Guarantee Trust Life Ins. Co. v. Kribbs

2016 IL App (1st) 160672

68 N.E.3d 1046

GUARANTEE TRUST LIFE INSURANCE CO., Plaintiff-Appellant,

v.Robert KRIBBS, Keith Lindvig, and Larry Graves, Defendants,

(Keith Lindvig and Larry Graves, Defendants-Appellees).

No. 1-16-0672

Appellate Court of Illinois, First District, FIRST DIVISION.

December 29, 2016

McKnight, Kitzinger & Pravdic, LLC, of Chicago (Kevin Q. Butler, Cornelius E. McKnight, and Nathan P. Karlsgodt, of counsel), for appellant.

Katten & Temple LLP, of Chicago (Nancy A. Temple, Nathaniel H. Tone, and Gina M. Aiello, of counsel), for appellee Larry Graves.

Samuel A. Orticelli, of St. Charles, for appellee Keith Lindvig.

OPINION

JUSTICE MIKVA delivered the judgment of the court, with opinion.

¶ 1 This is an appeal from an order dismissing claims against certain defendants as untimely. Plaintiff Guarantee Trust Life Insurance Company (Guarantee) entered into a reinsurance agreement with Somerset Reinsurance, Ltd. (Somerset), a company formed by an independent insurance producer for the sole purpose of reinsuring policies issued by Guarantee. Under the agreement, Guarantee forwarded premium payments to Somerset to hold in a custodial account for the payment of claims. Guarantee initially sued the founder of the reinsurance company, Robert Kribbs, alleging that he acted in concert with "an employee" inside Guarantee's organization both to secure the agreement and later to improperly obtain authorization for the release of funds from the account to Mr. Kribbs for his own use. Nearly six years after filing its initial complaint, while taking discovery depositions in the case, Guarantee discovered the identity of two of its own employees, Keith Lindvig and Larry Graves, who it claims participated in the scheme and sought to name them in the suit. Mr. Graves and Mr. Lindvig moved to dismiss the claims against them as untimely and the circuit court granted their motion. For the reasons that follow, we affirm the judgment of the circuit court.

¶ 2 BACKGROUND

¶ 3 Reinsurance is a contract of indemnity in which one insurer agrees to protect another insurer from a risk it has already assumed. Vial v. Norwich Union Fire Insurance Society of Norwich, England , 257 Ill. 355, 358, 100 N.E. 929 (1913). The original policyholder is generally not a party to such an agreement. In re Liquidations of Reserve Insurance Co. , 122 Ill.2d 555, 561, 120 Ill.Dec. 508, 524 N.E.2d 538 (1988). In this case, plaintiff Guarantee entered into a reinsurance agreement with Somerset, a reinsurance company formed by licensed insurance producer Robert Kribbs to reinsure credit life and disability policies issued by Guarantee.

¶ 4 A. Guarantee's Initial Lawsuit

¶ 5 On December 12, 2006, Guarantee brought a five-count complaint against Mr. Kribbs for unjust enrichment, conversion, constructive fraud, concert of action, and civil conspiracy (the 2006 Complaint). Guarantee alleged that it entered into the reinsurance agreement with Somerset to reinsure policies sold by Mr. Kribbs and others, pursuant to which it agreed to deposit premiums paid on the policies into a custodial account controlled by Somerset and Mr. Kribbs. Guarantee further alleged that, "[w]ithout regard to the contractually and statutorily mandated reserve requirements applicable to both [Guarantee] and Somerset, [Mr. Kribbs] authorized and requested the release of the ceded premiums to be paid directly to [Mr. Kribbs]," leaving insufficient remaining funds to pay claims on the policies. As a result, Guarantee alleged that it was forced to indemnify policyholders, using its other reserves and premiums, for claims that should have been paid by Somerset from the custodial account.

¶ 6 Although Mr. Kribbs was the only individual defendant originally named in this case, Guarantee specifically alleged in count IV of the 2006 Complaint, entitled "Concert of Action," that Mr. Kribbs could not have unilaterally withdrawn funds from the custodial account. According to count IV of the 2006 Complaint, "[t]he approval of an employee of Guarantee was required for Kribbs to allow the premium funds to be paid personally to Kribbs" and "[b]oth Kribbs and the employee of Guarantee knew that the release of funds directly to Kribbs constituted a breach of the employee's duty of loyalty to [Guarantee] and its duty to protect its policyholders."

¶ 7 On January 8, 2008, Mr. Kribbs disclosed in his responses to Guarantee's interrogatories the names of five individuals with knowledge of the losses allegedly suffered by Guarantee as a result of the transactions described in the 2006 Complaint, including Guarantee employees Larry Graves, Keith Lindvig, and Arthur Fess.

