JSM Management Inc v. Brickstreet Mutual Insurance Company et al
Filing
141
OPINION: For the reasons stated in the Opinion, JSM's motion for summary judgment (d/e 130 ) is GRANTED IN PART, in that summary judgment is entered in favor of JSM on the Carriers' third and fourth affirmative defenses and on the Carriers ' second affirmative defense with respect to its claims arising out of the 20122013, 20132014, and 20142015 Policies, and DENIED IN PART. FCCI's summary judgment motion (d/e 133 ) is DENIED. See written Opinion. Entered by Judge Sue E. Myerscough on 12/21/2020. (SKN, ilcd)
2:18-cv-02154-SEM-EIL # 141
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E-FILED
Tuesday, 22 December, 2020 08:45:59 AM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
JSM MANAGEMENT, INC.,
An Illinois corporation,
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)
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Plaintiff/Counter-Defendant,
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)
v.
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BRICKSTREET MUTUAL
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INSURANCE COMPANY, a Mutual )
Company,
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)
Defendant/Counter-Plaintiff,
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and
)
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MONROE GUARANTY
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INSURANCE COMPANY, a member )
Of the FCCI INSURANCE GROUP, )
)
Defendant.
)
No. 18-cv-2154
OPINION
SUE E. MYERSCOUGH, U.S. District Judge.
This cause is before the Court on a motion for summary
judgment (d/e 130) on several of the Defendants’ common
affirmative defenses filed by Plaintiff JSM Management, Inc.
(“JSM”). Also before the Court is a cross-motion for summary
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judgment (d/e 133) filed by Defendants Monroe Guaranty
Insurance Company and FCCI Insurance Company (together,
“FCCI”). Because the Court finds that a genuine issue of material
fact exists with respect to the timeliness of several of JSM’s claims,
but that JSM is entitled to summary judgment with respect to the
Defendants’ exhaustion, waiver, laches, estoppel, and ratification
defenses, JSM’s motion (d/e 130) is GRANTED IN PART AND
DENIED IN PART, and FCCI’s cross-motion for summary judgment
is DENIED.
I. BACKGROUND
On May 1, 2018, JSM filed this lawsuit in Illinois state court
alleging breach of contract (Counts I and III) and violations of 215
ILCS 5/462b (Counts II and IV). See Complaint (d/e 1). A Count
V, which alleged negligence against a defendant who has been
dismissed pursuant to an agreement with JSM, was also present in
the initial Complaint but has since been dismissed. See Partial
Judgment (d/e 97).
JSM filed its summary judgment motion (d/e 130) on
December 23, 2019, requesting summary judgment with respect to
several of the affirmative defenses asserted by FCCI and
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BrickStreet Mutual Insurance Company (collectively, the
“Carriers”)—namely, the Carriers’ second affirmative defense,
which consists of the assertion that JSM filed suit after the end of
applicable statutory and/or contractual limitation periods; the
Carriers’ third affirmative defense, which consists of the assertion
that JSM’s claims are barred by the equitable doctrines of waiver,
estoppel, laches, and ratification; and the Carriers’ fourth
affirmative defense, which consists of the assertion that JSM’s
claims are barred due to JSM’s failure to exhaust its
administrative remedies. See JSM MSJ (d/e 30); FCCI Answer
(d/e 61), at 14. FCCI filed a Response (d/e 132) opposing JSM’s
motion on January 13, 2019 and filed a cross-motion for summary
judgment (d/e 133) seeking dismissal of Counts III and IV on the
basis of its exhaustion and limitation period affirmative defenses
on the same day. Also on January 13, 2019, Defendant
BrickStreet Mutual Insurance Company (BrickStreet) filed its own
Response (d/e 134) in opposition to JSM’s summary judgment
motion (d/e 130), which Response largely “adopts and
incorporates” the arguments advanced in FCCI’s Response
(d/e 132). BrickStreet has not moved for summary judgment with
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respect to Counts I and II, which allege breach of contract and
violation of 215 ILCS 5/462b, respectively.
