The Holy Spirit Association for the Unification of World Christianity v. Sentinel Insurance Company, Ltd. et al

Filing 57

MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 1/25/2016:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

THE HOLY SPIRIT ASSOCIATION
FOR THE UNIFICATION OF WORLD
CHRISTIANITY,
Plaintiff,
Case No. 15 C 3423
v.
Judge Harry D. Leinenweber
SENTINEL INSURANCE COMPANY
LTD., LEE & ASSOCIATES,
INC., YONG S. LEE, LEAD WAYS
INSURANCE AGENCY ASSOCIATES,
INC., ANDY H. CHEN, and
JAMES F. CHEN,
Defendants.

MEMORANDUM OPINION AND ORDER
On September 23, 2015, Plaintiff the Holy Spirit Association for
the Unification of World Christianity (“HSA”) filed its First Amended
Complaint in this action.

Defendants Andy H. Chen, James F. Chen, and

Lead Ways Insurance Agency Associates, Inc. (collectively “Lead Ways”)
now move to dismiss the only counts pleaded against them, Count VII
(negligence) and Count VIII (breach of contract) [ECF No. 41].

For the

following reasons, Lead Ways’ Motion is granted.
I.

BACKGROUND

The Court draws the following facts, which it accepts as true, from
HSA’s Amended Complaint.

The Court also considers a February 2, 2015

denial of coverage letter from Defendant Sentinel Insurance Company, Ltd.
(“Sentinel”), which was attached as an exhibit to the original Complaint,

and which Lead Ways has now attached to its Motion.

Because the denial

of coverage is referenced in the Amended Complaint, (see, Am. Compl., ECF
No. 34, at 9 ¶¶ 64–65), and is central to HSA’s claims that coverage was
denied because of Lead Ways’ misrepresentations, the Court may consider
it in ruling on the Motion to Dismiss.

See, Wright v. Associated Ins.

Cos., 29 F.3d 1244, 1248 (7th Cir. 1994) (explaining that documents
attached to a motion to dismiss are considered part of the pleadings, and
may be considered by a district court ruling on the motion to dismiss,
“if they are referred to in the plaintiff’s complaint and are central to
his claim.”).

This is a narrow exception to the general rule that when

additional materials are attached to a motion to dismiss, the Court must
either exclude them or convert the motion into one for summary judgment.
188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir. 2002)
(citation omitted).
HSA is a religious organization and the owner of a property located
at

7450

North

“Property”).

Sheridan

Road,

on

Chicago’s

far

north

side

(the

When its residential fire policy for the Property was about

to expire, HSA asked Defendants Yong S. Lee and Lee and Associates, Inc.
(collectively,
coverage

“Lee”)

through

CNA

to

obtain

Insurance

replacement
Company

and

coverage.
then

Lee

Travelers

obtained
Indemnity

Company.
Before the Travelers policy expired, Lee contacted Lead Ways to
obtain replacement coverage again.
Sentinel.

Lead Ways then secured coverage from

HSA alleges that it never authorized the Sentinel policy and

did not know that Lee had changed carriers.

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On October 31, 2013, a fire occurred at the Property, causing
nearly

$200,000

in

damages.

During

the

course

of

Sentinel’s

investigation, Lead Ways represented to HSA and Lee that it was the
general broker for The Hartford, Sentinel’s parent company, and that it
had submitted a “reformation request” so that the fire damage claim would
be accepted.
2015,

(Am. Compl., ECF No. 34, at 8–9 ¶¶ 59–60.)

Sentinel

issued

a

letter

denying

coverage

On February 2,

under

the

Policy’s

“concealment, misrepresentation, or fraud” clause. Specifically, Sentinel
refused

coverage

indicating

that

based
the

on

misrepresentations

Property

was

used

as

an

in

HSA’s

office

application

rather

than

a

residence, and misrepresentations after the loss that there were no
permanent residents at the Property.

(See, id. at 9 ¶¶ 64–65.)

In the Amended Complaint, HSA attributes these misrepresentations
to both Lee and Lead Ways.
had

been

used

communications
Sentinel.

HSA alleges that Lead Ways “knew the premises

in

part

for

residential

purposes”

with

Lee,

but

transmitted

contrary

(Id. at 8 ¶¶ 56–57.)

based

on

information

its
to

HSA also alleges that on November 25,

2013, Lead Ways transmitted information to Sentinel stating that there
were no permanent residents living at the Property, and that the only
reason people were staying overnight there on the night of the fire was
“because they could not find motel accommodations.”

(Id. at 8 ¶ 59.)

