against an insurance broker on a theory of negligence. The Illinois Appellate Court in Lake County Grading, a 1992 decision, held that a plaintiff may recover for economic loss from an insurance broker because the insurance broker's extracontractual fiduciary duty to procure insurance was a duty in tort to prevent precisely the type of harm that occurred. Id. at 1131-32; see also Economy Fire & Casualty Co. v. Bassett, 170 Ill. App. 3d 765, 525 N.E.2d 539, 544, 121 Ill. Dec. 481 (1988) (tort liability imposed on insurance broker for failure to obtain proper insurance coverage; Moorman not addressed). An insurance broker's extracontractual duty arises from the contract and from the relationship between itself and its principal. Here, Morency enjoyed a relationship as insurance broker with Illinois Constructors since 1984, nearly seven or eight years prior to the accident, and was allegedly entrusted with a large degree of responsibility. Accordingly, the court can grant Illinois Constructors legal relief in the form of economic damages.
Under Illinois law, an insurance broker must exercise reasonable skill and diligence in the procurement of insurance for its principal. Scarsdale Villas Assoc. Ltd. v. Korman Assoc. Ins. Agency, Inc., 178 Ill. App. 3d 261, 533 N.E.2d 81, 83, 127 Ill. Dec. 463 (1988). The broker is accordingly liable for any loss the principal may bear as a result of the broker's failure to procure proper insurance. Id. Such a claim may sound in breach of contract, negligence, or breach of fiduciary duty. See, e.g., Lake County Grading, 226 Ill. App. 3d 697, 589 N.E.2d 1128, 168 Ill. Dec. 728 (negligence); Scarsdale, 178 Ill. App. 3d 261, 533 N.E.2d 81, 127 Ill. Dec. 463 (contract); Pickett v. First Am. Sav. & Loan Ass'n, 90 Ill. App. 3d 245, 412 N.E.2d 1113, 45 Ill. Dec. 531 (1980) (negligence, fiduciary duty, and contract); see also St. Paul Fire & Marine, 774 F. Supp. at 489-90 (contract and fiduciary duty).
A contract to procure insurance is established where (1) one party proposes to be insured and the other party agrees to find insurance; (2) the court can ascertain the subject, period, amount and rate of insurance; and (3) the premium is paid. Scarsdale, 533 N.E.2d at 83. Moreover, a factfinder may imply a contract to procure insurance from past dealings between the parties, correspondence between the parties, conversations between the parties, or customs prevalent in the locale. Pickett, 412 N.E.2d at 1119 (1980); see also United States Fidelity & Guaranty Co. v. Continental Casualty Co., 198 Ill. App. 3d 950, 556 N.E.2d 671, 676, 145 Ill. Dec. 53 (1990) (contractual duties may arise from inferences drawn from facts and circumstances).
Illinois Constructors sufficiently alleges a breach of contract in Count I. In paragraph four of the complaint, Illinois Constructors alleges that Morency "impliedly contracted to provide and did provide" brokerage services; and in paragraph eleven, Illinois Constructors alleges Morency "contracted . . . to provide Illinois Constructors with insurance to protect it from any and all risks arising out of its business operation." Illinois Constructors further claims that it paid Morency a commission for the provision of insurance brokerage services.
Morency therefore breached the contract by falling to provide Illinois Constructors with insurance coverage sufficient to protect it from all risks arising out of the maritime aspect of its business operation -- namely the risk of pollution. Illinois Constructors claims Morency knew or should have known that Illinois Constructors's vessels may release pollutants into the waters through fortuitous occurrences thus necessitating pollution coverage. Therefore, because the contract Morency procured contained a "Pollution Exclusion" clause and Morency was aware that various insurance underwriters provided pollution coverage to vessel owners and operators, Morency breached its contract by failing to advise Illinois Constructors of, or analyze and present to Illinois Constructors, the availability of pollution coverage. Morency's liability will depend on the extent of the understanding between the parties and the expectations resulting from Illinois Constructors prior dealings with Morency. Accordingly, Illinois Constructors sufficiently plead a breach of contract to procure marine pollution coverage.
Count II claims Morency failed to exercise reasonable skill and diligence in the transaction of the business Illinois Constructors entrusted to Morency. See Lake County Grading, 589 N.E.2d at 1132 ("Illinois places a particular burden on an insurance broker to exercise competence and skill in rendering services"); Scarsdale, 533 N.E.2d at 83 (1988) (broker must exercise reasonable skill and diligence in transaction of business). Specifically, Illinois Constructors alleges that Morency breached its duty to act as a competent insurance broker on behalf of Illinois Constructors by failing to advise Illinois Constructors that its policy contained no coverage for pollution clean-up or liability, by failing to advise Illinois Constructors that underwriters were willing and able to provide pollution coverage, by failing to act competently in evaluating the costs and benefits of purchasing pollution coverage versus the risk of operating on the inland waters without pollution coverage, by failing to competently advise Illinois Constructors as to its insurance requirements by failing to become familiar with Illinois Constructors's operations, and by failing to broker an umbrella liability coverage which would cover pollution risks. This is sufficient to allege a negligence claim.
Count III claims that Morency breached the fiduciary duty owed Illinois Constructors. To state a claim for breach of fiduciary duty by an insurance broker, a plaintiff must allege that he or she enjoyed a fiduciary relationship with the defendant insurance broker, that the broker owed specific duties to plaintiff, that the broker breached those duties, and that the breach damaged plaintiff. St. Paul Fire & Marine, 774 F. Supp. at 489-90. As an insurance broker, Morency owed a fiduciary duty to Illinois Constructors. See Lake County Grading, 589 N.E.2d at 1132 (relationship of broker and proposed insured is fiduciary one); Economy Fire, 525 N.E.2d at 543 (same). The complaint sufficiently alleges that Morency breached its duty by failing to act in accordance with custom and practice prevailing in the community with regard to insurance brokers through all of the above mentioned inactions.
Last, the court turns to Morency's motion to strike Illinois Constructors's prayer for attorney's fees. It is not unusual for a complaint to make a request for attorney's fees in its prayer for relief. As a result, the motion to strike is premature in that later developments may justify a request for fees. See generally Ingersoll Milling Mach. Co. v. M/V Bodena. 829 F.2d 293 (2nd Cir. 1987) (discussing availability of attorney's fees in admiralty cases), cert. denied, 484 U.S. 1042, 108 S. Ct. 774, 98 L. Ed. 2d 860 (1988); Knudson v. LeMarr, 787 F. Supp. 835 (N.D. Ill. 1992) (discussing American rule as to availability of fees and costs). Accordingly, the court denies the motion to strike Illinois Constructors's prayer for attorney's fees as premature and may revisit the issue later.
In sum, the complaint sufficiently states a claim under Illinois law against Morency and the motion to strike the prayer for attorney's fees is premature.
For the reasons stated above, the court denies Morency's motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(1). The court also denies Morency's motion to strike the prayer for attorney's fees pursuant to Fed. R. Civ. P. 12(f).
IT IS SO ORDERED.
CHARLES RONALD NORGLE, SR., Judge
United States District Court