II. FACTS
Plaintiff JSM is a property management company with its
headquarters in Champaign, Illinois. See Notice of Removal (d/e
1), at 2. Defendants FCCI and BrickStreet are insurance
companies based in Indiana and West Virginia, respectively. See
id. Between 2008 and 2010, JSM bought three workers’
compensation insurance policies from FCCI: the 2008–2009 Policy,
the 2009–2010 Policy, and the 2010-2011 Policy. See FCCI MSJ
(d/e 133), at 2. Between 2011 and 2014, JSM bought four
workers’ compensation insurance policies from BrickStreet: the
2011–2012 Policy, the 2012–2013 Policy, the 2013–2014 Policy,
and the 2014-2015 Policy. See BrickStreet Response (d/e 134), at
4–5; Second Amended Complaint (d/e 57), at 5. Each of these
policies provided that the amount paid by JSM in exchange for
coverage (the “final premium”) would be determined using
employee classifications promulgated by the National Council on
Compensation Insurance (“NCCI”). See FCCI MSJ (d/e 133), at
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7–8; Second Amended Complaint (d/e 57), at 5–6. In May, 2016,
JSM’s director of accounting Deanne Kuester was told by JSM’s
new insurance agent that JSM had been overcharged for workers’
compensation insurance because the Carriers had been applying
incorrect NCCI classification codes to certain JSM employees. See
BrickStreet Response (d/e 134), at 4. Prior to 2016, JSM was not
aware that its insurers had assigned incorrect classifications to
some of its employees. See FCCI Response (d/e 132), at 2.
JSM claims that FCCI and BrickStreet both treated
employees whose workers’ compensation insurance should have
been relatively inexpensive as if they were doing kinds of work that
result in relatively higher insurance premiums. See Second
Amended Complaint (d/e 57), at 3–4; JSM MSJ (d/e 130), at 3.
For example, JSM claims that the NCCI code that should have
been applied to the carpenters in its employ was 9015, which
applies to “property management company employees who perform
routine maintenance and repairs,” but that FCCI and BrickStreet
used alternative codes that are properly applied only to carpenters
engaged in the more dangerous work of constructing or framing
buildings. See Second Amended Complaint (d/e 57), at 3–4.
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III. JURISDICTION
This Court has subject matter jurisdiction pursuant to 28
U.S.C. § 1332(a) because complete diversity exists between the
parties. A corporation is a citizen of every state where it is
incorporated and where it has its principal place of business. 28
U.S.C. § 1332(c)(1). JSM is incorporated and has its principal
place of business in Illinois and is therefore a citizen of Illinois for
diversity purposes. See Notice of Removal (d/e 1), at 2. Monroe
Guaranty Insurance Company is incorporated and has its principal
place of business in Indiana, while BrickStreet is incorporated and
has its principal place of business in West Virginia. See id. FCCI
is incorporated and has its principal place of business in Florida.
Therefore, complete diversity exists.
The Court also finds that the amount in controversy exceeds
$75,000 exclusive of interest and costs based on the information
provided in the Notice of Removal. See Notice of Removal (d/e 1),
at 2. Therefore, the Court has jurisdiction.
IV. LEGAL STANDARD
Summary judgment is proper if the movant shows that no
genuine dispute exists as to any material fact and that the movant
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is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
The movant bears the initial responsibility of informing the court of
the basis for the motion and identifying the evidence the movant
believes demonstrates the absence of a genuine issue of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A
genuine dispute of material fact exists if a reasonable trier of fact
could find in favor of the nonmoving party. Carrol. v. Lynch, 698
F.3d 561, 564 (7th Cir. 2012). When ruling on a motion for
summary judgment, the court must consider the facts in the light
most favorable to the nonmoving party, drawing all reasonable
inferences in the nonmoving party’s favor. Egan Marine Corp. v.
Great Am. Ins. Co. of New York, 665 F.3d 800, 811 (7th Cir. 2011).
V. ANALYSIS
A.