Finally, HSA alleges that Lee provided “false and misleading” information
to Sentinel and encouraged others to do the same.

In December 2013, Lead

Ways specifically asked HSA questions about how the Property was being
used, and on January 28, 2014, HSA informed Lead Ways that its associate

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pastor and his family had been living at the Property “all the time.”
(Id. at 9 ¶ 63.)
The denial of coverage letter attributes the misrepresentations
about the Property’s use to Lee and HSA.

The letter states that on March

5, 2012, Lee sent an email to Lead Ways stating that the Property was
being used as an office, and that Lead Ways relied on this information in
completing HSA’s insurance application.

The letter also states that on

November 25, 2013, HSA informed Sentinel in writing that no permanent
residents lived at the Property.
On

September

9,

2015,

the

Court

granted

Lead

Ways’

Motion

to

Dismiss HSA’s negligence claim, which alleged that Lead Ways breached its
duty of care in failing to investigate the validity of the information
that Lee provided.

The Court held that absent special circumstances,

Lead Ways’ duty of “ordinary care and skill” did not require it to verify
Lee’s representations.

The Court

also granted Sentinel’s Motion to

Dismiss HSA’s estoppel claim.
II.
A

motion

to

dismiss

LEGAL STANDARD
for

failure

to

state

a

claim

Rule 12(b)(6) challenges the legal sufficiency of a complaint.

under

Hallinan

v. Fraternal Order of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir.
2009).

To survive a Rule 12(b)(6) motion to dismiss, a complaint must

contain “enough facts to state a claim to relief that is plausible on its
face.”

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).

When

considering a Rule 12(b)(6) motion, a court must accept the plaintiff’s
allegations as true, and view them in the light most favorable to the
plaintiff.

Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736
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(7th Cir. 2014) (citation omitted). However, a court need not accept as
true “legal conclusions, or threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements.”

Brooks v.

Ross, 578 F.3d 574, 581 (7th Cir. 2009) (quoting Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009)) (internal quotations and alterations omitted).
III.
A.

ANALYSIS

Count VII (Negligence)

In Count VII, HSA alleges that that Lead Ways breached its duty of
care during the claims handling process.
represented

that

it

was

the

general

According to HSA, Lead Ways

broker

for

Sentinel,

and

that

Sentinel was reviewing “the approval of the change in policy which they
submitted.”

(Am. Compl., ECF No. 34, at 17 ¶ 78.)

However, HSA alleges,

Lead Ways knew that the policy would not be changed — and the claim would
not be accepted — because of the false information it had provided to
Sentinel.

(Id. at 17 ¶¶ 79–80.)

Lead Ways argues that it was under no

duty to investigate the accuracy of information that Lee or HSA provided
about how the Property was used, and that HSA fails to allege that Lead
Ways actually knew the Property was a residence.
As this Court explained in its prior ruling, insurance producers,
agents and brokers are bound by the same duty:

to “exercise ordinary

care and skill in renewing, procuring, binding, or placing” insurance
coverage.

Skaperdas v. Country Cas. Ins. Co., 28 N.E.3d 747, 756 (Ill.

2015) (quoting 735 ILCS 5/2-2201(a)).

The Court is not aware of any case

holding

care

that

the

duty

of

ordinary

requires

these

entities

to

investigate the accuracy of information submitted by insureds or their
agents.

Instead, “in the absence of circumstances putting a reasonable
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person

on

inquiry,

that

person

is

justified

in

relying

on

a

representation without engaging in further inquiry, especially where the
misrepresentation concerns matters which may be assumed to be within the
knowledge of the party making them.”

Hassan v. Yusuf, 944 N.E.2d 895,

916 (Ill. App. Ct. 2011).
HSA directs the Court’s attention to several allegations in the
Amended Complaint that it claims would have put Lead Ways on notice that
the Property was being used for residential purposes.

HSA begins by

noting that Lee and Chen’s relationship with HSA predates the issuance of
the Sentinel policy.

It then notes that on May 5, 2012, it advised Lee

that

its

it

was

moving

office

operations

to

Schaumberg,

Illinois.

However, neither of these allegations suggests that Lead Ways knew the
Property was being used for residential purposes.
The

Amended

Complaint

contains

two

allegations

actually knew of the Property’s residential nature.

that

Lead

Ways

First, HSA alleges

that “Andy Chen and Lead Ways knew that the premises had been used in
part for residential purposes by virtue of their communications with Yong
Lee and Lee & Associates.”
conclusory
supported

allegation
by

any

is

facts

(Am. Compl., ECF No. 34, at 8 ¶ 56.)
insufficient,

lending

it

contradicted by other allegations

however,

because

plausibility.

