According to 3-J the relationship may be established by circumstantial evidence based upon an examination of the situation of the parties, their acts, and other relevant circumstances. ( Stefani v. Baird Warner, Inc. (1987), 157 Ill. App.3d 167.) 3-J asserts that the existence and scope of an agency relationship are questions of fact for the trier of fact. ( Stefani, 157 Ill. App.3d at 171; Sherman v. Field Clinic (1979), 74 Ill. App.3d 21.) 3-J relies on Estergard, Eberhardt Ackerman, Inc. v. Carragher (1982), 105 Ill. App.3d 816, as a case which demonstrates that agency should not be determined as a matter of law. However, Estergard did not involve a motion to dismiss for failure to state a cause of action but was an appeal from a judgment following a bench trial.
The duty of a subagent to the principal is the same as that of the agent. Restatement 2d Agency § 428(2) (1958); see also Estergard, Eberhardt Ackerman, Inc. v. Carragher, 434 N.E.2d 1185, 1187 (Ill.App. 1982); P.F.C. Management Corp. v. Athlone Intermediaries, Inc., Unreported Decision, Text at 1993 WL 147526 (N.D.Ill. 1993); cf. Gibson v. J.T. Allen Agency, 407 P.2d 708 (Wyo. 1965); Griffin v. Rosenblum, 23 P.2d 348 (Wyo. 1933). The defendants all stand in a fiduciary relationship to the insurance companies for which they were agents (or sub-agent) selling insurance on behalf of the company.
Further, Illinois courts have held that, unless otherwise agreed, a subagent, i.e. an agent of an agent, owes the principal the same duties as the agent. Estergard, Eberhardt Ackerman, Inc. v. Carragher, 105 Ill. App.3d 816, 61 Ill.Dec. 588, 434 N.E.2d 1185 (4th Dist. 1982), citing with approval the RESTATEMENT (SECOND) OF AGENCY, § 428. Section 428 of the RESTATEMENT (SECOND) OF AGENCY provides in relevant part:
Id. at 126. Accord, Estergard, Eberhardt Ackerman, Inc. v. Carragher, 105 Ill. App.3d 816, 61 Ill.Dec. 588, 434 N.E.2d 1185, 1188 (4th Dist. 1982) ("[m]oney paid under the impression of the truth of a fact which is untrue may be recovered back, however careless the party paying may have been in omitting to use due diligence to inquire into the facts"); RESTATEMENT OF RESTITUTION, § 59 (1937) ("[a] person who has conferred a benefit upon another by mistake is not precluded from maintaining an action for restitution by the fact that the mistake was due to his lack of care"); but cf. id. cmt. a ("where an innocent transferee has changed his position so that either he or the payer must suffer loss, the fact that the transferor has been neglectful in creating the situation is important in determining the allotment of the loss"). In sum, Connerton continued to make full payments when it was arguably on notice that it may have owed less than it was paying.
The broker must inform the insured of all material facts within the broker's knowledge that may affect the transaction or the subject matter of the relationship and not mislead the insured. American Environmental, 222 Ill. App.3d at 250; Protective Insurance Co. v. Coleman (1986), 144 Ill. App.3d 682, 694; Estergard, Eberhardt Ackerman, Inc. v. Carragher (1982), 105 Ill. App.3d 816, 820. • 8 Inherent in the obligation to seek coverage are the duties to act with promptness and to notify the customer if the insurer declines to insure the risk so that the insured customer will not be lulled into a false feeling of security or suffer prejudicial delay in seeking coverage elsewhere.
• 8 It is well settled in agency law that the relationship between a principal and agent is one of trust and confidence and that the agent owes a duty of loyalty to his principal. ( Estergard, Eberhardt Ackerman, Inc. v. Carragher (1982), 105 Ill. App.3d 816, 434 N.E.2d 1185; Willis v. Ruthrauff Ryan, Inc. (1957), 14 Ill. App.2d 259, 144 N.E.2d 636; 3 Am.Jur.2d Agency § 210 (1986); 3 C.J.S. Agency § 271 (1973).) Where, as in the present case, a conflict arises among joint principals concerning how an agent should act, a breach of this duty of loyalty may occur.
Although the Willens court did not firmly base its holding upon the fraud exception to the Groves rule, it is clear that such an exception exists. (See, e.g., Estergard, Eberhardt Ackerman, Inc. v. Carragher (1982), 105 Ill. App.3d 816, 820.) Examination of the plaintiff's amended complaint, however, reveals that plaintiff failed to plead facts which would trigger the operation of the fraud exception.