The opinion of the court was delivered by: Rovner, District Judge.
MEMORANDUM OPINION AND ORDER
The plaintiff in this diversity action, Joseph Lazzara
("Lazzara"), sued Howard A. Esser, Inc. ("Esser"), an
insurance broker, for breach of contract and negligence based
on Esser's failure to procure and maintain an agreed upon
level of automobile insurance coverage for Lazzara. On April
1, 1985 this Court entered summary judgment in the amount of
$150,000 in favor of Lazzara and against Esser, 604 F. Supp. 1205.
Presently pending before this Court is Lazzara's motion
to amend the judgment to include both interest and attorneys'
fees. This Court has decided to grant the motion with regard
to interest, but to base the award on Illinois, rather than
Florida law, and to deny the motion for attorneys' fees.
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, contracted to obtain $1 million in
automobile insurance for Lazzara. 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 Company ("Aetna"). These
policies were periodically renewed by Esser. These same
insurance policies were in force when Lazzara's insured
automobile was involved in an accident, and a $510,000
judgment was entered against him by a state court in Florida.
The basis for Lazzara's suit against Esser was that, at the
time of the accident, a $150,000 gap existed in the coverage
provided by the two policies which Esser had procured for
Lazzara. The primary liability policy that Esser obtained from
Reliance covered only the first $100,000 of Lazzara's
liability under the judgment; the excess liability policy that
Esser obtained from Reliance covered only liability in excess
of $250,000. Thus, in arranging Lazzara's insurance coverage,
Esser left a $150,000 gap, causing a judgment to be entered
against Lazzara in that amount by a Florida state court.
Lazzara, an Alabama citizen, sued Esser, an Illinois
corporation, invoking the diversity jurisdiction of this
Court. On April 1, 1985 this Court granted summary judgment in
favor of Lazzara and against Esser in the amount of $150,000.
Joseph Lazzara v. Howard A. Esser, Inc., 604 F. Supp. 1205
(N.D.Ill. 1985). Presently pending before this Court is
Lazzara's motion to amend the judgment to include both interest
and attorneys' fees. The Court will consider each separately.
Lazzara contends that by reason of Esser's failure to
properly procure his insurance, Esser is liable to Lazzara for
statutory "interest on a judgment" based on Fla.Stat.Ann.
§ 55.03 (West 1985) from May 5, 1982, the date the Florida
court entered judgment against him, through April 1, 1985, the
date this Court entered summary judgment in his favor. This
Court finds, however, that applying Illinois conflict of laws
principles, the Illinois prejudgment interest statute,
Ill.Rev.Stat. ch. 17, § 6402 (1983), governs the issue of
interest on the judgment.*fn1
In a diversity action, a federal court must apply the choice
of laws principles of the state in which it sits. Klaxon v.
Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct.
1020, 1021, 85 L.Ed. 1477 (1941); McIntosh v. Magna Systems,
Inc., 539 F. Supp. 1185 (N.D.Ill. 1982). Because prejudgment
interest is an item of substantive damages, it may be awarded
only when available under state law and at the rate set by
state law. Turner v. Japan Lines Ltd., 702 F.2d 752 (9th Cir.
1983); In re Air Crash Disaster Near Chicago, Illinois on May
25, 1979, 644 F.2d 594 (7th Cir. 1981). In Mitchell v. United
Asbestos Corp., 100 Ill. App.3d 485, 55 Ill.Dec. 375,
426 N.E.2d 350 (5th Dist. 1981), the Illinois Supreme Court determined
that the best way to approach a conflicts of laws problem is to
weigh the interests and public policies of each contact state
as they relate to each transaction in issue, and not to
mechanically apply one test to govern all situations. As such,
Illinois has adopted the "most significant contacts" test of
the Restatement Second of Conflicts of Law (1969) as the choice
of law theory applicable to diversity actions sounding both in
contract and tort. McIntosh, 539 F. Supp. at 1188. The "most
significant contacts test" incorporates the presumption that
local law should govern an issue unless another state has a
more significant relationship. Ingersoll v. Klein, 46 Ill.2d 42,
262 N.E.2d 593 (1970). In both a contract and a negligence
action, the conflict of laws inquiry is fundamentally the same.
The court looks to either the place of injury or of
contracting; to the place where the conduct causing the injury
occurred or the place of negotiation of the contract; to the
place of performance; to the situs of the subject matter of the
contract; to the place of domicile, incorporation, and business
of the parties; and to the center of gravity of the
relationship between the parties. Restatement (Second) of
Conflict of Laws § 188, 145 (1969); Boise Cascade Home & Land
v. Utilities, Inc., 127 Ill. App.3d 4, 82 Ill.Dec. 180,
468 N.E.2d 442 (1st Dist. 1984).
Both Lazzara and Esser agree that the substantive law of
Illinois governs the issue of Esser's liability to Lazzara. A
separate inquiry must be made, however, to determine which
state has a greater interest in having its law apply to the
precise issue of the rate of interest to be applied to a
judgment. This separate inquiry into the rate of interest is
derived from the theory of "depecage" recently adopted by the
Seventh Circuit. International Administrators Inc. v. Life
Insurance Co. of North America, 753 F.2d 1373, 1376 n. 4 (7th
Cir. 1985); In re Air Crash, 644 F.2d at 611 n. 13; Reese,
Depecage, 73 Columbia L.Rev. 58 (1973). Under the theory of
depecage, this Court considers issues on which there is
disagreement among the contact states over which rule of law is
applicable to each issue. International Administrators, Inc.,
753 F.2d 1373, 1376 n. 4. Because there is disagreement on the
rate of interest applicable to the instant situation, the
inquiry begins here.
The Florida "interest on a judgment" statute provides for
interest on judgments at the rate of 12% per annum. on
judgments rendered in a Florida court. Fla.Stat.Ann. § 55.03
(West 1985). The Illinois prejudgment statute provides for
interest to be calculated at the rate of 5% per annum.
Ill.Rev.Stat. ch. 17, § 6402 (1983). Under the Illinois "most
significant contacts" test, this Court finds that Illinois has
a greater interest than Florida does in applying its interest
rate to a judgment rendered in a federal court sitting in
The insurance agreement entered into between Lazzara and
Esser was executed in Illinois, and, although the place of
negotiation is unclear, it appears that the contract was
negotiated at least partially in Illinois. Illinois is also
the center of gravity of the parties' relationship, because
Lazzara obtained his insurance through Esser, who was in
Illinois. Moreover, Esser is an Illinois corporation, and,
although Florida was the place of the accident, the conduct
giving rise to the injury here — Esser's failure to procure
complete insurance coverage — occurred in Illinois.
Additionally, enforcement of the insurance contract was sought
in a district court sitting in Illinois, and damages were
awarded under Illinois law.
Although Florida would have an interest in applying its
interest statute to a judg — ment rendered in a district court
sitting in Florida where the judgment was based on Florida law,
this Court finds no similar interest applicable to a district
court sitting in Illinois following ...