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Hartford Casualty Insurance Co. v. Moore

October 12, 2010

HARTFORD CASUALTY INSURANCE COMPANY, PLAINTIFF/COUNTER-DEFENDANT,
v.
FRED MOORE, AN INDIVIDUAL, HELEN OGAR, AN INDIVIDUAL, KEVIN JACOBS, AN INDIVIDUAL, BETTY POTASNAK, AN INDIVIDUAL, VICKI COOK MUHS, AN INDIVIDUAL, PK MANAGEMENT CO. INC., AN ILLINOIS CORPORATION, LAWRENCE MOORE & OGAR, SUCCESSOR IN INTEREST TO LAWRENCE MOORE OGAR & JACOBS, AND PAUL LAWRENCE, AS SPECIAL ADMINISTRATOR OF THE ESTATE OF WILLIAM LAWRENCE, DECEASED, DEFENDANTS/COUNTER-PLAINTIFFS, AND LAWRENCE MOORE & OGAR, SUCCESSOR IN INTEREST TO LAWRENCE MOORE OGAR & JACOBS, FRED MOORE, AN INDIVIDUAL, HELEN OGAR, AN INDIVIDUAL, KEVIN JACOBS, AN INDIVIDUAL, THIRD-PARTY PLAINTIFFS,
v.
TARA CONKLIN AND SNYDER & SNYDER AGENCY, INC., THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Joe Billy McDADE United States Senior District Judge

ORDER & OPINION

On August 10, 2010, this Court issued an Order and Opinion ("Order and Opinion of August 10, 2010") granting Hartford Casualty Insurance Company's ("Hartford's") Motion for Summary Judgment as to Count I of its Amended Complaint for Declaratory Judgment, and ordering the parties to show cause as to 1) why Defendant Lawrence, Moore, Ogar & Jacobs' ("LMOJ's"),*fn1 Counterclaim for reformation should not be dismissed as a matter of law, and 2) why, if the LMOJ Counterclaim was dismissed as a matter of law, the Third Party Complaints of LMOJ and Paul Lawrence, as Special Administrator of the Estate of William Lawrence, deceased, ("Lawrence") against Tara Conklin and Snyder & Snyder Agency, Inc. (referred to collectively as "Snyder parties"), as well the Snyder parties' Cross-Claim against Hartford, should not be dismissed for lack of jurisdiction pursuant to 28 U.S.C. § 1367(c)(3). (Doc. 82).

Now before the Court are Hartford's Response to the Order to Show Cause (Doc. 83), LMOJ's Motion for Reconsideration and Response to Order to Show Cause and Memorandum in Support (Docs. 85 and 86), LMOJ's Motion for Leave to File an Amended Counterlcaim (Doc. 87), Hartford's Response to LMOJ's Motion for Leave to File an Amended Counterclaim and Motion for Reconsideration (Doc. 90), and LMOJ's Motion for Leave to File Instanter a Reply to Hartford's Response (Doc. 92). Also before the Court are Hartford's previously pending Motion to Dismiss the Snyder parties' Cross-Claim pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 67), and the Snyder parties' Motion to Dismiss Lawrence's Third-Party Complaint (Doc. 73). For the following reasons, LMOJ's Motion to File a Reply is GRANTED and the Reply is DEEMED filed, LMOJ's Motion for Reconsideration is DENIED, LMOJ's Motion for Leave to File an Amended Counterclaim is DENIED, and LMOJ's Counterclaim against Hartford is DISMISSED. In addition, Hartford's Motion to Dismiss the Snyder parties' Cross-Claim is GRANTED and the Cross-Claim is DISMISSED. Finally, the Third Party Complaint of LMOJ and the Third Party Complaint of Lawrence are DISMISSED WITHOUT PREJUDICE for lack of jurisdiction pursuant 28 U.S.C. § 1367. Accordingly, the Snyder parties' Motion to Dismiss Lawrence's Third-Party Complaint is rendered MOOT.

BACKGROUND

I. Factual Background

From January 1, 2005 to November 1, 2008, LMOJ was a partnership of attorneys in Bloomington, Illinois. Hartford issued a liability insurance policy to LMOJ, effective December 21, 2007 to December 21, 2008, and retroactive to December 21, 2006 ("policy"). On March 17, 2008, Betty L. Potasnak, Vicki Cook Muhs, and PK Management Co., Inc. ("Potasnak plaintiffs") filed suit against LMOJ and its partners, Fred Moore, Helen Ogar, and Kevin Jacobs (LMOJ and its partners collectively referred to as the "LMOJ parties") in the Seventh Judicial Circuit of Sanagmon County, Illinois, alleging that they had failed to properly prosecute three appeals on behalf of the Potasnak plaintiffs. On April 11, 2008, the LMOJ parties tendered their defense in the Potasnak suit to Hartford, and, on May 15, 2008, Hartford denied defense and indemnity.

