LEXINGTON INSURANCE COMPANY, Plaintiff/Counter-Defendant-Appellee, v. HORACE MANN INSURANCE COMPANY, Defendant/Counter-Plaintiff/Third-Party Plaintiff-Appellant, v. Aon Risk Insurance Services West, Inc., Third-Party Defendant-Appellee.
No. 16-2352
United States Court of Appeals, Seventh Circuit.
Decided June 29, 2017
Rehearing and Rehearing En Banc Denied July 31, 2017
661
Argued December 7, 2016
To determine the amount of sanctions it was prepared to impose, the court ordered Moore to submit an affidavit describing all fees that it had incurred in responding to Rine‘s motion. Moore did so, and based on the materials it submitted, the court settled on $7,427 (representing 27.6 hours of work) as the money Rine had to pay. This is a reasonable measure of the cost Rine imposed on her opponent. She argues that the sanction was too high, but she offers no support for that position other than a convoluted argument to the effect that Moore should be compensated only fоr the pages of its brief that (she thinks) the district court adopted. As the district court put it, “it is unfathomable why she would invent an algorithm rather than relying on the information supplied in the Defendants’ affidavit.”
IV
We have no need to consider whether the sanctions imposed by the district court were also justified under the court‘s inherent power. See Chambers v. NASCO, Inc., 501 U.S. 32, 45-46, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991). Nor are we saying that the district court would have erred if it had denied Moore‘s sanctions motion. We hold only that it lay within the district court‘s broad discretion, in light of all the circumstances of this case, to impose a calibrated sanction on Rine for her conduct of the litigation, culminating in the objectively baseless motion she filed in opposition to arbitration. We therefore AFFIRM the district court‘s order imposing sanctions.
Joseph E. Collins, Attorney, Fox Rothschild LLP, Chicago, IL, for Plaintiff-Appellee.
James I. Rubin, Andrew David Shapiro, Debra Kathryn Lefler, Attorneys, Butler, Rubin, Saltarelli & Boyd LLP, Chicago, IL, William P. Ferranti, Attorney, Ferranti Firm LLC, Portland, OR, for Horace Mann Insurance Company.
Jonathan Cifonelli, Walter Jones, Jr., Jorge V. Cazares, Attorneys, Pugh, Jones & Johnson P.C., Chicago, IL, for Aon Risk Insurance Services, Incorporated.
Before BAUER and FLAUM, Circuit Judges, and SHADID, District Judge.*
FLAUM, Circuit Judge.
I. Background
A. The Litigation Against Drake
In May 2008, Christopher Drake‘s truck collided with Joseph Burley‘s motorcycle in Tampa, Florida. Burley was seriously injured in the crаsh, and the following month, Burley‘s lawyer sent a letter to Drake‘s insurer, Horace Mann, in which Burley offered to settle his claims against Drake for $25,000 (the limit of Drake‘s insurance policy). The letter stated that Burley‘s offer would remain open for twenty days. Horace Mann responded that it could not make any payments until it had received Burley‘s medical records, but as Burley‘s lawyer did not provide those records, the twenty-day window closed without a settlement.
In August 2008, Burley‘s attorney sent a follow-up letter to Horace Mann, notifying the insurance company that Burley was pursuing his claims against Drake in the Florida courts. The insurer then attempted
The Burley v. Drake litigation continued, and two years later, on September 14, 2010, Burley‘s lawyer sent Drake‘s counsel a letter concerning an upcoming mediation session:
We have scheduled the mediation of this case [for later this year].... Obviously, the only way [Drake] is going to obtain any relief from the judgment that certainly will be obtained in this case, is if the [insurance] carrier agrees to acknowledge their extra-contractual exposure and “open” their limits.
... If [the carrier has] an extra-contractual lawyer looking into this matter, please let me know the name of that person and I will deal with them directly. If not, please relay my message that we intend to discuss the extra-contractual aspects of this case that, if acknowledged, would give your client assurance of financial relief.
