Los Angeles Team Receives Affirmance of Dismissal from Seventh Circuit in Negligent Procurement Matter

Los Angeles, Calif. (September 7, 2021) - Los Angeles Partners Connie M. Fickel, Ryan D. Harvey, and Timothy M. Schowe recently won an appeal before the Seventh Circuit Court of Appeals in a matter involving claims of negligent procurement against Lewis Brisbois' insurance broker client.

In the underlying matter, the plaintiff was an orthopedic surgeon in Alabama who had a disability insurance policy procured by Lewis Brisbois' client, which provided "occupational disability coverage." This policy insured the plaintiff's income if he became disabled or was unable to work as an orthopedic surgeon. The plaintiff then switched insurance companies and policies, using Lewis Brisbois' client to do so, but the new policy only provided coverage for total disability, which did not provide coverage if the plaintiff was unable to work as an orthopedic surgeon but was able to work in other fields. This fact allegedly remained undiscovered until years later when the plaintiff became disabled. The plaintiff then brought suit against Lewis Brisbois' client in Indiana (where the broker was located) for negligent procurement, and against the new insurance company for breach of contract.

At the district court in Indiana, the Lewis Brisbois team moved for dismissal on the grounds that under Indiana's choice-of-law rules, Alabama law was controlling in this case. And under Alabama law, the plaintiff's contributory negligence in failing to read his new policy and the state's statute of limitations both barred the plaintiff's negligence claims. The district court granted the motion and dismissed the claims with prejudice.

On appeal, the Seventh Circuit agreed with the district court and affirmed the dismissal. The appellate court determined that there was an "actual, material conflict" of the laws and therefore "the applicable law is the law of the place of the wrong," which in this case was Alabama, where the plaintiff lived, earned income, and allegedly sustained economic loss. Furthermore, the court noted that the presumption to apply the law of the state where the wrong occurred can only be overcome if that state bears little connection to the legal action. Here, the court agreed with Lewis Brisbois' argument that this presumption could not be overcome, stating "Alabama bears a significant connection to this case." 

One point raised in oral argument was the ability to conduct business virtually and the impact that may have on issues such as choice of law. In this case, the Lewis Brisbois team argued that where the broker was directing his efforts (Alabama), and where the product was received and the damage allegedly occurred (Alabama), was more important than where the client was physically located when he placed the insurance (Indiana). 

Mr. Schowe handled the motion to dismiss in the underlying case. Mr. Harvey wrote the team's appellate brief, and Ms. Fickel presented oral argument before the Seventh Circuit.

“We are proud to have obtained such an excellent result," said Ms. Fickel of the court's decision. "It was true teamwork in action." 

Ms. Fickel is a National Co-Chair of Lewis Brisbois' Professional Liability Practice and the Chair of the firm's Securities Litigation & FINRA Practice. She defends investment advisors, registered representatives, accountants, actuaries, ERISA fiduciaries, lawyers, and insurance agents and brokers, and has successfully defended claims involving a variety of alternative investments, annuities, options, and other investment products and strategies.  

Mr. Harvey is a member of Lewis Brisbois' Professional Liability and Securities Litigation & FINRA Practices. He routinely represents securities broker-dealers and their registered representatives, real estate brokers and agents, residential and commercial property owners and managers, healthcare service plans, and property/casualty insurers in litigation in state and federal courts, as well as various arbitration forums.

Mr. Schowe is a member of Lewis Brisbois' Professional Liability Practice. A seasoned trial attorney, he has litigated in federal and state courts, as well as participated in arbitrations and mediations. He regularly represents investment advisors, registered representatives, accountants, actuaries, ERISA fiduciaries, lawyers, real estate agents and brokers, automobile dealerships, insurance agents and brokers, and other miscellaneous private businesses.

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