The Carriers’ Limitation Period Arguments Fail, but a
Factual Dispute Exists that Prevents Summary Judgment
on JSM’s Pre-2013 Statutory Claims
The Carriers’ second affirmative defense concerns the
statutory and/or contractual limitation periods applicable to JSM’s
claims. One of JSM’s remaining claims—for damages resulting
from alleged violations of 215 ILCS 5/462b by Brickstreet with
respect to the 2014–2015 Policy—is concededly timely. See
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Brickstreet Response (d/e 134), at 7. The Carriers assert that all
of JSM’s other remaining claims—for breaches of contract and
violations of 215 ILCS 5/462b arising from misclassifications of
JSM employees by the Carriers between 2008 and 2013—are
untimely. The Carriers advance three arguments in support of this
assertion: that the five-year statute of limitations provided by 735
ILCS 5/13–205 should apply to JSM’s breach of contract claims as
well as its statutory claims; that the limitation period imposed by
735 ILCS 5/13–205 began to run when the allegedly incorrect
classification codes were applied to calculate the final premium on
each Policy; and that the parties contractually agreed to a
shortened three-year limitation period, which replaces the fiveand/or ten-year statutory periods. 1 The Court holds that the
parties have not agreed to a shortened contractual limitation
period, and that the statutory limitation period applicable to JSM’s
breach of contract claims is ten years. However, because the
factual question of when JSM “should have known” of its injury for
discovery rule purposes has not yet been resolved, the Court also
FCCI relies first on its discovery rule argument and offers its contractual argument “in the
alternative,” while BrickStreet relies primarily on the contractual argument. See FCCI
Response (d/e 32), at 6; BrickStreet Response (d/e 134), at 6–7.
1
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holds that a genuine dispute of material fact exists concerning the
date on which JSM’s claims accrued. Both JSM’s and FCCI’s
requests for summary judgment on the issue of the Carriers’
second affirmative defense are denied.
(1) The Parties Have Not Agreed to a Contractual
Limitation Period for Filing Suit
The Carriers argue that the “Audit” section of the Policies
constitutes an enforceable agreement to a “shortened contractual
limitation period” that replaces the otherwise-applicable statutory
limitation period with a period of three years. See FCCI Response
(d/e 132), at 6 (quoting Country Preferred Ins. Co. v. Whitehead,
979 N.E.2d 35 (2012).
In Illinois, parties to a contract may “agree to a shortened
contractual limitation period to replace a statute of limitations,”
but “[i]n the absence of specific and clear provisions limiting the
period within which suits must be filed, the 10-year statute of
limitations for actions on written contracts is applicable to actions
by insureds against their insurers based on insurance policies.”
Country Preferred, 979 N.E.2d at 43. Here, the contractual term
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on which the Carriers rely—the “Audit” section—is present in each
of the Policies at issue and provides as follows:
You will let us examine and audit all your
records that relate to this policy. These records
include ledgers, journals, registers, vouchers,
contracts, tax reports, payroll and
disbursement records, and programs for
storing and retrieving data. We may conduct
the audits during regular business hours
during the policy period and within three years
after the policy period ends. Information
developed by audit will be used to determine
final premium.
Brickstreet Policy (d/e 134 exh. 1), at 2.
The plain language of this provision appears to govern the
time period during which an insurer can “conduct . . . audits,”
rather than the limitation period for filing a lawsuit based on the
policy. See LM Ins. Corp. v. All-Ply Roofing Co., No. CV 14-4723,
2019 WL 366554, at *6 (D.N.J. Jan. 30, 2019) (observing that
identical policy language “address[ed] only the time during which
Plaintiffs have audit rights,” rather than “limit[ing] Plaintiffs’
ability to bring suit”). However, the Carriers cite a 2011 case from
the District of Connecticut, where the court held that an identical
“Audit” section contained “express contract language [that limited]
plaintiff’s time to seek a claim” to three years. Resinall Corp. v.
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Employers Ins. Co. of Wausau, No. 3-09-CV-1326 WWE, 2011 WL
873308, at *4 (D. Conn. Feb. 18, 2011); see FCCI Response (d/e
132), at 6–7; Brickstreet Response (d/e 134), at 6.
But the he Carriers’ reliance on Resinall is misplaced. While
the contractual provision discussed in Resinall is identical to the
“Audit” section at issue in this case, the Connecticut state law
governing contractual limitation periods differs from the Illinois
law that applies here. The court in Resinall refers to the “right[]”
conferred on insurers by Connecticut state law to “provide express
contract language limiting plaintiff's time to seek a claim.”
Resinall Corp., 2011 WL 873308, at *4; see Voris v. Middlesex
Mut. Assur. Co., 297 Conn. 589, 604–06 (2010) (explaining that
Connecticut statute of limitations merely “establishes a default
rule,” and discussing historical development of Connecticut
common law governing limitation periods in insurance contracts).
Illinois, by contrast, requires “specific and clear provisions
limiting the period within which suits must be filed” in order to
abridge the limitation period applicable to actions on written
contracts. Country Preferred, 979 N.E.2d at 43. This standard is
less conducive to the creation of contractual limitation periods
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than the standard applied by the court in Resinall. In the absence
of any specific and clear agreement to the contrary, the applicable
limitation periods for JSM’s claims are the periods imposed by
Illinois statutes.
