Allied World Specialty Insurance Company v. SIU Physicians & Surgeons, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF ILLINOIS

SPRINGFIELD DIVISION

ALLIED WORLD SPECIALTY )

INSURANCE COMPANY )

f/k/a DARWIN NATIONAL )

ASSURANCE COMPANY, )

a Delaware Corporation, )

)

Plaintiff, )

) Case No. 17-cv-03139

v. )

)

SIU PHYSICIANS & SURGEONS, )

INC., an Illinois Corporation, )

SAJIDA AHAD, JAN RAKINIC, )

CHRISTINA VASSILEVA, and )

ERICA ROTONDO, )

)

Defendants. )

OPINION

SUE E. MYERSCOUGH, U.S. District Judge:

Now before the Court are Plaintiff Allied World Specialty

Insurance Company’s (“Allied”) Motion for Summary Judgment, d/e

39, and Allied’s Motion to Strike Improper Argument and Evidence

from Defendant SIU Physician & Surgeons, Inc.’s Memorandum in

Opposition to Plaintiff’s Motion for Summary Judgment (“Motion to

Strike”), d/e 51. For the reasons discussed below, both motions are

granted.

I. PROCEDURAL HISTORY

This insurance dispute arises from an underlying lawsuit filed

by Sajida Ahad, M.D., (“Ahad”) against the Board of Trustees of

Southern Illinois University (“SIU”) and SIU Physicians & Surgeons,

Inc. (“SIU P&S”). See Ahad v. Bd. of Trs. of S. Ill. Univ., 15-cv-3308

(C.D. Ill. filed October 27, 2015) (hereinafter “the Ahad lawsuit”).

The Ahad lawsuit, alleging gender-based pay discrimination, sought

certification of a collective action under the Fair Labor Standards

Act (FLSA) and certification of a Federal Rule of Civil Procedure 23

class on claims under the Illinois Equal Pay Act, the Illinois Civil

Rights Act, and Title VII of the Civil Rights Act of 1964, as amended.

On June 9, 2017, Allied filed its complaint in this case, d/e 1,

against defendant SIU P&S seeking a declaratory judgment that

Allied has no duty to indemnify SIU P&S in connection with the

Ahad lawsuit. After this Court conditionally certified an FLSA

collective action in the Ahad lawsuit, Allied has twice amended its

complaint in this case to add as defendants in this action Ahad and

three physicians who opted in to the conditionally certified collective

action by filing consent forms—doctors Jan Rakinic, Christina

Vassileva, and Erica Rotondo. See Am. Compl., d/e 22; Second Am.

Compl., d/e 33.

In proceedings before the assigned United States Magistrate

Judge following the close of discovery, the parties reported that they

would be filing motions for summary judgment. See Minute Entry

April 23, 2018. Shortly thereafter, Allied filed the motion for

summary judgment now pending before the Court. In the motion

for summary judgment, Allied seeks a declaration that Allied has no

duty to defend or indemnify SIU P&S on the EEOC Charge and the

Ahad lawsuit, including the consent forms, under any of the

insurance policies issued by Allied to SIU P&S.

SIU P&S did not file its own motion for summary judgment,

but rather in SIU P&S’ response to Allied’s motion for summary

judgment, SIU P&S urges the Court to sua sponte grant summary

judgment in favor of SIU P&S. After SIU P&S filed its response to

Allied’s motion for summary judgment, Allied filed the motion to

strike that is also pending before the Court and which the Court

addresses first.

II. MOTION TO STRIKE

In conjunction with its reply, d/e 53, in support of its motion

for summary judgment, Allied filed a motion to strike, d/e 51,

which the Court now considers before turning to the motion for

summary judgment. In the motion to strike, Allied asks the Court

to strike, pursuant to Federal Rule of Civil Procedure 37(c)(1),

certain exhibits filed in support of SIU P&S’ Motion to Decertify

Collective Action in the Ahad lawsuit and relied on in SIU P&S’

Memorandum in Opposition to Allied World’s Motion for Summary

Judgment, d/e 45, and any argument in the memorandum based

on those exhibits. The exhibits at issue are the transcripts of the

depositions of Ahad, Rakinic, and Vassileva, along with the exhibits

attached to each of the deposition transcripts, as well as the

declaration of Wendy Cox-Largent.

In most cases, including this one, Federal Rule of Civil

Procedure 26(a)(1) requires parties to make certain initial

disclosures “without awaiting a discovery request.” Fed. R. Civ. P.

26(a)(1) (allowing court to order otherwise); but see id. R. 26(a)(1)(B)

(exempting certain types of cases). Under Rule 26(a)(2)(e), a party

must supplement its disclosures “when required under Rule 26(e).”

That rule, in turn, requires supplementation “in a timely manner if

the party learns that in some material respect the disclosure or

response is incomplete or incorrect, and if the additional or

corrective information has not otherwise been made known to the

other parties during the discovery process.” Id. R. 26(e)(1)(A).

Rule 37(c)(1) supplies a remedy for initial-disclosure and

supplementation violations. That Rule provides, in part, that “[i]f a

party fails to provide information or identify a witness as required

by Rule 26(a) or (e), the party is not allowed to use that information

or witness to supply evidence on a motion, at a hearing, or at a

trial, unless the failure was substantially justified or is harmless.”

