St. Paul Ins. Co. of Illinois v. Armas

• Decision Date: 02 August 1988
• Docket Number: No. 87-3017,87-3017
• Citation: 527 N.E.2d 921,123 Ill.Dec. 283,173 Ill.App.3d 669
• Parties: , 123 Ill.Dec. 283 ST. PAUL INSURANCE COMPANY OF ILLINOIS, Plaintiff-Appellee, v. Alberto S. ARMAS, M.D., Defendant-Appellant, and Thomas Freeman and Ernestine Freeman, individually and as parents of Ryan Thomas Freeman, a Minor, Defendants.
• Court: United States Appellate Court of Illinois

Page 921

527 N.E.2d 921

173 Ill.App.3d 669, 123 Ill.Dec. 283

ST. PAUL INSURANCE COMPANY OF ILLINOIS, Plaintiff-Appellee, v. Alberto S. ARMAS, M.D., Defendant-Appellant and Thomas Freeman and Ernestine Freeman, individually and as parents of Ryan Thomas Freeman, a Minor, Defendants.

No. 87-3017.

Appellate Court of Illinois First District, Second Division.

Aug. 2, 1988.

Rehearing Denied Sept. 15, 1988.

William J. Rogers, Timothy G. Nickels, Wildman, Harrold, Allen & Dixon, Chicago, for defendant-appellant.

Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago (D. Kendall Griffith, Katherine S. Dedrick and Robert G. Black, of counsel), for plaintiff-appellee.

Presiding Justice HARTMAN delivered the opinion of the court:

Defendant Alberto S. Armas, M.D. appeals from a circuit court order: (1) granting plaintiff St. Paul Insurance Company of Illinois' motion for summary judgment; (2) denying Armas' motion for summary judgment; and (3) granting plaintiff's motion to strike Armas' affidavit filed in support of his motion for summary judgment. The issues presented are whether: the circuit court ruled erroneously on the parties' cross motions for summary judgment; and the circuit court erred in granting plaintiff's motion to strike Armas' affidavit.

On January 15, 1985, plaintiff issued to Armas a physician's professional liability "claims made" policy, No. 512 TF 1470. The policy period ended January 15, 1986, with a retroactive date of January 15, 1983. The "claims made" policy promised Armas coverage and legal defense for any claims generated by professional services performed, or which should have been performed, between January 15, 1983 and January 15, 1986, provided Armas reported the claim to the insurer as required by the policy.

On August 7, 1985, Thomas and Ernestine Freeman, individually and as the parents of Ryan Thomas Freeman (collectively "Freeman"), filed a complaint in Cook County circuit court against Armas and others, alleging, inter alia, Armas' negligence in the diagnosis and treatment of Ernestine and Ryan Freeman in 1984, causing "permanent and debilitating" injury to Ryan Freeman. Service of the Freeman complaint on Armas was not effected until March 31, 1986, and Armas denied knowledge of the lawsuit until service upon him.

Meanwhile, in August or September 1985, Armas decided to terminate his policy with plaintiff, and notified by undated letter the James H. Cunningham Insurance Agency, Inc. ("Cunningham"), through whom Armas purchased the policy, of his intent. Armas received three letters from Cunningham, dated September 18, October 2, and October 23, 1985, in which Cunningham advised Armas of his policy's impending termination and provided the release form by which he could effect cancellation. Each letter, moreover, reminded Armas that he could, within 30 days of the policy's cancellation, extend the period in which to report claims to plaintiff by purchasing insurance coverage in the form of a reporting endorsement. Armas did not purchase the endorsement.

On October 6, 1985, Armas executed plaintiff's form designated "Cancellation Request/Policy Release," which indicated that his professional liability policy would be cancelled as of October 1, 1985.

After being served with the Freemans' lawsuit summons, Armas wrote to the Cunningham agency on April 16, 1986, informing it of the Freeman litigation and enclosing the summons and complaint served on March 31, 1986. The letter continued, "It is my understanding that this complaint was filed during the period of coverage when I was covered by a policy of professional liability insurance through [plaintiff]."

Plaintiff acknowledged receipt of Armas' letter to Cunningham in its written reply of May 22, 1986, but stated it would not extend coverage to or provide a defense for the claim because Armas reported it after the policy's termination date of October 1, 1985.

Plaintiff filed a complaint on June 2, 1986 against Armas and the Freemans, requesting the circuit court to determine and adjudicate the rights and liabilities of the parties with respect to the policy and enter a declaratory judgment in favor of plaintiff seeking a finding that: (1) Armas did not procure and/or request the reporting endorsement in writing within 30 days after the policy termination date of October 1, 1985; (2) Armas did not report his claim within the period of the policy agreement; (3) plaintiff is not obligated to defend Armas nor pay any judgment or settlement entered against him; and (4) plaintiff has no obligation to the Freemans.

