Nat. Union Fire Ins. v. Continental Illinois Corp.
| Decision Date | 12 January 1987 |
| Docket Number | No. 85 C 7080,85 C 7081.,85 C 7080 |
| Parties | NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff, v. CONTINENTAL ILLINOIS CORPORATION, et al., Defendants. HARBOR INSURANCE COMPANY and Allstate Insurance Company, Plaintiffs, v. CONTINENTAL ILLINOIS CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
James G. Hiering, Dennis C. Waldon, Jeffrey I. Berkowitz, A. Benjamin Goldgar, Keck, Mahin & Cate, Chicago, Ill., for plaintiff.
Roger W. Barrett, Franklin P. Auwarter, Michele Odorizzi, Mayer Brown & Platt, Gary L. Prior, Kevin T. Keating, McDermott, Will & Emery, Chicago, Ill., for defendants.
In the latest (though surely far from the last) chapter in this sprawling litigation,1 directors and officers ("D & O") insurers Harbor Insurance Company, Allstate Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa. (collectively "Insurers") seek to file a new counterclaim (sic) against a clutch of the numerous defendants Insurers have sued in these cases. Though the entire counterclaim is under attack in a briefing schedule still in process, one of its claims is so patently wanting in merit it is clearly ripe for dismissal now.
Insurers claim that they are entitled to indemnification from their insureds because of misrepresentations made to Insurers in the course of procurement of the D & O policies they then issued to Continental Illinois Corporation ("Continental"). In part that claim is sought to be advanced on a "negligent misrepresentation" theory. Promptly after receiving the new counterclaim, this Court asked Insurers to explain how such a negligent misrepresentation claim can be asserted in good conscience, given the narrow scope that well-established Illinois law (which controls here) gives to that cause of action.2
Insurers' counsel have responded in a totally untenable way, in which they seek to bend the clear Illinois precedents in this area out of shape. According to counsel, so long as any negligently-uttered misrepresentation provides someone else with information in the course of the speaker's or writer's business, that creates actionable negligent misrepresentation.
Any such theory would of course make negligent misrepresentation a virtually universal tort, instead of the narrowly restricted one the law has recognized.3 But more to the point here, it flies in the face of well-established and unvarying Illinois law. Among the cases this Court's December 11 memorandum order cited was Black, Jackson and Simmons Insurance Brokerage, Inc. v. IBM Corp., 109 Ill.App.3d 132, 64 Ill.Dec. 730, 440 N.E.2d 282 (1st Dist.1982), which cited with approval this Court's earlier opinion on the subject in National Can Corp. v. Whittaker Corp., 505 F.Supp. 147 (N.D.Ill.1981) and which left no doubt whatever on the nature and limited scope of the tort (109 Ill.App.3d at 135-36, 64 Ill.Dec. at 732, 440 N.E.2d at 284):
First, the defendant must supply the information in the course of his business and second, the information must be supplied for the guidance of others in their business transactions. While section 552 of the second Restatement of Torts says that liability arises when one "in the course of his business" supplies false information for the guidance of others, Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982) and Penrod v. Merrill Lynch, Pierce, Fenner & Smith, 68 Ill.App.3d 75, 24 Ill.Dec. 646, 385 N.E.2d 376 (3d Dist.1979) have construed that section to mean that the defendant must be in the business of supplying information.
And just within the past 60 days that same concept has been reaffirmed by the Illinois Supreme Court in Anderson Electric, Inc. v. Ledbetter Erection Corp., 115 Ill.2d 146, 153, 104 Ill.Dec. 689, 692, 503 N.E.2d 246, 249 (1986), not only by quoting Moorman but by citing the seminal decision in Rozny v. Marnul, 43 Ill.2d 54, 250 N.E.2d 656 (1969) — one of the very cases Insurers' attempted justification for the counterclaim seeks to distort to Insurers' own ends.
There is no way in which Continental (or its officials charged with the alleged misrepresentations) can conceivably be characterized as "in the business of supplying information for the guidance of others in their business transactions" (Anderson, 115 Ill.2d at 153, 104 Ill.Dec. at 692, 503 N.E.2d at 249 quoting Moorman). If the counterclaim is accepted as true, Continental (a bank holding company) made the alleged misrepresentations in the course of its business, but its business was not itself the supplying of information. That is fatal to Insurers' negligent misrepresentation claim, and their counsel had to know it.
This opinion comes hard on the heels of another (this Court's sixteenth in this litigation), which has just imposed Fed.R.Civ.P. ("Rule") 11 sanctions on Insurers for some of the other litigation tactics they have pursued in these actions. Now the current and totally baseless — in legal terms, frivolous — "negligent misrepresentation" claim has had to be dealt with. It is frankly appalling to find lawyers from a responsible firm making the kind of arguments, and dealing with such clear and unambiguous precedent, in the way evidenced by the aspect of the current counterclaim that has been dealt with in this opinion.4
To the extent Insurers' counterclaim purports to state a claim for negligent misrepresentation, it is dismissed. No opinion is expressed on the other aspects of the counterclaim, on which briefing remains in progress.
APPENDIX
MEMORANDUM ORDER
Dec. 11, 1986
This Court's November 13, 1986 memorandum opinion and order granted leave to Federal Deposit Insurance Corporation ("FDIC") to assert a counterclaim against plaintiffs Harbor Insurance Company, Allstate Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa. (collectively "Insurers"). As promised in their briefing on FDIC's motion for leave to file its counterclaim, Insurers have not only answered but advanced their own Counterclaim against Continental Illinois Corporation and Continental Illinois National Bank and Trust Company of Chicago (collectively "Continental") and a group of present or former Continental officer-directors (collectively the "Individual Defendants").
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