Fed. R. Civ. P. 37(c)(1). The Seventh Circuit has held that “[t]he

exclusion of non-disclosed evidence is ‘mandatory under Rule

37(c)(1) unless non-disclosure was justified or harmless.’” Rossi v.

City of Chicago, 790 F.3d 729, 737–38 (7th Cir. 2015) (quoting

Musser v. Gentiva Health Servs., 356 F.3d 751, 758 (7th Cir.

2004)); accord Cripe v. Henkel Corp., 858 F.3d 1110, 1112 (7th Cir.

2017) (citing Hassebrock v. Bernhoft, 815 F.3d 334, 341 (7th Cir.

2016) and Novak v. Board of Trs. of S. Ill. Univ., 777 F.3d 966, 972

(7th Cir. 2015)). Rule 37(c)(1) allows the court to impose lesser

sanctions “[i]n addition to or instead of this sanction.” See Malik v.

Falcon Holdings, LLC, 675 F.3d 646, 649–50 (7th Cir. 2012) (citing

Ball v. City of Chicago, 2 F.3d 752 (7th Cir. 1993)) (“[Rule 37] gives

the judge discretion to match a remedy to the wrong.”); Dynegy

Mktg. & Trade v. Multiut Corp., 648 F.3d 506, 514 (7th Cir. 2011)

(“Whether a failure to comply with Rule 26(a) or (e) is substantially

justified, harmless, or warrants sanctions is left to the broad

discretion of the district court.” (citing David v. Caterpillar, Inc.,

324 F.3d 851, 857 (7th Cir. 2003)).

In Allied’s motion to strike, Allied urges the Court to strike the

exhibits and argument based on the exhibits because the

documents relied on by SIU P&S in its response to Allied’s motion

for summary judgment were not listed in SIU P&S’ initial

disclosures or any supplement to those disclosures. Mem. Supp.

Mot. to Strike 2, d/e 52. Allied further argues that the documents

are not material to the motion for summary judgment and should

not be considered for that reason as well. Id.

In support of its Rule 37(c)(1) argument, Allied recounts the

timeline discovery has followed in this case. SIU P&S provided

Allied with SIU P&S’ initial disclosures on December 15, 2017. Id.

In its initial disclosures, SIU P&S identified the following as

documents SIU P&S may use to support its claims or defenses:

(a) Allied World’s Healthcare Organizations Management

Liability Package Policies issued to SIU P&S for the periods

November 4, 2013 to November 3, 2014 (the “2013 Policy”);

November 4, 2014 to November 1, 2015 (the “2014 Policy”);

November 1, 2015 to November 1, 2016 (the “2015 Policy”);

and November 1, 2015 to November 1, 2017 (the “2016

Policy”) (collectively, the “Policies”).

(b) All pleadings relating to the Ahad EEOC Charge, to the

extent not privileged or otherwise protected for discovery or

disclosure.

(c) All pleadings relating to the Ahad Lawsuit, to the extent not

privileged or otherwise protected from discovery or

disclosure.

(d) All pleadings relating to class action or collective action

aspects of the Ahad Lawsuit, including the Rakinic and

Vassileva Consent Forms.

(e) Communications involving SIU P&S, its insurance broker

and/or Allied World, relating to the Ahad EEOC Charge, the

Ahad Lawsuit, and/or the Rakinic and Vassileva Consent

Forms, including communications providing SIU P&S

insurance broker and/or Allied World with notice of claims.

Id. at 2-3. SIU P&S never supplemented these initial disclosures.

Id. at 3. Discovery closed on March 31, 2018, and Allied filed its

motion for summary judgment shortly thereafter. Id. SIU P&S

subsequently sought and was granted two extensions of time to

respond to Allied’s motion for summary judgment. See Motions for

Extension of Time, d/e 41, 42; Minute Entries dated May 1, 2018

and June 11, 2018 (granting motions for extension of time). In the

interim covered by these extensions of time, SIU P&S filed a motion

to decertify the conditionally certified collective action in the Ahad

lawsuit on June 15, 2018. Mem. Supp. Mot. to Strike 3. Soon

after, SIU P&S filed its response to Allied’s motion for summary

judgment in this case, relying on the exhibits filed in connection

with the motion to decertify which are the subject of the motion to

strike.

Allied contends that exclusion of these documents and the

argument based on them is mandatory under Rule 37 because SIU

P&S did not identify the documents in SIU P&S’ initial disclosures

or any supplement thereto. Id. at 4-5. In support, Allied adopts a

narrow reading of the definition of ‘pleading’ in Federal Rule of Civil

Procedure 7 which includes only complaints, answers to

complaints, and replies to answers among others. Id. at 5. Allied

argues that the failure to disclose is not substantially justified or

harmless because Allied suffered surprise and prejudice as a result,

Allied will not have an opportunity to cure the prejudice, and the

circumstances under which SIU P&S was able to rely on the

disputed documents is “suspicious” although perhaps not rising to

the level of bad faith or willfulness. Id. at 6-7.

