{ "id": 5677596, "name": "NATIONAL BEN FRANKLIN INSURANCE COMPANY, Plaintiff-Appellant, v. PETER DAVIDOVITCH, Adm'r of the Estate of Mary Davidovitch, et al., Defendants (Employers Insurance Company of Wausau, Defendant-Appellee)", "name_abbreviation": "National Ben Franklin Insurance v. Davidovitch", "decision_date": "1984-03-27", "docket_number": "No. 83\u2014562", "first_page": "88", "last_page": "95", "citations": [ { "type": "official", "cite": "123 Ill. App. 3d 88" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "81 Ill. 2d 606", "category": "reporters:state", "reporter": "Ill. 2d", "opinion_index": 0 }, { "cite": "409 N.E.2d 1", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1980, "opinion_index": 0 }, { "cite": "87 Ill. App. 3d 154", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3180783 ], "weight": 2, "year": 1980, "pin_cites": [ { "page": "157" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/87/0154-01" ] }, { "cite": "368 N.E.2d 702", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "53 Ill. App. 3d 274", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3393808 ], "pin_cites": [ { "page": "279" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/53/0274-01" ] }, { "cite": "407 N.E.2d 893", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "86 Ill. App. 3d 60", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3185011 ], "pin_cites": [ { "page": "63" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/86/0060-01" ] }, { "cite": "323 N.E.2d 521", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1980, "opinion_index": 0 }, { "cite": "25 Ill. App. 3d 449", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2702244 ], "year": 1980, "pin_cites": [ { "page": "462" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/25/0449-01" ] }, { "cite": "180 N.E.2d 470", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "24 Ill. 2d 128", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2803886 ], "opinion_index": 0, "case_paths": [ "/ill-2d/24/0128-01" ] }, { "cite": "173 N.E.2d 603", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1962, "opinion_index": 0 }, { "cite": "30 Ill. App. 2d 86", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5788344 ], "year": 1962, "opinion_index": 0, "case_paths": [ "/ill-app-2d/30/0086-01" ] }, { "cite": "240 N.E.2d 742", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1961, "opinion_index": 0 }, { "cite": "99 Ill. App. 2d 153", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5323549 ], "year": 1961, "pin_cites": [ { "page": "161-62" } ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/99/0153-01" ] }, { "cite": "263 N.E.2d 823", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1968, "opinion_index": 0 }, { "cite": "46 Ill. 2d 481", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2898837 ], "weight": 2, "year": 1968, "pin_cites": [ { "page": "487" }, { "page": "488" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/46/0481-01" ] }, { "cite": "355 N.E.2d 24", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 2, "opinion_index": 0 }, { "cite": "64 Ill. 2d 187", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5429542 ], "weight": 2, "pin_cites": [ { "page": "195" }, { "page": "196" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/64/0187-01" ] }, { "cite": "394 N.E.2d 1200", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "77 Ill. 2d 4", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5489609 ], "weight": 2, "pin_cites": [ { "page": "10" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/77/0004-01" ] }, { "cite": "384 N.E.2d 1340", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1979, "opinion_index": 0 }, { "cite": "67 Ill. App. 3d 496", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3312325 ], "weight": 2, "year": 1979, "pin_cites": [ { "page": "504" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/67/0496-01" ] }, { "cite": "388 N.E.2d 93", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "69 Ill. App. 3d 594", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3238145 ], "pin_cites": [ { "page": "596" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/69/0594-01" ] }, { "cite": "257 N.E.2d 265", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "121 Ill. App. 2d 77", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 1582639 ], "pin_cites": [ { "page": "83" } ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/121/0077-01" ] }, { "cite": "37 N.E.2d 760", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1983, "opinion_index": 0 }, { "cite": "378 Ill. 19", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2549775 ], "year": 1983, "pin_cites": [ { "page": "28" } ], "opinion_index": 0, "case_paths": [ "/ill/378/0019-01" ] } ], "analysis": { "cardinality": 841, "char_count": 16642, "ocr_confidence": 0.747, "pagerank": { "raw": 1.546337871439209e-07, "percentile": 0.673863032169057 }, "sha256": "75f376a2a6e947c6996de156cefe21d6bdf4c879b2c0a14d52004678b2274706", "simhash": "1:805571bd2bf1bc4f", "word_count": 2631 }, "last_updated": "2023-07-14T17:44:31.202001+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "NATIONAL BEN FRANKLIN INSURANCE COMPANY, Plaintiff-Appellant, v. PETER DAVIDOVITCH, Adm\u2019r of the Estate of Mary Davidovitch, et al., Defendants (Employers Insurance Company of Wausau, Defendant-Appellee)." ], "opinions": [ { "text": "PRESIDING JUSTICE HARTMAN\ndelivered the opinion of the court:\nPlaintiff National Ben Franklin Insurance Company (National) appeals from a summary judgment granted to defendant Employers Insurance Company of Wausau (Employers). The issue on appeal is whether the circuit court erred by denying retroactive reformation of an erroneous endorsement in an insurance policy so as to exclude coverage to an individual mistakenly classified as an insured by the endorsement.\nOn or about April 6, 1974, Dr. Henry Chan was \u201cmoonlighting\u201d in the radiology department of Palos Community Hospital (Palos) as an employee of Radiology and Nuclear Association, S.P., an independent contractor serving Palos under an oral agreement. On that date, Chan interpreted certain X rays of Mary Davidovitch, who subsequently died, allegedly as a result of Chan\u2019s negligent failure to diagnose a cancerous lesion. In March 1976 a wrongful death action was filed on her behalf, naming as defendants Palos, Chan and Dr. John H. Pai, an emergency room physician.\nPalos then possessed a hospital professional liability insurance policy issued by National as contracted for by National and the St. George Hospital Corporation (St. George), Palos\u2019 parent corporation. A policy endorsement provided that its \u201cdefinition of insured\u201d included \u201cany employees * * * staff members *** and others performing services\u201d for Palos. Chan carried his own professional liability insurance with Employers, which provided basic coverage in the absence of other insurance, but coverage only in excess of the maximum provided by other insurance if available.\nOn April 30, 1976, National notified Chan by letter that it would defend him in the suit because he was a \u201csalaried employee at the hospital\u201d under Palos\u2019 policy. National also advised Chan to contact his own attorney and insurance carrier because of potential excess liability exposure. National\u2019s attorneys subsequently appeared for Chan.\nFollowing Chan\u2019s notification, Employers began an investigation. On May 5, 1976, Chan told Employers\u2019 adjuster he was an employee of \u201cRadiology Associates\u201d and an independent contractor. Employers notified National of the excess coverage, but did not appear for Chan.\nIn May 1978, Michael Ehrens, Chan\u2019s personal attorney, inquired of Rudolph Schade, one of National\u2019s attorneys, as to Chan\u2019s status as Palos\u2019 employee at the time of the subject incident. Schade then requested verification of Chan\u2019s status from Underwriters Adjusting Company, which, in turn, was informed by Palos on May 30, 1978, that Chan was not its employee. On July 3, 1978, Underwriters wrote to Ehrens that Chan was never Palos\u2019 employee and was not entitled to be defended by National. By copy of the letter sent to Employers, National advised it was \u201ctendering all further defense of Dr. Chan to Employers.\u201d The letter noted that National would continue defending Chan \u201con an accommodation basis only,\u201d until a substitution of attorneys could be effected, and that National\u2019s continued defense was \u201cnot to be construed as an admission *** of any obligation to defend Dr. Chan.\u201d\nNotwithstanding the foregoing events, National made no effort to withdraw its appearance for Chan until August of 1979, some 15 months after it learned of Chan\u2019s employment status at Palos, when the cause was already on the trial assignment call. Its motion to withdraw at that time was denied by the circuit court as coming too late. At some point prior to November 28, 1978, William J. Harte, another of Chan\u2019s personal attorneys, appeared for Chan and subsequently demanded that National settle the suit for $200,000; National refused. Although Employers initially refused to assume Chan\u2019s defense, Chan on March 7, 1980, entered an agreement with Employers under which Employers settled all claims of the Davidovitch estate against Chan for $190,000 and thereby became subrogated to all of Chan\u2019s rights.