2025 IL App (1st) 231084-U SIXTH DIVISION
January 24, 2025
No. 1-23-1084
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1). ______________________________________________________________________________
IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________ KATHERINE SHAW BETHEA HOSPITAL, ) Appeal from the Circuit Court ) of Cook County. Plaintiff-Appellant, ) ) ) v. ) No. 20 CH 2816 ) NAUTILUS INSURANCE COMPANY, AMBER ) BLANKENSHIP, INDIVIDUALLY AND AS ) ADMINISTRATOR OF THE ESTATE OF GIANNA ) ANKNEY, JOHN ANKNEY, WILLIAM GORSKI, and ) DEBRA GORSKI, ) Honorable ) Anna M. Loftus, Defendants-Appellees. ) Judge, presiding.
JUSTICE C.A. WALKER delivered the judgment of the court. Presiding Justice Tailor and Justice Hyman concurred in the judgment.
ORDER
¶1 Held: We affirm the circuit court’s entry of summary judgment where the appellee insurance carrier appropriately denied coverage of claims against the appellant No. 1-23-1084
insured because appellant reported the claims to appellee outside of the contractually mandated reporting period.
¶2 In this insurance coverage dispute, appellant Katherine Shaw Bethea Hospital (KSB)
appeals from the circuit court’s entry of summary judgment in a declaratory judgment matter
brought against KSB by its former insurance carrier, appellee Nautilus Insurance Company
(Nautilus). The issue arose when Nautilus denied coverage of two claims against KSB, which KSB
contended was improper per the terms of an insurance policy KSB had with Nautilus (the Policy).
The parties each sought a declaratory judgment regarding whether Nautilus owed coverage for the
claims, which the court ultimately resolved by granting summary judgment in Nautilus’ favor. On
appeal, KSB argues this finding was erroneous because, per the terms of the Policy, KSB complied
with the applicable reporting requirements. We affirm.
¶3 BACKGROUND
¶4 The Policy had effective dates of March 2, 2016, to March 2, 2017. In relevant part, the
Policy required Nautilus to legally defend KSB against “medical professional injury” suits and
claims brought once KSB spent a threshold amount defending itself. 1 The operative portions
related to this appeal read as follows:
Section I.A.2.: “This coverage applies to ‘medical professional injury’ only if: ***
(c) A ‘claim’ or ‘suit’ with respect to the ‘medical professional injury’ is first made against
the insured and reported to us in writing, in accordance with [section I.A.4] below, during
the policy period or an extended reporting period we provide with accordance with [Section
V—Extended Reporting Period].” 2
1 There is no dispute the lawsuits at issue qualify as “medical professional injury” suits. 2 Section V permitted KSB to report claims after the Policy’s expiration for an additional charge. The additional coverage only applied if claims or suits were “first made and reported to us in writing during the extended reporting period.” 2 No. 1-23-1084
Section I.A.4:
“A ‘claim’ or ‘suit’ shall be considered to be first made at the earlier of the following times:
a. When notice of such ‘claim’ or ‘suit’ is received by any insured.
b. When you knew about or should reasonably have known a circumstance
was likely to result in a ‘claim’ or ‘suit.’
c. When a ‘claim’ or ‘suit’ is reported in writing directly to us or one of our
agents.
A ‘claim’ or ‘suit’ received by the insured and reported to us in writing within 30 days after
the end of the policy period will be deemed to have been reported on the last day of the
policy period.
You must report the ‘claim,’ ‘suit,’ or ‘medical incident’ in accordance with the terms and
conditions of Section IX.A.—Notice of Claim or Suit.”
Section IX.A.:
“Notice of Claim or Suit: As a condition precedent to the right to the protection afforded by
this insurance, the insured shall, as soon as practicable, give the Company written notice of
any ‘claim,’ ‘suit’ or ‘medical incident’ made against the insured.”
¶5 The Policy contained an amendment called the Self-Insured Retention Endorsement (SIR-
E). In relevant part, the SIR-E reads:
“Section [IX.A] is deleted in its entirety and replaced with the following:
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a. The Insured must notify the Company in writing upon exhaustion of 25% of the
self-insured retention, either by payments or reserves, or a ‘claim’ in which we are
named as a defendant.”