In response to the motion to strike, SIU P&S contends that the

disputed documents fall within the scope of Allied’s own initial

disclosures which included “documents generated in connection

with the Ahad claim, as defined by Allied World in the Complaint in

this action, including but not limited to pleadings, court orders,

motions, and responses thereto.” Mem. of Def. SIU P&S in

Opposition to Allied World’s Mot. to Strike 2, d/e 55 (hereinafter

“Resp. to Mot. to Strike”). For that reason, SIU P&S argues that

there has been no violation of Rules 26 or 37. Id. at 3. SIU P&S

further argues that even to the extent there was a failure to

disclose, any failure was technical and harmless and, therefore,

does not warrant exclusion under Rule 37. Id.

Allied’s argument that the documents at issue do not fall

within the scope of SIU P&S’s initial disclosures finds support in

the plain text of Rule 7 and the caselaw. Rule 7 states that “[o]nly

these pleadings are allowed: a complaint; an answer to a complaint;

an answer to a counterclaim designated as a counterclaim; an

answer to a crossclaim; a third-party complaint; an answer to a

third-party complaint; and if the court orders one, a reply to an

answer. Fed. R. Civ. P. 7(a) (internal numbering omitted). Rule 7(b)

refers to “motions and other papers.” Here, the motion to decertify

and the associated exhibits clearly do not fall within Rule 7(a)’s

definition of “pleadings,” but in the category of Rule 7(b)’s “motions

and other papers.”

Allied’s narrow reading of Rule 7(a) is also supported by the

caselaw. The Seventh Circuit has, for example, concluded that

motions to dismiss and motions for summary judgment are not

“responsive pleadings.” Haven v. Rzeczpospolita Polska, 215 F.3d

727, 732 (7th Cir. 2000); Edelman v. Belco Title & Escrow, LLC,

754 F.3d 389, 394-95 (7th Cir. 2014); see also DeBoer v. Vill. of

Oak Park, 90 F. Supp. 2d 922, 923 (N.D. Ill. 1999) (motion for

reconsideration and supporting materials not “pleadings”).

Following this logic, the Court sees no reason to treat a motion to

decertify differently. Accordingly, the Court finds that the disputed

evidence does not fall within the scope of SIU P&S’ disclosures.

Having found a failure to disclose the disputed evidence, the

Court still must consider whether exclusion of that evidence is

warranted under Rule 37. Here, the Court concludes that exclusion

is mandatory under Rule 37(c)(1) because the non-disclosure was

not substantially justified or harmless. See Rossi, 790 F.3d at 737–

38. Four factors guide the Court’s analysis of whether the non-

disclosure is justified or harmless: “(1) the prejudice or surprise to

the party against whom the evidence is offered; (2) the ability of the

party to cure the prejudice; (3) the likelihood of disruption to the

trial; and (4) the bad faith or willfulness involved in not disclosing

the evidence at an earlier date.” David v. Caterpillar, 324 F.3d 851,

857 (7th Cir. 2003).

Consideration of the first, second, and fourth of these factors

compels the Court’s conclusion that exclusion is warranted here.

The first and fourth factors are intertwined in this particular case.

Allied is not a party to the Ahad lawsuit and, therefore, did not have

an opportunity to participate in the depositions or to review the

exhibits used at the depositions prior to the filing of SIU P&S’

response to Allied’s motion for summary judgment. The disputed

evidence forms the basis for the entirety of SIU P&S’ statement of

additional material facts and the argument in the response that the

consent forms and the Ahad lawsuit do not share a factual nexus.

SIU P&S’ reference to pleadings in its disclosures would have

reasonably led Allied to believe that SIU P&S did not intend to rely

on such disputed evidence in this case. Had Allied known sooner

that SIU P&S did intend to rely on the disputed evidence, the

parties could have attempted to reach an agreement concerning its

use and requested Court intervention if they were unable to do so.

The timeline of events here is concerning as well. With Allied’s

motion for summary judgment filed on April 30, 2018, SIU P&S’

response was initially due on May 21, 2018. On May 2, 2018, the

parties in the Ahad lawsuit—which again, Allied is not a party to—

filed a proposed briefing schedule on the decertification motion,

which required that motion to be filed by June 15, 2018, which was

the date on which the decertification motion was ultimately filed.

Had SIU P&S not sought and received two extensions of time in

which to file its response to the motion for summary judgment here,

the disputed evidence would not have been part of the record in the

Ahad lawsuit. Moreover, the depositions of Vassileva and Rakinic

were not even scheduled to occur until May 22 and 30, 2018,

respectively, so the transcripts of those depositions would not have

even existed had SIU P&S’ response to the motion for summary

judgment been filed as originally scheduled. Had SIU P&S notified

Allied when SIU P&S requested the extensions that SIU P&S

intended to rely on this evidence, Allied could have better prepared

or sought court intervention sooner in order to limit that evidence’s

use. Accordingly, consideration of the relevant factors leads the

Court to conclude that SIU P&S’s non-disclosure was not

substantially justified or harmless and, therefore, exclusion of the

disputed evidence is mandatory.

The Seventh Circuit has urged district courts to “carefully

consider Rule 37(c), including the alternative sanctions available,

when imposing exclusionary sanctions that are outcome

determinative.” Musser, 356 F.3d at 760. In this case, though,

even if the Court were to consider the disputed evidence submitted

in response to Allied’s motion for summary judgment, the outcome

would still be the same because under Illinois law the disputed

evidence is not relevant to this coverage dispute, for the reasons

discussed in greater detail below.

III. MOTION FOR SUMMARY JUDGMENT

A. Facts

The following facts are drawn largely from Allied’s statement of

undisputed material facts. The court discusses any material

factual disputes in its analysis.

