DOD Technologies v. Mesierow Insurance Services, Inc.

381 Ill. App. 3d 1042
CourtAppellate Court of Illinois
DecidedFebruary 14, 2008
Docket1-06-3300 Rel
StatusPublished
Cited by32 cases

This text of 381 Ill. App. 3d 1042 (DOD Technologies v. Mesierow Insurance Services, Inc.) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
DOD Technologies v. Mesierow Insurance Services, Inc., 381 Ill. App. 3d 1042 (Ill. Ct. App. 2008).

Opinion

JUSTICE MURPHY

delivered the opinion of the court:

Plaintiff, DOD Technologies, brought a five-count putative class-action complaint against defendant, Mesirow Insurance Services, Inc., plaintiffs insurance broker, alleging that defendant received contingent commissions from insurers without informing plaintiff. The trial court granted defendant’s motion to dismiss pursuant to section 2 — 615 of the Code of Civil Procedure (Code) (735 ILCS 5/2 — 615 (West 2004)) on the basis that (1) section 2 — 2201 of the Code (735 ILCS 5/2 — 2201 (West 2004)) precludes claims for breach of fiduciary duty and (2) plaintiff failed to allege actual damages or reliance on the alleged concealment.

I. BACKGROUND

Plaintiffs second amended complaint alleges as follows. Defendant is a licensed Illinois insurance broker, or “insurance producer.” An insurance producer is “a person required to be licensed under the laws of this State to sell, solicit, or negotiate insurance.” 215 ILCS 5/500 — 10 (West 2004).

Plaintiff provided defendant with confidential and proprietary information with the expectation that defendant would seek the desired insurance at the lowest possible price. Standard industry practice is for consumers to make a single payment to the broker that includes both the insurer’s premium and the broker’s commission; the producer deducts the commission and forwards the premium to the insurer. Defendant also received “contingent commissions” from insurers, including Hartford Insurance Company, for its placement of insurance for plaintiff and other putative class members. The contingent commissions were based on three factors: (1) the aggregate amount of business referred to the insurer paying the kickbacks, (2) the “loss ratio” performance of the book of business referred to that insurer, and (3) renewals.

Defendant did not disclose its receipt of the contingent commissions to plaintiff. These undisclosed financial incentives caused defendant to refer business to a paying insurer even if the policy and rates quoted by that insurer were not the most advantageous for the customer. These kickbacks, which should have been returned to plaintiff like any other rebate, inflated the cost of insurance to consumers and created a conflict preventing brokers from acting in the customers’ best interest. Had plaintiff known about the contingent commissions, it would have been more diligent in its selection of insurance. Approximately 10% or more of defendant’s revenues as an insurance broker is derived from kickbacks.

Plaintiffs second amended complaint alleges breach of fiduciary duty, consumer fraud, fraudulent concealment, unjust enrichment, and accounting. Plaintiff based its breach of fiduciary duty count on section 500 — 80(e) of the Illinois Insurance Code (215 ILCS 5/500— 80(e) (West 2004)), which requires an insurance producer to disclose fees not directly attributable to premiums, and section 2 — 2201, which precludes breach of fiduciary duty actions against insurance producers but excepts claims based on the wrongful retention or misappropriation of premiums. In alleging that the statute of limitations should be tolled due to defendant’s fraudulent concealment and misrepresentation, plaintiff quoted a portion of defendant’s Web site, which provided:

“Our philosophy is to provide sound and unbiased advice with an emphasis on protecting your interests at all times. Rather than focusing on one area, we are adept at reviewing your entire situation, integrating personal and professional goals to identify and eliminate any areas of vulnerability. We are committed to being a resource for you.”

The trial court dismissed counts I, R/ and V (breach of fiduciary duty, unjust enrichment, and accounting) on the basis that section 2 — 2201 of the Code precludes claims for breach of fiduciary duty. Counts II and III (consumer fraud and fraudulent concealment) were dismissed because there was no proof of actual damages or reliance on the alleged concealment.

II. ANALYSIS

A. Motion to Dismiss

A motion to dismiss pursuant to section 2 — 615 attacks the legal sufficiency of the complaint. R&B Kapital Development, LLC v. North Shore Community Bank & Trust Co., 358 Ill. App. 3d 912, 920 (2005). A court reviewing an order granting a section 2 — 615 motion takes all well-pled facts as true. R&B, 358 Ill. App. 3d at 920. “On review of a section 2 — 615 dismissal, the reviewing court must determine whether the allegations of the complaint, when interpreted in [the] light most favorable to the plaintiff, sufficiently set forth a cause of action on which relief may be granted.” R&B, 358 Ill. App. 3d at 920. We review a dismissal pursuant to section 2 — 615 de novo. Collins v. Superior Air-Ground Ambulance Service, Inc., 338 Ill. App. 3d 812, 815 (2003).

