The case between West American Insurance Company and Midwest Open MRI was a result of an earlier lawsuit filed against Midwest MRI by a competitor, Advanced Physicians. West American filed a declaratory judgment stating that it was not responsible for the defense of Midwest in the lawsuit with Advanced Physicians. Midwest filed a countersuit seeking declaration of coverage. After both parties filed for cross motions, the circuit court granted West American’s motion and denied Midwest’s.
Some background on the lawsuit Midwest was seeking defense for:
Midwest Open MRI was sued by Advanced Physicians, a competing MRI provider, for an alleged violation of the Consumer Fraud Act. According to Richard and Dana Vallandigham, principals of Advanced Physicians, Midwest engaged in solicitation as well as kickbacks in exchange for referrals.
Midwest allegedly performed MRIs and, instead of billing the patient, would allow the referring physician to bill the patient. The physician would then pay a fee of $350-$450 to Midwest. While the amount was less than the actual cost of an MRI, it guaranteed Midwest a steady influx of patients.
Midwest performed the MRIs and charged the actual cost for it, then paid the referring physician a referral fee of around $450.
These practices allegedly created a monopoly and made it difficult for Advanced Physicians to compete. In addition to the pricing schemes, Midwest and the referring physicians were accused of entering false leasing agreements as if physicians had leased space at Midwest. This was supposed to make their false billing more believable.
Advanced Physicians’ asked for a declaration that Midwest’s conduct violated the Consumer Fraud Act, a permanent injunction to prevent Midwest from continuing to act unlawfully, monetary damages and restitution pursuant to the Consumer Fraud Act and attorney fees.
Midwest sought coverage from West American under its general liability insurance policy. West American then filed a declaratory judgment that it held no responsibility to defend or insure Midwest in the action brought against them by Advanced Physicians.
West American’s challenges were based on several factors:
1 Advanced Physicians and the Vallandighams failed to allege an “occurrence”, “Bodily Injury”, “Property Damage”, or “Personal and Advertising Injury.”
2 Intentional criminal activity causing injury was an exclusion in the application of coverage
3 Injuries that Advanced Physicians suffered occurred prior to coverage.
The circuit court ruled that West American was not liable for the lawsuit brought on by Advanced Physicians against Midwest Open MRI, and granted West American’s motion for judgment. In our next post, we will discuss the appellate court’s decision.