.Dec. at 588, 414 N.E.2d at 472.) This court indicated that the apparent difficulty between the putative insured and the insurer resulted in inadequate representation of the insurer's interest in a matter that may bind the insurer. (See Johnson, 91 Ill.App.3d at 195-96, 46 Ill.Dec. at 589, 414 N.E.2d at 473.) In this case, the record indicates that the insured's counsel, retained by ISMIE, showed no interest in settling the claims against Dr. Abadilla, whereas CHRPP appears to have been interested in settling the case. The tension between the interests involved may have been exacerbated when the insured's counsel, retained by ISMIE, determined that CHRPP was the primary insurer and ISMIE the excess insurer.

The traditional rule against intervention by insurers is based on the premise that a jury may be improperly influenced by knowledge of insurance issues. (See, e.g., Loeber Motors, Inc. v. Sims (1975), 34 Ill.App.3d 342, 351, 340 N.E.2d 132, 138.) In this case, as in Johnson, the purposes of intervention were fulfilled and the procedural posture of the case was such that a trial judge (not a jury) was able to consider the legal question of coverage separate and apart from the underlying tort action. Indeed, the coverage question in this case was decided by a judge other than the judge who supervised the underlying settlement. Consequently, this case may be one of those exceptional cases falling outside the general rule.

While not binding on this court, the decision of the Court of Appeals of Arizona in McGough v. Insurance Co. of North America (1984), 143 Ariz. 26, 691 P.2d 738, is persuasive authority on this point. In McGough, which was a wrongful death action arising from an airplane crash, the insurers of the aircraft owners and the pilot did not dispute which policy provided primary coverage, as the parties do in this case. However, the McGough court did conclude that the excess insurer should have been permitted to intervene to protect its interest where the counsel...