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Businesses alleging financial loss against insurer lose before 7th Circuit

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The 7th Circuit Court of Appeals ruled against a group of businesses that sued an insurance company claiming its failure to adequately pay G&S Metal Consultants Inc. following an explosion at the GSMC Georgia plant led to the plaintiffs suffering financial losses.

G&S Metal Trading, G&S Holdings, Aluminum Sizing, and owner operators of G&S Metal Consultants R. Scott Galley II and Cynthia Galley sued Continental Casualty Co., the insurer of GSMC. Pursuant to its policy, Continental made some payouts to GSMC after the explosion, but GSMC claimed those payments were inadequate. It since has filed for bankruptcy, which has affected the businesses of the parties in this case. G&S Metal Trading, G&S Holdings and Aluminum Sizing are affiliated with GSMC and are additional named insureds under the policy that covered the Georgia plant.

The lawsuit filed in South Bend alleges seven counts against Continental: breach of contract, promissory estoppel, bad faith claims handling, negligent claims handling, tortious interference with contract, negligent infliction of emotional distress and breach of fiduciary duties. The crux of the complaint was that as a result of the failure to receive timely and adequate payments, GSMC experienced financial difficulties and the plaintiffs were adversely affected by the ensuing loss of business with GSMC.

U.S. District Judge Jon DeGuilio dismissed the lawsuit for failure to state a claim or that the plaintiffs lacked standing. The 7th Circuit found the plaintiffs couldn’t succeed on their claim that the wrong standard was applied to the motion to dismiss. The federal pleading standard as set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), applies.

In G&S Holdings LLC, et al. v. Continental Casualty Company, 11-1813, the federal appellate court affirmed DeGuilio’s dismissal of the breach of contract, promissory estoppel, bad faith claims handling, negligent claims handling, and breach of fiduciary duties claims pursuant to Federal Rule of Civil Procedure 12(b)(1). DeGuilio ruled that the plaintiffs weren’t the real parties in interest because they did not seek recovery for an injury they suffered directly. The 7th Circuit also upheld DeGuilio’s rejection of the plaintiffs’ contention that they had standing as third-party beneficiaries of the policy.

The Circuit Court also found that Vectren Energy Marketing & Service Inc. v. Executive Risk Specialty Ins. Co., 875 N.E.2d 774 (Ind. App. 2007), applies.

“Even though the loss was a predictable result of the failure to fulfill the obligations of the policy, due to the interdependent relationship between the plaintiffs and GSMC, the claim against the insurer must be brought by the party to whom the duty is owed, which was GSMC,” Judge Ilana Diamond Rovner wrote.

 

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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