Drake‘s attorney forwarded this letter to Horace Mann, and Horace Mann sent to the mediation session a claims adjuster for extra-contractual-liability claims. The claims adjuster was authorized to offer no more than $200,000 in settlement, however, and Burley would accept no less than $8 million, so the parties concluded the session without reaching an agreement.
B. Horace Mann‘s Policy with Lexington
In August 2010, Horace Mann had in place a professional-liability insurance policy issued by Lexington. That policy, which had a one-year effective period beginning on September 28, 2009, obligated Lexington to pay Horace Mann‘s losses arising from errors committed by Horace Mann in serving its clients. On August 20, 2010, Horaсe Mann e-mailed its insurance broker, Aon, about notifying Lexington of the Burley litigation. Aon responded:
We don‘t have [a] record of this matter. Apparently, [the Burley suit was] filed in 2008.... If that‘s the case, we would have a late noticing issue.... Let us know how you would like us to proceed.
Horace Mann replied that it would like Aon to “[p]lease proceed in reporting” the matter to Lexington; but Aon stated that it would need a copy of the Burley complaint before doing so, and asked Horace Mann to send one over. Three days later, on August 23, Horace Mann explained in a follow-up e-mail that it was working on getting copies of the complaint, and reiterated its request that Aon “proceed in reporting” the suit to the insurance carrier. Aon in turn asked if it would be acceptable to notice the suit once Aon had received the complaint, and Horace Mann agreed that that would be fine. Horace Mann eventually forwarded the complaint to Aon on September 21, once more asking that Aon submit the matter to Lexington for review. On September 24, however, a Horace Mann employee e-mailed Aon to indicate that she had “d[one] a little more digging,” and that there were no “written” extra-contractual allegations; accordingly, wrote the emplоyee, Horace Mann “wish[ed] to withdraw this claim.” Aon did as the employee asked, and did not submit anything to Lexington at that time.
On February 4, 2011, a Florida jury returned a $17 million verdict against Drake in the Burley action. Horace Mann informed Lexington of the verdict, and transferred to Lexington the Burley claim file and related documents, including the September 2010 letter from Burley‘s lawyer. Burley‘s counsel then sent to Horace Mann a message on March 3, 2011, in which the attorney stated:
Following our conversation last night, I had a chance to talk to my client about settling this case.... I told you last night that our initial offer to settle this case would be the face value of the judgment, or $17 million. I have confirmed that my client is willing to negotiate from that number. [W]e should work towards doing this within the upcoming few days.
Several days later, on March 7, the head of Horace Mann‘s claims committee telephoned Lexington‘s claims adjuster and explained that Burley‘s lawyer had made an opening demand of $17 million; according to Horace Mann, the claims adjuster responded that $10 million or less would be “a good settlement.” Lexington ultimately sent Horace Mann a reservation-of-rights letter denying coverage, however, as in Lexington‘s view, Burley had demanded extrа-contractual damages from Horace Mann by letter dated September 14, 2010—and so Horace Mann‘s “claim” had accrued before the operative (2010-2011) policy with Lexington had taken effect on September 28.1 The reservation-of-rights letter concluded with a warning that Lexington planned to seek declaratory relief in court. In the meantime, Horace Mann settled with Burley for $7 million.
C. Procedural History
Lexington filed a declaratory-judgment action against Horace Mann in April 2011, seeking a judicial declaration that Lexington did not have a duty to indemnify Horace Mann for the Burley settlement. Lexington alleged, among other things, that there was no duty to indemnify because Horace Mann‘s “claim” for insurance coverage predated the relevant policy. Horace Mann counterclaimed for declaratory judgment and breach of contract, asserting
In December 2012 and January 2013, respectively, Horace Mann and Lexington filed cross-motions for (partial) summary judgment on the issues of whether the September 2010 letter from Burley‘s lawyer was a “claim” under Horace Mann‘s policy, and, relatedly, whether the operative “claim” had otherwise accrued before the start date of the (2010-2011) policy. The district court agreed with Horace Mann and answered “no” to both questions. Aon then moved for summary judgment, asserting that the district court‘s ruling had mooted Horace Mann‘s negligence suit against its insurance broker. The court denied Aon‘s motion as premature.
