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LAZZARA v. HOWARD A. ESSER

March 27, 1985

JOSEPH LAZZARA, PLAINTIFF,
v.
HOWARD A. ESSER, INC., DEFENDANT. HOWARD A. ESSER, INC., THIRD-PARTY PLAINTIFF, V. AETNA CASUALTY & SURETY COMPANY OF ILLINOIS, INC., AND RELIANCE INSURANCE COMPANY OF ILLINOIS, INC., THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Rovner, District Judge.

MEMORANDUM OPINION AND ORDER

This is a diversity action governed by the substantive law of Illinois. In the underlying lawsuit, Joseph Lazzara ("Lazzara") sued Howard A. Esser, Inc. ("Esser"), an insurance broker, for breach of contract and negligence based on Esser's alleged failure to procure and maintain an agreed upon level of automobile insurance coverage for Lazzara. Presently pending before this Court are the motions of both Lazzara and Esser for reconsideration of two rulings issued by Judge Charles Kocoras in this case before it was transferred to this Court. This Court has reconsidered the rulings at issue and, for the reasons set forth below, has decided to affirm the dismissal of Esser's third-party complaint but to reverse Judge Kocoras' denial of Lazzara's motion for summary judgment.

Facts

Lazzara handled his insurance needs through Esser for many years. In 1973 or 1974, Esser recommended that Lazzara increase his automobile liability insurance coverage to $1 million. Lazzara agreed and instructed Esser to procure such coverage for him. Esser, acting in its corporate capacity as an insurance broker, thus contracted to obtain for Lazzara $1 million in automobile insurance. To fulfill this contract, Esser procured a primary liability policy for Lazzara with Reliance Insurance Company ("Reliance") and an excess liability policy with Aetna Casualty & Surety Company of Illinois, Inc. ("Aetna"). These policies were in force when Lazzara's insured auto was involved in an accident, and a $510,000 judgment was entered against him by a state court in Florida.

Lazzara, a citizen of Alabama, sued Esser, an Illinois corporation, invoking the diversity jurisdiction of this Court. The two-count complaint asserts claims for breach of contract and negligence. After Lazzara filed his complaint, Esser filed a third-party complaint against Aetna and Reliance, attempting to impose upon them ultimate liability for the $150,000 gap on the following bases: a written indemnity agreement between Esser and the insurance companies (Counts I and V); indemnity based upon "active-passive" negligence (Counts II and VI); contribution (Counts III and VII); indemnity based on breach of agency duties and obligations (Counts IV and VIII); and, reformation of the contract with Reliance (Count IX).

After considering Esser's third party allegations against Aetna and Reliance, Judge Kocoras dismissed the third-party complaint in its entirety on February 21, 1984. The court dismissed Counts I and V because the "failure to procure" insurance claims by Esser do not fall within the strict terms of the Aetna or Reliance agreements as a matter of law. Counts II, III, VI, and VII were dismissed because the court held that an insurance company does not have a common law duty to monitor an insured's day-to-day financial affairs by inquiring into the insurance situation of the insured. Finally, Counts IV, VIII, and IX were dismissed because Esser's allegation that it was an agent of Aetna and Reliance for procuring insurance was "bare" and "conclusory" and because "it [is] clear as a matter of Illinois law that Esser was a broker which acted on behalf of Lazzara in procuring insurance." Lazzara v. Esser, No. 83 C 185, slip op. at 5-6 (N.D.Ill. Feb. 21, 1984).

After the third-party complaint against Aetna and Reliance was dismissed, certain discovery was completed. Thereafter, Lazzara filed his motion for summary judgment. In opposing the motion, Esser argued that a question of fact was presented on several issues:

1. whether Esser was a broker or agent;

  2. even assuming Esser was a broker, whether
     plaintiff instructed Esser to provide $1 million
     in continuous coverage or whether plaintiff merely
     assumed coverage would be continuous without
     discussion with Esser;
  3. whether, in July, 1979, Esser properly renewed
     plaintiff's existing coverage pursuant to its
     understanding with plaintiff even if that coverage
     contained a gap;
  4. whether the elements of a contract to procure
     insurance have been established; and
  5. whether the Reliance policy provided plaintiff
     covered the auto involved in the accident in
     Florida.

Judge Kocoras stated in his October 30, 1984 ruling on the motion for summary judgment that Esser could not withstand Lazzara's motion by arguing that the loss should not have been covered under the terms of the policies because that defense is available only to an insurer, and, in this case, the two insurers agreed that the ...


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