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American Inter-Fidelity Corp. v. M.L. Sullivan Insurance Agency, Inc.

United States District Court, N.D. Illinois, Eastern Division

June 9, 2017

AMERICAN INTER-FIDELITY CORP., an Indiana Corporation, as Attorney in Fact for AMERICAN INTER-FIDELITY EXCHANGE, Plaintiff,
M.L. SULLIVAN INSURANCE AGENCY, INC. a/k/a Sullivan & Associates-Insurance and Risk Management and a/k/a Transportation Insurance Solutions, Inc.; SEBASTIAN MIKLOWICZ, individually and as agent of M.L. Sullivan Insurance Agency, Inc., and Transportation Insurance Solutions, Inc.; and TRANSPORTATION INSURANCE SOLUTIONS, INC., Defendants.


          REBECCA R. PALLMEYER United States District Judge.

         Plaintiff American Inter-Fidelity Exchange (“AIFE”) provides liability insurance for trucking and other interstate transportation enterprises (“carriers”). (Fourth Am. Compl. [110] ¶ 2.) Premiums for the insurance coverage are calculated on the basis of the number of vehicles operated by the insured carriers, and the number of miles driven. (See id. at ¶¶ 20- 28.) In this lawsuit, Plaintiff claims that Defendants, M.L. Sullivan Insurance Agency, Inc. (“Sullivan”); Transportation Insurance Solutions, Inc. (“TIS”); and their agent, Defendant Sebastian Miklowicz, who acted as agents of the insured carriers, have withheld premiums owed to AIFE for the coverage it provided. (Id. at ¶ 31.)

         In its most recent iteration, Plaintiff's complaint alleges that Defendants are in the business of “provid[ing] insurance and risk management services to various individuals and businesses, ” including at least some carriers insured by Plaintiff. (Id. at ¶¶ 3-4.) According to Plaintiff, Defendants collected premiums from the carriers they represented based on accurate mileage and vehicle numbers, but then under-reported those figures to Plaintiff. Defendants allegedly paid Plaintiff premiums based on these inaccurately low mileage and vehicle numbers, retaining for themselves the higher premium commensurate with the risk Plaintiff had underwritten. (Id. at ¶¶ 30-31.) The Fourth Amended Complaint asserts, against all Defendants, a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (Count I); a claim of breach of contract (Count II) and for an accounting (Count III) against Defendant Sullivan; and, against all Defendants, a claim of conversion (Count IV), breach of fiduciary duty (Count V), constructive trust (Count VI), unjust enrichment (Count VII), and negligent misrepresentation (Count VIII). Finally, Plaintiff alleges a claim of negligent supervision against Sullivan and TIS (Count IX); claims Miklowicz is liable for fraud (Count X); and seeks a constructive trust against Miklowicz individually (Count XI).

         Defendants have filed motions to dismiss several of the counts. As explained below, the motions are granted in part and denied in part.


         The court addressed some of the arguments raised here when it granted Defendants Sullivan and Miklowicz's motions to dismiss an earlier version of Plaintiff's complaint.[1] Am. Inter-Fid. Corp. v. M.L. Sullivan Ins. Agency, Inc., No. 15 C 4545, 2016 WL 3940092 (N.D. Ill. July 21, 2016). The court assumes familiarity with that earlier opinion and addresses the current motions only briefly.

         I. Count I: Illinois Consumer Fraud and Deceptive Business Practices Act

         Defendants argue that Plaintiff's Consumer Fraud claim fails because the scheme alleged by Plaintiff does not implicate consumer protection concerns. The court agrees. In its various pleadings, Plaintiff has described the alleged wrongdoing in different ways, but Plaintiff appeared to settle on a theory in its brief in response to earlier motions to dismiss. That brief, consistent with this Fourth Amended Complaint, described Defendants' alleged scheme as one in which insured carriers provided accurate information to Defendants; but Defendants, apparently acting as agents for the insured carriers or in some brokerage capacity, underreported the risk and underpaid Plaintiffs for the coverage it was contractually bound to provide. See Id. at *5. That is, Plaintiff is responsible for covering all losses that the insured carriers may suffer, but is not being paid the full cost of that coverage. As the court explained in its earlier opinion, “if [Sullivan's] conduct only caused Plaintiff (an insurer) to lose premiums it was owed while the consumer carriers were fully insured by coverage for which they paid the appropriate premium rate, it is difficult to see how [Sullivan's] alleged conduct ‘implicates consumer protection concerns.'” Id. (quoting Roppo v. Travelers Companies, 100 F.Supp.3d 636, 651 (N.D. Ill. 2015)).

         Plaintiff's response to this argument is unsatisfying. Plaintiff cites Downers Grove Volkswagen, Inc. v. Wigglesworth Imports, Inc., 190 Ill.App.3d 524, 534, 546 N.E.2d 33, 41 (2d Dist. 1989), where the court recognized that a business may pursue a Consumer Fraud Act claim to challenge trade practices that are “addressed to the market generally or otherwise implicate[] consumer protection concerns.” The circumstances in that case were quite different: the plaintiff in Downers Grove Volkswagen alleged that the defendant had made false statements about the plaintiff's pricing, potentially misleading consumers. Id. Plaintiff in this case alleges that Defendant made false statements to it, not to consumers. Plaintiff suggests that Defendants' conduct harmed the insured truck carriers “by jeopardizing their insurance coverage” (Pl.'s Resp. in Opp. to Def. Miklowicz's Mot. to Dismiss (“Resp. to Miklowicz's Mot.”) [136] at 2), but Plaintiff has not explained how this is. Plaintiff does not allege that it has terminated or will terminate any consumer's coverage for wrongdoing on the part of Defendants, or that any of the insured carriers will be denied coverage for covered losses. So long as the insured carriers enjoy full coverage for any losses, they have suffered no harm. It was Plaintiff, allegedly on the hook for insuring a greater risk than accurately reported, who has been injured. Plaintiff's allegations satisfy the court that Plaintiff was harmed, but do not establish a scheme that harms consumer interests.

         Count I is dismissed.

         II. Count II: Breach of Contract

         In response to Defendant Sullivan's motion to dismiss the breach of contract claim, Plaintiff has withdrawn this count. Count II is dismissed without prejudice.

         III. Count III: Accounting

         In Count III, Plaintiff seeks an accounting. To state such a claim, Plaintiff must allege that it lacks an adequate remedy at law and one of the following circumstances: “(1) a breach of a fiduciary relationship between the parties; (2) a need for discovery; (3) fraud; or (4) the existence of mutual accounts which are of a complex nature.” Cole-Haddon, Ltd. v. The Drew Philips Corps., 454 F.Supp.2d 772, 778 (N.D. Ill. 2006) (quoting Mann v. Kemper Fin. Cos., 247 Ill.App.3d 966, 980, 618 N.E.2d 317, 327 (1st Dist. 1992). In seeking dismissal of this count, Defendants argue, first, that Plaintiff has not alleged the absence of a remedy at law and, second, that an accounting is not necessary where the parties are engaged in ample ongoing discovery. Neither argument is persuasive to the court. First, equitable relief may well be appropriate in this context; indeed, Defendants have not moved to dismiss Plaintiff's claim for breach of fiduciary duty. It is not clear that there is ...

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