In American Alternative Insurance Corp. v. Metro Paramedic Services, 2014 U.S. Dist. LEXIS 171841 (N.D. Ill. Dec. 12, 2014), the United States District Court for the Northern District of Illinois held that American Alternative Insurance Corporation (“AAIC”) had a duty to defend Metro Paramedic Services, Inc. (“Metro”). The claimants had filed suit against Metro and Antioch Rescue Squad (“ARS”) alleging sexual harassment and discrimination, negligent supervision and retention, assault and battery, and retaliation, while serving as joint employees of ARS and Metro.
Metro contended that it was an insured under the policy issued by AAIC to ARS because it was, in pertinent part, a member of a “joint venture” with ARS, as provided under the policy’s who is an insured provision. The district court agreed with Metro. The district court ignored the technical, legal meaning of “joint venture” in favor of the everyday meaning of the term, i.e., a mere “cooperative enterprise.” The district court then found that definition satisfied by the allegations that Metro and ARS jointly employed the bad actors and jointly operated the Rescue Squad.
Importantly, the district court rejected AAIC’s reliance on the contract between ARS and Metro in which they disclaimed having a joint venture relationship. The district court explained, “While the agreement between ARS and Metro might operate to bar claims between those parties predicated on the existence of a partnership or joint venture, it is not determinative of the rights of either party vis a vis the claimants. The [underlying] plaintiffs alleged that ARS and Metro operated the rescue squad together, thereby exposing Metro to potential liability as a joint employer with ARS. It does not matter whether the claimants were right or wrong about that fact; the allegations suffice to make Metro an additional insured under the ‘partnership or joint venture’ provision of the policy.”
This opinion employs a questionable approach. The district court first undertook a broad reading of a term with a commonly understood legal meaning. It then squarely rejected extrinsic evidence that would tend to disprove the insured’s interpretation of an ambiguity in the complaint. Notably, the plaintiff was not specifically alleging against ARS and Metro a joint venture theory. Thus, it stands to reason that the consideration of extrinsic evidence was proper here. Hopefully the Seventh Circuit will have the opportunity to provide a more suitable framework for evaluating AAIC’s duty to defend.