Robert Ferguson v Aon Risk Services Companies, Inc., 24-2017
U.S. Court of Appeals, Seventh Circuit Civil Insurance Law
Holdings
- Seventh Circuit affirms insurance brokers owe no duty to non-insured third parties absent explicit contractual intent to benefit them
- Court holds mere reference to a party in a brokerage contract does not confer third-party beneficiary status under Illinois law
- Useful for insurance coverage litigators and professional negligence defense counsel handling broker liability and third-party beneficiary claims
Summary
Plaintiffs, former shareholders of Clarendon's parent company, sued Aon Risk Services in Illinois state court for professional negligence and breach of contract, alleging Aon failed to notify SCB's insurance carriers of Clarendon's claims against Raydon under 1996 and 1999 agreements between Aon and SCB. After removal to federal court, the district court dismissed the negligence claim under Rule 12(b)(6) and later granted summary judgment to Aon on the contract claim. Plaintiffs appealed both rulings.
The Seventh Circuit affirmed on all grounds. First, applying Illinois's strong presumption that contracts benefit only the contracting parties, the court held Clarendon was not a third-party beneficiary of either agreement because neither document affirmatively and explicitly manifested intent to directly benefit Clarendon—at most, one document obliquely referenced Clarendon as a type of carrier SCB did business with, which was insufficient. Second, the court held Aon owed no professional duty to Clarendon, a non-insured third party, because Illinois law confines a broker's duty to its insured client (SCB), and no authority extends that duty to notifying an insured's carriers of claims brought by third parties. Third, even assuming viability, the claims were time-barred under Illinois's two-year statute of limitations for insurance producer claims, since Plaintiffs were on inquiry notice of the alleged breach by 2012 but did not sue until 2019.
The decision reinforces Illinois's restrictive approach to third-party beneficiary claims and broker liability, providing a clear roadmap for defending brokers against claims brought by parties outside the insurer-insured relationship.
In short
1) Under Illinois law, a third party may recover on a contract only where the contract affirmatively and explicitly manifests intent to directly benefit that party; a mere passing reference to the third party is insufficient. 2) An insurance broker's professional duty runs only to its insured client, not to non-insured third parties who assert claims against the insured. 3) Claims against insurance producers under 735 ILCS 5/13-214.4 are subject to a two-year statute of limitations, triggered by inquiry notice of the alleged breach. 4) The 'duty owed' test under Robson and Restatement (Second) of Contracts § 302 cmt. d presupposes third-party beneficiary status and cannot itself establish it.
This summary was drafted by AI and verified against the slip opinion. It may contain errors and is not legal advice — always read the original before relying on it.