\nMeanwhile, prior to Employers\u2019 settlement, National initiated the present declaratory action on March 2, 1979, seeking only to deny coverage to Chan under its policy. Employers filed a counterclaim on April 30, 1980, alleging that Chan was an insured under Palos\u2019 policy and Employers, as Chan\u2019s subrogee by virtue of the settlement, was entitled to reimbursement for the $190,000 it expended. National thereafter amended its complaint on September 18, 1981, in which it averred that policy coverage by endorsement of \u201cstaff members\u201d was a mistake and was never intended by the contracting parties and prayed for policy reformation to exclude such persons.\nNational and Employers filed cross-motions for summary judgment on July 6, 1982. On August 9, 1982, the circuit court granted Employers\u2019 motion and National\u2019s motion was denied. The court asserted that reformation was prospective only and could not affect Chan\u2019s status because \u201c*** [Chan] relied to his detriment on the coverage.\u201d National\u2019s motion to vacate the summary judgment was denied and judgment for $190,000 entered in Employers\u2019 favor.\nNational contends that despite apparent coverage for Chan, no actual coverage existed since the parties to the insurance agreement, National and St. George, properly reformed the policy by deleting the mistaken endorsement and substituting the corrected one. The asserted reformation is undated; however, the affidavit to which it is attached is dated February 26, 1982. The reformation of a written contract is premised upon mutual mistake by the contracting parties, among other reasons, in reducing their agreement to writing; reformation permits amendment in order to conform the written instrument to the actual agreement reached. (Harley v. Magnolia Petroleum Co. (1941), 378 Ill. 19, 28, 37 N.E.2d 760.) Such contracts include insurance policies. (17 Couch on Insurance Reformation sec. 66:1, at 280 (2d ed. 1983).) Equity cautions, however, that reformation if misapplied can lead to more damage than that caused by its denial. (Booth v. Cole Corp. (1970), 121 Ill. App. 2d 77, 83, 257 N.E.2d 265.) For that reason, mutual mistake must be clearly and convincingly proven. (All Brake & Drive Unit Service, Inc. v. Peterson (1979), 69 Ill. App. 3d 594, 596, 388 N.E.2d 93.) In the instant case, that burden has been fulfilled in showing that the subject endorsement was mutually mistakenly included by the parties in the policy and was thus a proper subject for reformation. Sister Margaret Wright, president of St. George, averred that the policy was never intended to provide professional liability coverage for nonemployee staff physicians, as did Richard Coglianese, one of National\u2019s underwriters, who swore that Chan was not an intended hospital policy beneficiary.\nNational\u2019s argument, that the policy should be reformed ab initio, thereby denying coverage to Chan under the erroneous endorsement, however, must be rejected. In L. E. Myers Co. v. Harbor Insurance Co. (1978), 67 Ill. App. 3d 496, 384 N.E.2d 1340, affd (1979), 77 Ill. 2d 4, 394 N.E.2d 1200 (Myers), cited by both parties, the appellate court focused on whether the third person there involved had actually relied upon the erroneously drafted instrument. Harbor, the excess insurance carrier, admittedly had not seen the primary policy until after suit had been brought; it could not have relied upon it in issuing its own policy. (L. E. Myers Co. v. Harbor Insurance Co. (1978), 67 Ill. App. 3d 496, 504.) Therefore, reformation was permitted to relate back. The supreme court likewise stressed Harbor\u2019s lack of notice as to the primary policy\u2019s exact terms at the time Harbor issued its excess policy. (L. E. Myers Co. v. Harbor Insurance Co. (1979), 77 Ill. 2d 4, 10.) Certain factual differences between Myers and the case sub judice are evident. Reformation in Myers resulted in policy coverage; here reformation would deny coverage. One of the parties in Myers seeking reformation was itself thereby incurring a financial obligation, which militated against the possibility of collusion; National here is trying to absolve itself of liability by reformation. In Myers, the reformation was effected while the underlying litigation there was still pending; the instant reformation was not attempted until after the original suit had been already settled.