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May 9, 2003


The opinion of the court was delivered by: Philip G. Reinhard, Judge, United States District Court



Plaintiffs, Miller's Blasting Service, Inc. ("MBS"), Ronald D. Miller, and Mildred A. Miller (collectively referred to as the "Millers"), have filed a five-count second-amended complaint against defendants, Texas AGA, Inc. ("AGA"), Jack Zogg, and Legion Insurance Company ("Legion"). The Millers have sued AGA and Zogg together for negligence (Count) and "insurance placement liability" under 735 ILL. COMP. STAT. 5/2-2201 (Count II); AGA by itself for breach of contract (Count III); and Legion for declaratory judgment (Count IV) and breach of contract (Count V). AGA and Zogg, in turn, have filed a single-count amended third-party complaint against third-party defendants, Nobel Insurance Company, Nobel Insurance Agency, and Renaissance U.S. Holdings, Inc. (collectively referred to as "Nobel"), for a right of contribution should AGA and Zogg be found liable on the Millers' complaint. As MBS is incorporated with its principal place of business in Illinois, Ronald and Mildred Miller are both Illinois citizens, AGA is incorporated with its principal place of business in Texas, Zogg is a Texas citizen, Legion is incorporated with its principal place of business in Pennsylvania, and the amount in controversy exceeds $75,000, diversity jurisdiction is proper based on 28 U.S.C. § 1332. Supplemental jurisdiction is proper over the third-party complaint under 28 U.S.C. § 1367. Venue is proper under 28 U.S.C. § 1391 (a). Before the court are the following motions: AGA and Zogg's motion for summary judgment, filed pursuant to Federal Rule of Civil Procedure 56, as to Counts I-III of the Millers' complaint; the Millers' and Legion's cross-motions for summary judgment as to Counts IV and V of the Millers' complaint; Nobel's motion for summary judgment as to AGA and Zogg's third-party complaint; and Legion's motion to file a counterclaim against the Millers under Rule 15.


Although Mildred and her husband, Ronald, are co-owners of MBS, Mildred has always handled all of the company's insurance matters by herself. (AGA & Zogg LR 56.1(a) ¶ 8; Legion LR 56.1(a) ¶ 11(1)*fn1) So when Nobel, the Millers' prior insurance agency, decided to get out of the agency side of the insurance business, Mildred met with Zogg and earl Taylor on July 8, 1997, to discuss MBS' overall insurance needs, as well as potential savings on worker's compensation insurance. (Legion LR 56.1(a) ¶¶ 10(2), 11(2)) Zogg, who initiated the contact with Mildred, attended the meeting as an insurance producer for AGA, a Texas-based insurance agency. (AGA & Zogg LR 56.1(a) ¶ 9; Legion LR 56.1(a) ¶ 10(1))

During this meeting, Mildred told Zogg that MBS' current worker's compensation policy in Illinois expired the following month, on August 6, 1997.*fn2 (Legion LR 56.1(a) ¶ 11(2)) At the same time, Zogg told Mildred that he would need certain information and documents to get her a worker's comp. policy, including MBS' "loss runs," or worker's compensation claims history. (Id. ¶¶ 10(2), 11(2); AGA & Zogg LR 56.1(a) ¶ 21) Mildred said she would try to get the information. (Legion LR 56.1(a) ¶ 11(2))

A few weeks later, on July 21, Mildred informed Ruth Bangs, an account executive at AGA, that she had not yet been able to obtain the requested loss runs. Bangs herself then ordered them from Nobel. (Legion LR 56.1(a) ¶ 13(2) & Pl. Resp. ¶¶ 11(2), 13(2)) She received them on August 12, 1997, six days after MBS' old worker's comp. policy supposedly had expired, and then forwarded them on to InsurAmeriCorp, a company that functioned as a sort of middleman between insurance agencies and Legion. (Legion LR 56.1(a) ¶¶ 13(3), 14(2)) After some more paper shuffling over the next few weeks, Legion authorized InsurAmeriCorp, on September 3, 1997, to release Legion's quote for a worker's compensation policy on MBS. (Id. ¶ 14(5))

Coincidentally, and rather tragically, on that same day one of the Millers' employees, a man by the name of Mark Owens, died in a work-related accident. (Id. ¶ 11(8)) The next day, September 4, 1997, Mildred called up Zogg to tell him about the accident and inquire whether he had obtained MBS' worker's comp. insurance yet. (Id. ¶ 11(9)) Zogg said he had not but that he had just received a quote from Legion the day before. Mildred asked if the policy could be backdated to cover the September 3 accident; Zogg said it could not. (Id. ¶¶ 10(4), 11 (10)) Nevertheless, Mildred agreed to accept Legion's worker's comp. policy with a September 4 effective date. (Id. ¶¶ 11 (10)-(12))

Per that conversation, the staff in charge of actually issuing the worker's comp. policy at Legion had been instructed from Legion's underwriting department to issue the MBS policy with coverage dates from September 4, 1997 to September 4, 1998. Due to a scrivener's error on the clerical staff's part, however, the effective date became September 1 — two days before Owens' accident. (Id. ¶¶ 15(4)-(5)) A few months later, in December 1997, after an internal audit discovered the error, Legion reissued the policy with the same policy number, merely changing "September 1" to "September 4" in the policy period. (Id. ¶¶ 15(6)-(7), 16(4))

Now that the Millers have incurred various costs and expenses arising from Owens accident, such as medical expenses, funeral and burial expenses, and weekly death benefits, as well as legal costs and fees in defending themselves in two law suits that have been filed in state court, they seek to hold AGA, Zogg, and Legion liable for some or all of these damages.


Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Remer v. Burlington Area Sch. Dist., 286 F.3d 1007, 1010 (7th Cir. 2002). With cross-motions for summary judgment, the court views the evidence and draws all reasonable inferences therefrom in favor of the party against whom the motion under consideration is made. See O'Regan v. Arbitration Forums, Inc., 246 F.3d 975, 983 (7th Cir. 2001). The court's function is not to weigh the evidence but merely to determine if there is a genuine factual issue for trial — one that can properly be resolved only by a finder of fact because it may reasonably be resolved in favor of either party. See Hilt-Dyson v. City of Chicago, 282 F.3d 456, 462 (7th Cir.) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986)), cert. denied 123 S.Ct. 97 (2002). Because the parties assume without discussion Illinois law controls this diversity action, the court will do the same. See Checkers Eight Ltd. P'ship v. Hawkins, 241 F.3d 558, 561 (7th Cir. 2001).

A. Legion

The Millers' theory for holding Legion liable is straightforward and based on the following premises: Mildred originally asked if the worker's compensation policy Legion had approved could be backdated to sometime before September 4, 1997; Legion issued the policy with an effective date of September 1, 1997; and Owens' accident occurred on September 3, 1997. Therefore, the Millers conclude, the policy provides coverage for the accident. Legion naturally disputes this and asks the court to reform the ...

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