Landmark Am. Ins. Co. v. Deerfield Constr., Inc.

LANDMARK AMERICAN INSURANCE COMPANY, Plaintiff, v. DEERFIELD CONSTRUCTION, INC., et al., Defendants.

No. 15 C 1785

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

May 3, 2018

Chief Judge Rubén Castillo

MEMORANDUM OPINION AND ORDER

Following an adverse jury verdict in a personal injury lawsuit, a state court entered judgment against Deerfield Construction, Inc. ("Deerfield") and Shawn Graff, one of Deerfield's employees. (R. 192-1, Bunch Dep. Tr. at 133, 183-86.) Excess insurance provider Landmark American Insurance Company ("Landmark") brought this action against Deerfield and Graff seeking a declaratory judgment that Deerfield and Graff are not entitled to insurance coverage for the state court judgment under an excess insurance policy that Deerfield purchased from Landmark. (R. 1, Compl.) Deerfield then filed a third-party complaint against American States, Arthur J. Gallagher Risk Management Services, Inc. ("AJG"), the Law Offices of Meachum, Starck, Boyle & Trafman ("MSBT"), and David J. Olmstead, seeking to hold them responsible for the adverse judgment. (R. 28, Third-Party Compl.)

Presently before the Court are: Landmark's motion for summary judgment against Deerfield and Graff; Deerfield's motions for summary judgment against American States and Landmark; and MSBT's, Olmstead's, and American States' motions for summary judgment against Deerfield. (R. 191; R. 198; R. 200; R. 205; R. 208.) Also before the Court is Deerfield's and Graff's motion to amend their third-party complaint. (R. 214, Mot. to Amend.) For the reasons stated below, Landmark's motion for summary judgment is granted, and the remaining claims are dismissed without prejudice for lack of jurisdiction. As a result, the Court denies all other pending motions as moot.

RELEVANT FACTS

The following facts are undisputed unless otherwise stated. The plaintiff, Landmark, is an Oklahoma company with its principal place of business in Georgia. (R. 1-4, Landmark Policy at 7.) Deerfield is a construction company with approximately 55 employees that specializes in construction projects within the telecommunications industry. (R. 223, Deerfield Resp. to Landmark Facts ¶ 25.) It is an Illinois corporation with its principal place of business in Illinois, and it has significant experience in dealing with insurance claims. (R. 192-1, Bunch Dep. Tr. at 53-55; R. 20, Deerfield Answer ¶ 8.) Graff is a Deerfield employee who resides in Illinois. (R. 20, Deerfield Answer ¶ 9; R. 203-8, Graff Dep. Tr. at 5.)

American States is an Indiana corporation with its principal place of business in Massachusetts. (R. 62, Am. States Answer ¶ 3.) MSBT is the in-house legal department of Liberty Mutual Insurance Company, and its principal place of business is in Illinois.¹ (R. 203-7, Olmstead Dep. Tr. at 27; R. 106, MSBT Answer ¶ 5.) Olmstead is an Illinois attorney who has lived and worked in Illinois for over two decades. (R. 203-7, Olmstead Dep. Tr. at 9-28.) Working for MSBT at the time, Olmstead represented Deerfield and Graff in a personal injury lawsuit filed against them by Ryan Keeping related to injuries that Keeping suffered in an automobile accident. (Id. at 31-32, 45-46; R. 106, MSBT Answer ¶¶ 10, 13, 16, 23, 26, 35.)

Lawns Strategies ("Laurus")—an insurance consultant who is not a party to this lawsuit—is Deerfield's insurance broker. (R. 225, Deerfield Resp. to MSBT Facts ¶ 10.) When Deerfield entered into construction contracts, Deerfield would work with Laurus to ensure that Deerfield satisfied any insurance coverage requirements for construction projects. (R. 223, Deerfield Resp. to Landmark Facts ¶¶ 33-35.)

AJG is another insurance broker that Laurus used to acquire insurance policies for Landmark. (R. 192-1, Bunch Dep. Tr. at 64-65.) In February 2007, Laurus could no longer manage Deerfield's commercial insurance needs, and Laurus introduced Deerfield representatives to AJG representatives at an in-person meeting so that AJG could procure commercial insurance for Deerfield. (Id. ¶¶ 29-30; R. 223-1, Hulett Dep. Tr. at 25-27.) Laurus, working with AJG, procured for Deerfield a commercial automobile insurance policy from American States and an excess insurance policy from Landmark. (R. 223, Deerfield Resp. to Landmark Facts ¶¶ 36-38.) The American States insurance policy was in effect from March 1, 2007, to March 1, 2008, and had coverage limits of $1 million. (R. 225, Deerfield Resp. to MSBT Facts ¶ 8.) The Landmark insurance policy was in effect from March 1, 2007, to March 1, 2008, and had coverage limits of $10 million. (Id. ¶ 9.) The Landmark policy, however, only covered liability in excess of the American States policy's $1 million coverage limit. (R. 223, Deerfield Resp. to Landmark Facts ¶¶ 3-4.) Both the American States and Landmark insurance policies required Deerfield to give "prompt" notice to the insurer of any "accident," "suit," "claim," or "loss," and to "immediately" send the insurer copies of any documents concerning a claim or lawsuit. (R. 225, Deerfield Resp. to MSBT Facts ¶¶ 12-15.)

