Sentry Ins. v. Cont'l Cas. Co.
| Decision Date | 24 March 2017 |
| Docket Number | No. 1-16-1785,1-16-1785 |
| Citation | 2017 IL App (1st) 161785,74 N.E.3d 1110 |
| Parties | SENTRY INSURANCE, a Mutual Company, Plaintiff and Counterdefendant, v. CONTINENTAL CASUALTY COMPANY; Northwestern Medical Faculty Foundation; Theodore Frank ; Nicholas Harris ; Joe Does 1-59; Jane Does 1-50; Joseph Doe; James Does 1-2; Jane Doe; James Anonymous; John Anonymous; and Jeffrey Doe, Defendants (Continental Casualty Company, Defendant and Counterplaintiff-Appellant; Northwestern Medical Faculty Foundation, Defendant and Counterdefendant-Appellee). |
| Court | United States Appellate Court of Illinois |
Karen W. Howard and Dawn Gonzalez, of Colliau, Carluccio, Keener, Morrow, Peterson & Parsons, of Chicago, for appellant.
Jill B. Berkeley, Seth D. Lamden, and Andrew G. May, of Neal, Gerber & Eisenberg LLP, of Chicago, for appellee.
¶ 1 The instant interlocutory appeal concerns the trial court's grant of a stay on the issue of whether Continental Casualty Company (Continental) owes a duty to indemnify Northwestern Medical Faculty Foundation (the Foundation) for any liability the Foundation incurs as a result of a number of lawsuits filed against it based on the failure of the Foundation's cryogenic tanks, which had held semen and testicular tissue specimens that were rendered unusable. Continental argues that the trial court erred in granting the stay because interpreting the two applicable exclusions to insurance coverage would not have involved the determination of an ultimate fact in the underlying litigation. Alternatively, Continental argues that if the trial court stayed the analysis concerning the applicability of the policy's exclusions, it should have also stayed the litigation concerning whether there was a duty to defend the Foundation under the policy. Continental also argues in the alternative that the trial court should have, at a minimum, determined coverage issues concerning two lawsuits that had already been settled. For the reasons that follow, we affirm.
¶ 3 On October 16, 2014, Sentry Insurance1 (Sentry) filed a complaint for declaratory judgment against the Foundation and Continental, alleging that Sentry had issued a commercial general liability insurance policy to the Foundation and that the Foundation claimed that Sentry owed it a duty to defend and indemnity for approximately 65 lawsuits in which the Foundation had been named as a defendant (the underlying lawsuits), and which had been consolidated for pretrial activities. Continental was named in the complaint as the Foundation's excess insurer. Sentry's complaint alleged that its policy did not provide coverage for the claims alleged against the Foundation and sought a declaratory judgment that it owed no duty to defend or indemnify the Foundation and reimbursement of the amount spent thus far in defending the underlying lawsuits.
¶ 4 According to Sentry's complaint, the Foundation owned and operated a cryopreservation
and storage tank for semen and testicular tissue and certain Foundation patients, including the plaintiffs in the underlying lawsuits (the underlying plaintiffs), provided semen or testicular tissue to the Foundation for storage and safekeeping; the Foundation received storage fees for the cryopreservation
of the semen and testicular tissue from the underlying plaintiffs. Certain patients who had stored semen or testicular tissue with the Foundation between April and June 2012, including the underlying plaintiffs, alleged that their samples had thawed and were irreversibly damaged due to the failure of the Foundation's cryopreservation tank. The underlying plaintiffs accordingly filed the underlying lawsuits against the Foundation and Northwestern Memorial Hospital (the Hospital), seeking damages relating to the allegedly damaged semen and testicular tissue.
¶ 5 According to Sentry's complaint, the Foundation admitted in the underlying lawsuits that it owned and operated the cryopreservation
tank for semen and testicular tissue; that certain patients provided semen for storage and safekeeping with the Foundation; that the Foundation accepted the semen supplied by certain patients for safekeeping; and that the Foundation received storage fees for cryopreservation of the semen. Additionally, the Hospital denied in the underlying lawsuits that it owned, operated, managed, or controlled the cryopreservation tank for semen and testicular tissue; that certain patients provided semen for storage and safekeeping with the Hospital; that the Hospital accepted the semen supplied by certain patients for safekeeping; and that the Hospital received storage fees for cryopreservation of the semen.