¶ 8 In the fall of 2012, nearly six years after originally filing the lawsuit, Guarantee took the discovery depositions of Mr. Kribbs, Mr. Fess, and Mr. Lindvig. Mr. Kribbs testified that he and Mr. Lindvig were both working for Guarantee—Mr. Kribbs as an insurance agent and Mr. Lindvig as a sales manager—when they were approached by vice president Larry Graves about forming Somerset. Mr. Kribbs stated that Mr. Graves explained how Mr. Kribbs could request "dividends" from the custodial account. During discovery, Mr. Kribbs produced copies of letters signed by both Mr. Graves and Guarantee's senior vice president of finance, Arthur Fess, instructing the bank to disburse funds from the custodial account directly to Mr. Kribbs.

¶ 9 Mr. Fess was also deposed and described how Mr. Graves prepared the letters and supporting documentation for Mr. Fess's signature.

¶ 10 Mr. Lindvig, who was at the time of his deposition the national sales manager for Guarantee's credit life division, testified that, at Mr. Graves's direction, it was he who initially approached Mr. Kribbs regarding forming a reinsurance company. Mr. Lindvig confirmed that, as the line-of-business manager, Mr. Graves was the one who reviewed quarterly statements to determine if sufficient excess was available in the custodial account to make a distribution. Mr. Lindvig also disclosed during his deposition that he had been receiving commissions from Mr. Kribbs "for many, many years back and forth."

¶ 11 B. The Re-Filed Action

¶ 12 On October 2, 2012, the circuit court granted Guarantee's request for a voluntary dismissal of the 2006 Complaint and, on February 7, 2013, Guarantee re-filed the action, this time naming both Mr. Kribbs and Mr. Lindvig as defendants and Mr. Graves as a respondent in discovery.

¶ 13 Guarantee filed a first amended complaint on July 31, 2013, in which it detailed Mr. Graves's involvement in the alleged scheme to wrongfully withdraw funds from the custodial account. On October 16, 2013, the circuit court granted Guarantee's motion to convert Mr. Graves from a respondent in discovery to a party defendant.

¶ 14 On January 6, 2014, Mr. Graves moved to dismiss the first amended complaint against him pursuant to sections 2-615 and 2-619 of the Code of Civil Procedure (Code) (see 735 ILCS 5/2-615, 2-619 (West 2012)), a motion that was later joined by Mr. Lindvig. The two argued that each of Guarantee's claims against them was barred by the five-year limitations period set out in section 13-205 of the Code (735 ILCS 5/13-205 (West 2006) ), which they contended began to run when Guarantee first learned of its injury, something that could have happened no later than the filing of the 2006 Complaint.

¶ 15 In response, Guarantee argued that its awareness of one cause of its injury—wrongdoing by Mr. Kribbs—did not trigger the statute of limitations for claims based on other causes—i.e. , wrongdoing by Mr. Graves and Mr. Lindvig—that it did not and could not have discovered sooner. Guarantee additionally argued that its claims were tolled because it alleged that Mr. Graves and Mr. Lindvig were fiduciaries as a matter of law who not only failed to disclose their involvement in the scheme, as they were bound to do, but engaged in acts of fraudulent concealment preventing Guarantee from discovering that it had claims against them. Attached to the motion to dismiss was the affidavit of Guarantee's general counsel, Robert Baluk, who stated that, before the deposition of Mr. Lindvig, no one at Guarantee besides Mr. Graves and Mr. Lindvig "had any knowledge that the defendant Lindvig was involved or received money from defendant Kribbs in connection with the facts alleged in the complaint." According to Mr. Baluk, it was only "after reviewing the deposition transcript of Kribbs" that he "began suspecting that Larry Graves may also have been involved in and received financial benefit from the scheme described in the Complaint."

¶ 16 On March 27, 2014, the circuit court dismissed each of Guarantee's claims against Mr. Graves and Mr. Lindvig. The court concluded that Guarantee could have discovered that it had claims against these defendants within the statutory period for bringing those claims because Guarantee already knew that one of its own employees was involved in the alleged scheme, received information as to persons with knowledge who worked at Guarantee in early 2008 as a part of interrogatory responses provided by Mr. Kribbs, and chose to wait six years after filing its lawsuit to take any depositions. The court likewise rejected both the notion that Guarantee's conclusory allegations of fraudulent concealment were sufficient to toll the claims against Mr. Graves and Mr. Lindvig and Guarantee's argument that the two were fiduciaries who fraudulently concealed information simply by remaining silent. According to the court, there was "no factual support" for the existence of a fiduciary relationship and the fiduciary exception did not apply.

¶ 17 Guarantee moved for reconsideration of the dismissal, arguing that Mr. Graves and Mr. Lindvig were fiduciaries as a matter of law because Mr. Graves was employed as a vice president of Guarantee and Mr. Lindvig was an insurance producer who was alleged to have misappropriated insurance premiums it received from Guarantee. Guarantee insisted...