Although plaintiff makes frequent references to the trial court’s abuse of discretion, a dismissal pursuant to section 2 — 615 is reviewed de novo. Collins, 338 Ill. App. 3d at 815.

1. Breach of fiduciary duty

Plaintiff argues that the trial court erred in dismissing its claims for breach of fiduciary duty, unjust enrichment, and accounting because it has alleged the existence of a fiduciary relationship between plaintiff and defendant. Defendant responds that section 2 — 2201 of the Code precludes claims for breach of fiduciary duty.

To state a claim for breach of fiduciary duty, a plaintiff must establish (1) a fiduciary duty on the part of the defendant, (2) the defendant’s breach of that duty, and (3) damages that were proximately caused by the defendant’s breach. Neade v. Portes, 193 Ill. 2d 433, 444 (2000). Historically, Illinois has recognized that the relationship between an insured and his broker, acting as the insured’s agent, is a fiduciary one. AYH Holdings, Inc. v. Avreco, Inc., 357 Ill. App. 3d 17, 32 (2005); Perelman v. Fisher, 298 Ill. App. 3d 1007, 1011 (1998).

In 1996, the General Assembly enacted Public Act 89 — 638 (Pub. Act 89 — 638, §5, eff. January 1, 1997), which added section 2 — 2201 of the Code. Section 2 — 2201 provides:

“(a) An insurance producer *** shall exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured or proposed insured.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Taylor v. Board of Education of the City of Chicago
2024 IL App (1st) 231373-U (Appellate Court of Illinois, 2024)
Gomberg Sharfman P.C. v. Kuznar
2023 IL App (1st) 221165-U (Appellate Court of Illinois, 2023)
Ash v. PSP Distribution, LLC
2023 IL App (1st) 220151 (Appellate Court of Illinois, 2023)
Agee v. The Kroger Co.
N.D. Illinois, 2023
Remprex, LLC v. Certain Underwriters at Lloyd's London, Syndicates 2623/623
2023 IL App (1st) 211097 (Appellate Court of Illinois, 2023)
Drury v. Liberty Principles PAC
2022 IL App (1st) 211313-U (Appellate Court of Illinois, 2022)
Clanton v. Oakbrook Healthcare Centre, Ltd.
2022 IL App (1st) 210984 (Appellate Court of Illinois, 2022)
Amalgamated Transit Union v. Barron
2021 IL App (1st) 200380-U (Appellate Court of Illinois, 2021)
Asian Human Services Family Health Center, Inc. v. Asian Human Services, Inc.
2020 IL App (1st) 191049 (Appellate Court of Illinois, 2021)
Kissee v. Gensini Excavating, Inc.
2020 IL App (3d) 190432-U (Appellate Court of Illinois, 2020)
County of Cook v. USI Insurance Services Corp. of Illinois, Inc.
2020 IL App (1st) 181889-U (Appellate Court of Illinois, 2020)
Joseph T. Ryerson & Son, Inc. v. Travelers Indemnity Co. of America
2020 IL App (1st) 182491-U (Appellate Court of Illinois, 2020)
U.S. Bank, National Ass'n v. Laskowski
2019 IL App (1st) 181627 (Appellate Court of Illinois, 2019)
Pape v. Braaten
N.D. Illinois, 2019
U.S. Bank v. Laskowski
2019 IL App (1st) 181627 (Appellate Court of Illinois, 2019)
Sophie Toulon v. Continental Casualty Company
877 F.3d 725 (Seventh Circuit, 2017)
American Family Mutual Insurance Co. v. Krop
2017 IL App (1st) 161071 (Appellate Court of Illinois, 2017)
American Family Mutual Insurance Company v. Krop
2017 IL App (1st) 161071 (Appellate Court of Illinois, 2017)
Barry v. St. Mary's Hospital Decatur
2016 IL App (4th) 150961 (Appellate Court of Illinois, 2016)
Cain v. Contarino
2014 IL App (2d) 130482 (Appellate Court of Illinois, 2014)

Cite This Page — Counsel Stack

Bluebook (online)
381 Ill. App. 3d 1042, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dod-technologies-v-mesierow-insurance-services-inc-illappct-2008.