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BCS INSURANCE COMPANY v. GUY CARPENTER & CO.

December 8, 2005.

BCS INSURANCE COMPANY, INC., Plaintiff,
v.
GUY CARPENTER & COMPANY, INC., Defendant.



The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge

MEMORANDUM OPINION

This matter is before the court on Plaintiff BCS Insurance Company, Inc.'s ("BCS") motion for summary judgment, and Defendant Guy Carpenter & Company, Inc.'s ("Guy Carpenter") motion for summary judgment. For the reasons below, we grant Guy Carpenter's motion for summary judgment in its entirety and deny BCS's motion for summary judgment.

BACKGROUND

  Insurance Specialists, Inc. ("ISI") sold extended warranty programs to producers, dealers, and retailers around the country for products such as automobiles, recreational vehicles, computers, and appliances. BCS alleges that it was introduced to the ISI program in 1992, by Guy Carpenter's predecessor in interest, H.S. Fox. BCS claims that Guy Carpenter understood that the ISI program would be one-hundred percent insured by a reinsurer who would be responsible for all risk and would administer the program, and that Guy Carpenter would be responsible for negotiating such a reinsurance agreement. BCS also alleges that it was understood by H.S. Fox and Guy Carpenter that BCS would retain no underwriting risk or other risk associated with the ISI program.

  BCS alleges that after a few years of participation in the ISI program, BCS agreed to retain a small portion of the risk in the ISI program, but then decided in 1995 to no longer retain any risk in the program. BCS alleges that in 1995, it notified Guy Carpenter that BCS would be terminating its participation in the ISI program at the end of the 1995 reinsurance treaty year. BCS alleges that in late 1995 or early 1996, Guy Carpenter advised BCS that a group of London-based reinsurers would be underwriting the ISI program, undertaking all risk in the program, and that the London-based reinsurers would oversee the program. BCS claims that Guy Carpenter asked BCS to reconsider its decision to terminate its participation in the ISI program, based on Guy Carpenter's assertions regarding the involvement of the London-based reinsurers in the ISI program. BCS agreed to continue its participation in the program, but BCS alleges that BCS and Guy Carpenter both understood that the ISI program would be one-hundred percent reinsured and managed by the London-based reinsurers. BCS alleges that it subsequently acted as the issuing carrier for the ISI program and the London-based reinsurers for the 1996, 1997, and 1998 reinsurance treaty years. BCS alleges that Guy Carpenter never properly procured the reinsurance for the ISI program as promised to BCS, which BCS claims resulted in liability to BCS. BCS alleges that it informed Guy Carpenter in late 1997 or early 1998 that BCS was terminating its participation in the ISI program and BCS agreed to continue its participation only during a transition period, during which the ISI program would continue to be fully reinsured.

  In March 1999, BCS submitted a claim for $36 million to the London based-reinsurers relating to liability from the ISI program. BCS alleges that the claim was paid in full. BCS claims that it was unaware at the time that the London-based reinsurers also conveyed a letter with a reservation of rights provision to Guy Carpenter. BCS alleges that during 1999 and 2000, BCS and the London-based reinsurers communicated only through Guy Carpenter, and BCS alleges that it continued to pay claims under the ISI program. BCS alleges that after the 2000 monthly account, the London-based reinsurers refused to make any additional payments to BCS and demanded arbitration to rescind the reinsurance agreements or, in the alternative, to obtain compensation from BCS for certain loses relating to the ISI program. BCS alleges that in order to toll the statute of limitations on any claims BCS had against Guy Carpenter, BCS and Guy Carpenter entered into a tolling agreement in February 2001. BCS alleges that it entered into arbitration with the London-based reinsurers. According to BCS, the London-based reinsurers prevailed in arbitration on the claims seeking compensation for certain losses and BCS prevailed on the issue of rescinding the reinsurance contracts. BCS claims that its liability owed to the London-based reinsurers was caused by Guy Carpenter's false representations and Guy Carpenter's failure to properly procure reinsurance. BCS brought the instant action, which includes a breach of contract claim (Count I), a breach of implied contract claim (Count II), a professional negligence claim (Count III), an implied indemnity claim (Count IV), a breach of fiduciary duty claim (Count V), and a negligent misrepresentation claim (Count VI). On September 2, 2005, both BCS and Guy Carpenter filed the instant motions for summary judgment.