Allied issued four Healthcare Organizations management

Liability Package Policies, each containing an Employment Practices

Liability Coverage Section (the “EPL Coverage Section”) to SIU P&S

for policy periods November 4, 2013 to November 4, 2014 (the

“2013 Policy”), November 4, 2014 to November 1, 2015 (the “2014

Policy”), November 1, 2015 to November 1, 2016 (the “2015 Policy”),

and November 1, 2016 to November 1, 2017 (the “2016 Policy”).

Pl.’s Statement of Undisputed Material Facts ¶ 1 (hereinafter “Pl.’s

SOF”). Each policy contains an EPL Coverage Section limit of

liability of $2 million, subject to any applicable retention. Id. SIU

P&S did not renew coverage with Allied after the 2016 Policy ended.

Id. at ¶ 2. The policies contain identical terms, conditions, and

exclusions, except for the policy period. Id. at ¶ 3.

The Insuring Agreement in the EPL Coverage Section states as

follows:

The Insurer shall pay on behalf of any Insured the Loss

arising from a Claim, first made during the Policy Period

(or Discovery Period, if applicable) against such Insured for

any Wrongful Act, and reported to the Insurer in

accordance with Section V. of the General Terms and

Conditions and Section IV. of this Coverage Section.

Id. at ¶ 4. In the EPL Coverage Section, a “Claim” is defined to

mean any:

(1) written demand for monetary, non-monetary or injunctive

relief made against an Insured;

(2) judicial, administrative or regulatory proceeding, whether

civil or criminal, for monetary, non-monetary or injunctive

relief, commenced against an Insured, including any appeal

therefrom, which is commenced by:

(a) service of a complaint or similar pleading;

(b) return of an indictment or similar document (in the case

of a criminal proceeding); or

(c) receipt or filing of a notice of charges;

(3) arbitration or mediation proceeding commenced against an

Insured by service of a demand for arbitration or mediation;

(4) notification of an investigation of an Insured by the Equal

Employment Opportunity Commission (“EEOC”) or similar

governmental agency commenced by the filing of a notice of

charges, formal investigative order or similar document;

(5) audit of an Insured conducted by the United States of

America Office of Federal Contract Compliance Programs

(“OFCCP”), but only if commenced by the receipt of a notice

of violation, order to show cause, or a written demand for

monetary or non-monetary or injunctive relief; or

(6) written request to toll or waive the applicable statute of

limitations, or to waive any contractual time-bar, relating to

a potential Claim against an Insured for a Wrongful Act.

Id. at ¶ 5. That same section further provides that “[a] Claim shall

be deemed first made when any Insured first receives notice of the

Claim.” Id. The Policies’ General Terms and Conditions defines

Related Claims as “all Claims for Wrongful Acts based upon, arising

out of, or in consequence of the same or related facts,

circumstances, situations, transactions or events or the same or

related series of facts, circumstances, situations, transactions or

events.” Id. at ¶ 6.

The Policies’ General Terms and Conditions provides that “[a]ll

Related Claims shall be deemed to be a single Claim made on the

date on which the earliest Claim within such Related Claims was

first made, or when the earliest Claim within such Related Claims is

treated as having been made . . . whichever is earlier.” Id. at ¶ 7.

The General Terms and Conditions of the Policies also provides, in

relevant part, that “in no event shall notice of any Claim be

provided to the Insurer later than ninety (90) days after the end of

the Policy Period or Discovery Period if applicable.” Id. at ¶ 8.

Dr. Sajida Ahad is a former Assistant Professor of

Surgery/Bariatric Surgeon at the Southern Illinois University

School of Medicine, and a female citizen of Pakistan of South Asian

national origin. Id. at ¶ 9. On or about July 28, 2014, Ahad filed a

Charge of Discrimination with the Equal Employment Opportunity

Commission (the “EEOC Charge”), naming SIU P&S, among others,

as a respondent. Id. at ¶ 10. SIU P&S first received notice of the

EEOC Charge during the Policy Period of the 2013 Policy, i.e.,

between November 4, 2013 and November 4, 2014. Id. at ¶ 11.

In the EEOC Charge, Ahad alleged discrimination based on

sex and national origin in violation of Title VII of the Civil Rights Act

of 1964 and the Equal Pay Act (the “EPA”). Id. at ¶ 12. On October

27, 2015, after receiving a “right to sue” letter from the EEOC, Ahad

filed a Class Action and Collective Action Complaint in this Court,

Case No. 15-cv-3308, captioned Sajida Ahad, M.D. on behalf of

herself and all others similarly situated v. Southern Illinois School

of Medicine, Southern Illinois University, Board of Trustees of

Southern Illinois University, SIU Healthcare, Inc., and SIU

Physicians & Surgeons, Inc. (the “Lawsuit”). Id. at ¶ 13.

In the Lawsuit, Ahad alleges that she has received unequal

pay for equal work as compared with her male colleagues for the

approximately six years she worked for SIU School of Medicine and

SIU P&S. Id. Ahad claims that, after she resigned, her

replacement—a male who recently completed his residency—was

paid a starting salary $75,000 higher than Ahad’s final salary. Id.

