Broker’s Motion to Dismiss Denied

    The curt denied the broker's motion to dismiss the insured's claim that the broker negligently failed to provide the requested coverage. The Paper Tigers, Inc. v. Arch Ins. Group, Inc., et al, 2025 US. Dist. LEXIS 128114 (N.D. Ill. July 7, 2025). 

    The Paper Tigers, Inc. (Plaintiff) specialized in reworking paper to meet its customers' specifications. Plaintiff stored paper products in its own facilities that it had reworked but not yet shipped to its customers. Therefore, it was important to Plaintiff that any insurance policies covering damage at its facilities also covered loss or damage to stored customer products.

    For years, Plaintiff relied upon Alliant Insurance Services, Inc. to procure policies sufficient for its business needs. To ensure adequate coverage, Plaintiff disclosed to Alliant that its business involved storing products at its facilities that were owned by Plaintiff's customers, not Plaintiff itself, and that such products needed to be covered by any policy procured.

    On August 21, 2023, a fire at one of Plaintiff's facilities destroyed paper rolls worth nearly $1.2 million The destroyed rolls were owned by one of Plaintiff's customers. Plaintiff held a policy issued by Arch Insurance Group, Inc. Alliant obtained the policy through Arch's agent, CRC Insurance Services, LLC. Plaintiff believed its policy covered customer inventory held at the facility that burned based on the information it had shared with Alliant, which it believed was transmitted to CRC, regarding Plaintiff's coverage needs. This included Plaintiff's submission to Alliant of a "Statement of Values" that disclosed $1.5 million of inventory at the facility. 

    Following the fire, Plaintiff submitted a claim to Arch. Arch denied coverage, explaining that paper rolls not owned by Plaintiff were not covered under the policy. 

    Plaintiff sued Arch and CRC.The complaint alleged that CRC had negligently failed to provide Plaintiff with appropriate coverage. CRC moved to dismiss the negligence claim. 

    Illinois law provided that insurance producers, including brokers, had a duty to exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured. Once a proposed insured made a specific request for coverage, an insurer's agent had to exercise reasonable care to obtain the coverage requested or – if no such coverage was available – inform the proposed insured that they should look elsewhere. 

    Here, Plaintiff plausibly alleged that it made a specific request for coverage. Plaintiff alleged that it discussed with Allianz the nature of its business and emphasized its need for a policy that protected third-party inventory at its facilities. It also alleged it submitted to Allianz a Statement of Values detailing the $1.5 million in inventory held at the facility and that this statement was passed on to CRC with the context that this inventory was owned by Plaintiff's customer. These allegations of a specific request made by Plaintiff and transmitted to CRC made it plausible that CRC owed Plaintiff a duty to procure insurance covering losses to third-party inventory at Plaintiff's facilities. 

    The motion to dismiss was denied.