Conseco breached that contract by refusing to pay Rhinehart’s expenses. Proving it may
be difficult, but that issue is not before the Court on this motion to dismiss. Accordingly,
Conseco’s motion to dismiss is denied as to Count I.

IL. Keystone Adequately Alleges Estoppel (Count II)

In Count II, Keystone adequately alleges an estoppel claim. To allege estoppel,
Keystone must plead that: (1) it was misled by an act or statement of Conseco; (2) that it
reasonably relied on that misleading information; and (3) it was prejudiced as a result.
Conagra v. Arkwright Mutual Ins. Co., 64 F. Supp. 2d 754, 765 (N.D. Ill. 1999). The
Court initially dismissed Count II because Keystone pled the first two elements in
“general, conclusory fashion.” (Minute Order 4 5). In its FAC, Keystone cured this
defect.

Keystone adequately alleges that it was misled by Conseco. As noted above,
Keystone has sufficiently alleged that an agreement was formed in December 1999 that
included coverage for alcohol-related medical expenses, Keystone alleges that after
accepting the terms of the agreement, Conseco accepted premiums from Keystone for
nine months that were calculated based on Keystone’s application and bid package. (R.
43-1, FAC { 23.) Keystone alleges that these actions led Keystone to believe that
Conseco intended to cover alcohol-related medical expenses.

Keystone alleges that its reliance was reasonable based on the terms of the
December 1999 agreement and the fact that Conseco never mentioned the exclusion until
September 5, 2000, nine months after the parties reached the agreement. Keystone
further argues that its reliance was reasonable based on the fact that Conseco accepted

Keystone’s premium payments. Conseco argues that Keystone’s reliance was

4



the bid package, Conseco agreed to cover alcohol-related medical expenses, and that
Conseco breached that agreement when it refused to pay Rhinehart’s expenses.

Conseco argues that the plan summaries could not have formed the basis of the
treaty because the bid package did not contain any plan summaries. Conseco bases its
argument on the fact that the plan summaries were not physically attached to FAC
Exhibit A, which Keystone referred to in its FAC as “the bid package.” Keystone
explains that the plan summaries were included in the complete bid package submitted to
Conseco but they were not attached to FAC Exhibit A due to their excessive length.
Conseco does not refute this explanation.

Conseco next argues that the December 19, 1999 agreement never expressly
included coverage for alcohol-related medical expenses, and that it was therefore
unreasonable for Keystone to assume that such expenses were covered.' Keystone argues
that the agreement never expressly excluded alcohol-related medical expenses, and that
the terms of the treaty were based on the bid package which included plan summaries
that covered alcohol-induced medical expenses.

Drawing all reasonable inferences in Keystone’s favor, the Court finds that
Keystone has alleged in the FAC that Keystone and Conseco reached an agreement on

December 19, 1999 that did not exclude alcohol-related medical expenses, and that

' Conseco argues that there was no “agreement” in December 1999 and that the only
contract between the parties is the September 5, 2000 treaty. The Court addressed this
argument in its Order and found, based on the allegations in the complaint, that it may
reasonably infer that the parties entered into an agreement in December 1999. (Whether
Keystone will actually be able to prove such an agreement is a different question.)
Therefore, the fact that the treaty expressly excluded coverage of alcohol-related medical
expenses is not dispositive at this stage.



unreasonable. The question at this stage, however, is not whether Keystone’s reliance
was objectively reasonable, but whether Keystone adequately pled reasonable reliance.

Finally, Keystone alleges that it incurred damages in excess of the Stop Loss Self-
Insured Retention that Conseco has not paid. (R. 43-1, FAC 28.)

The Court finds that Keystone adequately alleges that it reasonably relied on
Conseco’s representations to its detriment. Accordingly, Conseco’s motion to dismiss is
denied as to Count II.

Ill. Keystone Still Fails to Plead Negligent Misrepresentation (Count III)

Count III of the FAC is essentially identical to Count III of the original Complaint
and suffers the same deficiency. The Court warmed Keystone that there are few
exceptions to the rule prohibiting plaintiffs in Illinois from recovering in tort for purely
economic losses, and that Keystone must identify an exception and develop its argument
as to why that exception applies. Keystone failed to do so. Keystone appears to argue
that it had a fiduciary relationship with Conseco, and that Conseco served as a
“commercial information provider.”

Conseco asserts that for Keystone to benefit from the exception, it must show
that: 1) Conseco is in the business of supplying information, and 2) Conseco provides
this information for the guidance of others in its business relations with third parties.
Gerdes v. John Hancock Mutual Life Ins., Co., 712 F. Supp. 692, 696 (N.D. Ill. 1989).
Further, Conseco notes that one is not in the business of “supplying information” if the
information is merely ancillary to the services rendered or products sold. Lemont
Partners v. Meijer Stores Ltd. Partnership, No. 02 C 1799, 2002 WL 31641623, at *13
(ND. Ill. 2002) (citing Fox Assocs., Inc. v. Robert Half Int'l, Inc., 334 Ill. App. 3d 90,

5



Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge Amy J. St. Eve Sitting Judge if Other
or Magistrate Judge av than Assigned Judge
CASE NUMBER 02 C755 DATE 12/17/2003
CASE Keystone vs. Conseco Medical
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
q) ao Filed motion of [ use listing in “Motion” box above.]
(2) Q Brief in support of motion due
@) a Answer brief to motion due . Reply to answer brief due
(4) Oo Ruling/Hearing on set for at
(5) oO Status hearing[held/continued to] [set for/re-set for] on set for at
(6) ima} Pretrial conference[held/continued to] [set for/re-set for] on. set for at .
(7) o Trial[set for/re-set for] on at
(8) oO (Bench/Jury trial] [Hearing] held/continued to at
(9) 0 This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) CLocal Rule 41.1 COFRCP41(a)(1) COFRCP41(a)(2).
(10) | [Other docket entry] | Enter Memorandum Opinion and Order. Conseco’s motion to dismiss is
denied as to Counts I and II and granted as to Count III.
(il) «ff [For further detail see order attached to the original minute order.]

