Seventh Circuit Dispatches Insurer’s Coverage Defenses Against Ambulance Company

The Seventh Circuit affirmed a district court’s summary judgment in favor of an insured, finding that the insured may qualify as being in a “joint venture” with the named insured. In American Alternative Insurance Corp. v. Metro Paramedic Services, Inc. (Jul. 12, 2016), the issue confronting the court was whether allegations in the underlying complaint that the named insured and putative insured were engaged in a joint venture also satisfied the policy’s use of the term “joint venture,” at least for purposes of the insurer’s duty to defend. The court held that even though the underlying complaint may not have alleged all of the elements of a “joint venture,” as that term is interpreted under Illinois law, that did not matter for purposes of the insurer’s duty to defend.

The underlying lawsuit arose out of claims of sexual harassment, assault and battery, and unlawful retaliation against employees of two ambulance services, Antioch Rescue Squad and Metro Paramedic Services. American Alternative Insurance Corp. (AAIC) issued a liability policy to Antioch and contended it had no obligation to Metro. It was alleged in the underlying lawsuit that Antioch and Metro were a partnership or joint venture, as, among other things, they were jointly staffed and operated, Metro used Antioch ambulances, and employees of Metro and Antioch wore Antioch uniforms and gear.

The AAIC policy stated that members of a joint venture with the named insured are insureds. The Seventh Circuit found compelling the allegations in the underlying complaint that Metro and Antioch were engaged in a joint venture. It then reasoned that the term “joint venture” should be construed in its “generic sense,” i.e., its dictionary definition rather than its strictly legal sense. The Court was not persuaded that the contract between Metro and Antioch specifically disclaimed the existence of a joint venture or partnership, as that had no bearing on the theory the tort claimants pursued against them.

This case highlights the potential problem of using a legal term in an insurance policy without defining it. Following from this case and others, it remains unclear whether such terms will be afforded their legal meaning, whereby the insured will be entitled to coverage only if the claim at least sketches all of the necessary elements, or whether the terms will be construed in a lay sense, and the insured will be entitled to coverage if the claim merely sketches the general gist of the term. The safer play for insurers is to indicate in the policy that the legal term should be afforded the meaning ascribed to it under the law of the controlling jurisdiction.