opinion: MERIT INSURANCE COMPANY, an Illinois Corporation, Plaintiff-Appellant, v. Anthony COLAO et al., Defendants-Appellees.
  No. 78-1460.
  United States Court of Appeals, Seventh Circuit.
  Argued Dec. 7, 1978.
  Decided Aug. 7, 1979.
  Rehearing and Rehearing In Banc Denied Nov. 6,1979.
  Charles J. O’Laughlin, Jenner & Block, Chicago, Ill., for plaintiff-appellant.
  Thomas J. Weithers, Chicago, Ill., for defendants-appellees.
  Before SWYGERT, LAY and WOOD, Circuit Judges.
  The Honorable Donald P. Lay, Circuit Judge of 'the United States Court of Appeals for the Eighth Circuit, is sitting by designation.
  SWYGERT, Circuit Judge.
  This diversity suit was started in 1975. The complaint, as amended, contained three counts. Count I alleged negligence; Count II — gross negligence; and Count III— fraud. At the pretrial stage, the district court dismissed the negligence counts for failure to state a claim and proceeded to try the fraud issue to a jury. For four months, November 1,1977 to February 28,1978, the plaintiff presented its case. On March 1, 1978 the trial judge granted motions for directed verdict in favor of all the defendants. From these adverse rulings, plaintiff appeals.
  I
  Merit is an Illinois casualty insurance company. It and its predecessor have been engaged in writing automobile liability insurance since 1968. The defendants are being sued individually and also as partners in Joseph Froggatt & Co., an accounting firm located in New Jersey but also operating in Philadelphia and New York City.
  Two other entities are involved: General Auto Placement, Inc. and Leatherby Insurance Company. General Auto was, before it became bankrupt, a New Jersey corporation selling automobile insurance policies to high risk drivers. It did not issue the policies; rather, it marketed policies that were written by licensed casualty insurance companies. Leonard Lebowitz, ' owner of eighty-five per cent of General Auto’s stock, was president of the company and controlled its operations. Leatherby Insurance Company, a California-based casualty insurance company, started to underwrite policies for General Auto in May 1969. It was replaced by Merit in 1972.
  The instant dispute centers on General Auto’s financial arrangements with its underwriters. A distinctive feature of these arrangements was that General Auto was paid commissions by the underwriter on a “retrospective” basis. Rather than receiving a flat percentage of the policy premiums as its commission (the ordinary practice), General Auto earned its commission on a fluctuating scale; that is, after a review of its loss experience on the policies it had sold, General Auto received a profit (if any) gauged on the difference between the premiums paid by policyholders and amounts paid on claims. The underwriter received a fixed percentage of the premium as an “underwriting fee." Thus, General Auto functioned in large part as an insurance company without actually being one. It assumed most of the risks even though the underwriters were ultimately liable to the policyholders.
  In general terms, General Auto’s business was conducted as follows:
  (1) General Auto agents received a commission of 15-20 percent of the premium collected by them on the policies sold.
  (2) General Auto would report to the underwriter the policies it had sold and remit the premiums, less the agents’ commissions.
  (3) General Auto would give notice to the underwriting insurance company of any claims on the policies it had sold along with estimated settlement costs. The underwriter would place on its books the estimated settlement costs as “claim reserves,” awaiting the actual amount of the claims paid.
  (4) When the claims were settled, General Auto would issue drafts drawn on the underwriter to those entitled to share in the settlement.
  (5) Every four months, General Auto would be paid by the underwriter a retrospective commission calculated on the basis of its earned premiums. General Auto was paid the total of earned premiums less:
  (a) the fixed underwriting fees,
  (b) the loss reserves, and
  (c) the amounts paid on closed claims.
  By virtue of this formula the lower the loss reserves were the more General Auto was paid on each quarterly settlement between General Auto and its underwriter.
  In order to evaluate the financial well being of General Auto at any particular time, it was necessary to look at the “loss ratio” of the total policies it had sold. This ratio could be calculated by comparing the combined amount of reserves and losses paid against the total amount of earned premiums. If General Auto had too high a loss ratio, the premiums would be insufficient to cover the losses on claims filed on the policies and the underwriter would be required to cover the deficiency. To protect itself against such a contingency, the underwriter required a guarantee from General Auto to cover any deficiency in premiums available to pay claims. Thus, so long as General Auto’s loss ratio was low enough or was able to make up any deficiency, the underwriter had a guaranteed profit from its fixed fee.
  General Auto was formed in 1969 and soon thereafter entered into a retrospective commission contract with Leatherby. The contract provided that General Auto was to be paid by Leatherby the amount of earned premiums generated by General Auto less (1) 17.5 percent as a fixed underwriter fee, (2) the amount set aside as reserves on open claims, and (3) the amounts paid out on claims. The retrospective commission was to be calculated by Leatherby on a quarterly basis. The contract gave General Auto the right to suggest the amount of loss reserves, but Leatherby retained ultimate control over setting the amount of these reserves.