No notices required, advised in open court,

No notices required. ,
umber of tices

Notices mailed by judge’s staff.

Notified counsel by telephone.

wv | Docketing to mail notices.

Mail AO 450 form.

Copy to judge/magistrate judge.

courtroom
deputy’s
initials

THY

‘Bate/time readived in ~
contrat Clerk’s Office

‘maling deputy initiats

ates



TTT N.E.2d 603, 267 Il. Dec. 800 (1* Dist. 2002)). Conseco argues that, as an insurance
company, it is in the business of accepting risk in return for money. Thus, Conseco
argues that it is not in the business of “supplying information,” and that at most,
providing information is merely ancillary to its business.

Keystone simply argues that “Illinois law is not so broad in its prohibition of
negligent misrepresentation as Conseco would have the Court believe.” Keystone
provides no case law to support its contention that Conseco is in the business of
supplying information, however, and fails to develop an argument as to why a particular
exception to the economic loss doctrine precludes dismissal of this count.

Accordingly, Conseco’s motion to dismiss is denied as to Count Ti.

CONCLUSION

In Count I, Keystone adequately alleges that a contract was formed in December
1999 that covered alcohol-related medical expenses, and that Conseco breached that
contract when it failed to pay Rhinehart’s medical expenses. In Count Il, Keystone
adequately alleges that it reasonably relied on Conseco’s representations to its detriment.
In Count Ill, Keystone offers no reason why its negligent misrepresentation claim is not
prohibited by the economic loss doctrine. Accordingly, Conseco’s motion to dismiss is

denied as to Counts I and II and granted as to Count II.

Dated: December 17, 2003 ENTERED
AMY J. STSEYWE

United States District Court Judge



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

KEYSTONE CONSOLIDATED
INDUSTRIES,

Plaintiff, 02 C 0755

Vv.

CONSECO MEDICAL INSURANCE
COMPANY and EMPLOYEE BENEFITS
CORPORATION,

NN Nee eee

Defendants.
MEMORANDUM ORDER AND OPINION
AMY J. ST. EVE, District Judge:

On June 25, 2003, the Court granted Conseco Medical Insurance Company’s
(“Conseco’s”) motion to dismiss in part and dismissed Counts II and II of Keystone
Consolidated Industries’s (“Keystone’s”) complaint. (R 33-1, Minute Order 3.) On
September 12, 2003, Keystone filed a five count First Amended Complaint (“FAC”)
asserting three counts against Conseco: breach of contract (Count I), estoppel (Count ID)
and negligent misrepresentation (Count II). Conseco seeks to dismiss the FAC pursuant

to Rule 12(b)(6) for failure to state a claim. For the reasons stated herein, Conseco’s
: F

%
motion is denied as to Counts J and II and granted as to Count III.
BEC £ 8 2003
LEGAL STANDARDS
A Rule 12(b)(6) motion tests the sufficiency of the complaint. Petri v. Gatlin,
997 F. Supp. 956, 963 (N.D. Ill. 1997). When determining whether to grant a Rule

12(b)(6) motion to dismiss, a court must accept all factual allegations as true and draw all

reasonable inferences in the plaintiff's favor. Jang v. A.M. Miller & Assocs., 122 F.3d



480, 483 (7" Cir. 1997). A complaint should be dismissed under Rule 12(b)(6) only if “it
is clear that no relief could be granted under any set of facts that could be proved
consistent with the allegations.” Hishon v. King & Spaulding, 467 U.S. 69, 73, 1048.
Ct. 2229, 2232, 81 L.Ed.2d 59 (1984).
BACKGROUND

Keystone entered into an insurance agreement with Conseco wherein Conseco
agreed to reinsure Keystone’s self-funded health plan. (R. 43-1, FAC 9.) On March 3,
2000, Keystone employee Steven Rhinehart was injured in a motor vehicle accident
while under the influence of alcohol. (/d. {J 11-12.) Conseco denied coverage for
Rhinehart’s medical expenses, claiming that the contract excluded coverage of medical
expenses related to alcohol-related accidents. (/d. J] 14, 28.) Keystone had no notice of
that exclusion until it received the reinsurance treaty on September 5, 2000.

ANALYSIS

I. Keystone Alleges A Breach of Contract Claim (Count I)

In Count I, Keystone adequately states a breach of contract claim. Keystone
sought specific reinsurance coverage from Conseco in a bid package on October 19,
1999. On December 19, 1999, Keystone submitted an application to Conseco for
coverage. Conseco issued a reinsurance treaty on September 5, 2000. Keystone alleges
that the bid package it submitted to Conseco contained certain summary plans that
provided coverage for alcohol-related medical expenses, and that the bid package formed
the basis of the treaty. Keystone further alleges that its December 19, 1999 application
constituted an offer based on the information in the bid package, and that Conseco
accepted that offer. Keystone argues that by accepting Keystone’s offer as set forth in

2