The Policy set the self-insured retention amount for each medical incident at $250,000.
¶6 The Policy’s “Declarations Page” reads, “This is a claims made and reported policy.” Two
pages later, the following language appears immediately before section I: “This is a claims made
and reported policy. This policy is limited to claims that are first made against an insured and
reported to the company in writing during the policy period or during the extended reporting
period, if applicable.” Additionally, both sections I.A.5 and III.C.2 state: “Only the policy in effect
when the first such related ‘claim’ or ‘suit’ is made and reported to us in writing will apply.”
¶7 On March 6, 2020, KSB filed their initial complaint against Nautilus, seeking a declaratory
judgment that Nautilus owed coverage in two lawsuits: (1) Amber Blankenship, individually and
as Administrator of the Estate of Gianna Ankney, et al. v. KSB, et al. (case No. 2016 L 266), and
(2) William and Debra Gorski v. KSB, et al. (case No. 2017 L 4) (hereinafter “Ankney” and
“Gorski”). KSB twice amended its filing, and the circuit court ultimately granted in part and denied
in part Nautilus’ motion to dismiss KSB’s second amended complaint.
¶8 On March 9, 2022, KSB filed its third amended complaint, the operative complaint for this
appeal. Therein, KSB alleged that Nautilus denied coverage in both the Ankney and Gorski cases
improperly and in bad faith. In support, KSB alleged that the SIR-E “eliminated” the requirement
that KSB report a claim to Nautilus during the policy period. Instead, KSB claimed, all that was
required to trigger coverage was that the underlying incident occur during the policy period, and
KSB provide notice to Nautilus “upon exhaustion of 25% of the $250,000 self-insured retention.”
KSB alleged it complied with this requirement.
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¶9 On the Ankney suit, KSB alleged it was served on October 20, 2016, and reported the suit
to Nautilus on December 8, 2017. Nautilus denied coverage on March 8, 2018, citing that KSB
failed to report the suit within 30 days of the Policy’s March 2, 2017 expiration date.
¶ 10 On the Gorski suit, KSB alleged it was served on February 3, 2017. KSB did not specifically
allege when it provided notice to Nautilus, but relayed that Nautilus maintains it did not receive
notice until June 2017, and then denied coverage on June 12, 2017, again because KSB reported
the case more than 30 days after the Policy’s end date.
¶ 11 KSB brought five counts: count I for a declaratory judgment that Nautilus owed coverage
on both suits; count II for bad faith for Nautilus’ denial of coverage; count III for bad faith for
interfering with the underlying cases 3; count IV for consumer fraud; and count V for a declaratory
judgment under a waiver/estoppel theory.
¶ 12 Nautilus filed a “Counter-Complaint,” seeking a declaratory judgment that they did not owe
KSB coverage for the Ankney or Gorski suits. Therein, it contended the Policy was a “claims made
and reported” policy, and KSB failed to timely report either.
¶ 13 On December 9, 2022, KSB moved for partial summary judgment, reiterating that the SIR-
E altered the reporting requirement such that KSB only had to report claims made during the policy
period to Nautilus when the 25% threshold was met, meaning Nautilus improperly denied coverage
in both suits because KSB reported before it reached that threshold in each case. Specifically, KSB
filed affidavits that represented it spent $35,875.83 in the Ankney case at the time of reporting,
and $0 in the Gorski case.
3 Counts III and V were previously dismissed by the court, and re-plead for preservation only.
5 No. 1-23-1084
¶ 14 In support, KSB cited the legal principle that if contract language conflicts with an
endorsement, the endorsement controls. It argued the SIR-E “did not include any specified time,
such as number of days, weeks or months for reporting a claim nor did it tie reporting to expiration
of the policy period.” The SIR-E controlled over any other contract language regarding a reporting
period because, “Requiring a claim to be reported during the policy period (or within 30 days
thereafter) but also mandating reporting a claim only after exhaustion of a percentage of the [self-
insured retention], cannot be reconciled.” It also contended, alternatively, that if the circuit court
deemed the Policy terms ambiguous, this ambiguity must be resolved in its favor.