Lexington moved for summary judgment again in December 2015—this time on Horace Mann‘s counterclaim—arguing that Horace Mann could not prove that it had adequately notified Lexington of any “claims” made against Horace Mann in 2011. Horace Mann filed a response and cross-motion, and Aon, too, filed a second motion for summary judgment. While these motions were pending, the district court set a trial date for Horace Mann‘s claims, and trial began on April 12, 2016. The claims for breach of contract, declaratory judgment, and negligence were tried before a jury, while a bench trial was conducted on Horace Mann‘s request for additiоnal damages under
Before the substantive claims were submitted to the jury, the parties filed a series of motions for judgment as a matter of law under
A. The Insurance-Coverage Dispute
1. Horace Mann‘s Claims Against Lexington
Horace Mann first appeals the denial of its
Nothing in the text of
The problem with the appellate court‘s instructions in Cone, said the Court, was that
Horace Mann argues that Cone is inapposite here, as that case—like
If the court does not grant a motion for judgment as a matter of law made under
Rule 50(a) , the court is considered to have submitted the action to the jury subject to the court‘s later deciding the legal questions raised by the motion. No later than 28 days after the entry of judgment—or if the motion addresses a jury issue not decided by a verdict, no later than 28 days after the jury was discharged—the movant may file a renewed motion for judgment as a matter of law and may include an alternative or joint request for a new trial underRule 59 . In ruling on the renewed motion, the court may:(1) allow judgment on the verdict, if the jury returned a verdict;
(2) order a new trial; or
(3) direct the entry of judgment as a matter of law.
Fed. R. Civ. P. 50(b) (2009). Horace Mann4 points to the Rule‘s opening prоviso—which states that the court is considered to have submitted an action to the jury if “the court does not grant a motion for judgment as a matter of law made under
In this respect, the present version of
Cone and Globe Liquor together instruct that, in order for a party to request on appeal a judgment in their favor due to insufficient evidence supporting the other side, the requesting party must not only havе filed a motion under
Unfortunately for Horace Mann, the forfeiture extends to all of that party‘s arguments against Lexington, because Horace Mann has made no attempt to disentangle from the factual issues any questions that we could otherwise review. We may, for example, considеr pure questions of law despite the absence of even a
The parties agreed before the trial in 2016 that the district court‘s 2013 summary-judgment order had disposed of Lexington‘s declaratory-judgment action. The court also barred the parties from raising at trial any issues decided in that order. Nevertheless, Horace Mann moved for judgment on Lexington‘s complaint under
Oddly, however, both parties insist on appeal that Lexington‘s motion in the alternative was somehow granted. It was not. The district court had no occasion to reconsider—and, as far as we can see, did not reconsider—its earlier ruling on Lexington‘s cause of action. Insofar as that suit is concerned, then, we have before us only the district court‘s denial of Horace Mann‘s motion under
B. Claims Against Aon
Horace Mann‘s negligence claims against its insurance broker were the subject of cross-motions by the parties under
A new trial is appropriate if, viewing all evidence and drawing all inferences from that evidence in Horace Mann‘s favor, we determine that a reasonable jury could have returned a verdict for Horace Mann on its negligence claims. See Campbell, 499 F.3d at 716. For a reasonable jury to have found for Horace Mann on these claims, Horace Mann must have shown: (1) that Aon owed it a duty; (2) that Aon breached that duty; and (3) that Horace Mann was proximately injured by the breach. See Jones v. Chi. HMO Ltd. of Ill., 191 Ill.2d 278, 246 Ill.Dec. 654, 730 N.E.2d 1119, 1129 (2000) (citation omitted).7 There is no dispute that, as Horace Mann‘s insurance broker, Aon owed Horace Mann a duty of reasonable care. Cf. Garrick v. Mesirow Fin. Holdings, Inc., 374 Ill.Dec. 49, 994 N.E.2d 986, 990-91 (Ill. App. Ct. 2013) (noting that, because the relationship between an insured and its broker is a fiduciary one, the latter must “exercise reasonable skill and diligence” toward its client) (citations omitted). Horace Mann therefore focuses its arguments on the remaining two elements of the tort.
