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ILLINOIS CONSTRUCTORS CORP. v. MORENCY & ASSOCS.

September 29, 1992

ILLINOIS CONSTRUCTORS CORPORATION, a corporation, Plaintiff,
v.
MORENCY & ASSOCIATES, INC., a corporation, d/b/a/ MORENCY, WEIBLE & SAPA, Defendant.



The opinion of the court was delivered by: CHARLES RONALD NORGLE, SR.

HONORABLE CHARLES R. NORGLE

 ORDER

 Before the court are the motions of defendant Morency & Associates, Inc., d/b/a Morency, Weible & Sapa ("Morency") to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) and to strike the complaint's prayer for attorney's fees pursuant to Fed. R. Civ. P. 12(f). For reasons that follow, the court denies both motions.

 FACTS

 According to the complaint, Morency is an insurance broker plaintiff Illinois Constructors Corporation ("Illinois Constructors") hired to represent its interests before insurance underwriters in order to secure insurance for its business operations. Morency is allegedly familiar with Illinois Constructors's onshore and marine operations due to Morency's relationship with Illinois Constructors since 1984. On or about August 1, 1991, Morency negotiated an Ocean Marine Insurance contract on behalf of Illinois Constructors through the St. Paul Insurance Company of Illinois. This policy failed to provide for pollution coverage.

 On December 22, 1991, Illinois Constructors's tugboat M/V Dutch Gap sank in the Mississippi River at the Power Plant dam between Rock Island, Illinois and Arsenal Island, Illinois. Illinois Constructors engaged the services of various entities to clean up the diesel fuel polluting the Mississippi River and the adjoining river bank as a consequence of the accident. As a result of Morency's failure to secure pollution coverage, Illinois Constructors had no coverage for claims arising out of the spill or indemnification for money expended on the clean-up.

 On April 24, 1992, Illinois Constructors brought suit against Morency alleging breach of contract, negligence, and breach of fiduciary duty, invoking this court's admiralty and maritime jurisdiction under 28 U.S.C. § 1331(1) and Fed. R. Civ. P. 9(h). It seeks to recover for expenses incurred by the clean-up and third-party liability claims as well as for damages it shall become legally liable to pay in the future. The court earlier determined that Illinois Constructors's agreement with Morency for the procurement of insurance for Illinois Constructors's tugboat fell within the ambit of federal court admiralty jurisdiction under 28 U.S.C. § 1333(1). See Illinois Constructors Corp. v. Morency & Assoc., Inc., 794 F. Supp. 841, 1992 U.S. Dist. LEXIS 11126, at *7 (N.D. Ill. 1992).

 Referring to Illinois law, Morency presently claims that Illinois Constructors's three count complaint fails to state a claim for breach of contract, negligence, or breach of fiduciary duty. Illinois Constructors asserts that admiralty law controls the case, or alternatively, the complaint sufficiently states a claim under Illinois law.

 DISCUSSION

 On a motion to dismiss, the court accepts all well-pleaded factual allegations as true, Johnson v. Martin, 943 F.2d 15, 16 (7th Cir. 1991), as well as all reasonable inferences drawn from those allegations. Nelson v. Monroe Regional Medical Center, 925 F.2d 1555, 1558 (7th Cir. 1991). Because federal courts simply require "notice pleading," a complaint need not specify the correct legal theory nor point to the right statute to survive a motion to dismiss. Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992). The court must construe the pleadings liberally, and mere vagueness or lack of detail alone does not constitute sufficient grounds to dismiss a complaint. Strauss v. City of Chicago, 760 F.2d 765, 767 (7th Cir. 1985). Accordingly, a party fails to state a claim only if that party can prove no set of facts upon which to grant legal relief. Ross v. Creighton Univ., 957 F.2d 410, 413 (7th Cir. 1992).

 In the absence of a controlling federal statute or established rule of maritime law, a federal district court sitting in admiralty applies state law to disputes over contracts of marine insurance. Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 99 L. Ed. 337, 75 S. Ct. 368 (1955). This rule is equally applicable to contracts for the procurement of insurance and disputes arising from the relationship between the insurance broker and its principal. Because neither party points to a federal statute or rule of maritime law governing the present case, resort must be made to state law. *fn1"

 In determining which state's substantive law is to apply to claims subject to the admiralty jurisdiction of the federal courts, federal choice-of-law rules govern. Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882 (5th Cir.), cert. denied, 116 L. Ed. 2d 230, 112 S. Ct. 279 (1991); State Trading Corp. v. Assuranceforeningen Skuld, 921 F.2d 409, 414 (2d Cir. 1990). Federal courts sitting in admiralty apply the law of the state with the most significant relationship to the dispute. See Commercial Union Ins. Co. v. Horne, 787 F. Supp. 337, 339 (S.D.N.Y. 1992) (Connecticut law applied to marine insurance policy); In re Litigation Involving Alleged Loss of Cargo, 772 F. Supp. 707, 712 (D.P.R. 1991) (Florida law applied to availability of direct action against legal liability insurer).

 By briefing Illinois law, the parties concede Illinois bears the most significant relationship to the dispute, and the court agrees. Accordingly, Illinois law governs the contract claim in Count I. As for Counts II and III, the claims are in substance the same as the claim in Count I in that each addresses the same set of acts or omissions preliminary to the production of the maritime insurance policy. Thus, Counts II and III are governed by Illinois law as well.

 First, the court turns to the issue of Illinois Constructors's recovery for the expenses incurred by the clean-up and by third-party liability claims -- purely economic losses. A federal court applying state law must determine how the appropriate state supreme court would decide the issue if presented before it. Ross, 957 F.2d at 413. The Illinois Supreme Court's decision in Moorman Mfg. Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443, 61 Ill. Dec. 746 (1982) bars recovery of purely economic loss in most tort actions in Illinois. *fn2" Nonetheless, Illinois constructors's claims in Counts I and III are based on contract and agency theories and thus Moorman is ...


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