Rosalind Franklin Univ. of Med. & Sci. v. Lexington Ins. Co.
Decision Date | 07 May 2014 |
Docket Number | 1–11–3756.,Nos. 1–11–3755,s. 1–11–3755 |
Citation | 8 N.E.3d 20,380 Ill.Dec. 89,2014 IL App (1st) 113755 |
Parties | ROSALIND FRANKLIN UNIVERSITY OF MEDICINE AND SCIENCE, f/k/a Finch University/Chicago Medical School, Plaintiff–Appellee and Cross–Appellant, v. LEXINGTON INSURANCE COMPANY and Landmark American Insurance Company, Defendants–Appellants and Cross–Appellees (Lexington Insurance Company, Cross–Plaintiff–Appellant and Cross–Appellee; Landmark American Insurance Company, Cross–Plaintiff–Appellant and Cross–Appellee). |
Court | United States Appellate Court of Illinois |
OPINION TEXT STARTS HERE
Matthew J. Fink, Paula M. Carstensen, Amy P. Klie, and Bridget M. Curry, Bates Carey Nicolaides LLP, Chicago, for appellant Lexington Insurance Company.
Michael S. Knippen, James M. Eastham, and Natalie M. Limber, Traub Lieberman Straus & Shrewsberry, LLP, Chicago, for appellant Landmark American Insurance Company.
Michael R. Gregg, Martin A. Kanofsky, and Danita L. Davis, Merlo Kanofsky & Gregg Ltd., Chicago, for appellee.
¶ 1 This appeal arises out of a declaratory judgment action involving an insurance dispute between plaintiff, Rosalind Franklin University of Medicine and Science (Rosalind), and two of its insurers, Lexington Insurance Company (Lexington) and Landmark American Insurance Company (Landmark).
¶ 2 Rosalind claimed coverage for a settlement it paid in an underlying lawsuit brought by former patients who sought compensation for Rosalind's decision to discontinue an experimental breast cancer vaccine program. As shall be discussed in greater detail below, Lexington's policies covered liability “resulting from a medical incident arising out of professional services,” while Landmark's policy contained a specific exclusion for medical malpractice damages. When both insurers denied coverage, Rosalind brought the instant declaratory judgment action against them. Subsequently, Lexington filed a cross-claim against Landmark, contending that Landmark's policy should provide coverage for the underlying suit and settlement.
¶ 3 On November 23, 2011, the trial court granted summary judgment for Rosalind and against Lexington and Landmark, finding that both insurers had a duty to indemnify Rosalind for the settlement in the underlying suit. It is from this judgment that Lexington and Landmark now appeal. For the reasons that follow, we affirm in part and reverse in part.
¶ 6 The following facts regarding the underlying lawsuit are undisputed for purposes of this appeal. Rosalind is a not-for-profit medical school. Between 1989 and 2004, Rosalind administered a research study of a breast cancer vaccine developed by the late Dr. Georg Springer. The purpose of the study, entitled “Treatment of Carcinoma Patients with T/Tn Antigen,” was to evaluate whether stimulating a person's immune system was effective in fighting breast cancer. Dr. Springer funded the study through a gift agreement that provided a donation of common stock valued at $2.5 million.
¶ 7 Each patient who participated in the Springer vaccine program executed a consent form that provided, in relevant part: The consent form additionally stated:
¶ 8 In 2004, Rosalind's institutional review board (IRB) decided to discontinue the Springer vaccine program, citing the following reasons: (1) inadequate information from the program's principal investigator, (2) lack of scientific validity, (3) lack of demonstrable efficacy, and (4) inadequate assurance of safety.