¶ 6 Sentry's complaint alleges that the Foundation tendered the underlying lawsuits to Sentry, seeking defense and indemnity pursuant to the Foundation's insurance policy with Sentry, and that Sentry accepted the Foundation's tender of the defense under a reservation of rights.
¶ 7 According to Sentry's complaint, John Anonymous,2 one of the underlying plaintiffs, filed a motion for summary judgment against the Foundation, contending that the Foundation was liable to him under a bailment theory. Sentry alleged that in order to prevail on a bailment claim, it was necessary to establish (1) an express or implied agreement to create a bailment, (2) delivery of the property in good condition, (3) the bailee's acceptance of the property, and (4) the bailee's failure to return the property or the bailee's redelivery of the property in a damaged condition. Sentry's complaint alleged that on March 12, 2014, the trial court in the consolidated underlying lawsuits entered summary judgment in favor of John Anonymous "relative to elements (1), (3) and (4), thereby establishing that a bailment was created and that [the Foundation] had exclusive possession of the specimens."
¶ 8 Sentry's complaint set forth 15 "claims," each serving as a basis for exclusion under its policy, and requested a declaration that Sentry had no obligation to defend or indemnify the Foundation against the claims asserted in the underlying lawsuits. Sentry also requested reimbursement of the funds it had expended in defending the Foundation in the underlying lawsuits.
¶ 9 The Sentry insurance policy, which was attached to Sentry's complaint, contained two exclusions that are relevant to the instant appeal: a "care, custody, or control" exclusion and a "professional services" exclusion. The "care, custody, or control" exclusion provided that the insurance did not apply to property damage to "[p]ersonal property in the care, custody or control of the insured." The "professional services" exclusion provided that "[t]his insurance does not apply to ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ due to the rendering of or failure to render any professional service." The exclusion further defined "professional services" as "all professional liability relating to health care medical malpractice, druggist liability, to include accountants E & O as well as directors and officers liability."
¶ 10 On November 20, 2014, Continental filed an answer and counterclaim. The counterclaim contained substantially identical factual allegations as Sentry's complaint regarding the allegations of the underlying lawsuits. Continental's counterclaim also alleged that (1) the Foundation made a number of admissions in a third-party complaint that the Foundation had filed in the underlying lawsuits, including that the Foundation provided storage in a cryogenic tank located on the 20th floor of the Foundation for the semen and testicular tissue of the male underlying plaintiffs; (2) the Foundation was a faculty medical practice at the hospital; (3) the Foundation used an electronic controls system on the cryogenic tank that was designed to cause a page to be sent to a Foundation lab technician when an alarm was triggered by the control system; and (4) on the afternoon of April 23, 2012, a Foundation lab technician discovered that the cryogenic tank at the Foundation had failed to maintain a proper temperature.
¶ 11 In its counterclaim, Continental alleged that it issued to the Foundation a commercial umbrella policy and that in order for the Foundation to obtain coverage from Continental's policy, "it must prove that it is entitled to coverage under the [Continental] Umbrella Policy insuring provision, including all of [Continental's] terms, definitions and conditions," which it could not do. First, Continental alleged that the Foundation could not establish that "bodily injury" or "property damage" occurred during the policy period, as required under the policy. Additionally, like Sentry's policy, Continental's policy included a "care, custody, or control" exclusion and a "professional services" exclusion. The "care, custody, or control" exclusion provided that the insurance coverage did not apply to property damage to "[p]ersonal property in the care, custody or control of the insured." The "professional services" exclusion provided:
Continental's counterclaim alleged that, even if the Foundation could establish that it complied with all of the policy's terms, conditions, and definitions, coverage in connection with the underlying lawsuits would still be excluded by the "care, custody, or control" or "professional services" exclusions. Accordingly, Continental sought a declaration that Continental owed no coverage to the Foundation.
¶ 12 On January 12, 2015, the Foundation filed a combined motion under section 2-619.1 of the Code of Civil Procedure (Code...
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