McKenna Law Update & News – March 2015
In This Issue...
CAPTIVE INSURANCE AGENT DOES HAVE A DUTY OF ORDINARY CARE WHEN PROCURING INSURANCE COVERAGE
In Skaperdas v. Country Casualty Insurance Company et al, 2015 IL 117811, Steven Skaperdas was issued an auto insurance policy by Country Casualty through its agent, Tom Lessaris. Skaperdas’ fiancée, Valerie Day, was later involved in an accident while driving Skaperdas’ car. Country Casualty covered the loss, but required Skaperdas to change his policy to add Day as an additional driver. Skaperdas met with Lessaris and requested coverage for Day. Lessaris prepared the policy but only identified Skaperdas as the named insured. Day was not included as a named insured, but the declarations page of the policy identified the driver as female.
Subsequently, Day’s minor son, Jonathon Jackson, was struck by a car while riding his bicycle. The car only had $25,000 in coverage, which was insufficient to cover Jackson’s medical expenses. Day and Skaperdas filed a claim for underinsured motorists coverage under the Country Casualty policy. Country Casualty denied the claim on the ground that neither Day or Jackson was listed as a named insured.
Skaperdas and Day sued Lessaris for negligently failing to procure the insurance coverage requested by Skaperdas and for Lessaris’ breach of his duty to exercise ordinary care when procuring the requested coverage. The trial court granted Lessaris’ motion for summary judgment on the basis that he did not owe plaintiffs a duty of care in procuring the requested coverage.
On appeal the appellate court held that a plain reading of section 2-2201 together with the definition of “insurance producer” in section 500-10 of the Illinois insurance code, showed that “any person required to be licensed to sell, solicit, or negotiate insurance has a duty to exercise ordinary care in procuring insurance”. Therefore, the appellate court ruled that Lessaris owed the plaintiffs a duty of care in procuring insurance coverage. Lessaris appealed.
On appeal to the Illinois Supreme Court, Lessaris argued that section 2-2201 does not impose a duty of ordinary care on a “captive insurance agent” to procure a specific type or amount of coverage for a client and that a captive agent owes a duty to the company, not the insured. Lessaris distinguished himself from an insurance broker, which he argued is employed by an insured and therefore owes the insured a fiduciary duty. He argued section 2-2201 only applies to insurance brokers.
The Illinois Supreme Court framed the issue as whether an insurance company’s agent has a duty to exercise ordinary care and skill in procuring specific insurance coverage. The Court looked to the construction and legislative intent behind section 2-2201 which reads in part, “an insurance producer, registered firm and limited insurance representative shall exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured or proposed insured”. The Court examined if Lessaris, as an agent of Country Casualty, is an insurance producer within the meaning of section 2-2201. The Court noted that Black’s Law Dictionary includes the term “producer” in the definition of “insurance agent” and “insurance broker”.
Lessaris argued that Illinois common law defines “insurance producer” as an “insurance broker” and also argued that only insurance brokers owe their insured a fiduciary duty. He argued the language of the statute indicates the term “insurance producer” is limited to “insurance brokers”.
The Court reasoned the purpose of Section 2-2201 is not restricted to limiting the fiduciary liability of insurance producers. The terms in section 2-2201(a) may reasonably be applied to both captive agents and brokers. The Court stated that every person owes a duty of ordinary care to all others to guard against injuries which naturally flow as a reasonably probable and foreseeable consequence of an act and such a duty does not depend on a contract, privity of interest or proximity of the relationship, but extends to remote and unknown persons.
The Court defined the duty in section 2-2201(a) as a duty to exercise ordinary care that may be applied to any insurance salesperson regardless of whether a fiduciary or agency relationship exists. As section 2-2201 is ambiguous, the Court looked at the legislative intent behind it. Lessaris argued that the legislative history indicates it was not intended to apply to captive insurance agents, but he did not identify any specific statement in the legislative history to support his argument.
The Court cited to previous decisions which held that captive agents owe a duty to insureds such as where the agent’s acts induce detrimental reliance by the insured. The Court held that section 2-2201(a) only imposes a duty of ordinary care after a specific request is made and no duty exists based on a vague request to make sure the insured is covered. In this case, Skaperdas did make a specific request, to add Day to his auto policy. The Illinois Supreme Court affirmed the appellate court holding allowing the plaintiffs’ case to continue.
For further information contact Alex Sweis at 312.558.3994 or firstname.lastname@example.org
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SIX FLAGS HAS NO LIABILITY FOR DEATH OF WORKER KILLED WHILE DISMANTLING A WATERSLIDE
The Illinois First District Appellate Court upheld summary judgment for Six Flags in a wrongful death and survival action based on construction negligence and premises liability arising from the death of a worker who fell while dismantling the “Splash Water Falls” ride. The Court found the plaintiff failed to raise a genuine issue of material fact as to whether Six Flags was directly or vicariously liable based on contractual, supervisory or operational control over the project, and whether it had actual or constructive knowledge of the conditions that led to the fall. Lee v. Six Flags Theme Parks, Inc., 2014 IL App (1st) 130771.
In March, 2008, Six Flags was dismantling the "Splash Water Falls" ride using Campanella & Sons and Royal Crane as contractors. The decedent, Thomas, was employed by Campanella as a heavy equipment mechanic and was disconnecting and removing the structural steel. Thomas and coworkers disconnected a motor on a platform 43 feet above ground and moved it to the ground, resulting in a large opening in the platform which was not covered or barricaded. While working on the platform, Thomas fell to his death through the opening created by the motor’s removal.
