lead it to believe that the terms “finder” and “intermediary” meant anything than their ordinary
meanings and that coverage for such transactions was excluded. First was familiar with its own
operating methods and entered into a contract that excluded coverage for losses by such business
conduct. The exclusion clearly sets forth what coverage is excluded. First may have intended that
the policy not exclude conduct constituting fraud, but such intention was unreasonable in light of the
policy’s clear and ambiguous language and First’s knowledge of its own business. One party’s
subjective unreasonable intent may not provide the basis for finding an ambiguity in an insurance
policy. Granite State Ins. Co. v. Degerlia, 925 F.2d 189, 193 (7th Cir. 1991).

First also asserts that dismissal is improper because First properly pled that the exclusion
does not apply because at no time did Colesons and its employees act as intermediaries or finders
for First. In First’s response to the first motion to dismiss, First conceded “that First conducts its
premium lending business soley through outside firms that in legitimate transactions act as insurance
agents or brokers in procuring financial coverage.” Based on this concession, the Court previously
found that First did not contest that Colesons was a finder or intermediary. First has not refuted the
Court’s conclusion but argues that Colesons was not an intermediary or finder by definition.

An intermediary is “[a] mediator or go between; a third-party negotiator ... Cf. FINDER.”
Black’s Law Dictionary 820 (7th ed. 1999). A finder is “[a]n intermediary who brings together
parties for a business opportunity, such as two companies for a merger, a borrower and a financial
institution, or an issuer and an underwriter of securities.” Black’s Law Dictionary 646 (7" ed.
1999). First argues that Colesons could not be considered an intermediary because First never
engaged, employed or contracted with Colesons to act on its behalf. However, as previously stated,

First concedes that it conducts its premium finance lending business soley through outside firms that


of generating premium finance business for First. When a business
customer request its broker’s assistance in obtaining premium
financing, the broker’s approach typically involves contacting various
premium finance companies in order to obtain a range of quotations
for the customer’s consideration. It was in that connection that
Colesons was authorized to select First from among the vendors
offering premium financing in Colesons’ market.

First’s initial “new” allegation is the same allegation First argued, and the Court disagreed
with in the initial motion to dismiss. As the Court previously held, nothing in the contract
demonstrates that the exclusion contained the caveat that the finder or intermediary must in fact be
acting for the insured. Therefore, this “new” allegation fails to remove First’s claim from the
exclusion.

First also alleges that it properly pled that the exclusion contains one or more ambiguities
that must be resolved in First’s favor.

First argues that the fact that the exclusion includes no “caveat that the finder or intermediary
must in fact be acting for the insured” (citing the March 2001 Order) and the circumstances in this
case reveal a latent ambiguity stemming from such exclusion. First alleges that the latent ambiguity
is that the Bond covers no misconduct by third-party firms and that such result could not comport
with First’s reasonable expectations.

“For the latent ambiguity doctrine to be applicable, the words or the terms in question must
initially be susceptible of more than one possible meaning or description.” General Cas. v. Elam,
8 Ill. App. 3d 215, 220 (Ill. 1972). “Courts must enforce an unambiguous contract by its plain
meaning, even if the result limits the insured’s coverage.” Schenkel & Schultz v. Homestead, 119

F.3d 548, 550 (7th Cir. 1997).

Again, as previously found by this Court, First points to nothing in the contract that would


act as insurance agents or brokers and that Colesons was authorized to select First for premium
financing. Minimally, First’s and Coleson’s method of business establishes that Coleson acted as
an intermediary.

Furthermore, the exclusion includes loss caused by not only a finder or intermediary but also
any other “agent”, “broker”, or “other representative of the same general character of the
ASSURED.” Assuming arguemendo, that Colesons was nota finder or intermediary, the exclusion
would still apply because First concedes that it only does business through outside firms that act as
insurance agents or brokers, and First’s admitted method of business with Colesons would constitute
an “other representative of the same general character of [First].”

First’s declaratory judgment and breach of contract claims are dismissed because coverage
is excluded pursuant to Section 3.m of the Bond. In addition, First’s bad faith claim pursuant to §
155 of the Illinois Insurance Code is also dismissed because First has failed to make a preliminary
showing of a legitimate claim for coverage. Prisco Serna Sturm Architects v. Liberty Mut. Ins. Co.,
126 F.3d 886, 894 (7th Cir. 1997).

For the reasons stated above, Federal’s Motion to Dismiss is granted without prejudice as to
all counts. Plaintiff is granted leave to file an amended complaint within 14 days of this order if

plaintiff can do so consistent with its obligations under Fed. R.CivAProc. 11.