  LEGAL STANDARD

  Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In seeking a grant of summary judgment, the moving party must identify "those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). This initial burden may be satisfied by presenting specific evidence on a particular issue or by pointing out "an absence of evidence to support the non-moving party's case." Id. at 325. Once the movant has met this burden, the non-moving party cannot simply rest on the allegations in the pleadings, but, "by affidavits or as otherwise provided for in [Rule 56] must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). A "genuine issue" in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The court must consider the evidence as a whole, in a light most favorable to the non-moving party, and draw all reasonable inferences that favor the non-moving party. Anderson, 477 U.S. at 255.

  DISCUSSION

  I. Statute of Limitations

  Guy Carpenter alleges that Counts I-III and V-VI are barred under 735 ILCS 5/13-214.4 ("Section 13-214.4"), which requires that claims against certain insurance entities be filed within two years of their accrual. BCS, however, argues that Section 13-214.4 does not apply to reinsurance companies such as Guy Carpenter, that the tolling agreement between the parties bars application of the statute of limitations in this case, and that BCS's claims against Guy Carpenter did not accrue more than two years before the tolling agreement started.

  Section 13-214.4 states:
Actions against insurance producers, limited insurance representatives, and registered firms. All causes of action brought by any person or entity under any statute or any legal or equitable theory against an insurance producer, registered firm, or limited insurance representative concerning the sale, placement, procurement, renewal, cancellation of, or failure to procure any policy of insurance shall be brought within 2 years of the date the cause of action accrues.
735 ILCS 5/13-214.4. BCS primarily cites an Illinois Supreme Court case, In re Liquidations of Reserve Ins. Co., 524 N.E.2d 538, 540-41 (Ill. 1988) ("Reserve Insurance"), to support its argument that causes of action involving reinsurance companies are not governed by Section 13-214.4. The court in Reserve Insurance stated that "[a] reinsurance agreement is different from a policy or contract of direct insurance in both form and substance," and that "when the legislature intended reinsurance to be included within a particular section, `reinsurance' was explicitly mentioned." Id. at 540-42 (citing Illinois statutes that specified that they applied to reinsurance contracts). From these statements, BCS reasons that Section 13-214.4 "only applies to claims concerning `policies of insurance' and not to claims concerning reinsurance contracts." (Resp. 2).

  Reserve Insurance, however, involved a different statutory provision than the one in question here, and the case was decided in 1988, three years before the Illinois legislature passed the Reinsurance Intermediary Act ("Reinsurance Act"), 215 ILSC 100/1 et seq. The Reinsurance Act clearly provides that "`Reinsurer' means any person, firm, association, or corporation duly licensed in this State under the applicable provisions of law as an insurer with the authority to assume reinsurance." 215 ILCS 100/5 (emphasis added). The Reinsurance Act also states that "[n]o person, firm, association, or corporation that maintains an office, officer, director, agent, or employee, directly or indirectly, in this State shall act as an intermediary broker unless licensed as an insurance producer in this State." 215 ILCS 100/10 (emphasis added). Finally, the Illinois Insurance Code, 215 ILCS 5/1 et seq., states that an insurance producer is "a person required to be licensed under the laws of this State to sell, solicit, or negotiate insurance" and that an insurance producer can be licensed to sell a number of types of insurance, including "[a]ny other line of insurance permitted under State laws or rules." 215 ILCS 5/500-10; 215 ILCS 5/500-35. It is clear from the interaction of these statutory provisions that reinsurance was subsumed within the statutory scheme of the Illinois Insurance Act and, thus, reinsurance companies should be considered insurance producers for the purposes of the statute of limitations in Section 13-214.4.

  Such a reading of the statute is particularly reasonable given the perverse outcome that would arise if we were to find that claims against reinsurance companies were not included in the two-year statute of limitations. Excluding reinsurance claims from Section 13-214.4 would mean that individual consumers in Illinois would be required to bring claims against insurance companies in the shortened two-year period, but sophisticated insurance companies, like BCS, would be able to bring their reinsurance claims at a much more leisurely pace. This would make no sense. See Reserve Insurance, 524 N.E.2d at 540-541 (stating that "reinsurance agreements may be entered into only by and between certain insurance ...


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