The complaint alleged (1) construction negligence, alleging Six Flags retained sufficient control over the manner and method of the safety aspects of the project to incur liability for the negligence of Campanella and had actual knowledge the work would create the dangerous condition, yet failed to provide Thomas a safe place to work and (2) premises liability, alleging Six Flags knew of the dangerous conditions on its land but failed to exercise reasonable care to protect invitees.
A. No Construction Negligence
The issue on appeal was whether Six Flags owed a duty to the plaintiff. Generally, one who employs an independent contractor is not liable for the acts or omissions of the independent contractor, but they can be held liable for vicarious or direct liability in certain situations. Illinois follows Restatement Section 414 which provides an exception to the general rule, referred to as the "retained control" exception. It states in part that one who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care.
The Appellate Court addressed the three methods used by Illinois courts for determining control for purposes of vicarious liability: (1) contractual control, (2) supervisory control and (3) operational control and held that plaintiff failed to raise a genuine issue of fact regarding retained control based on any of those methods.
As to contractual control, the contract required Campanella to supervise and direct the work, Campanella was solely responsible for and had control over construction means, methods, techniques, sequences and procedures and for coordinating all portions of the work and generally was required to provide and pay for all labor, materials, equipment, and other facilities and services necessary for the proper execution and completion of the work. The Court found that these provisions were evidence that Six Flags did not retain contractual control over Campanella's performance of the work.
As to supervisory control, although the evidence established some involvement by Six Flags, the Court determined that plaintiff did not establish that Six Flags intervened for safety reasons, let alone the pervasive supervision of the work sufficient to raise a genuine issue regarding retained control.
As to operational control, the Court determined that Six Flags exercised no control over the operational details of the job and Campanella provided the only supervision given to its employees.
The Plaintiff also failed to show a genuine issue of material fact existed regarding Six Flags' alleged direct liability for the incident. An owner may have direct liability where they were the superintendent on the job, or if they knew or should have known the contractors have carelessly done their work and failed to exercise reasonable care either to remedy it or cause the contractor to remedy it. The Court held the record established Six Flags did not superintend the job and there was no evidence Six Flags' personnel knew or should have known Campanella planned to remove the gearbox separately instead of removing the entire platform and did not know of the conditions at the jobsite at the time of the injury.
B. No Premise Liability
Finally, with respect to premises liability, a possessor of land can be liable for physical harm caused to his invitees by a dangerous condition on the land if he knew or should have known that the condition involved a reasonable risk of harm. Here, the Appellate Court found that the record did not establish a genuine issue regarding Six Flags' actual or constructive knowledge of the conditions that resulted in the incident at issue. Accordingly, the circuit court did not err in entering summary judgment.
For further information, contact Kristin Tauras at 312.558.3923 or email@example.com.
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A BROAD EXCLUPATORY CLAUSE MAY NOT BE ENOUGH
In an opinion filed March 4, 2015, the Illinois First District Appellate Court looked at whether a release by a fitness club member barred recovery for personal injury. In Hawkins v. Capital Fitness, Inc, 2015 IL APP (1st) 133716. Michael Hawkins appealed a summary judgment ruling in favor of Capital Fitness after Capital argued successfully to the trial court that the exculpatory clause in its membership agreement barred Hawkins’ injury claim.
Hawkins bought a fitness club membership with X-Sport Fitness, owned and operated by Capital Fitness and signed an agreement with an exculpatory clause which provided that members acknowledge the risks of working out at the club and assume all risk of injury. Hawkins admitted he never read the agreement before signing it. While he was working out on a bench in front of a mirror hanging from the wall, another patron bumped into the mirror, dislodging it. As Hawkins tried to move out of the way, the mirror hit him in the head. Hawkins sued Capital Fitness for negligence and the trial court granted Capital’s motion for summary judgment on the basis that the exculpatory language in the membership agreement barred Hawkins’ claim for personal injury.
The Appellate Court first determined that nothing in the circumstances of Hawkins signing the agreement rendered the exculpatory clause unenforceable. Hawkins had a duty to read the membership agreement before signing it, he received a copy of it and there was no evidence that Capital made any false representations to get Hawkins to enter into the agreement.
The Court next looked at the scope of the exculpatory clause. Hawkins claimed his injury resulted from a possible danger beyond the ordinary risks associated with the use of a fitness club. The Court confirmed that a party may contract to avoid liability for its own negligence. However, the scope of the exculpatory clause depends on the foreseeability of a specific danger. In relying on Cox v. US Fitness, LLC, 2013 IL App (1st) 122442, the Court indicated that the relevant inquiry was not whether the particular plaintiff foresaw the defendant’s exact act of negligence but whether plaintiff knew or should have known the accident was a risk encompassed by his release.
Here, the Court stated that when the agreement was signed, Hawkins and Capital Fitness did not contemplate that Hawkins would be struck by a mirror. The Court stated that there was nothing in the record that showed Hawkins knew or should have known that this particular danger accompanied his working out at the facility.
The Court found that it was unable to conclude, as a matter of law, that the risk of a mirror falling on a patron ordinarily accompanies the use of a fitness facility. In finding that a broad release does not encompass all accidents without limit, a genuine issue of fact existed as to whether the exculpatory clause in the membership agreement included the potential injury due to a mirror falling off the wall. As such, the case was reversed and remanded.
For further information, contact Paul Steinhofer at 312.558.3985 or firstname.lastname@example.org.
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McKenna Storer has again been selected as a 2015 Top Ranked Law Firm in the United States. The firm will be included in FORTUNE® magazine’s 2015 listing of the top ranked law firms. McKenna Storer also received this honor in 2012, 2013 and 2014.
Kelly Purkey and Alexander Sweis will be presenting a section on Ethics of Social Media at the upcoming IDC Spring Symposium.
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