Sperling & Slater, P.C. v. Hartford Cas. Ins. Co.
| Decision Date | 05 September 2012 |
| Docket Number | 12 C 761 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | SPERLING & SLATER, P.C., Plaintiff, v. HARTFORD CASUALTY INSURANCE COMPANY, Defendants. |
MEMORANDUM OPINION AND ORDER
Plaintiff Sperling & Slater, P.C. (the "Firm"), filed suit against its insurer Hartford Casualty Insurance Company for declaratory judgment that Hartford wrongfully denied coverage to the Firm for loss incurred by one of the Firm's partners, Bruce Sperling, when a secretary forged his checks to steal $880,000 from his personal bank account. The Firm also brought claims for breach of contract and a violation of 215 ILCS 5/155, seeking compensatory damages, statutory damages and attorneys' fees. Hartford moves to dismiss for failure to state a claim, arguing that the insurance Policy does not cover loss of Sperling's personal funds due to a Firm employee's forgery of checks and unauthorized transfers. For the following reasons, the Court grants Hartford's Motion to Dismiss.
The Firm originally filed suit in the Circuit Court of Cook County Chancery Division on January 6, 2012. Hartford removed the case to this Court on February 3, 2012, pursuant to 28 U.S.C. § 1441. There is no dispute that diversity jurisdiction exists under 28 U.S.C. § 1332 and thatvenue is proper under 28 U.S.C. § 1441(a). There is no dispute that the contract is subject to Illinois law. The following facts are from the Firm's Complaint. In deciding the instant Motion, the Court assumes the veracity of the well-plead allegations in the Complaint and construes all reasonable inferences in the Firm's favor. See Killingsworth v. HSBC Bank, 507 F.3d 614, 618 (7th Cir. 2007).
Sperling is a principal of the Firm and maintains his office at the Firm's premises. The Firm employed a secretary named Crystal Sangiacomo for approximately four years and assigned her for the past two years to work directly with Sperling. Her responsibilities included administering Sperling's personal bank account with Fidelity Investments, which meant reviewing his bank statements, maintaining custody of his blank checks and preparing checks as authorized by Sperling. In December 2009, other Firm employees discovered that Sangiacomo had been taking Sperling's blank checks, fraudulently making them payable to herself and forging their endorsement with Sperling's signature stamp. Sangiacomo did this more than 20 times over the course of a year and a half to the tune of $880,000. On March 8, 2010, Sangiacomo pled guilty to federal bank fraud in violation of 18 U.S.C. § 1344. To date, the Firm and Sperling have mitigated the losses through various sources to recover approximately $360,000 minus the costs of recovery. In accordance with its obligations, the Firm reimbursed Sperling the remaining uncovered losses of approximately $525,000.
The Firm submitted a claim to Hartford in January 2010 for the loss due to Sangiacomo's acts under the Firm's Insurance Policy. The Policy provides coverage, in a policy endorsement called Super Stretch for Law Offices, for "direct physical loss of . . . personal property of others that is in your care, custody or control" under a blanket limit of $250,000. .1 The Policy also provides coverage, in an endorsement called Employee Dishonesty Coverage, for "any loss from employee dishonesty . . . in addition to any other Limit of Insurance" under a sub-limit of $55,000 that comprises $30,000 under the main Policy, and $25,000 under the Super Stretch. (P. A0004, A0106).
Hartford denied the claim in February 2010. The Firm filed suit and seeks a declaration that the claim is covered by both the Super Stretch for Law Offices endorsement, (Count I), and the Employee Dishonesty endorsement, (Count II), as well as any accompanying compensatory damages. The Firm alleges that Hartford's denial of the claim is a breach of the Policy, (Count III), and that the wrongful denial is vexatious in violation of 215 ILCS 5/155, (Count IV), for which the Firm seeks compensatory damages, statutory damages and attorneys' fees.
When considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all the well-pleaded facts alleged in the complaint and construes all reasonable inferences in favor of the non-moving party. See Killingsworth, 507 F.3d at 618 (citing Savory, 469 F.3d at 670); accord Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995). To properly state a valid claim, the complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "Detailed factual allegations" are not required, but the plaintiff must allege facts that, when "accepted as true ... 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To determine whether a complaint meets this standard the "reviewing court [must] draw on its judicial experience and common sense." Iqbal, 556 U.S. at 678. If the factual allegations arewell-plead, the Court assumes their veracity and then proceeds to determine whether they plausibly give rise to an entitlement to relief. See Id. at 679. A claim has facial plausibility when its factual content allows the Court to draw a reasonable inference that the defendant is liable for the misconduct alleged. See Id. at 678. In addition, when a plaintiff refers to documents in a complaint that are central to the claims alleged, those documents become part of the pleadings. See Fed. R. Civ. P. 10(c); McCready v. Ebay, Inc., 453 F.3d 882, 891 (7th Cir. 2006).