¶ 15 Nautilus also filed a motion for partial summary judgment, similarly reiterating its position
on the function of the SIR-E. Specifically, Nautilus argued that as the Policy was initially written,
before the SIR-E was added to it, “Nautilus had the duty to defend and KSB was required to: (1)
report a claim made during the policy period, in writing, within 30 days after the end of the policy;
and (2) provide written notice of the claim to Nautilus ‘as soon as practicable.’ ” After the SIR-E,
however, to trigger Nautilus’ coverage obligations, KSB had “to: (1) report a claim made during
the policy period, in writing, within 30 days after the end of the policy; and (2) provide written
notice to Nautilus once it exhausts 25% of its [self-insured retention] with respect to any single
claim.”
¶ 16 On April 13, 2023, the circuit court granted Nautilus’ motion for partial summary judgment
following argument on the motions. During the proceedings, the court explained that it found the
Policy was a “claims made and reported” policy. It highlighted the Policy’s requirement, per
sections I.A.2(c) and I.A.4, that KSB’s reporting duty had to be carried out “in accordance with”
section IX.A. The court continued that “in accordance” is defined as “in a way that agreed with or
follows,” meaning the SIR-E simply provided an additional requirement to those in sections
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I.A.2(c) and I.A.4. It explained that the SIR-E replacing section IX.A “does not mean that the
insured no longer has to report the claim made during the policy period to the insurer within the
policy period. It means that there is no longer a requirement to provide the notice as soon as
practicable within the policy period.” The court also highlighted that, “there is nothing in the [SIR-
E] itself that removes the language of the [P]olicy confirming it as a claims made and reported
policy.” Instead, the SIR-E changes the focus from notice when practicable to notice when KSB
is nearing the threshold spending amount so Nautilus “can start paying attention, given its duty to
defend may soon be triggered.” The court denied the language at issue was ambiguous. Finally,
the court stated that KSB’s interpretation was unreasonable because it would require the court to
“ignore the language” regarding the “claims made and reported nature” of the Policy.
¶ 17 That same day, the circuit court entered an order that: (1) denied KSB’s motion for partial
summary judgment; (2) granted Nautilus’ motion for partial summary judgment; and (3) found
counts I and II of KSB’s third amended complaint were thus rendered moot, leaving only count
IV. On May 16, 2023, the circuit court entered an order granting KSB’s oral motion to voluntarily
dismiss count IV, and this appeal followed.
¶ 18 JURISDICTION
¶ 19 The circuit court entered its order resolving all pending matters in the litigation on May 16,
2023, and KSB filed its notice of appeal on June 15, 2023. Accordingly, this court has jurisdiction
pursuant to article VI, section 6 of the Illinois Constitution (Ill. Const. 1970, art. VI, § 6) and
Illinois Supreme Court Rules 301 (eff. Feb. 1, 1994) and 303 (eff. July 1, 2017).
¶ 20 ANALYSIS
¶ 21 On appeal, KSB claims that the circuit court misinterpreted the Policy to require reporting
within 30 days of expiration because the SIR-E eliminated this requirement and only required that
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(1) a claim be made within the policy period and (2) KSB report the claim to Nautilus before it
spent 25% of the self-insured retention, or $62,500.
¶ 22 The circuit court granted summary judgment in favor of Nautilus based on its interpretation
of the Policy, meaning this matter presents an issue of contractual interpretation for this court,
which we conduct de novo. See Kuhn v. Owners Insurance Co., 2024 IL 129895, ¶¶ 14-15. When
interpreting a contract, a court’s role is to give effect to the parties’ intent, as expressed by the
language of the contract. Id. When the contract’s language is clear and unambiguous, the court
must apply that language as written. Id. “[A] contract must be construed as a whole, viewing each
part in light of the others. *** The intent of the parties is not to be gathered from detached portions
of a contract or from any clause or provision standing by itself.” Gallagher v. Lenart, 226 Ill. 2d
208, 233 (2007). The court will give effect to the entirety of a contract if possible. Wood v.
