ASSOCIATED UND. OF AMERICA AGY. v. McCarthy

• Decision Date: 31 March 2005
• Docket Number: No. 1-03-0577.,1-03-0577.
• Parties: ASSOCIATED UNDERWRITERS OF AMERICA AGENCY, INC., Plaintiff-Appellant, v. Richard McCARTHY, Lloyd's of London Syndicate No. 51, a/k/a A.N. Taylor Syndicate, Defendants-Appellees (Moore Brown Barnes, Ltd., Defendant.)
• Court: United States Appellate Court of Illinois

826 N.E.2d 1160

356 Ill. App.3d 1010

292 Ill.Dec. 724

ASSOCIATED UNDERWRITERS OF AMERICA AGENCY, INC., Plaintiff-Appellant, v. Richard McCARTHY, Lloyd's of London Syndicate No. 51, a/k/a A.N. Taylor Syndicate, Defendants-Appellees (Moore Brown Barnes, Ltd., Defendant.)

No. 1-03-0577.

Appellate Court of Illinois, First District, Fourth Division.

March 31, 2005.

Novoselsky Law Offices, David A. Novoselsky, Kevin S. Besetzny, Chicago, for Plaintiff-Appellant.

Lord, Bissell & Brook LLP, Michael P. Comiskey, Hugh S. Balsam, Jennifer A. Gallagher, Chicago, for Defendants-Appellees.

Justice GREIMAN delivered the opinion of the court:

Plaintiff, Associated Underwriters of America Agency, appeals from the trial court's grant of summary judgment to defendants Richard McCarthy and Lloyd's of London (Lloyd's) Syndicate No. 51 and from the court's subsequent denial of plaintiff's motion to reconsider. For the reasons that follow, we affirm.

Plaintiff initially filed suit against McCarthy, Lloyd's, and Moore Brown Barnes, Ltd., alleging a violation of the Illinois Insurance Code (215 ILCS 5/1 et seq. (1994)) and retaliatory termination of contract. Defendants moved to dismiss, and plaintiff acquired new counsel and was granted leave to file an amended complaint.

The following facts were undisputed. In the early 1990s, a company called Republic Hogg Robinson of Florida (Republic) developed a market for the insurance of hotels and related properties by organizing a network of subproducers, contacts, leads, expirations, renewals and related information that came to be known as the National Hotel Program (the Program). Republic asked defendant McCarthy, then the lead underwriter for Lloyd's Syndicate No. 212, to underwrite and act as the insurance carrier for the Program. McCarthy agreed and the parties arranged for Lloyd's to have access to Program information for purposes of underwriting insurance policies and for Republic to receive commissions for the premiums it generated for the Program. Premiums were placed through Lloyd's London broker, Steel Burrill Jones.

In 1993, plaintiff, an Illinois insurance wholesaler, purchased several of Republic's assets, including the National Hotel Program and its appurtenant information. At that time, Elizabeth Rhodes was the authorized underwriter for the Program. As part of the purchase agreement, plaintiff employed Rhodes to administer the program and assumed the same terms and conditions with respect to the underwriting and operation of the National Hotel Program as had been in effect between Lloyd's and Republic. Also at that time, McCarthy was associated with Lloyd's Syndicate No. 51, which assumed the duties Syndicate No. 212 had performed under the Program between Republic and McCarthy. Plaintiff resumed acting as Lloyd's broker for the National Hotel Program.

In March 1994, Moore Brown Barnes acquired Steel's North American operations and assumed Steel's duties as Lloyd's London broker. Through Moore Brown Barnes, plaintiff became "tribunalized," meaning it was granted certain access to the London insurance market in addition to the properties it insured in the United States. In November 1994, Moore Brown Barnes issued a renewal cover note to plaintiff on behalf of Lloyd's effective for one year, beginning in August 1994. The cover note granted plaintiff binding authority to underwrite insurance on behalf of Syndicate No. 51 for United States hotel properties.

That same year, Rhodes met with Harvey Sheldon, vice president of Advanced Insurance Underwriters (Advanced), and inquired whether Advanced might be interested in participating in the National Hotel Program. Sheldon agreed to participate and was advised that the Program would be insured by Lloyd's, though he was not apprised of the particular syndicates, underwriters, or brokers associated with the Program. In February 1995, plaintiff and Advanced entered into a brokerage agreement providing that Advanced would retain independent ownership of the business produced during the companies' relationship as well as expirations, billing information, and sales data. The agreement was nonexclusive and terminable by either party at any time. The majority of the business Advanced placed with plaintiff were hotels located in Florida.

