845 F.3d 313
7th Cir.2017Background
- WCPP (risk purchasing group) and MGSA (its broker/program administrator) sought renewal insurance for ~600 properties; MGSA engaged MC Risk, which engaged NCAIG, which planned to place coverage with Ward’s JRSO.
- Ward/JRSO issued a fictitious insurance program; Ward was later convicted of wire fraud and the purported policies were void.
- Norman-Spencer (Ohio agency) met with Ward and Littlejohn (NCAIG) and executed an unsigned Memorandum of Understanding; Norman-Spencer was paid $25,000 to issue ~64 backlogged policies (including Myan Management), but was excluded from the separate WCPP placement and received no commission from WCPP.
- Norman-Spencer discovered potentially troubling information about Ward (conservation order, reinsurance irregularities) but did not notify WCPP or MGSA.
- Plaintiffs sued multiple parties; all claims against Ward/JRSO resolved by default/settlement except claims against Norman-Spencer for negligence and breach of fiduciary duty. District court granted Norman-Spencer summary judgment; plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Norman-Spencer owed WCPP a duty under Illinois Insurance Placement Liability Act (IIPLA §2-2201) | NCAIG requested Norman-Spencer join as sub-broker; Norman-Spencer discovered red flags and thus had duty to warn | Norman-Spencer was not asked to procure WCPP coverage, was excluded by Ward, received no WCPP funds/commission | No duty under §2-2201; summary judgment for Norman-Spencer affirmed |
| Whether Norman-Spencer owed WCPP a duty under common-law negligence/affirmative undertaking | Even absent formal request, general negligence or an affirmative undertaking imposed duty to avoid foreseeable harm | Illinois courts limit broker duties to §2-2201 scope; no evidence of undertaking or request | Common-law theory rejected; duty not expanded beyond §2-2201 |
| Whether MGSA can sue over Myan Management policy (negligence) | MGSA claims harm from Norman-Spencer’s failure re: Myan policy and seeks reimbursement | Norman-Spencer only performed limited admin work on already-bound Myan policy; MGSA is not the insured on that policy and paid no premium | MGSA not an insured under §2-2201(a); claim fails; summary judgment affirmed |
| Breach of fiduciary duty / wrongful retention of premiums under IIPLA §2-2201(b) | Plaintiffs assert Norman-Spencer wrongfully retained or misappropriated premium funds | Norman-Spencer did not receive or retain WCPP or MGSA premium funds from the placements | Claim fails because Norman-Spencer received no premiums from plaintiffs; summary judgment affirmed |
Key Cases Cited
- AYH Holdings, Inc. v. Avreco, Inc., 357 Ill. App. 3d 17 (discusses broker duty extending to authorized sub-brokers and disclosure duties)
- Skaperdas v. Country Casualty Insurance Co., 28 N.E.3d 747 (Ill. 2015) (duty under §2-2201 arises only after insured requests specific coverage)
- Talbot v. Country Life Insurance Co., 8 Ill. App. 3d 1062 (1973) (affirmative undertaking can create liability where agent induced reliance)
- Bovan v. American Family Life Insurance Co., 386 Ill. App. 3d 933 (2008) (agent’s inducement of detrimental reliance creates individual duty)
- Rahn v. Board of Trustees of Northern Illinois University, 803 F.3d 285 (7th Cir. 2015) (standard for reviewing summary judgment)
- Office Furnishings, Ltd. v. A.F. Crissie & Co., Ltd., 44 N.E.3d 562 (Ill. App. 2015) (courts refuse to expand producer duties beyond §2-2201)
- Melrose Park Sundries, Inc. v. Carlini, 399 Ill. App. 3d 915 (2010) (declines to impose duty beyond requested coverage)
- United States v. Hook, 471 F.3d 766 (7th Cir. 2006) (perfunctory or undeveloped arguments are waived)