Armas answered the complaint on September 2, 1986, admitting the terms of the policy as explained in the preceding paragraphs, but denying that: he made the claim six and one-half months following the policy's termination date; and his policy was cancelled by execution of the release form.

On April 8, 1987, plaintiff filed a motion for summary judgment, supported by affidavits and a memorandum of law, asserting that: Armas neither ordered nor applied for a reporting endorsement prior to April 1, 1986; on or after April 1, 1986, Cunningham first received notice from Armas of the Freeman litigation and the alleged acts of negligence raised by the Freeman complaint; plaintiff knew nothing of the Freeman complaint before April 16, 1986; plaintiff has no duty to defend nor does the policy provide coverage when a claim is not reported within the time frame specified by the policy; and the court should thus rule in plaintiff's favor as a matter of law.

Armas moved on July 20, 1987, for summary judgment, submitting to the court a memorandum of law and his affidavit. Plaintiff filed a reply in support of its motion on August 10, 1987, to which Armas responded on August 18, 1987.

Plaintiff additionally moved, on August 10, 1987, to strike portions of Armas' affidavit, maintaining that the affidavit contained statements inadmissible at trial, including: (1) Armas' expectation of insurance coverage; (2) conclusory remarks concerning Cunningham's alleged status as agent of plaintiff; (3) hearsay; and (4) statements lacking proper foundation and authentication.

Following a hearing on August 26, 1987, the circuit court found that plaintiff bore no duty to defend nor indemnify Armas in the Freeman litigation and entered an order: (1) granting plaintiff's motion for summary judgment; (2) denying Armas' motion for summary judgment; and (3) striking and dismissing Armas' affidavit. Armas appeals.

I.

Armas insists the court erroneously granted summary judgment in plaintiff's favor because the policy language, alone and in conjunction with the cancellation form and correspondence with Cunningham, creates an ambiguity as to when a "claim is made" under the insurance contract.

The instant insurance policy is purportedly drafted in "clear, straightforward English." It contains no definitional section, however, requiring the insured to rely on the following provisions to inform him of the coverage terms:

"When you're covered

"To be covered the professional service must have been performed (or should have been performed) after your retroactive date that applies. The claim must also first be made while this agreement is in effect.

"When is a claim made?

"A claim is made on the date you first report an incident or injury to us or our agent."

On another page, the policy continues:

"WHAT TO DO IF YOU HAVE A LOSS

"Someone Is Injured Or Something Happens Which Can Result In A Liability Claim

"If there's an accident or incident covered under this policy you * * * must:

"Tell us or our agent what happened as soon as possible. Do this even though no claim has been made but you * * * [are] aware of having done something that may later result in a claim."

The above-quoted sections suggest that a claim must be made when the insured suffers a "loss." "Loss" is nowhere defined in the policy, which leaves the policyholder to decide whether "loss" means an actual finding of liability resulting in the entry of a judgment against him or means merely the filing of a complaint against him. If "loss" encompasses the latter scenario, must the insured be served with summons and complaint to trigger his obligation to "make a claim" to plaintiff for coverage? The policy itself implies "loss" could additionally mean "an accident or incident" covered under the policy. "Loss" also may mean when "someone is injured or something happens which can result in a liability claim."

Definitions of "loss" contained in caselaw and insurance treatises include: "[d]eath, injury, destruction or damage, in such a manner as to charge the insurer with a liability under the terms of the policy" (American Republic Life Insurance Co. v. Cummings (1951), 218 Ark. 888, 239 S.W.2d 10, 11-12), and "injury or damage for which the insurer, under the provisions of the policy, may be liable, although at the time the extent of the loss may not be ascertainable" (13A G. Couch, Couch Cyclopedia of Insurance Law § 49:62, at 291 (2d ed. rev. vol. 1982)); the definition ultimately depends on the type of insurance at issue (see American Republic Life Insurance Co. v. Cummings, 239 S.W.2d at 11-12; 1 G. Couch, Couch Cyclopedia of Insurance Law § 1:91, at 254 (2d ed. rev. vol. 1982); 13A G. Couch, Couch Cyclopedia of Insurance Law §§ 49:62, 49:216, at 291, 414 (2d ed. rev. vol. 1982)).

Further, the cancellation form signed by Armas on October 6, 1985, merely compounds the questions raised by the policy terms. The cancellation form reads, in pertinent part:

"No claims of any type will be made against the Insurance Company under this policy for losses which occur after the date of cancellation shown above." (Emphasis added.)

Armas urges the clear implication of this statement to be that while claims pertaining to occurrences after October 1, 1985 may not be made to plaintiff, claims arising against the doctor prior to the policy's cancellation date may be so reported, even...