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Wausau Underwriters Insurance Company v. Pronto Staffing Services

December 2, 2011

WAUSAU UNDERWRITERS INSURANCE COMPANY, PLAINTIFF,
v.
PRONTO STAFFING SERVICES, INC. DEFENDANT. AND PRONTO STAFFING SERVICES, INC. COUNTER-PLAINTIFF,
v.
WAUSAU UNDERWRITERS INSURANCE COMPANY, COUNTER-DEFENDANT.



The opinion of the court was delivered by: Blanche M. Manning United States District Judge

MEMORANDUM AND ORDER

Defendant Pronto Staffing purchased workers' compensation insurance policies from plaintiff Wausau Underwriters Insurance Company. The policies at issue in this case had a retrospective premium endorsement that allowed Wausau to adjust the premium up or down based on Pronto's claim activity. Wausau adjusted the premiums up for three policies running from April of 2007 through April of 2010, and billed Pronto for $229,012.00. After Pronto refused to pay, Wausau filed suit. In response, Pronto filed affirmative defenses and a two-count counterclaim alleging that Wausau had breached the insurance contracts (Count I) and was liable for a breach of fiduciary duty based on its allegedly negligent adjustment of claims, which wrongfully caused Pronto's premiums to go up (Count II). Wausau's motion to dismiss the breach of fiduciary duty counterclaim and to strike the corresponding affirmative defense based on an alleged breach of fiduciary duty [#9] is before the court. For the reasons set forth below, Wausau's motion is granted in its entirety.

II. Background

The following facts are taken from Pronto's answer and counterclaim and are accepted as true for purposes of Wausau's motion to dismiss. Pronto supplies temporary workers to Chicagoland businesses and provides workers' compensation coverage for those workers. Pronto purchased three workers' compensation insurance policies covering April of 2007 through April of 2010. The premiums for these policies were not set at a predefined flat rate. Instead, the policies contained a retrospective premium endorsement that allowed Wausau to adjust the premium up or down at the end of the coverage period based on Pronto's claim activity.*fn1

Wausau billed Pronto for upward premium adjustments on the three policies totaling $229,012.00. After Pronto refused to pay, Wausau filed suit. Pronto contends that Wausau failed to properly investigate and adjust a claim (referred to by the parties as the "O claim" without explanation), causing its premiums to unfairly go up. According to Pronto, Wausau bungled the handling of the O claim by failing to secure necessary medical records before calculating the claim reimbursement for a worker who reported a slip and fall injury but had been hospitalized for a skin infection. Pronto also asserts that Wausau refused to turn over all of its claim files and thus prevented Pronto from determining if any of its other claims were mismanaged.

Along with its answer and affirmative defenses, Pronto filed a two-count counterclaim. Count I seeks damages for breach of contract and Count II alleges that Wausau breached a fiduciary duty by mishandling Pronto's claims. Wausau has filed a motion to dismiss Count II and strike Pronto's second affirmative defense.

II. Discussion

A. Count II -- Breach of Fiduciary Duty

1. Standard for a Motion to Dismiss

To survive a motion to dismiss, a complaint's request for relief must be "'plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009), quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007). A complaint meets this standard when the alleged facts "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "[N]aked assertions devoid of further factual enhancement" are insufficient. Id. at 1949 (internal quotation marks omitted). Thus, the Supreme Court recently clarified that determining if a complaint states a plausible claim is "a context-specific task that requires [the court] to draw on [its] judicial experience and common sense." Id. at 1950.

2. Motion to Dismiss Count II

In Count II, Pronto asserts that Wausau is liable for "professional negligence" because Wausau breached its fiduciary duties to Pronto by allegedly botching the handling of the O claim. Wausau seeks to dismiss this count, arguing that it fails as a matter of law because it is based on an alleged breach of fiduciary duty, but under Illinois law, no such extracontractual duty exists.

Alternatively, Wausau contends that the economic loss doctrine, also known as the Moorman doctrine, prevents Pronto from recovering in tort for purely economic losses. See Moorman Manufacturing ...


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