Ahad also believes that her replacement was paid a $25,0001

signing bonus which she never received and was guaranteed annual

income in excess of $300,000. Id. Ahad’s Complaint alleges that

she is bringing suit on her behalf and on behalf of other similarly

situated individuals. Id. She asserts individual and collective

action claims under the EPA, Title VII, the Illinois Equal Pay Act of

2003, and the Illinois Civil Rights Act of 2003. Id. Paragraph 15 of

the amended complaint expressly references the prior filing of

Ahad’s July 2014 EEOC Charge—inclusive of the Title VII

discrimination claims—and her receipt of a “right to sue” letter from

the EEOC. Id.

SIU P&S first received notice of the suit during the Policy

Period of the 2015 Policy, i.e., between November 1, 2015 and

November 1, 2016. Id. at ¶ 14. The EEOC Charge and what SIU

P&S refers to as “the individual claim of Sajida Ahad” in the suit

constitute Related Claims because they are both Claims for

1 Allied’s Statement of Facts states that the signing bonus was $2,500, but

Ahad’s Complaint in 15-cv-3308 states that the signing bonus was $25,000.

See Am. Class Action and Collective Action Compl. ¶ 44, d/e 31.

Wrongful Acts based upon, arising out of, or in consequence of the

same or related facts, circumstances, situations, transactions or

events or the same or related series of facts, circumstances,

situations, transactions or events. Id. at ¶ 15. Therefore, the

EEOC Charge and the suit constitute a single Claim first made on

the date on which the earliest Claim within such Related Claims

was first made. Id.

The EEOC Charge and what SIU P&S refers to as “the

individual claim of Sajida Ahad” in the suit are deemed first made

during the Policy Period of the 2013 Policy because SIU P&S first

received notice of the EEOC Charge during that Policy Period. Id. at

¶ 16. There is no coverage for the EEOC Charge and what SIU P&S

refers to as “the individual claim of Sajida Ahad” in the suit under

the 2014 Policy, the 2015 Policy, or the 2016 Policy because that

claim is not a Claim first made during any of those Policy Periods.

Id. at ¶ 17. SIU P&S first reported the Claim to Allied on or after

April 24, 2017. Id. at ¶ 18.

On September 29, 2017, the cause of action was conditionally

certified as a collective action with respect to Count I, under the

federal Equal Pay Act. Id. at ¶ 20. On October 27, 2017 and

October 31, 2017, respectively, plaintiff consent forms were filed in

the suit on behalf of Dr. Jan Rakinic and Dr. Christina M. Vassileva

(collectively, the “Consent Forms”). Id. at ¶ 21. Pursuant to 29

U.S.C. § 216(b), Rakinic and Vassileva became party plaintiffs in

the suit by filing the Consent Forms. Id. On November 21, 2017,

Allied received correspondence from SIU P&S’ insurance broker

forwarding copies of the Consent Forms. Id. at ¶ 22. A third

plaintiff consent form was filed in the suit on behalf of Dr. Erica

Rotondo on January 5, 2018. Id. at ¶ 24. SIU P&S does not seek

coverage for the Rotondo consent form. Id. at ¶ 25. SIU P&S

admits that any claimants who make claims after November 1,

2017, including any future members of any class that may be

certified in the suit, are not entitled to coverage under the Policies,

because the last Policy expired on November 1, 2017. Id. at ¶ 26.

The only matters for which SIU P&S seeks coverage are the Consent

Forms. Id. at ¶ 27. SIU P&S asserts the Consent Forms are Claims

first made during the Policy Period of the 2016 Policy. Id.

B. Legal Standard

Summary judgment is proper if the movant shows that no

genuine dispute exists as to any material fact and that the movant

is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).

The movant bears the initial responsibility of informing the Court of

the basis for the motion and identifying the evidence the movant

believes demonstrates the absence of any genuine dispute of

material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A

genuine dispute of material fact exists if a reasonable trier of fact

could find in favor of the nonmoving party. Carroll v. Lynch, 698

F.3d 561, 564 (7th Cir. 2012). When ruling on a motion for

summary judgment, the Court must construe all facts in the light

most favorable to the non-moving party and draw all reasonable

inferences in that party’s favor. Woodruff v. Mason, 542 F.3d 545,

550 (7th Cir. 2008).

“In a suit where the federal court’s subject matter jurisdiction

is based on diversity, such as this one, the forum state’s choice of

law rules determine the applicable substantive law.” Sound of

Music Co. v. Minn. Mining & Mfg. Co., 477 F.3d 910, 915 (7th Cir.

2007). The parties do not dispute that Illinois substantive law

applies to this dispute.

The construction of an insurance contract is a question of

law. Chatham Corp. v. Dann Ins., 812 N.E.2d 483, 488 (Ill. App.

Ct. 2004) (citing Lapham-Hickey Steel Corp. v. Prot. Mut. Ins. Co.,

655 N.E.2d 842, 846 (Ill. 1995)). The same rules of construction

that apply to other types of contracts also apply to insurance

contracts. Country Mut. Ins. Co. v. Teachers Ins. Co., 755 N.E.2d

136, 139 (Ill. App. Ct. 2001). That is, this Court must ascertain

and give effect to the intent of the parties, which is determined by

examining the language of the contract. Stark v. Ill. Emcasco Ins.