Evergreen Condominium Ass’n, 2021 IL App (1st) 200687, ¶ 51. A contract’s headings will not
be interpreted to “modify the coverage provided by the actual textual language appearing in the
policy.” See Pekin Insurance Co. v. Tovar Snow Professionals, Inc., 2012 IL App (1st) 111136,
¶ 14. In an insurance policy context, a court will construe any ambiguity in the contractual
language in favor of the insured. Acuity v. M/I Homes of Chicago, LLC, 2023 IL 129087, ¶ 31.
¶ 23 An “endorsement” to an insurance policy is an amendment to an existing policy and does
not constitute a separate agreement. Alshwaiyat v. American Services Insurance Co., 2013 IL App
(1st) 123222, ¶ 33. When language in the body of a contract conflicts with language in an
endorsement, the endorsement controls. Pekin Insurance Co. v. Recurrent Training Center, Inc.,
409 Ill. App. 3d 114, 118 (2011).
¶ 24 Two common types of policies in this field of insurance are described as “claims made” or
“claims made and reported” policies. Southwest Disabilities Service and Support v. ProAssurance
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Specialty Insurance Co., 2018 IL App (1st) 171670, ¶ 18. A “claims made” policy only requires
that the incident occur during the policy period. Id. A “claims made and reported” policy, however,
requires “not only that the claim be first made during the policy period, but also that it be reported
to the insurer during the policy period.” Id.
¶ 25 There is no dispute that KSB did not report either the Ankney or Gorski cases within 30
days of the conclusion of the Policy and did not purchase a reporting period extension. The parties
also agree that KSB reported each case to Nautilus before it spent $62,500 on either. Accordingly,
the core issue before this court is whether the SIR-E altered the Policy to eliminate the reporting
requirement described in section I.A.2(c) and I.A.4, leaving only the requirement that KSB give
notice to Nautilus upon spending $62,500 on defense of a claim, provided that claim was made
during the policy period.
¶ 26 We find that the plain language of the Policy, including the SIR-E, is clear and unambiguous
that the reporting requirement contained in section I.A.2(c) and I.A.4 maintained after the SIR-E
modified the Policy, and therefore Nautilus was within its rights to decline coverage for both suits.
The express language of the SIR-E, in relevant part, eliminated section IX.A, and along with it,
the requirement that KSB provide notice of claims “as soon as practicable.” At that point, per the
SIR-E, KSB had no obligation to provide notice of a claim as soon as practicable, and instead had
to provide notice before it spent $62,500 on defending the claim. The SIR-E did not, however,
purport to affect section I.A.2(c) and I.A.4 at all, meaning the requirement that KSB report claims
before 30 days after the Policy’s expiration date survived the SIR-E intact.
¶ 27 There is no conflict between applying the 30-day reporting requirement and the SIR-E’s
$62,500 notice requirement. They are simply separate requirements. Nor do I.A.2(c)’s and I.A.4’s
requirements that each provision be applied “in accordance” with the SIR-E create any conflict.
9 No. 1-23-1084
Instead, all three sections operate in combination to detail the requirements for KSB to trigger
coverage from Nautilus: (1) KSB had to report a claim made during the policy period within 30
days of the end of the policy period, and (2) in the event KSB’s expenditure would exceed $62,500
before that 30-day date, it had to report the claim before it reached that threshold.
¶ 28 In so finding, we are guided by the principle that a court must consider a contract in its
entirety when determining the intent of any particular passage. Gallagher, 226 Ill. 2d at 233. If we
adopted KSB’s position, large portions of the Policy—sections the SIR-E does not purport to
alter—would be rendered superfluous. Most glaringly, section V regarding extended reporting
periods would be meaningless if the SIR-E removed the 30-day reporting requirement.
Additionally, the language included in the Policy specifically declaring it a “claims made and
reported” policy would be negated under KSB’s interpretation. This language appears throughout
the Policy, including on the Declarations page, before section I, and in sections I.A.5 and III.C.2.
