St. John's Hosp. of the Hosp. Sisters of the Third Order of St. Francis v. Nat'l Guardian Risk Retention Grp., Inc.

2015 IL App (4th) 140181-U

ST. JOHN'S HOSPITAL OF THE HOSPITAL

SISTERS OF THE THIRD ORDER OF ST.

FRANCIS, Plaintiff-Appellant, v. NATIONAL GUARDIAN RISK RETENTION

GROUP, INC.; EMERGENCY CONSULTANTS,

INC.; CENTRAL ILLINOIS EMERGENCY

PHYSICIANS, P.C.; ELIZABETH McDANIEL, D.O.;

AAMIR BANDAY, M.D.; JOHN BYRNES, M.D.;

PATRICIA FUGATE; and ROBERT FUGATE, Defendants-Appellees.

ST. JOHN'S HOSPITAL OF THE HOSPITAL

SISTERS OF THE THIRD ORDER OF ST.

FRANCIS, Plaintiff-Appellee,

and

NATIONAL GUARDIAN RISK RETENTION

GROUP, INC.; AAMIR BANDAY, M.D.; JOHN

BYRNES, M.D.; and ELIZABETH McDANIEL, D.O., Defendants-Appellees, v. PATRICIA FUGATE and ROBERT FUGATE, Defendants-Appellants,andEMERGENCY CONSULTANTS, INC.; andCENTRAL ILLINOIS EMERGENCY PHYSICIANS, P.C., Defendants.

NO. 4-14-0181

NO. 4-14-0205 cons.

APPELLATE COURT OF ILLINOIS FOURTH DISTRICT

May 11, 2015

NOTICE

This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).

Appeal from Circuit Court of Sangamon County

No. 13MR66

Honorable John P. Schmidt, Judge Presiding.

JUSTICE HOLDER WHITE delivered the judgment of the court.

Justices Knecht and Steigmann concurred in the judgment.

ORDER

¶ 1 Held: The appellate court affirmed, holding the trial court did not err in dismissing for lack of ripeness plaintiff's declaratory action regarding defendant insurance company's duty to indemnify where liability had not yet been established.

¶ 2 In January 2013, plaintiff, St. John's Hospital of the Hospital Sisters of the Third Order of St. Francis (St. John's) filed a complaint for declaratory judgment against defendants, National Guardian Risk Retention Group, Inc. (National Guardian); Emergency Consultants, Inc.; Central Illinois Emergency Physicians, P.C. (CIEP); Patricia and Robert Fugate; and physicians Elizabeth McDaniel, D.O.; Aamir Banday, M.D.; and John Byrnes, M.D. The complaint sought the trial court's interpretation of the amount of liability coverage provided by an insurance policy and associated agreements as it related to a pending lawsuit.

¶ 3 In March 2013, National Guardian filed a motion to dismiss, which was later joined by other defendants. In September 2013, the trial court denied defendants' motion to dismiss but, in February 2014, following a hearing on defendants' motion to reconsider, the court reversed its decision and granted the motion to dismiss, finding St. John's lacked standing and that the issue was not yet ripe for adjudication.

¶ 4 St. John's and the Fugates appeal, arguing the trial court erred by dismissing St. John's complaint for declaratory judgment because (1) St. John's did not lack standing and (2) the issues were ripe for adjudication. The parties also assert the court erred by dismissing the complaint against defendant physicians, Emergency Consultants, and CIEP as part of National Guardian's motion to dismiss.

¶ 5 I. BACKGROUND

¶ 6 A. The Parties

¶ 7 St. John's is a hospital located in Springfield, Illinois. To staff its emergency room, St. John's entered into a contract with CIEP, a company that provides physician services tomedical facilities throughout Illinois. The agreement between CIEP and St. John's required CIEP to maintain professional-liability insurance coverage on behalf of its physicians in the amount of $1 million per occurrence and $3 million in the aggregate. CIEP obtained an insurance policy from Emergency Consultants, which was an agent of National Guardian. The insurance policy provided coverage in the amount of $1 million per occurrence and $3 million in the aggregate.

¶ 8 CIEP subsequently provided the services of Drs. Banday, Byrnes, and McDaniel to St. John's. As part of their placement with St. John's, defendant physicians all signed agreements to maintain insurance in the amount of $1 million per occurrence and $3 million in the aggregate.

¶ 9 B. The Underlying Case

¶ 10 In March 2011, Patricia and Robert Fugate filed a complaint against numerous defendants, including those relevant to this appeal: St. John's, Drs. McDaniel, Banday, and Byrnes, and Emergency Consultants (Madison County case No. 11-L-270). The complaint alleged defendants' failure to timely diagnose and treat Patricia's mastoiditis resulted in her developing a brain abscess that required surgery, and the surgery caused brain damage. Specifically, the Fugates alleged, while visiting the St. John's emergency room, (1) Dr. McDaniel was negligent in her care and treatment of Patricia on May 3, 2009; (2) Dr. Banday was negligent in his care and treatment of Patricia on May 4, 2009; and (3) Dr. Barnes was negligent in his care and treatment of Patricia on May 11, 2009.