(2) JSM’s Breach of Contract Claims are Timely
According to JSM, the applicable limitation period for its
breach of contract claims, Counts I and III, is set at ten years by
735 ILCS 5/13–206, while the general five-year Illinois statute of
limitations set forth in 735 ILCS 5/13–205 applies to the statutory
claims in Counts II and IV. See Combined Reply (d/e 138), at 6–7.
The Carriers argue that the general five-year statute of limitations
should apply to all of JSM’s claims.
Section III.A of FCCI’s Response brief (d/e 132) interweaves
two unrelated legal arguments. FCCI’s first argument is that
JSM’s breach of contract claims are “redundant” because they are
based on the same allegedly wrongful acts that give rise to JSM’s
statutory claims, that JSM’s inclusion of the breach of contract
claims is an attempt to circumvent the five-year statute of
limitations by “artful pleading,” and that the statutory and breach
of contract claims should therefore be “considered one and the
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same and subject to the same statute of limitations.” FCCI
Response (d/e 132), at 4. FCCI’s second argument is that the
existing common law dealing with misclassification of employees
has been “supplanted” by 215 ILCS 5/462b, and that in light of
this JSM’s breach of contract claims themselves have somehow
been “supplanted.” See id. at 5. In the Reply (d/e 138) filed by
FCCI in support of its summary judgment cross-motion, FCCI
offers a “clarification” of its timeliness argument that includes the
first argument but not the second, but since BrickStreet
incorporated the supplantation argument into its response along
with FCCI’s other arguments and has not retracted it, see
BrickStreet Response (d/e 134), at 6–7, the Court addresses it as
well as the “artful pleading” argument.
(a)
JSM’s Breach of Contract Claims Are Not
“Supplanted” by Existence of Relevant Statute
The “supplantation” doctrine referenced by the Carriers
applies when there is “general and comprehensive legislation”
enacted for the purpose of changing the common law, as opposed
to “simple, straightforward codification” of the common law. In re
C.B.L., 309 Ill. App. 3d 888, 890 (1999). 215 ILCS 5/462b is, by
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its terms, “intended to codify existing law and practice”—in other
words, it is a straightforward codification of existing common and
statutory law, precisely the sort of change that cannot supplant
the common law. FCCI nevertheless asserts that accepted canons
of statutory interpretation require the final sentence of § 462b
(“This Section is intended to codify existing law and practice”) to
have some substantive effect on existing law and practice. See
FCCI Response (d/e 132), at 5. However, a statutory provision
that clarifies and condenses an existing legal framework without
changing its substance is not surplusage. Nor is a clause stating
the purpose of a statute or statutory provision superfluous. See,
e.g., Tennessee Valley Auth. v. Hill, 437 U.S. 153, 180 (1978).
Furthermore, even if “codify” were read to mean “change,” FCCI
offers no explanation of why any change to the existing substantive
law of NCCI classification must necessarily result in the dismissal
of JSM’s breach of contract claims.
(b) 735 ILCS 5/13–206’s Ten-Year Limitation Period
Applies to JSM’s Breach of Contract Claims
Under Illinois law, “[t]he determination of the applicable
statute of limitations is determined by the type of injury at issue,
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irrespective of the pleader’s designation of the nature of the
action.” Armstrong v. Guigler, 174 Ill. 2d 281, 286, 673 N.E.2d
290, 293 (1996). Therefore, if JSM’s breach of contract claims
were based on some theory of liability other than breach of
contract, and were merely labeled as breach of contract claims in
order to gain the benefit of a longer limitation period, the breach of
contract claims would not be “actions on a written contract”
subject to the ten-year limitation period provided by 735 ILCS
5/13–206. See id. at 290–91.
Here, JSM’s breach of contract claims do in fact seek
damages for the alleged breach of a written contract. See id. at
291 (“[W]here liability emanates from a breach of a contractual
obligation . . . the action may be fairly characterized as an action
on a written contract. . . . As long as the gravamen of the
complaint rests on the nonperformance of a contractual obligation,
section 13–206 applies.”) (internal quotation marks omitted);
Complaint (d/e 57), at ¶¶ 34–38, 45–49.