: / [ pris —

LS om W. DARRAH
ited States District Judge

Dated: C De (Cf


& Minute Onde Form (06/97)

C0

United States District Court, Northern District of Illinois

UA Namelaf Assigned Judge John W. Darrah Sitting Judge if Other
or Magistrate Judge . than Assigned Judge
CASE NUMBER 00 C 8135 DATE 6/26/2001
CASE FIRST INSURANCE FUNDING CORP. vs. FEDERAL INSURANCE COMPANY
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the
MOTION: nature of the motion being presented.)
DOCKET ENTRY:
ql) oO Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
(3) Oo Answer brief to motion due. . Reply to answer brief due.
(4) o Ruling/Hearing on set for at
(5) im Status hearing[held/continued to] [set for/re-set for] on set for at
(6) o Pretrial conference[held/continued to] [set for/re-set for} on set for at :
(7) Oo Trial[set for/re-set for] on at
(8) Q {Bench/Jury trial] [Hearing] held/continued to at
(9) Qa This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) OGeneral Rule21 OFRCP41(a)(1) OFRCP41(a)(2).
ao) «of {Other docket entry] Enter Memorandum Opinion And Order. Defendant Federal Insurance
Company’s motion to dismiss is granted without prejudice as to all counts. Plaintiffis granted leave to
file an amended complaint within 14 days of this order if plaintiff can do so consistent with its obligations
under Fed.R.Civ.Proc.11. Status hearing held.
(il) w@ [For further detail see order (on reverse side of/attached to) the original minute order.]
No notices required, advised in open court.
No notices required. 4
Notices mailed by judge’s staff. JUN 3% 2008
Notified counsel by telephone. date doeketed
. q
¥ | Docketing to mail notices.
Mail AO 450 form. ® ‘ A o) |
fi
A trate i t
Copy to judge/magistrate judge. FILED FOR G0es AE TING JUN 2 q 2001
courtroom O1 JUN 26 Pid 7: Css
LG deputy’s
initials () Mt
Date/time received in
central Clerk’s Office ailingedeputy initsts



UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
FIRST INSURANCE FUNDING CORPORATION, )
)
Plaintiff, )
) No. 00 C 8135
Y. )
) Judge John W. Darrah
FEDERAL INSURANCE COMPANY, ) eerewg
) ReCKeT
Defendant. ) .

JUN 2 7 2001
MEMORANDUM OPINION AND ORDER

Plaintiff, First Insurance Funding Corporation (First), filed suit against defendant, Federal
Insurance Company (Federal), seeking declaratory judgment for indemnity of losses sustained by
First and alleging breach of contract and vexatious and unreasonable conduct under the Illinois
Insurance Code. In March 2001, this Court dismissed First’s complaint with leave to refile, finding
that Section 3.m of the Financial Institution Bond (Bond) excluded coverage. First Ins. Funding
Corp. v. Federal Ins. Co., 2001 WL 293967 (N.D.Il. Mar. 27, 2001) (First). First filed an amended
complaint, and Federal filed a Motion to Dismiss, which is now pending before the Court.

In ruling on a motion to dismiss, the Court must accept the events as specified in the
complaint as true, and all ambiguities are construed in favor of the plaintiff. Curtis v. Bembeneck,
48 F.3d 281, 283 (7th Cir 1995) (Curtis). A complaint should be dismissed for failure to state a
claim only if it appears “beyond doubt that the plaintiff can prove no set of facts in support of his
claim which would entitle him to relief.” Conley v. Gibson, 335 U.S. 41, 45-46 (1957) (Conley).
The complaint must contain either direct or inferential allegations with respect to all material

elements necessary to sustain a recovery under some viable legal theory. Banks v. National


Collegiate Athletics Ass’n, 977 F.2d 1081, 1093 (7th Cir. 1992). However, “[c]onclusory statements
of law ... are not sufficient to defeat a motion to dismiss for failure to state a claim.” Northern Trust
Co. v. Peters, 69 F.3d 123, 129 (7th Cir. 1995).

The factual basis of First’s claims are fully set forth in the March 2001 Order and need not
be repeated here. In the March 2001 Order, the Court noted that First did not contest that Colesons
was a “finder” or “intermediary”. Instead, First argued that Section 3.m should only be applied when
the third party is in fact acting as the insured’s finder or intermediary. The Court rejected First’s
argument, finding that First did not allege that the terms “finder” or “intermediary” were ambiguous
or that Colesons does not meet the terms’ ordinary meanings. The Court also noted that First was
familiar with its own operating method when it entered into the contract that contained the exclusion
clause, and First pointed to nothing that would have lead it to believe that the terms “finder” and
“intermediary” meant anything other than their ordinary meaning or that the exclusion contained the
caveat that the finder or intermediary must in fact be acting for the insured. First, 2001 WL 293967
at * 2,

First filed an amended complaint containing the same allegations as the first complaint and
added the following paragraph:

18. Exclusion 3.m does not bar coverage for First’s loss because:

a. Colesons was not in fact acting as a “finder,” “intermediary,” or
other representative of First in connection with the fraudulent
“transactions,” but was instead acting soley on its own behalf;

b. the exclusion contains one or more ambiguities that must be
resolved in favor of coverage;

c, First never engaged, employed or contracted with Colesons to act
as its “finder,” “intermediary,” or other representative for the purpose