¶ 29 We acknowledge that certain of these passages appear outside of a specific Policy section,
but this is not an instance where headings or section titles of a contract conflict with a policy’s
substantive coverage descriptions such that the language should be disregarded. See Firebirds
International, LLC v. Zurich American Insurance Co., 2022 IL App (1st) 210558, ¶ 19; Tovar,
2012 IL App (1st) 111136, ¶ 14. Instead, the language describing the Policy as a “claims made and
reported policy” is consistent with the coverage described elsewhere in the Policy, including the
SIR-E, meaning it can and should be considered as illustrative of the parties’ intent. Wood, 2021
IL App (1st) 200687, ¶ 51. 4
4 Because we find that the 30-day reporting requirement maintained, and there is no factual dispute that KSB did not meet it, we affirm the circuit court’s order in its entirety on this basis alone. Accordingly, we do not reach the issue discussed in the parties’ briefing on whether KSB also violated a separate provision in the SIR-E concerning notice of serious medical incidents. 10 No. 1-23-1084
¶ 30 In support of its position, KSB first claims that the parties’ intent for the SIR-E to replace
the reporting requirement in its entirety should be inferred because the Policy provides “excess”
coverage, in that Nautilus’ requirements are only triggered after KSB spends a threshold amount.
KSB continues that, in the context of excess policies, general reporting requirements within certain
date ranges are less common than a spending threshold notice requirement, and the parties likely
intended for the SIR-E to bring the Policy in line with this, citing Essex Insurance Co. v. Village
of Oak Lawn, 189 F. Supp. 3d 779 (N.D. Ill. 2016). This argument fails because the SIR-E does
not purport to fundamentally alter the Policy’s reporting/notice apparatus. The SIR-E only
overrides distinct, enumerated sections of the Policy. Crucially, it does not alter the reporting
requirement described in I.A.2(c) and I.A.4, or the language labeling the Policy a “claims made
and reported” policy, and we must apply the SIR-E as written and in the context of the Policy as a
whole. Gallagher, 226 Ill. 2d at 233; Wood, 2021 IL App (1st) 200687, ¶ 51. If the parties intended
for the SIR-E to replace the reporting/notice apparatus to align the Policy with how KSB alleges
excess policies typically operate, they had to express this intent in the actual language of the SIR-
E. They did not.
¶ 31 KSB also argues that the intent to not impose a time-limit on reporting is clear from the lack
of a specific number of days listed in the SIR-E, contending that when a specific time period is at
issue in the Policy, that period is delineated. The problem with this argument is that the Policy
does reference a specific timeframe for reporting claims—the 30-day end-of-policy expiration
period. The SIR-E did not alter this language, and thus must be read and interpreted in conjunction
with it. Wood, 2021 IL App (1st) 200687, ¶ 51.
¶ 32 KSB next contends that the SIR-E cannot be reconciled with the 30-day reporting
requirement, and thus, per Illinois law, we must only apply the SIR-E because when a conflict
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exists between an endorsement and pre-existing contract, and the endorsement controls. See
Recurrent, 409 Ill. App. 3d at 118. As explained above, this is inaccurate; the SIR-E is not in
conflict with the other provisions of the Policy, and only imposes an additional requirement for
reporting.
¶ 33 We also reject KSB’s citation to Panfil v. Nautilus Insurance Co., 799 F.3d 716 (7th Cir.
2015), as dictating our result here. There, the court found the policy at issue was subject to multiple
reasonable interpretations, one of which meant that Nautilus improperly denied coverage. Id. at
720. In ruling against Nautilus, the Panfil court relied on the principle that when multiple
interpretations of an insurance policy are possible, a court must interpret the policy in favor of the
insured. Id. at 720-22. The Policy, conversely, is not subject to multiple reasonable interpretations,
and contains no ambiguities—the only reasonable interpretation is that the SIR-E did not remove
the reporting requirement, and thus Nautilus was within its rights to deny coverage.
¶ 34 Finally, KSB argues that during the litigation, Nautilus contended there was at least a bona
fide coverage dispute in denying it acted in bad faith, which amounts to an acknowledgement that
the Policy’s language was ambiguous. We disagree. Nautilus only argued this position in the
alternative and did not waiver from its primary stance that its denial was proper based on the clear
and unambiguous language of the Policy.
¶ 35 CONCLUSION
¶ 36 The SIR-E did not remove KSB’s requirement to report claims within 30 days of March 2,
2017. KSB did not report either the Ankney suit or the Gorski suit within this timeframe, and thus
Nautilus’ denial of coverage was permissible pursuant to the Policy. We affirm.
¶ 37 Affirmed.