The Carriers argue that the breach of contract claims are
“duplicative” of JSM’s statutory claims and “redundant,” and that,
by asserting them, JSM is attempting to avoid liability by the
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“artful pleading” that Armstrong v. Guigler warns against. True,
JSM’s claims are redundant in that they arise from the same
allegedly wrongful acts—the misclassifications of certain
employees. To the extent that JSM seeks to recover damages for a
given misclassification on the basis that the misclassification
constituted a breach of contract and also seeks to recover damages
because the same misclassification constituted a statutory
violation, such a double recovery is not permitted. See Thornton v.
Garcini, 237 Ill. 2d 100, 111, 928 N.E.2d 804, 811 (2010). It does
not follow that JSM is forbidden from pleading in the alternative.
See Fed. R. Civ. P. 8(a)(3); Guinn v. Hoskins Chevrolet, 361 Ill.
App. 3d 575, 604, 836 N.E.2d 681, 704 (2005); Cromeens,
Holloman, Sibert, Inc v. AB Volvo, 349 F.3d 376, 397 (7th Cir.
2003).
Because the theory of liability underlying JSM’s breach of
contract claims involves the breach of a written contract, the
applicable statute of limitations is ten years. 735 ILCS 5/13–206.
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(3)
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The Timeliness of Some of JSM’s Claims Depends on
the Application of the Discovery Rule, Which
Depends on a Disputed Issue of Material Fact.
The parties agree that, if no contractual limitation period
exists, the statute of limitations applicable to JSM’s statutory
claims is the five-year “catch-all” period provided by 735 ILCS
5/13–205. See FCCI Response (d/e 132), at 9; JSM Motion (d/e
130), at 6. JSM filed its initial Complaint in Illinois state court on
May 2, 2018. Thus, any statutory claims that accrued on or after
May 2, 2013 are timely, while any statutory claims for which the
limitation period began to run before May 2, 2013 are untimely.
JSM contends that its statutory claims accrued on the date
when JSM discovered the alleged NCCI misclassifications—
sometime in the Spring of 2016—because of the operation of the
“discovery rule.” The Carriers disagree, and FCCI argues that
JSM’s claims actually accrued on the dates when the allegedly
incorrect NCCI classification codes were used to calculate final
premiums for the Policies giving rise to each cause of action. See
FCCI MSJ (d/e 133), at 11. Under FCCI’s theory, JSM’s only timely
statutory claims are those arising from misclassifications relating
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to the 2012–2013, 2013–2014, and 2014–2015 BrickStreet
policies.
The timeliness of the other four statutory claims depends on
the applicability of the discovery rule, an Illinois common law
doctrine that delays the running of the limitation period until a
claimant “knew or reasonably should have known of the injury and
that the injury was wrongfully caused.” Am. Family Mut. Ins. Co.
v. Krop, 2018 IL 122556, ¶ 21, 120 N.E.3d 982, 988, reh'g denied
(Nov. 26, 2018). Here, undisputedly, JSM first discovered the
alleged misclassifications at some point in the Spring of 2016, and
no later than May 18, 2016. Neither of the Carriers has argued
that JSM should have discovered the alleged misclassifications
earlier.
The Carriers 2 contend that the discovery rule cannot apply
because the “lone legal doctrine” available to extend the limitation
period “[w]hen a putative plaintiff already knows it has been
injured” is that of “equitable tolling.” FCCI additionally argues that
2 BrickStreet’s Response to JSM’s summary judgment motion incorporates the “legal
arguments . . . contained in FCCI’s Response to JSM’s Motion pertaining to the Common
Affirmative Defenses shared by BrickStreet and FCCI, including . . . Limitations Periods . . . .”
BrickStreet Response (d/e 134), at 7–8 (internal quotation marks omitted). The Court
therefore attributes the tolling argument contained in FCCI’s Response to BrickStreet as well
as to FCCI.
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the discovery rule cannot apply in cases where the injury is
discovered “after the claim arose, but before the applicable statute
of limitations has run.”