Co., 869 N.E.2d 957, 960 (Ill. App. Ct. 2007). In doing so, this

Court construes the policy as a whole, taking into account the type

of insurance, the risks undertaken, and the purpose of the

contract. Country Mut. Ins. Co., 755 N.E.2d at 139 (citation

omitted). “A court must read the provision in its entire factual

context and not in isolation.” Allstate Ins. Co. v. Amato, 865 N.E.2d

516, 522 (Ill. App. Ct. 2007). If the terms of the policy are clear and

unambiguous, they must be given their plain and ordinary

meaning. Stark, 869 N.E.2d at 961 (quoting Rohe v. CNA Ins. Co.,

726 N.E.2d 38, 41 (Ill. App. Ct. 2000)). If the terms of the policy are

susceptible to more than one meaning, then the terms are

ambiguous. Pekin Ins. Co. v. Wilson, 930 N.E.2d 1011, 1017 (Ill.

2010) (quoting Am. States Ins. Co. v. Koloms, 687 N.E.2d 72, 75 (Ill.

1997)). Ambiguities are construed strictly against the insurer who

drafted the policy. Id. “Although ‘creative possibilities’ may be

suggested, only reasonable interpretations will be considered.”

Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d 561, 564 (Ill.

2005) (citation omitted). Thus, the Court “will not strain to find an

ambiguity where none exists.” Id. (citation omitted). While policy

terms limiting an insurer’s liability shall be liberally construed in

favor of coverage, this rule of construction only comes into play

when the policy is ambiguous. Id. (citation omitted).

Under Illinois law, “[c]ourts strictly construe notice

requirements in claims-made policies and view notice requirements

as valid conditions precedent.” Hanover Ins. Co. v. R.W. Dunteman

Co., 446 F. Supp. 3d 336, 348 (N.D. Ill. 2020) (citing Exec. Risk.

Indem., Inc. v. Charter Benefit Servs., Inc., 2005 WL 1838433, at *6

(N.D. Ill. July 29, 2005)). “Illinois law is clear that the issue of

prejudice is irrelevant in the context of a ‘claims-made’ insurance

policy.” Pac. Ins. Co. v. Eckland Consultants, Inc., 2001 WL

1388279, at *3 (N.D. Ill. Nov. 5, 2001).

C. Analysis

SIU P&S concedes there is no coverage for Ahad’s EEOC

charge. See Second Am. Compl. ¶ 51; Ans. ¶ 51. SIU P&S also

concedes the suit and the EEOC charge are related claims under

the policies, such that there is no coverage for the suit. See Second

Am. Compl. ¶ 31; Ans. ¶ 31. SIU P&S also concedes there is no

coverage for the Rotondo consent form or for others who may have

attempted to join the suit after November 1, 2017. See Second Am.

Compl. ¶ 84; Ans. ¶ 84.

The parties agree that the only issue in dispute is whether

Allied has a duty to defend and indemnify SIU P&S for the Consent

Forms filed by Rakinic and Vassileva. See Pl.’s Mot. Summ. J. 10;

Resp. 17. Allied contends the Consent Forms are part of the Ahad

claim that SIU P&S did not report under the terms of the policies,

while SIU P&S contends the Consent Forms are new and distinct

claims first made and reported during the Policy Period of the 2016

Policy.

All of the policies are “claims made and reported policies.” Any

claim reported to Allied for coverage must be first made during the

policy period of a policy and reported no later than ninety days after

the expiration of the policy. Pl.’s SOF ¶ 4 (quoting Ex. A-D, EPL

Coverage Section, § I.A); Pl.’s SOF ¶ 8 (quoting Ex. A-D, General

Terms and Conditions, § V.B). The policies define related claims as

“all Claims for Wrongful Acts based upon, arising out of, or in

consequence of the same or related facts, circumstances,

situations, transactions or events or the same or related series of

facts, circumstances, situations, transactions or events.” Pl.’s SOF

¶ 6 (quoting Ex. A-D, General Terms and Conditions, § II.F).

Allied argues that the Consent Forms are not separate and

distinct claims, but they are simply documents by which Rakinic

and Vassileva joined the suit as opt-in plaintiffs. SIU P&S concedes

the suit—or at least Ahad’s claim in the suit—is a related claim to

the EEOC charge, and because the EEOC charge was not timely

reported under any of the Policies, there is no coverage. Pl.’s Mem.

Supp. Mot. Summ J. 11. Allied contends that just because the suit

now includes new opt-in plaintiffs, that does not make the

allegations of the new plaintiffs new claims. Id. (citing Cmty.

Found. For Jewish Educ. V. Fed. Ins. Co., 16 F. App’x 462, 466-67

(7th Cir. 2001)). In Allied’s view, the suit is still the same untimely

reported “judicial proceeding” under Section II.B of the EPL

Coverage Section of the Policies that it was before Rakinic and

Vassileva opted in by filing the Consent Forms. Id. (citing Great

Am. Ins. Co. v. Sea Shepherd Conservation Soc’y, 2014 WL

2170297, at *6-7 (W.D. Wash. May 23, 2014) and Checkrite Ltd.,

Inc. v. Ill. Nat’l Ins. Co., 95 F. Supp. 2d 180, 195-96 (S.D.N.Y.

