Sphere Drake Ins. v. All American Life Ins. Co.

• Decision Date: 22 September 2003
• Docket Number: No. 99 C 4573.,99 C 4573.
• Citation: 300 F.Supp.2d 606
• Parties: SPHERE DRAKE INSURANCE LIMITED, Plaintiff-Counterdefendant, v. ALL AMERICAN LIFE INSURANCE COMPANY, Defendant-Counterplaintiff.
• Court: U.S. District Court — Northern District of Illinois

300 F.Supp.2d 606

SPHERE DRAKE INSURANCE LIMITED, Plaintiff-Counterdefendant, v. ALL AMERICAN LIFE INSURANCE COMPANY, Defendant-Counterplaintiff.

No. 99 C 4573.

United States District Court, N.D. Illinois, Eastern Division.

September 22, 2003.

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James I. Rubin, Kevin Jason O'Brien, Renton Douglass Bond, Teresa Lynn Snider, Butler Rubin Saltarelli & Boyd LLP, Stanley Carlylle Sneeringer, Law Offices of Stanley Sneeringer, Chicago, IL, for plaintiff.

Laura Ann Derouin, Holland & Knight LLC, Tasha Jackson Brown, Peterson & Ross, LLC, George N. Vurdelja, Jr., John

M. Heaphy, Griswold L. Ware, Vurdelja & Heaphy, Chicago, IL, Andrew S. Amer, Kathleen L. Turland, Lanier Saperstein, Chet A. Kronenberg, Simpson Thacher & Bartlett LLP, Vincent J. Vitkowsky, Peter T. Maloney, Edwards & Angell, L.L.P., New York City, Eric L. Webb, Simpson Thacher & Bartlett, Los Angeles, CA, Donald Alan Murday, Chittenden, Murday & Novotny, LLC, Chicago, IL, for defendant.

MEMORANDUM OPINION AND ORDER

HART, District Judge.

I. BACKGROUND

The underlying dispute in this case concerns whether plaintiff-counterdefendant Sphere Drake Insurance Limited,¹ an English corporation, is liable to defendant-counterplaintiff All American Life Insurance Company,² an Illinois corporation, on a retrocession policy know as the "Unicare Retrocession."³ In its Amended Complaint, Sphere Drake seeks a declaration that the Unicare Retrocession is void because the Sphere Drake agent⁴ that issued the retrocession exceeded its authority in that EIU acted beyond the monetary limits of the Binding Authority and with the knowledge of a purported agent of All American (the "excess authority" claim). Sphere Drake also contends EIU violated its fiduciary duty with the knowledge of or in conspiracy with All American's purported agents⁵ (the "fiduciary duty" claim). Sphere Drake seeks a declaration that the Unicare retrocession was void ab initio; it does not seek any other relief. All American counterclaims for a declaration that the Unicare Retrocession is valid and enforceable and seeks compensatory damages for the amount due under the Unicare Retrocession. All American also contended that all claims were subject to arbitration and continues to seek arbitration of any arbitrable claims. It has previously been held that the excess authority claim is an issue for the court to decide, not the arbitrator. Sphere Drake Insurance Ltd. v. All American Insurance Co., 256 F.3d 587, 590-92 (7th Cir.2001) ("Sphere Drake II"). See also Sphere Drake Insurance Ltd. v. All American Life Insurance Co., 221 F.Supp.2d 874, 877-78 (N.D.Ill.2002) ("Sphere Drake IV"). If the excess authority claim is resolved in Sphere Drake's favor, the case is over and Sphere Drake is not liable on the Unicare Retrocession, but must return the premiums that were previously paid. If the excess authority claim is resolved against Sphere Drake, then the fiduciary duty claim must be considered, but that claim is to be resolved in arbitration, not by this court. Sphere Drake IV, 221 F.Supp.2d at 879-80.

Presently pending are the parties' cross motions for summary judgment on the excess authority claim and Sphere Drake's related motions to strike some of the evidence submitted by All American. Sphere Drake contends that undisputed evidence shows that, as of June 29, 1998 when EIU purported to accept the Unicare Retrocession on Sphere Drake's behalf, EIU lacked actual authority because it was not permitted to accept further policies on Sphere Drake's behalf because EIU had already exceeded the $12,000,000 premium limit applicable in 1998 under the Binding Authority EIU had to act on Sphere Drake's behalf. Sphere Drake contends that there could not be apparent authority for EIU's action because Stirling Cooke was actually aware the premium limit had been exceeded. Alternatively, Sphere Drake contends that Stirling Cooke was constructively aware the premium limit had been exceeded because it knew there was a limit and had a duty to inquire as to whether it had been exceeded. Sphere Drake also contends that WEB had a statutory obligation to be aware of EIU's authority to act on Sphere Drake's behalf. Further, Sphere Drake contends that All American cannot show that it detrimentally relied upon any apparent authority that may have existed. In another alternative argument, Sphere Drake contends that, if Stirling Cooke was not an agent of All American, Sphere Drake could not have entered into any contract with All American.

