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ST. PAUL FIRE & MARINE INS. CO. v. GREAT LAKES TUR

September 19, 1991

ST. PAUL FIRE & MARINE INSURANCE COMPANY, Plaintiff,
v.
GREAT LAKES TURNINGS, LTD., NATIONAL MATERIAL TRADING, NATIONAL PINKERT STEEL, a Division of NATIONAL MATERIALS LTD., and TANG INDUSTRIES, INC., Defendants; GREAT LAKES TURNINGS, LTD., Third-Party Plaintiff, v. ALEXANDER & ALEXANDER, INC., Third-Party Defendant



The opinion of the court was delivered by: DUFF

 BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE

 Background

 Great Lakes alleges that it turned to A & A not only for assistance in procuring insurance, but also for advice regarding what types of insurance were necessary. A & A advised Great Lakes to procure cargo insurance and ship insurance, and Great Lakes followed that advice, authorizing A & A to purchase cargo insurance from Marine Office of America Corp. (MOAC) and ship insurance from St. Paul Insurance Co. of Illinois (St. Paul). A & A did not advise Great Lakes to procure insurance against its own negligence, nor did Great Lakes purchase such insurance. Both the MOAC and St. Paul policies were in effect at the time of the fire.

 Immediately after it obtained the insurance policies, Great Lakes' practice was to notify A & A of the name, tonnage, on hire and off hire dates of its shipments, at the time the shipments were made. A & A however instructed Great Lakes not to report each shipment but rather, that shipments were to be reported on an "audit basis". Great Lakes notified A & A of the fire the day after it occurred (Great Lakes never dealt with either insurance company directly, it communicated only with A & A) and A & A told Great Lakes it would inform both insurance companies of the loss. A & A did in fact notify MOAC immediately after learning of the loss, but failed (Great Lakes alleges) to notify St. Paul until about three months later. The company to which Great Lakes had contracted to sell the turnings paid Great Lakes $ 2,000,000 for the shipment and turned to the cargo insurer, MOAC, for reimbursement. MOAC subsequently paid the purchaser approximately $ 1,000,000 and, as subrogee of the purchaser, itself turned to the ship for recovery, suing it in New York. Marcial Ucin, S.A. v. M/V Star I, No. 90 CIV 6323 (S.D.N.Y.) (the New York litigation). The owners of the ship named Great Lakes as a third-party defendant in that action, claiming that Great Lakes' own negligence caused the loss.

 Great Lakes notified A & A of the New York litigation and, following A & A's advice, obtained counsel. A & A tendered the defense of the New York litigation to St. Paul, which agreed to defend Great Lakes in that matter but reserved its rights to contest both coverage and responsibility for the defense. In fact, St. Paul is contesting those very matters in this litigation, arguing that it is not liable for this loss because Great Lakes did not comply with the requirements of the contract -- specifically, Great Lakes failed to inform St. Paul of the shipment or the loss in a timely fashion, and did not consult with St. Paul prior to retaining counsel for the New York litigation. Great Lakes attributes all these errors, if errors they were, to the bad advice it received from A & A, and seeks to hold A & A liable should St. Paul prevail on its suit for declaratory judgment.

 Discussion

 The parties agree that Illinois law governs this diversity case, and A & A raises a number of arguments based upon Illinois law in support of its motion to dismiss. The standard governing this court's decision on such a motion is well established. Only if the allegations of the complaint, and all reasonable inferences drawn therefrom, could not support any cause of action may this court grant the motion. See generally Charles Wright & Allen Miller, 5A Federal Practice and Procedure: Civil 2d ยง 1357 (West Publishing, 2d ed. 1990). With this standard in mind, the court will address each of A & A's arguments in turn.

 1. Indemnification

 In its third-party complaint, Great Lakes seeks indemnification for A & A's alleged breach of fiduciary duty in obtaining the insurance (Count 1), breach of contract (Count 2) and breach of fiduciary duty in administering the insurance contract (Count 3). *fn1" It seeks an order from this court ordering A & A to indemnify it for any costs, expenses and liability arising from either the New York litigation or this litigation. A & A's first argument in support of its motion is that Great Lakes has failed to state a claim for indemnification, since Illinois has rejected both the "active-passive" theory of indemnity among joint tort-feasors and the doctrine of implied indemnity in contract.

 a. Tortious Implied Indemnity

 A & A argues that this court must dismiss Great Lakes' complaint because, since the advent of the Illinois Contribution Act, Illinois does not recognize a cause of action of implied indemnity among joint tort-feasors. See Allison v. Shell Oil Co., 113 Ill. 2d 26, 99 Ill. Dec. 115, 495 N.E.2d 496 (1986) (holding that implied indemnity is no longer an acceptable doctrine for shifting the cost of tortious conduct from one tort-feasor to the other). Great Lakes counters that it seeks recovery under a contract, not a tort theory and that Allison is therefore inapplicable.

 In Illinois, claims for breach of fiduciary duty sound in agency, contract and equity, Kinzer v. City of Chicago, 128 Ill. 2d 437, 445, 539 N.E.2d 1216 (1989) and thus are not subject to the Contribution Act (which applies only to tort claims). Ill.Rev.Stat. ch. 170, par. 302(a) (1986) (". . . where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or in the same wrongful death, there is a right of contribution among them . . ."). See also Giordano v. Morgan, 197 Ill. App. 3d 543, 549, 143 Ill. Dec. 875, 554 N.E.2d ...


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