\nIt is significant that in Myers the third party was an additional insurer; here the third party was an additional insured. Because of this crucial difference, estoppel was not an issue in Myers-, here, because National assumed Chan\u2019s defense early on, and thereby assertedly led him to rely to his injury upon the existence of coverage, estoppel may be raised as an effective defense to the retroactive effect of the reformation with respect to Chan. (Maryland Casualty Co. v. Peppers (1976), 64 Ill. 2d 187, 195, 355 N.E.2d 24.) In the instant case, National conducted Chan\u2019s defense without reserving its rights for more than two years after entering the case. (Gibraltar Insurance Co. v. Varkalis (1970), 46 Ill. 2d 481, 487, 263 N.E.2d 823; Apex Mutual Insurance Co. v. Christner (1968), 99 Ill. App. 2d 153, 161-62, 240 N.E.2d 742.) The case cited by National, New York Life Insurance Co. v. Rak (1961), 30 Ill. App. 2d 86, 173 N.E.2d 603, affd (1962), 24 Ill. 2d 128, 180 N.E.2d 470, is not helpful. There a life insurance policy was reformed to conform to the insurance application made part of the policy, notwithstanding the fact that such reformation took place after the death of the insured, is inapposite to the facts in the case at bar.\nA party claiming the benefit of an estoppel must prove reasonable reliance upon the acts or representations of the party sought to be es-topped, without knowledge of or convenient means of learning the true facts. (Allstate Insurance Co. v. National Tea Co. (1975), 25 Ill. App. 3d 449, 462, 323 N.E.2d 521; Meakens v. City of Chicago (1980), 86 Ill. App. 3d 60, 63, 407 N.E.2d 893.) The \u201ctrue facts\u201d here are that the policy, as it then existed, expressly provided Chan with coverage. National insists that Chan knew National\u2019s defense was based upon the faulty premise that he was Palos\u2019 employee; thus, he had no right to rely upon National\u2019s conduct of his defense in order to assert an estoppel. We disagree. National\u2019s April 30, 1976, letter to Chan, which advised him of his defense by National because he was \u201ca salaried employee at the hospital,\u201d cannot be said to have put Chan on notice as to National\u2019s error; he was in fact a \u201csalaried employee,\u201d a resident radiologist who worked \u201cat\u201d the hospital. He performed the same functions in substitution for the staff radiologist on weekends, and, in fact, provided services for the hospital at the hospital, utilizing the hospital\u2019s equipment and facilities in diagnosing the hospital\u2019s patients. A subsequent letter to Chan from National\u2019s attorneys notes that Chan\u2019s interests are the same as those of Palos, since he was \u201can employed physician of the hospital.\u201d This letter also fails to specify that Chan was being defended because he was a hospital employee. That Palos required Chan to carry his own liability insurance need not be construed as notice of noncoverage. Notably, Michael Ehrens, Chan\u2019s personal attorney, inquired of National\u2019s attorneys representing Chan as to his hospital employee status. Had Chan indeed been aware of noncoverage, his attorney would not have raised this question. Contrary to National\u2019s contentions, therefore, the undisputed facts do not establish that Chan was aware of National\u2019s mistake.\nEstoppel arises only where the party asserting it has relied to its prejudice or detriment on the other party\u2019s conduct. (Old Mutual Casualty Co. v. Clark (1977), 53 Ill. App. 3d 274, 279, 368 N.E.2d 702.) The mere appearance and assumption of the defense by an insurer of its insured does not presume prejudice; where, however, the insured is induced by the insurer\u2019s actions \u201cto surrender his right to control his own defense, he has suffered a prejudice which will support a finding that the insurer is estopped to deny policy coverage.\u201d (Maryland Casualty Co. v. Peppers (1976), 64 Ill. 2d 187, 196, 355 N.E.2d 24.) In Maryland, no prejudice was found where the insurer defended the insured, who was also represented by private counsel, for three months. Contrariwise, in Textile Machinery, Inc. v. Continental Insurance Co. (1980), 87 Ill. App. 3d 154, 409 N.E.2d 1, appeal denied (1980), 81 Ill. 2d 606, the insurer\u2019s mistaken defense of the insured for 2V2 years, in which action the insured\u2019s own attorney did not participate, was held to be sufficiently prejudicial to support an estoppel. The instant facts closely parallel those in Textile, and that case is dispositive.