Hartford moves to dismiss the Firm's claim by arguing that the unambiguous language of the Policy does not provide coverage for the loss of Sperling's personal funds for several reasons. In addition, Hartford argues that it could not have denied the claim in bad faith under 215 ILCS 5/155 because there is no bad faith where there is no wrongful denial.
"[T]he construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law." Hurst-Rosche Engineers, Inc. v. Commercial Union Ins. Co., 51 F.3d 1336, 1342 (7th Cir. 1995). The court's objective when interpreting the terms of an insurance policy, which is a contractual agreement, is to determine the intent of the parties. See Wood v. Allstate Ins. Co., 21 F.3d 741, 743 (7th Cir., 1994); Dash Messenger Serv., Inc. v. Hartford Ins. Co., 582 N.E.2d 1257, 1260 (Ill. App. Ct. 1991), appeal denied, 587 N.E.2d 1013 (Ill. 1992). Under Illinois law, a court initially must look only at the relevant language of a policy, "as the language, given its plain and ordinary meaning, is the best indication of the parties' intent." Metro Federal Credit Union v. Federal Ins. Co., 607 F. Supp. 2d 870, 874 (N.D. Ill. 2009) (citing Gallagher v. Lenart, 874 N.E.2d 43, 58 (Ill. 2007)). To ascertain the meaning of the policy's words and the intentof the parties, the Court construes the policy as a whole with due regard to the risk undertaken, the subject matter that is insured, and the purposes of the entire contract. Ind. Ins. Co. v. Pana Cmty. Unit Sch. Dist. No. 8, 314 F.3d 895, 900-901 (7th Cir. 2002) (citing Illinois law). Illinois law requires that provisions of an insurance agreement be interpreted in the factual context of the case. Id. If the contract language is subject to only one reasonable interpretation, a court applies the terms as written. National Fidelity Life Ins. Co. v. Karaganis, 811 F.2d 357, 361 (7th Cir. 1987). "When an insurance contract is unambiguous, the court must not consider any evidence beyond the four corners of the policy for construing the contract." T.H.E. Insurance Co., 724 N.E.2d at 192. Moreover, when the contract is unambiguous, it should be enforced as written and the Court should not speculate on the purposes underlying the provision. Coley v. State Farm Mutual Automobile Insurance Co., 534 N.E.2d 220, 222 (Il.. 1989).
In addition, language of an insurance policy "is not considered ambiguous merely because a term is not defined within the policy or because parties can suggest creative possibilities for the term's meaning." Bd. of Educ. of Maine Twp. High Sch. Dist. No. 207 v. Int'l Ins. Co., 799 N.E.2d 817, 823 (Ill. 2003). If the language is susceptible to more than one meaning or is obscure in meaning through indefiniteness of expression, the language is ambiguous. See Allstate Ins. Co. v. Amato, 865 N.E.2d 516, 520 (Ill. App. Ct. 2007) (citing cases). Under Illinois law, ambiguous provisions or equivocal expressions whereby an insurer seeks to limit its liability are to be construed most strongly against the insurer and liberally in favor of the insured. See, e.g. Id. at 521; T.H.E. Insurance Co., 724 N.E.2d at 192. "[E]ven in doubtful cases, courts should be quick to construe the policy in favor of coverage so that the insured is not deprived of a benefit for which the insured paid." Dash Messenger Serv., Inc, 582 N.E.2d at 1260. It is the burden of the insurer toaffirmatively prove that an exclusion in an insurance policy applies. See Pekin Insurance Co. v. Miller, 854 N.E.2d 693, 697 (Ill. 2006). The liberal standard applicable to determinations of whether an insurer has a duty to defend is also applicable to determinations of whether an exclusion applies. Id.
The basic Policy contractually obligates Hartford to "pay for direct physical loss of or physical damage to Covered Property at the . . . scheduled premises . . . caused by or resulting from a Covered Cause of Loss." (P. A0014, Section A). The scheduled premises are undisputedly the Firm's office. The definition of Covered Property explicitly excludes money2 and bank notes "except as provided in any Additional Coverages or Option Coverages." (P. A0014, A.2.c.). As to...
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