2000)). Allied argues because the EEOC charge was not timely

reported and because the suit is a related claim to the EEOC

charge, then if the Consent Forms are merely part of the suit and

not new and distinct claims, there is also no coverage for the

Consent Forms. Allied also argues that even if the Consent Forms

are new and distinct claims, they are related claims to the EEOC

Charge and the suit, such that they all constitute a single untimely

reported claim. Id. at 12.

SIU P&S posits two reasons why the Court should deny

Allied’s motion for summary judgment and instead sua sponte grant

summary judgment for SIU. First, SIU P&S argues that both the

related claims provision and the policies’ definition of related claims

are ambiguous and should therefore be construed against Allied

and in favor of coverage. Resp. 17. Second, SIU P&S argues that

the Consent Forms are not practically or logically related to Ahad’s

claims in the suit. Id. at 17-18.

At the outset, the Court notes that the Seventh Circuit has

stated that while “[g]ranting summary judgment sua sponte is

permissible, . . . it is a hazardous procedure which warrants special

caution. Osler Inst., Inc. v. Forde, 333 F.3d 832, 836 (7th Cir.

2003) (citation omitted). The Seventh Circuit has “repeatedly

explained that it is appropriate to grant summary judgment sua

sponte only when it is clear that neither side will be disadvantaged

or unfairly surprised by the move.” R.J. Corman Derailment Servs.,

LLC v. Int’l Union of Operating Eng’rs, Local Union 150, AFL-CIO,

335 F.3d 643, 650 (7th Cir. 2003) (collecting cases). For those

reasons, even if the Court did not reach the conclusion the Court

has made, the Court would still decline to sua sponte grant

summary judgment in favor of SIU P&S.

The related claims provision of the policies states in relevant

part that “[a]ll Related Claims shall be deemed to be a single Claim

made on the date on which the earliest Claim within such Related

Claim was first made.” Pl.’s Mot. Summ. J., Ex. A-D, General

Terms and Conditions, § V.D. And the policies define related claims

as “all Claims for Wrongful Acts based upon, arising out of, or in

consequence of the same or related facts, circumstances,

situations, transactions or events or the same or related series of

facts, circumstances, situations, transactions or events” as

previously noted. Pl.’s SOF ¶ 6 (quoting Ex. A-D, General Terms

and Conditions, § II.F). SIU P&S argues that both sections of the

policies are ambiguous but focuses its discussion on the related

claims definition. See Resp. 19-20. SIU P&S contends the

definition is ambiguous because the definition uses the adjective

“related” in two places to define the term and because the definition

fails to provide any meaningful guidance as to the scope or limit of

coverage or as to which claims should be considered related claims.

Id. at 20.

In support of its ambiguity argument, SIU P&S cites to

American Medical Security, Inc. v. Executive Risk Specialty Ins. Co.,

393 F. Supp. 2d, 693, 705-77 (E.D. Wis. 2005), in which the district

court found a similar related claims provision to be ambiguous.

SIU P&S argues the related claims provision in the policies here is

even more ambiguous than the provision in American Medical,

because the provision in American Medical contained additional

descriptors not used in the policies here. Resp. 22.

“A policy is not made ambiguous simply because the parties

disagree on how it applies to a given situation.” Gregory v. Home

Ins. Co., 876 F.2d 602, 605 (7th Cir. 1989) (applying Indiana

substantive law). In Gregory, the district court “found the policy’s

language to be unambiguous, and that it should be given its ‘plain

and ordinary meaning.’” Id. In Gregory, the Seventh Circuit

specifically rejected the argument that the meaning of the word

related should be construed to mean only causally related, finding

that would “require[ ]a drastic restriction of the natural scope of the

definition of the word ‘related.’” Id. at 606. Instead, the Seventh

Circuit looked to the common understanding of the word to arrive

at a definition of the term “related” to cover “a very broad range of

connections, both causal and logical.” Id. at 606 n.5 (quoting

Black’s Law Dictionary definition of related as “[s]tanding in

relation, connected; allied; akin”).

Although the district court in American Medical found the

related claims provision at issue there to be ambiguous, the court

went on to impose what the court referred to as a “limiting

construction” on the definition, construing the related claims

provision as requiring a causal or logical relationship in order for

two or more claims to be considered related, following the Seventh

Circuit’s reasoning in Gregory. American Medical, 393 F. Supp. 2d

at 706-07. Here, the Court does not find the related claims

provision to be ambiguous. But, even if the provision were

ambiguous, and the Court were to impose a limited construction on

that term following the decisions in Gregory and American Medical,

the conclusion would still be the same because the Court finds the

claims to be causally and logically related.

Although the Seventh Circuit has noted that “[a]t some point,

of course, a logical connection may be too tenuous reasonably to be

called a relationship, and the rule of restrictive reading of broad

language would come into play[,]” the facts of this case—that SIU

P&S compensation plan was administered in such a way as to harm

Ahad and the opt-in plaintiffs by resulting in unequal pay for equal

work—fit squarely within the commonly accepted definition of what

constitutes ‘related.’ Gregory, 876 F.2d at 606. The consent forms

are both causally and logically connected. But for the Ahad suit,

the Consent Forms would not exist. The Consent Forms came to be

in the suit as a result of the conditional certification order. And the

claims are logically connected because they arise out of the same

common allegations of gender-based pay discrimination.

