American Environmental, Inc. v. 3-J Co.

• Decision Date: 11 December 1991
• Docket Number: No. 2-90-1334,2-90-1334
• Citation: 164 Ill.Dec. 733,583 N.E.2d 649,222 Ill.App.3d 242
• Parties: , 164 Ill.Dec. 733 AMERICAN ENVIRONMENTAL, INC., Plaintiff, v. 3-J COMPANY, Defendant and Third-Party Plaintiff-Appellant (Jeff Blackburn, Defendant; Insurance Brokers Service, Inc., Third-Party Defendant-Appellee).
• Court: United States Appellate Court of Illinois

Page 649

583 N.E.2d 649

222 Ill.App.3d 242, 164 Ill.Dec. 733

AMERICAN ENVIRONMENTAL, INC., Plaintiff, v. 3-J COMPANY, Defendant and Third-Party Plaintiff-Appellant

(Jeff Blackburn, Defendant; Insurance Brokers

Service, Inc., Third-Party Defendant-Appellee).

No. 2-90-1334.

Appellate Court of Illinois,

Second District.

Dec. 11, 1991.

O'Halloran, Kosoff & Miller, P.C., James E. O'Halloran, Jr., Kirk L. Miller, and Clifford G. Kossof, argued, Northbrook, for 3-J Co. and Jeff Blackburn.

Lord, Bissell & Brook, Sharon R. Patterson, argued, Nick J. Digiovanni, Hugh C. Griffin and Sandra K. Macauley, Chicago, for Ins. Brokers Service and American Environmental Const.

Jenner & Block, Raymond T. Reott, Chicago, for appellee.

Justice NICKELS delivered the opinion of the court:

This appeal is taken by 3-J Company (3-J) from the October 31, 1990, order of the circuit court of Du Page County which dismissed with prejudice 3-J's second amended third-party complaint (third-party complaint) for breach of contract and breach of fiduciary duty against Insurance Brokers Service, Inc. (IBS). The underlying action was brought by American Environmental Construction, Inc. (American), the successor in interest to E & E Hauling, Inc. (E & E), against 3-J and Jeff Blackburn for fraud and negligent misrepresentation and breach of certain duties. For clarity purposes all references to American are synonymous with E & E. Although 3-J sets forth three issues, these can be summarized in one issue on appeal: whether 3-J's third-party complaint against IBS states a cause of action.

Based on relevant allegations in American's complaint against 3-J and Jeff Blackburn, American, a demolition company, had umbrella or excess liability insurance with Great American Surplus Lines Insurance Company (GASLIC). The insurance had been placed through Assurance Agency, Ltd., a division of 3-J. Blackburn was an insurance broker employed by Assurance. Under GASLIC endorsement No. 8, American was required to notify GASLIC prior to the beginning of any demolition project involving a structure in excess of 4 stories or 40 feet in height, whichever was less. GASLIC could decline coverage for the project.

Late in August 1986, American entered into a contract with Continental Illinois National Bank and Trust Company (Continental) for the demolition of two buildings exceeding the GASLIC height restrictions. The contract required American to provide written verification to Continental of American's excess liability insurance in the amount of $15 million. American asked 3-J to secure coverage verification from GASLIC as soon as possible. American sent written notification to GASLIC about the project on August 25, 1986. On August 28, 1986, American received a copy of a report sent by 3-J to the reinsurers under the GASLIC policy. The report described the project. (The report indicates a copy went to IBS.)

3-J continued to assure American that approval of insurance coverage could be expected in a matter of days. American told 3-J on September 3, 1986, that Continental required coverage verification by September 5, 1986. 3-J sent a letter to Continental on September 3, 1986, informing it that insurance coverage should be available by September 5, 1986. 3-J told American on September 4, 1986, that 3-J would probably not be able to complete the paper work in time. On September 5, 1986, Continental contacted 3-J and learned that GASLIC was not insuring the project and that 3-J was unable to secure sufficient alternate insurance coverage.

Later on September 5, 1986, 3-J told American that it could provide only $8 million in excess liability insurance for an additional premium of $200,000 over and above the premiums on the GASLIC policy. American began searching for alternate insurance coverage on September 5, 1986. 3-J informed American on September 8, 1986, that it had secured only $3 million in alternate coverage rather than $8 million. On September 11, 1986, 3-J admitted it could not secure alternate coverage, and American began searching on its own. Another insurance broker notified American that a $14 million umbrella liability policy (American earlier offered to provide the first $1 million as self-insurer) could be obtained for a $40,000 premium. When American contacted Continental it had already secured another demolition company for the project.