However, the case relied on in FCCI’s briefs— Cada v. Baxter
Healthcare Corp., 920 F.2d 446, 449 (7th Cir. 1990)—concerns a
federal question and applies federal common law doctrines. Here,
the Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332,
and therefore must apply the substantive law of Illinois. See
F.D.I.C. v. Wabick, 335 F.3d 620, 624 (7th Cir. 2003). Insofar as
the federal discovery rule is similar enough to the Illinois discovery
rule that the same principles apply here, Cada still does not
support the Carriers’ theory. The Carriers confuse the discovery
rule—which delays the accrual of a Plaintiff’s cause of action and
thus the date on which a limitation period begins to run—with
tolling doctrines that arrest or extend a limitation period after a
claim has already accrued. See FCCI Response (d/e 132), at 10–
11; FCCI MSJ (d/e 133), at 12. True, the discovery rule does not
apply when discovery occurs “after the claim arose, but before the
applicable statute of limitations has run”—because discovery, by
definition, occurs when a claim accrues, and not afterwards.
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Furthermore, the idea that the discovery rule cannot benefit a
plaintiff who discovered his injury after it occurred but before the
statute of limitations would have expired if it had begun to run at
the time of injury is simply the “reasonable time rule,” which the
Illinois Supreme Court has rejected. See Hermitage Corp. v.
Contractors Adjustment Co., 166 Ill. 2d 72 (1995) (holding
discovery rule to be “not so much . . . an extension of period of
time to file, but rather . . . a rule which determines when the
statute should begin to run.”).
While FCCI has not shown that either of the Carriers is
entitled to summary judgment with respect to JSM’s pre-2012
statutory claims, neither is JSM entitled to judgment as a matter
of law on the Defendants’ statute of limitations defense. When a
party “should have had the requisite knowledge under the
discovery rule to maintain a cause of action” is “ordinarily a
question of fact” which should be determined at the summary
judgment stage only if “the facts are undisputed and only one
answer is reasonable.” Am. Family Mut. Ins. Co. v. Krop, 2018 IL
122556, ¶ 21, 120 N.E.3d 982, 988, reh'g denied (Nov. 26, 2018)
(citing Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill.2d
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240, 250, 198 Ill.Dec. 786, 633 N.E.2d 627 (1994)). Here, whether
JSM should have known of its alleged injury before 2016, when
Deanna Kuester—then JSM’s director of accounting—was informed
of the alleged misclassifications by JSM’s new insurance broker, is
disputed. See Amended Compl. (d/e 34), at 2–3. As FCCI states in
its cross-motion for summary judgment, another former JSM
director of accounting—Donna Lawson—has testified that she
handled a dispute with a previous insurer over allegedly incorrectly
assigned NCCI classification codes in 2007 or 2008. See FCCI
MSJ (d/e 33), at 12 n.4; Lawson deposition (d/e 33–4), at 10–12.
Furthermore, under Illinois law insurance customers “should know
the specifics of their policy as soon as they purchase it,” and have
an “obligation to read their policies.” Krop, 2018 IL 122556 at ¶¶
22, 29. FCCI has also stated that JSM’s knowledge of the alleged
misclassifications “occurred on (or before) May 18, 2016.” See
Response (d/e 132), at 9. Therefore, a disputed issue of fact exists
regarding when JSM should reasonably have known of the alleged
misclassifications.
In summation: a ten-year limitation period applies to JSM’s
breach of contract claims, which are all timely; JSM’s statutory
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claims arising from the 2012–2013, 2013–2014, and 2014–2015
Policies are timely; the timeliness of JSM’s pre-2013 statutory
claims depends on the as-yet unresolved factual question of when
JSM should have known that the injury giving rise to each claim
had occurred.
B.
The Carriers Have Not Sufficiently Alleged the Elements
of Waiver, Estoppel, Laches, or Ratification.
Waiver, estoppel, laches, and ratification are all affirmative
defenses, and the Carriers therefore bear the burden of alleging
and proving each essential element of each defense. They have not
done so; in fact, none of the defendants’ filings mention what the
essential elements of the listed defenses are, or what specific facts
support the application of each individual defense in this case.
With respect to waiver, the Carriers had “the burden of
proving a clear, unequivocal, and decisive act of [their] opponent
manifesting an intention to waive its rights.” In re Nitz, 317 Ill.
App. 3d 119, 130, 739 N.E.2d 93, 103 (2000). The Carriers have
not identified any specific act that might constitute waiver, and
summary judgment for JSM on the issue of waiver is therefore
appropriate.
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With respect to estoppel, the Carriers had the burden of
alleging and proving six elements, the first of which is that JSM
misrepresented or concealed material facts. See Maniez v.
Citibank, F.S.B., 404 Ill. App. 3d 941, 949, 937 N.E.2d 237, 245
(2010). The Carriers have yet to assert which material facts JSM
concealed, or when they did so. Summary judgment for JSM on
the issue of estoppel is therefore appropriate.
