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Guarantee Trust Life Ins. v. Insurers Administrative Corp.

September 24, 2010


Name of Assigned Judge Sitting Judge if Other or Magistrate Judge Amy J. St. Eve than Assigned Judge


Plaintiff's motion to dismiss [79] Count V of Defendant Munich Reinsurance America, Inc.'s counterclaim is granted. Count V of Defendant Munich's counterclaim is dismissed with prejudice.

O[ For further details see text below.] Notices mailed by Judicial staff.


Plaintiff, Guarantee Trust Life Insurance Company ("GTL"), has filed a motion ("Motion") to dismiss Defendant Munich Reinsurance America, Inc.'s ("Munich") counterclaim for breach of the duty of utmost good faith. For the following reasons, the Court grants the Motion with prejudice.


"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). Pursuant to Rule 8, a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). As the Seventh Circuit recently explained, this "[r]ule reflects a liberal notice pleading regime, which is intended to 'focus litigation on the merits of a claim' rather than on technicalities that might keep plaintiffs out of court." Brooks v. Ross,578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S.Ct. 992 (2002)). The short and plain statement must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99 (1957)); Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 764 (7th Cir. 2010).

Under the federal notice-pleading standard, a plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Put differently, a "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly,550 U.S. at 570); see also Cooney v. Rossiter, 583 F.3d 967, 971 (7th Cir. 2009) (amount of factual allegations required to state a plausible claim for relief depends on complexity of legal theory); Reger Dev., 592 F.3d at 763-64. "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197 (2007); London v. RBS Citizens, 600 F.3d 742, 745 (7th Cir. 2010) (court construes complaint in light most favorable to plaintiff, drawing all reasonable inferences in plaintiff's favor).


As reinsurer Munich alleges in its counterclaim, it entered into two reinsurance treaties with GTL, its reinsured. (See R. 61, Affirmative Defenses at ¶¶ 1-2.) Pursuant to those reinsurance treaties, GTL was responsible for issuing health insurance policies to individuals, properly processing the premiums collected, paying fees and commissions to the various brokers or managers involved in the reinsurance program, and paying the claims of any individuals. (See id. at ¶¶ 1-2, 8; R. 61, Counterclaim at ¶ 6.) If the premiums collected were more than the program expenditures, Munich was to receive 90% of the profits. (See R. 61, Affirmative Defenses at ¶¶ 4-6.) If the program expenditures were more than the premiums collected, Munich was to receive monthly reconciliations demonstrating the difference. (See id. at ¶ 17; R. 61, Counterclaim at ¶¶ 19-20.)

After Munich asserted that some program expenditures had been incorrectly calculated and applied, GTL conducted an audit of the issues that Munich raised. (See R. 61, Affirmative Defenses at ¶¶ 20, 28; R. 61, Counterclaim at ¶ 8.) GTL eventually informed Munich that it had incorrectly billed Munich for approximately $3.5 million in program deficits. (R. 61, Counterclaim at ¶ 9.) In 2009, as partial reconciliation of the $3.5 million that GTL owed Munich, Munich withheld payment of approximately $1.8 million from bills it had received. (Id. at ¶ 10.)

Count V of Munich's counterclaim, entitled "GTL's Breach of Duty of Utmost Good Faith," alleges that "GTL breached its duty of utmost good faith by failing to fulfill its contractual obligations to [Munich] in a proper and businesslike manner." (Id. at ¶ 38.) Specifically, Munich alleges that GTL failed to properly administer commissions and fees, co-mingled funds, untimely administered claims, failed to reconcile the reinsured businesses, failed to comply with state regulations, failed to timely reimburse and rectify overbillings, and prevented Munich from obtaining information needed to monitor GTL's compliance with its obligations. (Id. at ¶¶ 38(a)-(f), 39.)


GTL argues that Illinois law does not recognize a separate cause of action for breach of the duty of utmost good faith. (R. 79, Pl.'s Mot. at ΒΆ 3.) In response, Munich argues that Illinois does recognize the duty of utmost good faith in the reinsurance context, but Munich does not provide any authority recognizing an independent cause of action for a breach of that duty. Because Illinois law does not ...

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