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Perez v. AMCO Insurance Co.

March 23, 2009


The opinion of the court was delivered by: Judge Robert M. Dow, Jr.


Before the Court is Defendants'motion to dismiss Plaintiffs' complaint [7]. For the reasons stated below, Defendants'motion to dismiss is granted in part and denied in part. The Court grants Defendants'motion to dismiss Count II of the complaint, but denies the motion to dismiss Count III. Both rulings apply as to all Defendants.

I. Background*fn1

Plaintiff, Victor G. Perez ("Perez"), is the former sole-shareholder and current assignee of a now-defunct commercial printing business. The company was called Pinata Graphics, Inc. ("Pinata"). Plaintiff filed his complaint (see [1-2]) on June 30, 2008 in the Circuit Court of Cook County. Defendants removed the action to this Court [1] pursuant to 28 U.S.C. § 1441.

All of the Defendants are insurance companies: AMCO Insurance Company ("AMCO"), Nationwide Property & Casualty Insurance Company ("Nationwide"), and Allied Insurance Company ("Allied"). Plaintiff states that Nationwide and Allied are both "affiliated" with AMCO and that both "provide[] claims adjustment services for claims brought by policyholders of AMCO." Compl. ¶¶ 5, 6. All three Defendants'names appear on the first page of the insurance policy that is at the heart of this case. See [1-2] at 25.*fn2

AMCO issued an insurance policy to Pinata and Plaintiff (Compl. ¶¶ 7-10), the details of which are laid out in the complaint (id. at 13-16), but which are not at issue for purposes of Defendants'motion to dismiss. There are two aspects of the policy that are worth noting, however. First, the policy covered not only property but also certain lost business income. Id. ¶ 15. Second, the policy covered Pinata' s Ryobi 685 XL S/N 1084 printing press with Aqueous/U.V. Coater System ("the Press"). See id. ¶ 17.

The Press was "state of the art" and during the four year period from 2001 to 2005, Pinata enjoyed a growth in its business income. Compl. ¶ 20. In 2005, however, the Press sustained a cracked frame as a result of an accident covered by the insurance policy. Plaintiff gave notice of the crack to AMCO, which in turn gave notice to Nationwide and Allied. One or more of the Defendants "retained adjusters, investigators and accountants to investigate the damage to the * * * Press and the loss of business income sustained as a result of the cracked frame property loss." Id. ¶¶ 21-23. One or more of the Defendants also gave notice of the cracked frame to Hartford Steam Boiler Inspection and Insurance Company ("Hartford"), whom Plaintiff alleges was AMCO' s reinsurer. Hartford in turn retained Louis Benbow to investigate and supervise the repair of the press. Id. ¶¶ 25-29. To summarize: Plaintiff alleges that AMCO issued the insurance policy; that AMCO is "affiliated" with Nationwide and Allied; that Hartford is the agent of one (or more) of the three; and that Benbow is the agent of Hartford (and the sub-agent of AMCO, Nationwide, and/or Allied). See also id. ¶¶ 29-30.

Plaintiff alleges that Benbow assumed control over the repairs of the Press (Compl. ¶ 33) but then refused to authorize necessary repairs, which would have amounted to about $250,000. Instead, Benbow purportedly approved only far-less-costly temporary repairs. Plaintiff contends that Pinata lost money as a result of the slowdowns that resulted from obtaining incomplete repairs, and that Benbow and Plaintiff engaged in a back-and-forth over having more costly repairs made. See id. ¶¶ 34-43. The claims related to the delay have since been settled by the parties (id. ¶ 69), although the parties dispute the applicability of that settlement to what happened next.

On or about July 22, 2006, there was a fire inside the press, which Plaintiff alleges was caused when paper "bec[a]me trapped in the drying/curing system of the machine during use and operation authorized by * * * Benbow." Compl. ¶ 44 (emphasis added). At that point, one or more of the Defendants authorized the costly permanent repairs for the cracked frame as well as repairs for the fire damage. Id. ¶¶ 51-52. However, Defendants' accountants and Pinata disagreed over Pinata' s loss of business claim related to the fire. Pinata ultimately contended that the fire caused lost business income of about $1.5 million. Id. ¶¶ 59, 65. Defendants' accountants ultimately placed the number at about $139,000. Id. ¶¶ 64, 71.

On April 26, 2007, Pinata dissolved; before doing so, the company assigned to Plaintiff any claims that it had against the Defendants. Id. at 74-75. Plaintiff's complaint comprises three counts: Count I -- Breach of Contract (against AMCO alone); Count II -- Negligence (against all Defendants); and Count III -- Vexatious and Unreasonable Delay (against all Defendants). Plaintiff seeks recovery only for losses associated with the fire, as the parties have already reached a settlement with regard to losses incurred from the cracked frame. Defendants'motion seeks dismissal of all counts against Nationwide and Allied, and seeks dismissal of Counts II and III in their entirety. The parties'

arguments anticipate that Illinois law applies to the agreement, a conclusion that is likely correct. See Lapham-Hickey Steel Corp. v. Protection Mut. Ins. Co., 655 N.E.2d 842, 844-45 (Ill. 1995) (outlining Illinois choice of law rules with respect to insurance policies).

II. Legal Standard on Motion to Dismiss

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint, not the merits of the case. See Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To survive a Rule 12(b)(6) motion to dismiss, the complaint first must comply with Rule 8(a) by providing "a short and plain statement of the claim showing that the pleader is entitled to relief" (Fed. R. Civ. P. 8(a)(2)), such that the defendant is given "fair notice of what the * * * claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the "speculative level," assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 127 S.Ct. at 1965, 1973 n. 14). "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts ...

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