American's count IV alleged 3-J owed it a duty of good faith and fair dealing. This duty was breached by 3-J's conduct by not obtaining requested coverage; not informing American of the inadequacy of coverage; not promptly notifying American of 3-J's inability to obtain coverage and trying to force American to purchase additional insurance at rates substantially above market price. Breach of this duty proximately caused American economic loss, and American sought $2,500,000 in damages.

3-J filed the instant third-party complaint after two previous ones had been dismissed. It alleged that it did not normally solicit insurance quotations from excess liability insurers and IBS held itself out as a broker who could procure this insurance. A course of dealing was described whereby 3-J engaged IBS as its broker on prior occasions to procure insurance coverage. 3-J alleged that IBS and 3-J knew and understood certain things when IBS acted as 3-J's broker. These were: IBS would use its best efforts to obtain insurance quotations; to bind coverage as requested by 3-J; notify 3-J promptly if it could not obtain coverage; transmit notices to insurers from 3-J or 3-J's customers; and, if requested by 3-J, obtain timely replacement coverage. It was alleged that no written contract existed between 3-J and IBS.

It was alleged that when 3-J procured umbrella insurance coverage for American in 1985, it engaged IBS to obtain quotations.. IBS transmitted a GASLIC quotation to 3-J, and 3-J transmitted it to American. When American accepted, 3-J transmitted the coverage request to IBS. IBS bound coverage with GASLIC and delivered the policy (for American) to 3-J. IBS was compensated. This procedure was followed for American's renewal of the GASLIC policy.

On August 20 or 21, 1986, 3-J telephoned IBS with information received from American about American's bid on the Continental project. 3-J informed IBS that the buildings exceeded the height restrictions in the policy and that work was beginning in 15 days. IBS requested more information about the project for GASLIC. 3-J contacted American for the information. 3-J forwarded the information to IBS on August 27, 1986. Two days later (August 29, 1986), IBS told 3-J that GASLIC might not provide coverage for the project or might only cover it for an increased premium charge. 3-J asked IBS if excess liability coverage for the project could otherwise be obtained for American. IBS stated that it did not know where such coverage could be obtained. 3-J alleged that upon information and belief, IBS did not thereafter attempt to obtain coverage from any other insurer except GASLIC.

In count I, 3-J alleged that a contract existed between 3-J and IBS based on these allegations. It was alleged IBS breached the contract. In count II 3-J alleged that IBS was its agent based on these allegations and that IBS owed certain duties to 3-J. IBS breached these duties according to 3-J. 3-J alleged in both counts that if it was determined that it breached any obligation owed to American such breach was caused by IBS' failure to procure insurance for American in a timely manner. 3-J asked that a judgment be entered against IBS to the extent IBS' breach caused 3-J to be liable to American in the event a judgment for American was entered against 3-J.

The trial court dismissed with prejudice the (second amended) third-party complaint pursuant to IBS' section 2-615 motion. (Ill.Rev.Stat.1989, ch. 110, par. 2-615.) 3-J filed a timely notice of appeal.

Before considering the appeal on the merits, we find it necessary to address a number of points. 3-J's issues and arguments are based in part on its assumption that the trial court dismissed its third-party complaint for failure to allege sufficient facts to establish an agency relationship. It also claims that the trial court found as a matter of law that IBS was not 3-J's agent. However, there are no specific findings in the section 2-615 dismissal order, and the order may be sustained on any basis found in the record regardless of what led the trial court to its conclusion. (Rome v. Commonwealth Edison Co. (1980), 81 Ill.App.3d 776, 36 Ill.Dec. 894, 401 N.E.2d 1032.) It is the judgment that is on appeal and not what else may have been said by the lower court. (Material Service Corp. v. Department of Revenue (1983), 98 Ill.2d 382, 75 Ill.Dec. 219, 457 N.E.2d 9.) Thus, the issue on appeal is whether the third-party complaint was properly dismissed for failure to state a cause of action.

3-J used the same allegations to allege a contract existed between it and IBS in count I and an agency relationship in count II. From its argument on appeal, 3-J apparently intended to allege a contract of agency in count I. 3-J centers its arguments on the alleged breach of fiduciary duties by IBS and has combined counts I and II for purposes of its arguments on appeal. Therefore, we consider only whether the third-party complaint stated a cause of action under either count based upon an alleged agency relationship or contract of agency between 3-J and IBS.

It is also noted that 3-J seeks recovery from IBS only to the extent that IBS' alleged actions relate to alternative insurance coverage for American for the Continental project. This position was taken by 3-J before the trial court and stated in its oral argument before this court. Furthermore, 3-J refers to all four counts of American's complaint against 3-J in its brief and argues that IBS is liable to 3-J as a subagent. In its response to IBS' motion to dismiss and at the hearing on the motion below, 3-J...