Moreover,

is
it

not
is

in the Amended Complaint that Lee

routinely provided false information about the Property.
¶ 81.e, 16 ¶ 77.e).

it

This

(See, id. at 15

The denial of coverage letter only underscores the

implausibility of Lead Ways’ knowledge.

The letter states that Sentinel

completed HSA’s insurance application relying on false information that

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Lee provided — specifically, his March 5, 2012 representation that the
Property was being used as an office.
Second, HSA alleges that on January 28 2014, its associate pastor
informed Lead Ways that the Property was being used for residential
purposes all along.

However, there are no allegations that Lead Ways hid

this information from Sentinel during the investigation or otherwise
failed to disclose it.

To the contrary, the denial of coverage letter

emphasizes that on January 28, 2014, HSA admitted to using the Property
as a residence “the entire time.”
HSA has failed to allege any “special circumstances” that would
have put Lead Ways on notice that the Property was being used as a
residence.

It

has

also

failed

to

plausibly

allege

that

Lead

Ways

actually knew of the Property’s true nature when providing information to
Sentinel.

For

these

reasons,

the

Court

dismisses

Count

VII

with

prejudice.
B.

Count VIII (Breach of Contract)

In Count VIII, HSA alleges that Lead Ways breached an oral contract
with Lee to obtain replacement coverage for the Property “for the benefit
of HSA” by failing to confirm the accuracy of information in the Sentinel
policy and by providing false information to Sentinel after learning how
the Property was actually used.

Lead Ways contends that HSA has failed

to plead the existence of an underlying contract in which HSA was an
intended third-party beneficiary, and in any case, has failed to plead
breach.
The Court begins with the issue of breach.

To state a claim for

breach of contract, a plaintiff must allege (1) offer and acceptance; (2)
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consideration; (3) definite and certain contract terms; (4) plaintiff’s
performance

of

all

required

contractual

conditions;

(5)

defendant’s

breach of the terms of the contract; and (6) resulting damages.
v. Feuer, 299 Ill. App. 3d 1076, 1082 (Ill. App. Ct. 1998).

Hirsch

The Amended

Complaint does not describe any contract terms requiring Lead Ways to
investigate the accuracy of the information it received from HSA or Lee,
and as explained above, no such duty arises under Illinois law.

In the

absence of contract terms imposing a duty on Lead Ways to investigate the
information that HSA or Lee provided, HSA has failed to state a claim for
breach of contract.
As

for

HSA’s

claims

that

Lead

Ways

knowingly

provided

false

information to Sentinel during the investigation, the Amended Complaint
lacks factual support.
Ways

transmitted

to

HSA alleges that the “contrary information” Lead
Sentinel

includes

the

November 25,

2013

representation “that there were no permanent residents living at [the
Property], and that the reason people were staying overnight . . . on the
date of the loss was because they could not find motel accommodations
after a meeting.”

(Am. Compl., ECF No. 34, at 8 ¶ 58.)

However, the

denial of coverage letter contradicts this statement, noting that “HSA
Holy Spirit on November 25, 2013 represented in writing that there were
no permanent residents living at [the Property] and that the reason
people were staying overnight . . . on the date of the loss was because
they could not find hotel accommodations after a meeting.”

Because the

letter flatly contradicts the allegation in HSA’s Amended Complaint, it
controls.

See, Bogie v. Rosenberg, 705 F.3d 603, 609 (7th Cir. 2013).

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Although the Court has not considered the unauthenticated emails
attached

to

HSA’s

response

in

ruling

on

this

Motion,

the

Court

is

compelled to note that HSA’s own exhibit appears to confirm that the
November 25 communication came from HSA — not Lead Ways.

(See, Ex. D to

HSA Resp., ECF No. 49, at 18 (“Dear Mr. Lee, The people stayed overnight
because they couldn’t find motel accomodation [sic] after the meeting.
We don’t have permanent resident in the property at 7450 N. Sheridan
Road.”).

The November 25, 2013 communication is the only example of

“contrary information” that Lead Ways allegedly provided to Sentinel
during the investigation.

Without it, it is unclear how Lead Ways misled

Sentinel.
Because HSA has failed to establish contract terms requiring Lead
Ways to verify the information it received from HSA and Lee, HSA has not
stated a claim for breach of contract.

Count VIII is therefore dismissed

with prejudice.
IV.

CONCLUSION

For the reasons stated herein, Lead Ways’ Motion to Dismiss [ECF
No. 41] is granted.

Counts VII and VIII of HSA’s Amended Complaint are

dismissed with prejudice.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
Dated:1/25/2016
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