All American contends Sphere Drake cannot be entitled to summary judgment because disputed facts support that there was actual authority for EIU to act on Sphere Drake's behalf because the premium limit was actually $20,000,000 and the amount of premiums represented by policies was less than $20,000,000 and even less than $12,000,000.

As to its own summary judgment motion,⁶ All American contends undisputed facts support that there was apparent authority because Stirling Cooke's knowledge of the premium limit indicated the premium limit was subject to modification and Stirling Cooke was not required to inquire further as to whether the premium limit had been modified for 1998. All American also contends that Sterling Cooke did not have actual knowledge that the premiums for prior policies exceeded the existing premium limit nor was it required to inquire further. Additionally, All American contends Stirling Cooke was not its agent and therefore its knowledge cannot be imputed to WEB or All American. Alternatively, even if actual and apparent authority were both lacking, All American contends that Sphere Drake ratified the Unicare Retrocession, or waived objection thereto, by accepting premium payments and waiting until March 1999 before first attempting to rescind the contract.⁷

II. SUMMARY JUDGMENT STANDARD

On a motion for summary judgment, the entire record is considered with all reasonable inferences drawn in favor of the nonmovant and all factual disputes resolved in favor of the nonmovant. Turner v. J.V.D.B. & Associates, Inc., 330 F.3d 991, 994-95 (7th Cir.2003); Palmer v. Marion County, 327 F.3d 588, 592 (7th Cir.2003); Abrams v. Walker, 307 F.3d 650, 653-54 (7th Cir.2002). The burden of establishing a lack of any genuine issue of material fact rests on the movant. Outlaw v. Newkirk, 259 F.3d 833, 837 (7th Cir.2001); Wollin v. Gondert, 192 F.3d 616, 621-22 (7th Cir.1999). The nonmovant, however, must make a showing sufficient to establish any essential element for which it will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Binz v. Brandt Construction Co., 301 F.3d 529, 532 (7th Cir.2002); Traylor v. Brown, 295 F.3d 783, 790 (7th Cir.2002). The movant need not provide affidavits or deposition testimony showing the nonexistence of such essential elements. Celotex, 477 U.S. at 324, 106 S.Ct. 2548. Also, it is not sufficient to show evidence of purportedly disputed facts if those facts are not plausible in light of the entire record. See NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 236 (7th Cir.), cert. denied, 515 U.S. 1104, 115 S.Ct. 2249, 132 L.Ed.2d 257 (1995); Covalt v. Carey Canada, Inc., 950 F.2d 481, 485 (7th Cir.1991); Collins v. Associated Pathologists, Ltd., 844 F.2d 473, 476-77 (7th Cir.), cert. denied, 488 U.S. 852, 109 S.Ct. 137, 102 L.Ed.2d 110 (1988). As the Seventh Circuit has summarized:

The party moving for summary judgment carries the initial burden of production to identify "those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Logan v. Commercial Union Ins. Co., 96 F.3d 971, 978 (7th Cir.1996) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citation and internal quotation omitted)). The moving party may discharge this burden by "`showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 325, 106 S.Ct. 2548, 91 L.Ed.2d 265. Once the moving party satisfies this burden, the nonmovant must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). "The nonmovant must do more, however, than demonstrate some factual disagreement between the parties; the issue must be `material.'" Logan, 96 F.3d at 978. "Irrelevant or unnecessary facts do not preclude summary judgment even when they are in dispute." Id. (citation omitted). In determining whether the nonmovant has identified a "material" issue of fact for trial, we are guided by the applicable substantive law; "[o]nly disputes that could affect the outcome of the suit under governing law will properly preclude the entry of summary judgment." McGinn v. Burlington Northern R.R. Co., 102 F.3d 295, 298 (7th Cir.1996) (citation omitted). Furthermore, a factual dispute is "genuine" for summary judgment purposes only when there is "sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Hence, a "metaphysical doubt" regarding the existence of a genuine fact issue is not enough to stave off summary judgment, and "the nonmovant fails to demonstrate a genuine issue for trial `where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party....'" Logan, 96 F.3d at 978 (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

Outlaw, 259 F.3d at 837.

Along with its answer to All American's summary judgment motion, Sphere Drake filed a motion to strike. With its reply in support of its own summary judgment motion, Sphere...