\nNational defended Chan for over two years before notification of withdrawal. Of what that defense consisted, specifically, is unknown in the absence of the full record. It is nevertheless apparent that the Davidovitch case was not defaulted for any lack of defense nor dismissed for noncompliance with rules or law. The defense was sufficiently vital, substantial and effective to provide a basis for compromise of the ad damnum for less than two-fifths of the amount asked. While National\u2019s attorneys were defending Chan, they acted in his behalf as though policy coverage by National existed, thereby permitting him to rely entirely upon National for his defense. (Gibraltar Insurance Co. v. Varkalis (1970), 46 Ill. 2d 481, 488; Textile Machinery, Inc. v. Continental Insurance Co. (1980), 87 Ill. App. 3d 154, 157.) Chan was not represented in the litigation by his own attorney during this time. William J. Harte did not enter his appearance on Chan\u2019s behalf until some point around November 28, 1978, when he promptly demanded that National settle the suit for $200,000. National refused. Whether Chan would have settled earlier or for a lesser amount, or any, had his personal attorney represented him from the outset of the litigation is moot. The controlling fact, establishing Chan\u2019s surrendering his defense to National, is that for over two years the decision not to settle was made by National\u2019s attorneys. Chan\u2019s right to estop National from denying him coverage was thus sufficiently established.\nThe remaining issue is whether Employers, by reason of its own conduct in this matter, may stand in Chan\u2019s shoes as his subrogee. National contends that Employers\u2019 knowledge of Chan\u2019s true employment status should have alerted Employers to National\u2019s mistake, since it was \u201ccommon knowledge in the insurance industry\u201d that a hospital\u2019s liability policy does not extend to cover the professional services of staff physicians. Chan, however, was not a mere \u201cstaff physician\u201d attending to his own patients while utilizing hospital facilities, but provided services there only for Palos, doing part-time the same work as its full-time employee. As excess insurer who was not privy to the actual terms of National\u2019s policy, Employers\u2019 knowledge of Chan\u2019s specialized status cannot be said to have put it on notice of National\u2019s error. Moreover, even if Employers had seen the policy, it would have found that coverage was in fact provided to \u201cstaff members\u201d and \u201cothers performing services for\u201d Palos. In an effort to show Employers\u2019 bad faith, National points to internal memoranda which speculate upon provisions of National\u2019s policy. They suggest no firm knowledge, however, of National\u2019s mistake, and Employers owed no duty to National to inform it otherwise. An employee\u2019s recommendation that Employers \u201cjust lay back in the weeds and only communicate with the policyholder alone\u201d was rejected. National was informed of Employers\u2019 excess coverage. As excess insurer, Employers was not obliged to defend Chan in court. There is no indication that Employers affirmatively promoted National\u2019s error. Employers\u2019 actions were consistent with its position as excess insurer and do not bar its subrogation to Chan\u2019s rights.\nThe record demonstrates no basis upon which to disturb the decision of the circuit court. Accordingly, the judgment of the circuit court is affirmed.\nAffirmed.\nDOWNING and BERLIN, JJ., concur.", "type": "majority", "author": "PRESIDING JUSTICE HARTMAN" } ], "attorneys": [ "Clausen, Miller, Gorman, Caffrey & Witous, P.C., of Chicago (James T. Ferrini and Frank L. Schneider, of counsel), for appellant.", "Schaffenegger, Watson and Peterson, Ltd., of Chicago (Jack L. Watson, of counsel), for appellee." ], "corrections": "", "head_matter": "NATIONAL BEN FRANKLIN INSURANCE COMPANY, Plaintiff-Appellant, v. PETER DAVIDOVITCH, Adm\u2019r of the Estate of Mary Davidovitch, et al., Defendants (Employers Insurance Company of Wausau, Defendant-Appellee).\nFirst District (2nd Division)\nNo. 83 \u2014 562\nOpinion filed March 27, 1984.\nRehearing denied April 23, 1984.\nClausen, Miller, Gorman, Caffrey & Witous, P.C., of Chicago (James T. Ferrini and Frank L. Schneider, of counsel), for appellant.\nSchaffenegger, Watson and Peterson, Ltd., of Chicago (Jack L. Watson, of counsel), for appellee." }, "file_name": "0088-01", "first_page_order": 110, "last_page_order": 117 }