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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. Well, maybe it's because they are unelected, and, they have a tendency to strike down laws by elected officials from all over the country. When you have been taught that "Democracy" is something almost sacred, then, you will have a tendency to frown on such imperious conduct. Lawyers get acculturated in law school into thinking that this is the very essence of high minded government, but to people who are more heavily than King George ever did, they may not like it. Thanks for the information.

  2. I pd for a bankruptcy years ago with Mr Stiles and just this week received a garnishment from my pay! He never filed it even though he told me he would! Don't let this guy practice law ever again!!!

  3. Excellent initiative on the part of the AG. Thankfully someone takes action against predators taking advantage of people who have already been through the wringer. Well done!

  4. Conour will never turn these funds over to his defrauded clients. He tearfully told the court, and his daughters dutifully pledged in interviews, that his first priority is to repay every dime of the money he stole from his clients. Judge Young bought it, much to the chagrin of Conour’s victims. Why would Conour need the $2,262 anyway? Taxpayers are now supporting him, paying for his housing, utilities, food, healthcare, and clothing. If Conour puts the money anywhere but in the restitution fund, he’s proved, once again, what a con artist he continues to be and that he has never had any intention of repaying his clients. Judge Young will be proven wrong... again; Conour has no remorse and the Judge is one of the many conned.

  5. Pass Legislation to require guilty defendants to pay for the costs of lab work, etc as part of court costs...

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