  By August, 1970, Leatherby and General Auto were in dispute over the amount of loss reserves. Leatherby maintained that the reserves set by General Auto were forty percent less than what they should have been. General Auto thought thirty percent was more accurate. Leatherby insisted that the reserves should be increased by at least $85,000. An increase of that size would have created a severe cash flow difficulty for General Auto. President Lebowitz decided to find a replacement for Leatherby. Accordingly, he met in September 1970 with William A. F. Smith, head of the Philadelphia office of Joseph Froggatt & Co. They discussed the possibility of Froggatt providing General Auto with an audited financial statement which Lebowitz could use either to obtain public financing for purchase (or formation) of an insurance company or to induce another insurance company to supplant Leatherby.
  Smith said that a financial statement would aid in dealing with other insurance companies and indicated an interest in making such an audited statement. During the meeting Lebowitz told Smith about his policy of setting reserves as low as possible. Smith agreed that Froggatt would furnish the audited statement and in February 1971 telephoned Lebowitz, saying the audit for the year 1970 would start soon and that he would provide “the best looking statement he possibly could.”
  In March 1971 two Froggatt employees, Lotman and Cable, started the audit. During the course of their audit, they discovered a variety of disturbing situations: (1) one of the expenses claimed by General Auto in its book of accounts was “Manager’s Expense.” An audit of this account revealed that more than half of the $64,045 listed consisted of personal, rather than business, expenses of Lebowitz. (2) General Auto did not report or transmit all premiums due Leatherby within the time required by the agency contract. Upon questioning by Cable, Lebowitz conceded that he deliberately engaged in late reporting to enhance the cash position of General Auto. (3) Cable and Lotman discovered that General Auto was keeping two different sets of policy records. One set, for General Auto’s use, was complete. The other set, for Leatherby’s use, did not include the endorsements which required the payment of additional premiums. After Lotman and Cable had completed their field audit, they turned over their work product to Smith.
  In late June or early July 1971 Smith talked with Lebowitz several times about the drafts of the audited financial statement. The first draft submitted by Smith contained entries based on a loss ratio of approximately sixty-six percent. Lebowitz told Smith this was “totally unacceptable.” Smith said he would review the matter. Several days later a new draft was produced showing a fifty-six percent loss ratio. Lebowitz said this corresponded to Leather-by’s calculations which contained some “fat.” A week later Smith submitted a third draft of a financial statement based on a fifty percent loss ratio. Lebowitz expressed satisfaction and said that with that kind of statement General Auto could either obtain an agency agreement with a different company or form its own company. (The trial judge excluded all testimony of conversations between Lebowitz and Smith concerning the draft statements.)
  In September 1971 Lebowitz wrote a letter to Jerome Stern, president of Merit, saying that while General Auto was satisfied with its “present carrier,” it had a “capacity problem” and that General Auto was “looking for an additional company so that our expansion can continue.” On April 4, 1972 Lebowitz sent a copy of the Froggatt audit statement for 1970 to Stern and an in-house unaudited financial statement for the first nine months of 1972. On June 22, 1972 Merit and General Auto entered into an agency agreement similar to the Leatherby agreement, and General Auto began selling Merit policies in July 1972. In October 1972 Merit entered into a contract with Leatherby and General Auto whereby Merit assumed Leatherby’s outstanding policies sold by General Auto.
  In November 1972 General Auto ceased issuing policies for Merit. . It did continue to adjust claims it had issued for Merit and on the assumed Leatherby policies. By the end of July 1973 General Auto owed Merit $250,000 on promissory notes and $72,000 in premiums, and on August 8, 1973 Merit terminated its business relations with General Auto. Soon thereafter, General Auto went out of business. On the Leatherby policies assumed by Merit, Merit paid out between three and four million dollars compared to the nearly two million it had received from Leatherby. Merit also offered to make further proof of loss but was barred by an order of the trial judge.
  II
  The judgment of the district court must be reversed primarily because it erred in directing a verdict for the defendants. Under the rule that requires the evidence to be viewed in the light most favorable to the party opposing a motion for directed verdict, the plaintiff presented sufficient evidence to establish a prima facie case of fraud despite the fact that much relevant evidence was not admitted. The standard for establishing a prima facie case under Illinois law is that “verdicts ought to be directed . . . only in those cases in which all of the evidence, when viewed in the aspect most favorable to the opponent, so overwhelmingly favors movant that no contrary verdict based on that evidence could ever stand.” Pedrick v. Peoria & Eastern R.R. Co., 37 Ill.2d 494, 229 N.E.2d 504 (1967).
  Illinois law requires that civil fraud must be established by clear and convincing evidence, Ray v. Winter, 67 Ill.2d 296, 10 Ill.Dec. 225, 367 N.E.2d 678 (1977), and that the essential elements of fraud are: (1) the fraudulent representation must be a statement of a material fact, as opposed to mere opinions; (2) the representation must be untrue; (3) the one making the statement must know or believe that it is untrue; (4) the person to whom the statement is made must rely on it; (5) the statement must have been made for the purpose of inducing the other party to take some affirmative action; and (6) the reliance by the person to whom the statement is made must result in his injury. Roth v. Roth, 45 Ill.2d 19, 256 N.E.2d 888 (1970); Roda v. Berko, 401 Ill. 835, 339-40, 81 N.E.2d 912, 914 (1948). Except for the proof of the injury (damages), which was not permitted by the trial court, we are of the view that a prima facie case was made out by the plaintiff as to the above enumerated elements of fraud. Having already detailed the facts of this case, and since we remand for trial, no purpose would be served in further marshalling the evidence which compels that conclusion. We do note that reliance upon the report by plaintiff was primarily based on the testimony of Jerome Stern, president of Merit. Although his testimony was severely restricted (erroneously we think), that which was admitted made reliance a jury question.