The defense of laches “requires a showing that (1) a party has
exhibited an unreasonable delay in asserting a claim; and (2) the
opposing party has suffered prejudice as a result of the delay.” In
re Estate of Beckhart, 371 Ill. App. 3d 1165, 1171, 864 N.E.2d
1002, 1007 (2007). The Carriers have claimed, in their statute of
limitations arguments, that the roughly eighteen-month delay
between JSM’s discovery of the misclassifications and the filing of
this lawsuit was unreasonable. However, they have not alleged
any specific facts indicating that they have suffered any prejudice
as a result of this delay. JSM is entitled to summary judgment on
the laches defense.
The defense of ratification requires the asserting party to
show that the ratifying party had “full knowledge” of all relevant
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facts at the time of ratification. Monco v. Janus, 222 Ill. App. 3d
280, 295, 583 N.E.2d 575, 584 (1991) Here, the Carriers have not
alleged that JSM knew about the alleged misclassifications at the
time of their ratification of any of the policies; the most recent
Policy was in effect from 2014 to 2015, and the Carriers have
agreed that JSM learned of the alleged misclassifications in 2016.
Summary judgment for JSM is therefore appropriate on the
affirmative defense of ratification.
C.
Since JSM Is Not Challenging an Administrative Action,
JSM Was Not Required to Exhaust its Administrative
Remedies Before Filing Suit
The doctrine of exhaustion of administrative remedies
applies to parties “aggrieved by administrative action,” and
mandates that such parties “pursue all available administrative
remedies before resorting to the courts.” Poindexter v. State, ex
rel. Dep't of Human Servs., 229 Ill. 2d 194, 207, 890 N.E.2d 410,
419 (2008). JSM is not aggrieved by the NCCI classification
system itself; rather, JSM’s grievance is with the alleged
misclassification of its employees by the named private defendants.
The Carriers state that NCCI provides a Dispute Resolution
Process through which classification issues can be addressed, but
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the Carriers do not cite any case in which a court applying Illinois
law has applied the exhaustion doctrine to a dispute between two
private parties that merely involves an available administrative
remedy. The case cited for the proposition that the doctrine
applies “whenever an agency has exclusive jurisdiction over an
action” actually states that “[t]he doctrine applies only when an
agency has exclusive jurisdiction over an action.” Vill. of S. Elgin
v. Waste Mgmt. of Illinois, Inc., 348 Ill. App. 3d 929, 935, 810
N.E.2d 658, 665 (2004) (emphasis added); see FCCI Response (d/e
132), at 12.
In past cases where a plaintiff has sued under 215 ILCS
5/462b alleging misclassification of its employees by a workers’
compensation insurance carrier, Illinois and federal courts have
not required the Plaintiff to exhaust available administrative
remedies before bringing a civil claim. See W. Bend Mut. Ins. Co.
v. Procaccio Painting & Drywall Co., 794 F.3d 666 (7th Cir. 2015);
Cas. Ins. Co. v. Hill Mech. Grp., 323 Ill. App. 3d 1028, 1037, 753
N.E.2d 370, 377 (2001). CAT Express, Inc. v. Muriel concerns a
plaintiff that chose to exhaust its administrative remedies before
resorting to the court system, but the court in that case did not
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hold that such exhaustion was mandatory. Indeed, the
involvement of NCCI and the Illinois Department of Insurance in
CAT Express consisted entirely of telling the plaintiff that it should
have filed a lawsuit instead of bothering the agencies with a
dispute over which they had no jurisdiction because it “require[d]
an interpretation of the state or federal law.” 2019 IL App (1st)
181851, ¶¶ 4–7, 148 N.E.3d 726, 729. Because JSM’s suit
concerns the actions of private defendants, rather than
administrative agencies, JSM was not required to exhaust its
administrative remedies before filing suit.
VI. CONCLUSION
For the reasons stated, JSM’s motion for summary judgment
(d/e 130) is GRANTED IN PART, in that summary judgment is
entered in favor of JSM on the Carriers’ third and fourth
affirmative defenses and on the Carriers’ second affirmative
defense with respect to its claims arising out of the 2012–2013,
2013–2014, and 2014–2015 Policies, and DENIED IN PART.
FCCI’s summary judgment motion (d/e 133) is DENIED.
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ENTERED: December 21, 2020
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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