In summer 1994, McCarthy expressed concern over the profitability of the National Hotel Program and advised Rhodes that continued losses could affect its continuation. In January 1995, McCarthy directed plaintiff to cancel the insurance policy for Regency Windsor Management, a Program insured that had experienced a bad year financially, based on a measurable risk increase. Plaintiff refused to cancel the policy and instead found a substitute insurer for Regency. In March 1995, McCarthy, through Moore Brown Barnes, notified plaintiff that he had decided to cancel the Program because it had not been profitable for some time. Rhodes informed Sheldon, who at that time was seeking new insurers for many of his Florida apartment and condominium building customers.

Sheldon worked in the same building as John Nava, owner of the Florida Adjustment Bureau, which served as the third-party administrator of the National Hotel Program. Shortly after McCarthy terminated the Program, Nava informed Sheldon that Robert Brown of Moore Brown Barnes would be in Florida in the near future and suggested that the two meet. Sheldon met with Brown and discussed the possibility of Advanced serving as a Lloyd's cover holder through a program of insurance for condominiums and apartment buildings. In April 1995, Sheldon traveled to London to meet with several Lloyd's underwriters and was introduced to members of the Moore Brown Barnes staff as well as McCarthy. As a result of those meetings, Advanced began placing policies with McCarthy and Syndicate No. 51, mainly to insure apartments and condominiums. Advanced insured a few hotels in London through its affiliation with Lloyd's.

In its complaint, plaintiff alleged that Moore Brown Barnes and Lloyd's relationship with Sheldon and Advanced amounted to an effort to solicit plaintiff's subproducers and place insurance through the subproducers to plaintiff's exclusion, and that such business was executed using Program information. Plaintiff alleged that such solicitation was in accordance with a scheme by defendants to misappropriate and convert Program information in an effort to market insurance and place insurance business through plaintiff's confidential subproducers. Plaintiff contended that defendants' actions constituted a violation of the Illinois Trade Secrets Act (765 ILCS 1065/1 et seq. (West 1994)), a breach of its confidentiality and exclusivity agreement with Lloyd's, breach of contract, tortious interference with its prospective economic advantage, a violation of the Uniform Deceptive Trade Practices Act (815 ILCS 510/2 (West 1994)), and civil conspiracy. In relief, plaintiff sought a permanent injunction barring defendants from making false or misleading statements to plaintiff's customers and subproducers and compensatory damages.

Defendants McCarthy and Lloyd's Syndicate No. 51 moved for summary judgment, arguing that plaintiff could not identify any of its previous retail customers that were insured by Lloyd's after the National Hotel Program was terminated and could identify only one of its subproducers (Advanced) that had placed business with defendants after the Program's termination. In opposing the motion, plaintiff contended that a question of fact was created by the deposition testimony of Maurice Rutty, director of Citadel Insurance, a brokerage that specialized in obtaining business for Lloyd's. Rutty testified that one of the Moore Brown Barnes partners (it was unclear which one) asked him to arrange an introduction to Sheldon in late 1994 or early 1995. Rutty stated that he agreed to arrange such an introduction, but it was unclear whether and when any introduction took place, and Rutty could not recall whether Sheldon had ever met with anyone from Moore Brown Barnes. Rutty also testified that he had spoken with Sheldon, although it was unclear whether he had done so at Moore Brown Barnes' behest, and Sheldon indicated that he was interested in establishing an insurance program with Lloyd's without having to do so through a wholesaler. Sheldon had testified that he first met Robert Brown of Moore Brown Barnes shortly after the National Hotel Program was terminated, and McCarthy testified that George Moore had asked him to meet with Sheldon in April 1995.

After briefing and oral arguments, the trial court granted defendants' motion on all counts, finding that Sheldon entered into a relationship with Lloyd's of his own volition and that neither McCarthy nor Lloyd's initiated that relationship. The trial court found no indication that McCarthy had misappropriated any trade secrets or proprietary information nor any indication that McCarthy or Lloyd's committed any of the other misdeeds plaintiff alleged, stating that the program defendants conducted with Advanced was distinct from the program they conducted with plaintiff.

Plaintiff filed a motion to reconsider, contending that the trial court mistakenly concluded that Moore Brown Barnes, as a Lloyd's broker, acted as an agent of the insured, not Lloyd's, in dealing with plaintiff. Plaintiff also argued that the court mischaracterized the nature of the Program and that defendants conducted a similar program with Advanced to plaintiff's detriment. Lastly, plaintiff argued that the trial court incorrectly held that the testimony of Sheldon and Rutty was not inconsistent and did not create a triable issue of fact. The court denied plaintiff's motion, finding that Moore Brown Barnes acted as plaintiff's agent in having its insurance policies underwritten by defendants, that there was no exclusivity or confidentiality breached by Advanced's interaction with defendants, and that any discrepancies...