SIU P&S next argues that even if the Court does not find the

related claims provision and the definition of related claims to be

ambiguous, the Court should still deny Allied’s motion for summary

judgment and enter summary judgment for SIU P&S because the

claims of Ahad, Rakinic, and Vassileva are not related claims.

Resp. 23. SIU P&S disputes that the Consent Forms are part of the

same claim merely be virtue of being part of the same suit. Id. SIU

P&S notes that plaintiffs in a collective action each individually

pursues her own claim and that opt-in plaintiffs have the right to

proceed individually—a right confirmed by the language of the

Consent Forms, which state that the opt-in plaintiffs may withdraw

their consent and proceed with their claims at any time.

A collective action allows plaintiffs to pool their resources in order

to vindicate their rights, resulting in lower individual costs.

Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 170, (1989). In

this manner, collective action proceedings promote judicial economy

by allowing for the efficient resolution of common issues of law and

fact arising from the same alleged discriminatory activity. Id.

Although it is true, as SIU P&S notes, that resolution of each

individual plaintiff’s claims would require separate proofs and

defenses, the Court has already acknowledged as much in its

decertification order in the Ahad lawsuit. Whether the opt-in

plaintiffs can pursue their own claims individually is not relevant to

the issue of whether the Consent Forms constitute part of the same

claim as the Ahad claim. Although different factual proof would

likely be needed to establish the individual claims as to both

liability and to damages, the allegations of the underlying complaint

are that that the plaintiffs were injured by the same discriminatory

policies. Although Ahad, Rakinic, and Vassileva held different

positions, they all allege that they were injured by the same

discriminatory policies or practices.

The policies define a claim in relevant part as a “judicial . . .

proceeding, . . . which is commenced by service of a complaint or

similar pleading . . . .” Mem. Supp. Mot. Summ. J., Ex. A-D,

Definitions § II.C (internal punctuation omitted). The Consent

Forms here do not commence a new judicial proceeding and are not

a complaint or similar pleading. Indeed, absent the judicial

proceeding commenced with the Ahad suit, the Consent Forms

would not exist. The Consent Forms themselves are not

“proceedings,” nor did they commence new proceedings, they are all

part of the same proceeding. The plain language of the policies

compels the conclusion then that the Consent Forms are part of the

same claim. For that reason alone, the Court concludes that

granting summary judgment in Allied’s favor is warranted.

However, even if the Consent Forms are separate and distinct

claims, the Court would reach the same conclusion because the

Consent Forms are causally and logically related to the EEOC

Charge and the suit such that the Consent Forms constitute related

claims.

In conditionally certifying a class, the Court concluded that

Ahad made the requisite showing that she and other similarly

situated female employees were subjected to a common policy and

plan involving discriminatory compensation practices. Pl.’s Ex. J,

Opinion & Order 20, Lawsuit d/e 53. Admittedly, the Court’s order

decertifying the conditionally certified class found that the plaintiffs

had not shown that they were subjected to a common policy or

practice that resulted in the alleged unequal treatment. But, as the

parties recognize, the coverage question raised in Allied’s motion for

summary judgment is a separate and distinct question which is

decided under different legal standards from those raised in the

class certification and collective action decertification motions in

the Ahad lawsuit. Pl.’s Statement of Position as to Effect of

Decertification Order 4, d/e 60 (quoting Mem. of SIU P&S in

Opposition to Physician Defs.’ Mot. to Stay 4, d/e 49). Class

certification is separate and distinct from the policy language at

issue here governing whether claims are related for coverage

purposes. The policy language controls whether the claims are

related, not the Rule 23 standard for certifying a class action. See

Royal Indem. Co. v. C.H. Robinson Worldwide, Inc., 2009 WL

2149637, at *5-6 (Minn. Ct. App. July 21, 2009) (rejecting argument

that claims could not be related because they failed to satisfy Rule

23’s commonality standard, and instead looking to the policy’s

definition, which was broader than the Rule 23 standard).

Here, in order to determine whether Allied has a duty to

defend, the court looks at the allegations in the underlying

complaint and compares those allegations to the relevant provisions

of the insurance policy. Outboard Marine Corp. v. Liberty Mut. Ins.

Co., 607 N.E.2d 1204, 1212 (Ill. 1992). And here, the allegations of

the underlying complaint are that there existed a common policy or

practice that resulted in the alleged disparate treatment. But for

the suit and the conditional certification order, the Consent Forms

would not exist. This alone is sufficient to conclude that the

Consent Forms are claims that arise out of the same facts and are

logically or causally connected. The Consent Forms are related

because they arise from the same alleged discriminatory practices.

Although the Court’s decertification order found that the plaintiffs

had not presented sufficient factual evidence of a common policy or

practice, the related claims provision at issue in the policies here

encompasses both actual facts or allegations of fact. Those

allegations are enough to determine that the Consent Forms are

related claims.

V. CONCLUSION

For the reasons stated, Plaintiff Allied World Specialty

Insurance Company’s Motion to Strike, d/e 51, and Motion for

Summary Judgment, d/e 39, are GRANTED. The Clerk is

DIRECTED to enter judgment in favor of Allied and against SIU

P&S. Any pending deadlines are TERMINATED. Any scheduled

settings are VACATED. This case is CLOSED.

ENTER: March 30, 2021

/s/ Sue E. Myerscough

SUE E. MYERSCOUGH

UNITED STATES DISTRICT JUDGE