An Illinois appellate court has held that a professional liability insurer has a duty to defend suits seeking only declaratory and injunctive relief, even though the suits did not allege potentially covered damages. MHM Correctional Servs., Inc. v. Evanston Ins. Co., 2021 WL 689525 (Ill. Ct. App. Feb. 23, 2021).
The policy was issued to healthcare providers that contract with state departments of corrections to provide medical care to inmates. The contracts required the providers to name the departments of correction as additional insureds and to indemnify the departments of correction for liability arising out of the providers’ performance of the contracts. In three separate lawsuits, inmates named the departments of correction and/or the providers as defendants, alleging failure to provide adequate healthcare services to inmates. The suits sought declaratory and injunctive relief that would compel the departments of correction and providers to deliver sufficient healthcare to the inmates. The suits also sought to rectify other institutional problems beyond insufficient medical care. None of the suits expressly sought monetary damages.
The policy provided that the insurer would “defend any Claim to which coverage under this Coverage Part applies.” The policy defined a “Claim” as “[a] demand for monetary damages or services involving Professional Healthcare Services” or a “suit . . . against the Insured involving Professional Healthcare Services,” which included “the medical care or treatment of any patient.” The insured argued that the policy obligated the insurer to defend “Claims,” and the inmate suits satisfied the definition of “Claim.” The insurer argued it had no duty to defend because “coverage” would not “apply” to the suits. The insurer pointed to the insuring agreement, which stated that the insurer “shall pay on behalf of the Insured all sums in excess of the Self-Insured Retention . . . which the Insured shall become legally obligated to pay as Damages as a result of Claims.” The insurer also argued that the self-insured retention only could be exhausted by the defense and settlement of Claims seeking “Damages.”
The court agreed with the insureds, holding that the insurer had a duty to defend the inmate suits. The court held that the insurer’s argument would improperly negate the “services” part of the “Claim” definition. The court also reasoned that the duty to defend is broader than the duty to indemnify and rejected the insurer’s argument that it could have no duty to defend if it had no duty to indemnify. The court opined that defense of suits seeking only injunctive relief was a key part of the “coverage” that the insured purchased.