II. Procedural Background

Hartford filed its Complaint for Declaratory Judgment in this Court on December 1, 2008; it filed its Second Amended Complaint on February 12, 2010. (Docs. 1 & 55). Hartford sought a declaration that it had no duty to defend or indemnify the LMOJ parties in the Potasnak suit. In each of its Complaints, Hartford alleges that it has no duty to defend or indemnify the LMOJ parties (1) because the conduct of which the Potasnak plaintiffs complained occurred prior to the policy's retroactive date, (2) because the LMOJ parties knew or could have foreseen, as of the policy's effective date, that the conduct of which the Potasnak plaintiffs complained could result in the basis of a claim, and (3) because the LMOJ parties made misrepresentations in their application to Hartford by failing to disclose the facts out of which the Potasnak suit arose. (Doc. 55).

On July 16, 2009, the LMOJ parties filed a Counterclaim against Hartford, alleging that the policy, as issued, is the product of a mutual mistake of fact between the parties, and should be reformed. (Doc. 40). On January 20, 2010, this Court denied Hartford's Motion to Strike and Dismiss the LMOJ parties' Counterclaim against it. (Doc. 47). The Court found that the LMOJ parties' Counterclaim against Hartford was pled with sufficient particularity under Rule 9(b). (Doc. 47 at 15-19).

Prior to filing their Counterclaim against Hartford, on February 9, 2009, the LMOJ parties filed a Third-Party Complaint against the Snyder parties. (Doc. 8). The Third-Party Complaint alleges that the Snyder parties were negligent in obtaining insurance coverage for the LMOJ parties, and seeks damages in the amount of $980,000. The LMOJ parties assert that the Snyder parties, though informed by LMOJ that the policy needed to cover the period of time during which LMOJ was in existence and during which the partners were licensed to practice law, failed to ensure that the policy would cover those time periods and misrepresented the coverage of the policy to the LMOJ parties. On January 20, 2010, this Court denied the Snyder parties' Motion to Dismiss the LMOJ parties' Third-Party Complaint against them. (Doc. 47). The Court found that impleader of the Snyder parties by the LMOJ parties was proper because the Snyder parties' liability to the LMOJ parties is dependent on the outcome of Hartford's suit for declaratory judgment against the LMOJ parties, and would require examination of much of the same evidence; the fact that some of the LMOJ parties' claims were "contingent" upon the outcome of both the state-court malpractice action and Hartford's declaratory judgment claim was not a bar to the Third-Party Complaint. (Doc. 47 at 6-14).

On February 19, 2010, the Snyder parties filed their Answer to the Third-Party Complaint, which included a Cross-Claim against Hartford. (Doc. 57 at 14-20). The Snyder parties alleged that Hartford: (1) failed to properly train its underwriter and insurance producers, (2) failed to properly communicate the significance and application of the retroactive date to the LMOJ parties, (3) failed to make a proper inquiry with the LMOJ parties regarding the possibility of potential claims for legal malpractice preceding the effective date of the policy, (4) failed to follow its own guidelines with regard to determining potential claims for legal malpractice preceding the effective date of the policy, and (5) failed to make an adequate inquiry with regard to preceding the effective date of the policy when reviewing the policy for renewal. (Doc. 57 at 18-19). The Snyder parties further alleged that these actions resulted in the damages claimed by the LMOJ parties against the Snyder parties, and stated that they were entitled to contribution from Hartford pursuant to the Illinois Joint Tortfeasor Contribution Act if the Snyder parties were found liable to the LMOJ parties. (Doc. 57 at 19). Hartford has filed a Motion to Dismiss the Cross-Claim, which is now before the Court. (Doc. 67).

In addition, Hartford was granted leave to file its Second Amended Complaint on February 12, 2010 to add Paul Lawrence, as Special Administrator of the Estate of William Lawrence, deceased, who was a partner in LMOJ, as a Defendant. (Doc. 55). Thereafter, on March 12, 2010, Lawrence filed his own third-party complaint against the Snyder parties, making the same allegations that the other LMOJ parties had made in their Third-Party Complaint. (Doc. 70). The Snyder parties have filed a Motion to Dismiss Lawrence's Third-Party Complaint, which is now before the Court. (Doc. 73).

On August 10, 2010, the Court granted Hartford's Motion for Summary Judgment as to Count I of its Second Amended Complaint, finding that the policy issued by Hartford to LMOJ did not cover acts occurring before December 21, 2006, including those alleged by the Potasnak suit, that any mutual mistake of the parties in the terms of the policy was one of law, and that such a mistake of law was not subject to reformation. (Doc. 82). Accordingly, the Court directed the parties to show cause as to why the LMOJ Counterclaim for reformation against Hartford should not be dismissed as a matter of law and, in addition, why the remaining third party complaints and cross-claims should not be dismissed for lack of jurisdiction. (Doc. 82).

LMOJ'S MOTION FOR RECONSIDERATION

In addition to responding to this Court's order to show cause, LMOJ has moved this Court to reconsider its Order and Opinion of August 10, 2010 pursuant to Federal Rule of Civil Procedure 59(e).*fn2 (Doc. 85). A motion to reconsider under Rule 59(e) is not an opportunity for a losing party to reargue the merits of its case with arguments and theories that could have been made before the court rendered judgment. LB Credit Corp. v. Resolution Trust Corp., 49 F.3d 1263, 1267 (7th Cir. 1995). Rather, such motion is meant "to bring to the trial court's attention a manifest error of law or fact." Neal v. Newspaper Holdings, Inc., 349 F.3d 363, 368 (7th Cir. 2003). "A 'manifest error' is not demonstrated by the disappointment of the losing party." ...


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