Deerfield paid its initial premium payment for the Landmark policy to AJG, but thereafter paid the remainder of the Landmark policy through a finance company. (R. 192-1,Bunch Dep. Tr. at 70-71, 247-48; R. 223, Deerfield Resp. to Landmark Facts ¶ 40.) Although Deerfield had been introduced to AJG, it was Laurus that worked with AJG to acquire the Landmark policy for Deerfield, and Deerfield had no direct communication with AJG. (R. 192-1, Bunch Dep. Tr. at 66.) Tom Sauriol was the Deerfield employee responsible for handling its insurance claims and he sent everything relating to insurance claims to Laurus; he did "not know anything about AJG." (R. 223, Deerfield Resp. to Landmark Facts ¶¶ 46-47.) Christopher Bunch,² Sauriol's superior, believed that AJG was the "conduit" to Landmark, but Bunch relied on Laurus—not AJG—to communicate with Landmark. (R. 192-1, Bunch Dep. Tr. at 65-66, 69, 102.) His belief that AJG was the "conduit" for communication to Landmark was based on "discussions with Andy Hulett from Laurus Strategies," however, Bunch "never knew or understood the specifics as to why" this was the case. (Id. at 69.)³ When Deerfield requested endorsements to the Landmark policy or requested that the coverage limits on the policy be increased, Deerfield would send these requests to Laurus who would then relay that information to AJG, who in turn communicated with Landmark. (Id. at 248-49.) Whenever Deerfield received any communications about the Landmark policy, Deerfield received it from Laurus through AJG. (Id. at 75-76.) During the 2007-2008 period the Landmark policy was in effect, Deerfield sought to increase its coverage limits under the Landmark policy from $5 million to$10 million. (Id. at 80.) All of the documentation needed to increase the limits, however, "went through Laurus" and the payment for the increase in coverage "went through [AJG]." (Id.)

On January 16, 2008, Graff was involved in a car accident with Keeping, a truck driver. (R. 225, Deerfield Resp. to MSBT Facts ¶ 16; R. 203, Deerfield Facts ¶ 3.) Soon after the accident, Deerfield, through Laurus, notified American States and AJG of the accident. (R. 223, Deerfield Add'l Facts ¶ 8;⁴ R. 192-1, Bunch Dep. Tr. at 163, 173.) Deerfield believed that "notice to AJG constituted notice to Landmark," but Landmark never actually received notice of the Keeping accident at this time. (R. 225, Deerfield Resp. to MSBT Facts ¶ 24; R. 223, Deerfield Add'l Facts ¶¶ 13-14, 21.) Deerfield believed at this time that it only needed to notify Laurus because Laurus was "Deerfield's primary contact with the insurance companies, and any information provided to them would then be . . . forwarded to the next party." (R. 192-1, Bunch Dep. Tr. at 85, 89.) This was "the same procedure [Deerfield] followed on every other claim." (Id. at 87.) Deerfield was not certain that AJG received notice of the Keeping accident, just that "Laurus would have submitted notice or whatever [AJG] required." (Id. at 91.) Deerfield was not aware of any notice that Laurus provided to AJG, and instead submitted information regarding insurance claims to Laurus, allowing Laurus to "run with it." (Id.) Nor could Deerfield employees recall directly speaking to anyone from AJG in 2008. (Id. at 91-92.) Instead, any communication from AJG was only received by Laurus, who would then relay that communication to Deerfield. (Id. at 92.)

Keeping then filed a lawsuit against Deerfield and Graff in the Circuit Court of Cook County, Illinois, on December 22, 2009, and served Deerfield and Graff soon thereafter. (R. 223, Deerfield Resp. to Landmark Facts ¶¶ 9-10.) As soon as Deerfield was served, it notified Laurus of the lawsuit. (R. 225, Deerfield Resp. to MSBT Facts ¶ 23.) Deerfield believed that Laurus would then notify Deerfield's insurers of the lawsuit. (Id. ¶¶ 24-25.) Sometime between December 30, 2009, and January 19, 2010, Deerfield and Graff notified American States of the Keeping lawsuit. (R. 223, Deerfield Resp. to Landmark Facts ¶ 11.) During the pendency of the Keeping lawsuit, Deerfield still used Laurus as its primary source of information regarding the Landmark excess policy, reaching out to Laurus to obtain information about the Landmark insurance policy that it needed in order to respond to interrogatories. (R. 192-1, Bunch Dep. Tr. at 178.)

Deerfield does not point to any evidence showing that it was aware that AJG was notified of the Keeping lawsuit after it was served on Deerfield. (Id. at 97, 99.) Deerfield, however, believed that notice of the lawsuit was given to Landmark "by virtue of the notice given to Laurus[.]" (Id. at 143.) Deerfield's "only indication" that Landmark received notice of the Keeping lawsuit was from an email Laurus sent to Deerfield in January 2015 "saying that notice was delivered to [AJG] who was the broker for Landmark."⁵ (Id. at 212-14.)

Olmstead was appointed to...