  Stern testified that it was General Auto’s certified audit report which induced him to follow through on the business arrangement with General Auto. He said that he was particularly impressed with defendants’ “clear opinion” showing that General Auto had a substantial net worth and high operating income. Stern further testified that he knew Froggatt to be a well-known accounting firm in the insurance field and believed at the time that it had given “an unqualified opinion that those statements fairly presented” General Auto’s financial position. Thus, it became a jury question as to whether Stern was justified in relying on the audit report which, in part at least, indicated General Auto’s financial health in 1972.
  Defendants argue that plaintiff failed to establish a prima facie case that they knowingly made material misrepresentations for the fraudulent purpose of inducing merit to act. Although much relevant and material evidence going to fraudulent intent was excluded erroneously by the trial judge, even that which was admitted was sufficient to present a jury question. Smith knew why the audit was made and he knew that a limited class of persons might rely on it. Moreover, Lebowitz testified about a meeting he had with Smith in September 1970:
  “I discussed at that time the problems that I was having with Leatherby Insurance Company in regard to the increases of loss reserves and I explained to him [Smith] the purpose of the audit was so that I would have a certified statement in order to attempt to obtain an underwriter for a public issue at the time and also that I was to approach other companies in an attempt to obtain another contract. He advised me at that time that he would look around and see what companies he could possibly suggest and he also felt that it was good to have a certified statement at that time.”
  Ill
  Contrary to the dissent, the majority of the panel is of the view that the trial court erred in dismissing Count One of the amended complaint alleging negligence in defendants’ conduct in preparing and submitting the 1970 General Auto audit. Under Illinois law, privity between Merit and the defendants is not required. Rozny v. Marnul, 43 Ill.2d 54, 250 N.E.2d 656 (1969). That case is the controlling authority in this area of the law of Illinois. One of the relevant criteria listed in Rozny is that potential liability for a negligent audit must be directed to a comparatively small group only one of whom would suffer a loss. The trial judge’s ruling was based on this criterion. Defendants support the ruling by arguing that the extension of liability for negligence to unforeseen third parties “would impermissively extend the number of potential plaintiffs to an undeterminable class.” App. Brief at 117. Plaintiff counter-argues that the class of insurance companies able to do business with General Auto, of which Merit was a member, was considerably more limited than the class of persons who might have bought the house in Rozny. To choose between these two contentions at the pleading stage is impermissible. The issue must be resolved at trial. One of the paragraphs of Count I reads:
  Froggatt knew or should have known that its certified financial statements would be used by third persons such as plaintiff as a basis for business decisions involving General Auto Replacement, Inc.
  This count, liberally interpreted, alleges a class of insurance companies which, like Merit, could provide the kind of insurance policies General Auto sold. Thus, the complaint was sufficient to withstand defendants’ challenge that the complaint was defective for want of facts showing that they knew of a limited class that might rely on the audit report. In all other respects the complaint met the requirements of Fed.R. Civ.P. 8(a). Conley v. Gibson, 355 U.S. 41, 47 — 48, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see e. g., Eyerly Aircraft v. Killian, 414 F.2d 591, 603 (5th Cir. 1969). Illinois procedure requires a plaintiff allege freedom from contributory negligence. The complaint contains no such allegations. But the allegation was unnecessary because under Fed. R.Civ.P. 8(c) contributory negligence is an affirmative defense which a defendant, not a plaintiff, must plead.
  With respect to Count Two, Illinois does not recognize gross negligence as an independent ground for recovery. C.R.I. & P. Ry. v. Hamler, 215 Ill. 525, 74 N.E. 705 (1903). Accordingly, the trial court did not err in dismissing Count Two.
  Plaintiff contends that the trial judge erred in refusing to require Anthony Colao, one of the defendants, to complete his deposition and that such refusal, under the circumstances, was a manifest abuse of discretion. We need not recite those circumstances because we believe the problem should, if the occasion demands, be reviewed and ruled upon anew by the district court at the new trial.
  Because we remand for a new trial, we deem it unnecessary to comment on the numerous allegedly erroneous evidentiary rulings by the trial judge (other than those to which we have alluded in general terms in Part II).
  The judgment of the district court is reversed and vacated. The cause is remanded for a new trial under the provision of Circuit Rule 18.
  . While Lebowitz was operating G.I.A., Inc., a company authorized to write automobile casualty insurance in New Jersey and Pennsylvania, he met William A. F. Smith. On Smith’s advice, G.I.A. retained Froggatt to furnish auditing services. G.I.A. became insolvent in 1968 and went out of business. Thereafter, Lebowitz formed General Auto.