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Certain Underwriters at Lloyd's, London v. Johnson & Bell, Ltd.

United States District Court, Seventh Circuit

December 10, 2013

CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, Plaintiffs,
v.
JOHNSON & BELL, LTD., GLENN F. FENCL, and RICHARD R. GORDON, Defendants.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge.

The plaintiff in this case, referred to in the caption as "Certain Underwriters at Lloyd's, London, " is a syndicate that underwrites and insures risk with Lloyd's London. In their papers, the parties refer to the syndicate by the name Canopius. Canopius sued Johnson & Bell, Ltd., an Illinois law firm, and two of its attorneys at the time of the allegations, Glenn F. Fencl and Richard R. Gordon, alleging two counts of legal malpractice. Defendants previously moved to dismiss plaintiff's complaint. The Court granted defendants' motion in part and denied it in part. See Certain Underwriters at Lloyd's, London v. Johnson & Bell, Ltd., No. 10 C 7151, 2011 WL 3757179 (N.D. Ill. Aug. 25, 2011).

Defendants have now moved for summary judgment on the remaining claims. The Court denies defendants' motion for the reasons stated below.

Background

A. Lewis and Zarndt lawsuits

Canopius subscribed to a liability insurance policy issued to Franklin Construction Company (Franklin) for a one-year period beginning on March 8, 2007. Phillip Koerner, apparently Franklin's owner, executed the application on behalf of Franklin. In April 2008, Canopius received notice that Paul Lewis had filed a personal injury suit against Koerner and Franklin Construction and Development, Inc. (Franklin C&D) in the Circuit Court of Cook County, Illinois. See Paul Lewis v. Phillip Koerner and Franklin Construction and Development, Inc., Case No. 07 L 012823. Lewis filed the case after falling through an unlatched doorway down a staircase in a building that Koerner owned.

In February 2009, plaintiff received notice that Christine Zarndt had filed a civil suit against Koerner and Franklin 1631 Milwaukee, LLC, also in the Circuit Court of Cook County, Illinois. See Christine L. Zarndt v. Phillip A. Koerner and Franklin 1631 Milwaukee, LLC., Case No. 08 CH 48174. Zarndt, who had agreed to purchase a condominium built by Koerner, accused him of defective construction that caused property damage.

B. Defendants' legal services as counsel for plaintiff

Canopius hired defendants to determine what its coverage responsibilities were in the Lewis and Zarndt suits and to prepare and file any necessary legal documents in connection with the cases. On July 10, 2008, defendants advised plaintiff to defend the Lewis case under a reservation of rights with regard to a policy exclusion for "prior completed work." Upon defendants' advice, plaintiff hired outside counsel to represent Koerner and Franklin C&D in the Lewis lawsuit.

On April 27, 2009, defendants reversed their earlier position and recommended that Canopius deny coverage for the Lewis case and file a declaratory judgment action seeking a judgment that it had no duty to defend. The next day, Canopius authorized defendants to file such a lawsuit, and they did so. See Certain Underwriters at Lloyd's, London, Subscribing to Certificate No. CRC000860 v. Franklin Construction and Development, Inc., an Illinois corporation, Phillip A. Koerner, Individually, and Paul Lewis, Individually, Case No. 09 CH 16235. Defendants named Franklin C&D as a defendant in the declaratory judgment suit but did not name Franklin.

As for the Zarndt case, Canopius's third-party claim administrator, an entity called CCMSI, determined that the insurance policy that Koerner had executed did not require Canopius to defend anyone. CCMSI then hired defendants to file a complaint seeking a declaratory judgment to this effect, which defendants filed in April 2009. See Certain Underwriters at Lloyd's, London, Subscribing to Certificate No. CRC000860 v. Phillip A. Koerner, Individually, Franklin 1631 Milwaukee, LLC. and Christine L. Zarndt, Individually, Case No. 09 CH16234. Defendants again did not name Franklin as a defendant.

Canopius later retained a different law firm, which added Franklin as a defendant in both the Zarndt and Lewis cases. This, Canopius alleges, caused it to incur additional legal fees and costs. Canopius ultimately obtained a declaratory judgment of non-coverage in both cases.

C. Plaintiff's complaint and defendants' motion to dismiss

In the present lawsuit, Canopius alleges that defendants were negligent in: 1) initially advising Canopius that it had a duty to defend in the Lewis case, 2) including inaccurate and detrimental factual allegations in the declaratory actions concerning both underlying cases, and 3) failing to include Franklin as a defendant in the declaratory judgment actions concerning both lawsuits. Canopius alleges ...


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