¶ 11 C. Declaratory Action

¶ 12 1. Complaint for Declaratory Judgment¶ 13 In January 2013, while the underlying case was in the discovery phase, St. John's filed a complaint for declaratory judgment in the present case. As part of this complaint, St. John's sought clarification of the insurance policy provided by National Guardian and the various agreements St. John's entered into with CIEP and defendant physicians.

¶ 14 As to National Guardian, St. John's asserted National Guardian was obligated to provide coverage in the amount of $1 million per occurrence and $3 million in annual aggregate for each defendant physician but instead declined to cover more than $1 million total. Because of National Guardian's unwillingness to provide coverage in the amount of $3 million, St. John's argued it would be vicariously liable for any amounts exceeding $1 million, thus demonstrating an active controversy between the parties. Therefore, St. John's asked the trial court to interpret the insurance contract to determine whether National Guardian was required to provide $1 million in coverage for each defendant physician's alleged negligence. Though St. John's was not a party to the contract between National Guardian and CIEP, St. John's asserted it had an interest and a stake in the determination of the declaratory-judgment action because it could be held vicariously liable for any judgment exceeding the policy limits.

¶ 15 As to Emergency Consultants, St. John's asserted Emergency Consultants, as an agent of National Guardian, was obligated to furnish $1 million in coverage per occurrence with a $3 million annual aggregate but failed to do so. Thus, St. John's asked the trial court to interpret the contract and find Emergency Consultants had breached its agreement for emergency-department-management services with St. John's by failing to provide the appropriate level of insurance.

¶ 16 As to CIEP and the defendant physicians, St. John's asserted they had breached their agreements for emergency-department-management services with St. John's by failing to maintain the appropriate levels of insurance.

¶ 17 St. John's also joined the Fugates as necessary parties due to their involvement in the underlying case.

¶ 18 2. National Guardian's Motion To Dismiss

¶ 19 In March 2013, National Guardian filed a motion to dismiss, asserting (1) the dispute was not ripe for adjudication and (2) the trial court lacked jurisdiction because the insurance policy specifically required all disputes to be settled in a Michigan forum under Michigan law. National Guardian argued St. John's failed to establish an actual controversy between the parties as required to provide the court with jurisdiction under section 2-701 of the Code of Civil Procedure (Civil Code) (735 ILCS 5/2-701 (West 2012)), contending the issue raised by St. John's was not ripe for adjudication because liability had not yet been established in the underlying case. In May 2013, both Emergency Consultants and CIEP joined in National Guardian's motion to dismiss.

¶ 20 In June 2013, St. John's filed a response to National Guardian's motion to dismiss, asserting (1) National Guardian waived any objection to the forum by failing to file a motion to transfer venue, and (2) its complaint adequately stated a cause of action requesting the trial court's interpretation of the insurance policy. In July 2013, National Guardian replied, clarifying it sought dismissal under sections 2-615 and 2-619 of the Civil Code.

¶ 21 In September 2013, the trial court denied the motion to dismiss brought by National Guardian.

¶ 22 3. The Motion To Reconsider

¶ 23 In October 2013, National Guardian filed a motion to reconsider the trial court's order, asserting (1) St. John's lacked standing, (2) the issue was not ripe for adjudication, and (3) the court lacked jurisdiction where the policy specified disputes were subject to a Michigan forum.

¶ 24 Also in October 2013, CIEP filed a motion to dismiss pursuant to section 2-612 of the Civil Code (735 ILCS 5/2-612 (West 2012)), asserting the complaint for declaratory judgment failed to demonstrate an actual controversy between CIEP and St. John's. That motion was never ruled upon by the trial court.

¶ 25 In January 2014, Drs. Banday and Byrnes filed a joint motion to dismiss pursuant to sections 2-615 and 2-619, asserting St. John's complaint was not ripe for adjudication. Drs. Banday and Byrnes also adopted National Guardian's motion to reconsider. Later that month, Dr. McDaniel adopted the motions filed by her codefendants.

¶ 26 That same month, the trial court held a hearing on the motion to reconsider. In February 2014, the court entered a written order granting National Guardian's motion to reconsider, thus reversing its earlier decision. The court determined St. John's was neither a party to the insurance contract nor a third-party beneficiary, thus it lacked standing to pursue declaratory relief. Moreover, the court determined the issue raised by St. John's was not ripe for adjudication. Accordingly, the court dismissed St. John's complaint for declaratory relief as to all parties.

¶ 27 In March 2014, St. John's filed a notice of appeal, which we docketed as Appellate Court case No. 4-14-0181. The Fugates also filed a notice of appeal, which we docketed as Appellate Court ...