An Illinois appellate court has ruled in favor of ISMIE Mutual Insurance Company in a closely watched professional liability coverage dispute involving a prenatal genetic testing lawsuit. The decision, handed down June 16, 2025, held that ISMIE had no duty to pay a malpractice settlement linked to a former medical director at Northwestern Reproductive Genetics.
The dispute stems from a case brought by Taryn and Doug Kessel, who alleged that Dr. Eugene Pergament failed to properly advise them of genetic testing results during a pregnancy in 2009. Their child was later born with a serious hereditary condition, and the couple claimed that faulty test interpretation, which they believed stemmed from Dr. Pergament's actions, led to the outcome.
Dr. Pergament held a professional liability policy with ISMIE at the time. The policy covered damages he was “legally obligated to pay” as a result of personal medical services. But it excluded coverage for managerial or entrepreneurial roles involving entities not listed in the policy - such as his role as medical director for Northwestern Reproductive Genetics.
ISMIE defended Dr. Pergament under a reservation of rights for nearly eight years but declined to participate in settlement talks. In 2018, Dr. Pergament, Northwestern Reproductive Genetics, and another entity reached a private settlement with the Kessels. As part of that agreement, Dr. Pergament assigned his rights under the ISMIE policy to the plaintiffs but paid no part of the settlement himself. The couple then attempted to recover the full settlement amount from ISMIE.
The appellate court rejected that attempt. In its unanimous opinion, the court emphasized that because Dr. Pergament was not personally obligated to pay the settlement, ISMIE’s duty to indemnify was never triggered. The court noted that the policy language requiring a “legal obligation to pay” was clear, and the settlement agreement explicitly stated that Dr. Pergament would owe nothing beyond the policy assignment.
The ruling also turned on the absence of any breach by ISMIE. While the plaintiffs argued the insurer’s 2016 communication amounted to a coverage denial, the court found that ISMIE had continued to provide a defense under reservation of rights and was within its rights to decline indemnity until liability was established.
For insurers, the decision reinforces the value of clear indemnity language and the importance of carefully drawn exclusions. For brokers and underwriters in the medical liability space, it highlights a growing focus on how dual roles - such as clinical versus directorial - are treated under coverage agreements. And for risk managers, it’s a reminder that the way settlements are structured can have a decisive impact on insurance recovery efforts.
Ultimately, the court’s position was straightforward: if the insured was never required to pay, the insurer cannot be required to indemnify. That clarity could guide both insurers and insureds when structuring future coverage and settlements in the professional risks space.