1. Aon‘s Claims-Reporting Advice
Horace Mann first asserts that Aon breached its duty of care by providing Horace Mann with flawed claims-reporting advice. On May 5, 2010, Aon gave to Horace Mann a set of reporting guidelines, which included a warning that if Horace Mann notified Lexington of a “potential” claim for coverage—and Lexington rejected that notice as providing insufficient information—“there would likely be no coverage for the matter under the noticed policy” or “any future policy” (should any efforts to cure the deficiency be unsuccessful). Horace Mann contends that this warning did not track the policy language, and that, but for this unsound advice, Horace Mann would not have asked Aon to hold off on reporting the Burley matter to Lexington in September 2010. Once aware of a “potential” coverage issue, the theory goes, Lexington would have set up a claim file, and would have asked Horace Mann to keep Lexington abreast of any relevant goings on. Lexington therefore would have learned, much sooner than it actually did, of the Septеmber 2010 letter seeking extra-contractual damages (and of other significant documents and events); and the defenses to coverage upon which Lexington relied in its first summary-judgment motion would not have been viable, as each stemmed from an alleged delay in reporting certain information about the underlying dispute. Thus, says Horace Mann, Lexington would have indemnified Horace Mann for any Burley “claim,” and Horace Mann could have avoided the present litigation altogether.
Aon offers several reasons why Horace Mann‘s theory cannot win the day, but we need only one: Horace Mann has not shown but-for causation. Evеn assuming that Aon‘s advice was faulty, and that, absent that advice, Lexington‘s original defenses to coverage would have been unavailable, Horace Mann points to no evidence—and otherwise makes no argument—that Lexington would not have lodged any other objections to indemnifying its insured. That Horace Mann had to fight for indemnification because of Aon‘s advice (or that, because of this advice, Horace Mann had to incur greater costs in fighting for coverage than it otherwise would have) is mere speculation—which
2. Aon‘s Alleged Failure to Follow Instructions
Horace Mann also сontends that it was forced to litigate coverage for the Burley “claim” because Aon did not adequately follow Horace Mann‘s instructions to notify Lexington of that matter in 2010. Because this theory of recovery suffers from the same defect as the previous one, we again affirm the judgment for Aon under
We end with a parting observation: The district court in this instance took the fairly unusual step of removing the case from the jury before the jury had rendered a verdict. While this step was certainly a permissible one, in general, we think the better practice is for the court to take any
III. Conclusion
The decisions of the district court are AFFIRMED.
Notes
Fed. R. Civ. P. 50(b) (1938) (emphases added).Whenever a motion for a directed verdict made at the close of all the evidence is denied or for any reason is not granted, the court is deemed to hаve submitted the action to the jury subject to a later determination of the legal questions raised by the motion. Within 10 days after the reception of a verdict, a party who has moved for a directed verdict may move to have the verdict and any judgment entered thereon set aside and to have judgment entered in accordance with his motion for a directed verdict; or if a verdict was not returned such party, within 10 days after the jury has been discharged, may move for judgment in accordance with his motion for a directed verdict. A motion for a new trial may be joined with this motion, or a new trial may be prayed for in the alternative. If a verdict was returned the court may allow the judgment to stand or may reopen the judgment and either order a new trial or direct the entry of judgment as if the requested verdict had been directed. If no verdict was returned the court may direct the entry of judgment as the requested verdict had been directed or may order a new trial.