¶ 9 Following this decision, in July 2004, approximately 50 of the former Springer vaccine patients filed suit against Rosalind, claiming that the decision to discontinue the vaccine program put their lives at risk. (We shall refer to this suit as “the Pollack suit” or “the underlying suit.”) The Pollack complaint was prefaced with a preliminary statement alleging that the Springer vaccine treatments “have helped save and prolong the patients' lives,” and, as a result, the termination of the vaccine program “has caused these patients to suffer incalculable damage.” The preliminary statement additionally stated:
¶ 10 The Pollack complaint alleged the following facts about Rosalind's decision to discontinue the Springer vaccine program. Starting in 1988, the Food and Drug Administration (FDA) cited the Springer vaccine program for multiple violations of proper laboratory management and research techniques. Instead of spending the necessary money to correct these deficiencies, Rosalind chose to end the program. To this end, its university administrators allegedly “manipulate[d] the IRB to ensure the termination of the T/Tn anti-cancer vaccine program.” The complaint acknowledged that the IRB cited lack of scientific validity as a reason for ending the program, but it stated that this justification was “a ruse” and contradicted “decades of evidence to the contrary.” The complaint further alleged that the decision to end the program “significantly increases the likelihood that the patients will suffer a recurrence of cancer.” In support, the complaint cited an alleged statement by Dr. Springer that “in order to maintain its effectiveness against any possible recurrence of cancer, the [vaccine] treatments must be continued throughout [the patient's] lifetime.”
¶ 11 The Pollack plaintiffs sought injunctive relief as well as damages for breach of fiduciary duty, breach of contract, unjust enrichment, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2012)), common law fraud, and negligence. In the count for injunctive relief, the plaintiffs asked the court to require Rosalind to “disgorge all sums received from Dr. Springer” and release the available vaccines as well as all records pertinent to the program.
¶ 12 In the count for breach of fiduciary duty, plaintiffs claimed that a hospital/patient fiduciary relationship existed between the parties, which gave Rosalind the obligation “to comport with their professional responsibilities as articulated in the Code of Medical Ethics.” Plaintiffs alleged that Rosalind violated the provision of the Code of Medical Ethics which states that a health care provider “may not discontinue treatment of a patient as long as further treatment is medically indicated, without giving the patient reasonable assistance and sufficient opportunity to make alternative arrangements for care.” Plaintiffs further alleged that Rosalind breached its fiduciary duty by promising to continue the Springer vaccine treatments “ ad infinitum” and then discontinuing them without any legitimate justification.
¶ 13 In the count for “Unjust Enrichment and Disgorgement,” plaintiffs stated that during the course of the Springer vaccine program, Rosalind collected millions of dollars from Dr. Springer and thousands of dollars from the patients. Plaintiffs contended that Rosalind's retention of those funds after termination of the vaccine program constituted unjust enrichment and that such funds “should be disgorged from” Rosalind and placed in a fund to continue the vaccine program.
¶ 14 In the count for violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, plaintiffs alleged that Rosalind knowingly deceived the patients by promising to continue the vaccine treatments “ ad infinitum ”; Rosalind intended for the patients to rely on its representations by entering the vaccine program and contributing sums of money; and the plaintiffs did, in fact, rely on such representations.
¶ 15 Finally, in the count for negligence, plaintiffs alleged that Rosalind had a duty to treat its patients with reasonable care, and it breached that duty by improperly managing the vaccine program and then terminating it with the knowledge that doing so would expose the patients to significant risk of injury. Plaintiffs stated, “As evidence of [Rosalind's] breach of its standard of care, [Rosalind] violated the Code of Medical Ethics.” In support, they attached a healing arts affidavit from a health professional opining that there was a meritorious cause for the filing of the action.
¶ 16 On October 25, 2004, a hearing began on the Pollack plaintiffs' motion for a preliminary injunction to secure the funds that were gifted by Dr. Springer as well as the remaining vaccine. After the second day of the hearing, counsel for Rosalind determined that the case was not proceeding well for Rosalind and that the possibility of a settlement should be explored. Consequently, the preliminary injunction hearing turned into a settlement conference.
¶ 17 On October 27, 2004, the parties reached a settlement in principle. Rosalind's president and board of trustees subsequently approved the settlement, and the final agreement was executed on December 4, 2004. The agreement provided for payments by the university of: (1) $2.5...
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