Fox v. American Economy Insurance Company
Filing
50
MEMORANDUM Opinion and Order Signed by the Honorable George M. Marovich on 2/14/2012. (nf, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
H. CRAIG FOX,
Plaintiff,
v.
AMERICAN ECONOMY INSURANCE
COMPANY,
Defendant.
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10 C 2580
Judge George M. Marovich
MEMORANDUM OPINION AND ORDER
After a flood at the building plaintiff Dr. H. Craig Fox (“Dr. Fox”) owned and used for
his podiatry practice, Dr. Fox filed in the Circuit Court of DuPage County a suit against
Defendant American Economy Insurance Company (“American”). American removed the suit
to this Court.1 American has filed a motion for summary judgment. For the reasons set forth
below, the Court grants in part and denies in part defendant’s motion for summary judgment.
I.
Background
Local Rule 56.1 outlines the requirements for the introduction of facts parties would like
considered in connection with a motion for summary judgment. The Court enforces Local Rule
56.1 strictly. Facts that are argued but do not conform with the rule are not considered by the
Court. For example, facts included in a party’s brief but not in its statement of facts are not
considered by the Court because to do so would rob the other party of the opportunity to show
that such facts are disputed. Where one party supports a fact with admissible evidence and the
other party fails to controvert the fact with citation to admissible evidence, the Court deems the
1
The Court has jurisdiction over this case, because the parties are diverse and the amount
in controversy is greater than $75,000.00. Plaintiff Dr. Fox is a citizen of Illinois. Defendant
American Economy Insurance Company is a citizen of Indiana and of Washington.
fact admitted. See Ammons v. Aramark Uniform Services, Inc., 368 F.3d 809, 817-818 (7th Cir.
2004). This does not, however, absolve the party putting forth the fact of its duty to support the
fact with admissible evidence. See Keeton v. Morningstar, Inc., __ F.3d __, __, slip. op. at 2,
2012 WL 130456 at *1 (7th Cir. 2012). Asserted “facts” not supported by deposition testimony,
documents, affidavits or other evidence admissible for summary judgment purposes are not
considered by the Court. At the summary judgment stage, it does not suffice to rely on
complaint allegations. Nor is it enough for either party to say a fact is disputed. The Court
considers a fact disputed only if both parties put forth admissible evidence of his or its version of
the fact.
The Court notes at the outset that defendant several times disputed plaintiff’s facts
without citing evidence. The result is that several of plaintiff’s statements (including ¶¶ 66, 67,
71, 72, 81 and 82) are deemed admitted, because plaintiff supported those statements with
evidence but defendant did not cite evidence to dispute them. Defendant also repeatedly argues
that Dr. Fox’s deposition testimony, merely because he is a plaintiff, cannot constitute evidence
unless corroborated by other evidence. This argument fails. Rule 56 lists depositions as a form
of evidence admissible at the summary judgment stage. Fed. R. Civ. P. 56(c). As the Seventh
Circuit explained in Payne v. Pauley, 337 F.3d 767, 770-71 (7th Cir. 2003), a “nonmoving
party’s own affidavit or deposition can constitute affirmative evidence to defeat a summary
judgment motion.” Payne, 337 F.3d at 770-771 (explaining that when testimony or affidavits are
rejected, it is not because they are self-serving or uncorroborated but rather because they lack a
basis on personal knowledge). So long as the testimony is based on personal knowledge (and,
here, defendant does not suggest it is not), Dr. Fox’s deposition testimony is admissible for
summary judgment purposes.
The following facts are undisputed unless otherwise noted.
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Dr. Fox ran his podiatry practice out of a building he owned at 75 S. Broadway Street in
Coal City, Illinois. The building was insured, during the period of August 1, 2003 through
August 1, 2004, by a policy (the “Policy”) issued by American. The Policy included an
Ordinance or Law Coverage Endorsement, which provided, in relevant part:
B.
Application of Coverage(s)
The coverage(s) provided by this endorsement apply only if both B.1. and
B.2. are satisfied and are then subject to the qualifications set forth in B.3.
1.
The ordinance or law:
a.
b.
Regulates the demolition, construction or repair of
buildings, or establishes zoning or land use requirements at
the described premises; and
is in force at the time of loss.
But coverage under this endorsement applies only in response to
the minimum requirements of the ordinance or law. Losses and
costs incurred in complying with recommended actions or
standards that exceed actual requirements are not covered under
this endorsement.
*
D.
*
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Coverage
1.
Coverage A–Coverage for Loss to the Undamaged Portion of the
Building
With respect to the building that has sustained covered direct
physical damage, we will pay under coverage A for the loss in
value of the undamaged portion of the building as a consequence
of enforcement of an ordinance or law that requires demolition of
undamaged parts of the same building.
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2.
*
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Coverage B–Demolition Cost Coverage
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With respect to the building that has sustained covered direct
physical damage, we will pay the cost to demolish and clear the
site of undamaged parts of the same building, as a consequence of
enforcement of an ordinance or law that requires demolition of
such undamaged property. Paragraph E.6.d. Section I – Property,
Loss Conditions does not apply to Demolition Cost Coverage.
3.
Coverage C–Increased Cost of Construction Coverage
a.
With respect to the building that has sustained covered
direct physical damage, we will pay the increased cost to:
(1) Repair or reconstruct damaged portions of that building;
and/or
(2) Reconstruct or remodel undamaged portions of that
building, whether or not demolition is required;
when the increased cost is a consequence of the ordinance
or law.
However:
(1) This coverage applies only if the restored or remodeled
property is intended for similar occupancy as the current
property, unless such occupancy is not permitted by zoning
or land use ordinance or law.
(2) We will not pay for the increased cost of construction if
the building is not repaired, reconstructed or remodeled.
Paragraph E.6.d. Section I–Property, Loss Conditions does
not apply to Increased Cost of Construction Coverage.
*
E.
*
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*
*
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Loss Payment
3.
The most we will pay, for the total of all covered losses for
Demolition Cost and Increased Cost of Construction, is the
combined limit of $150,000, applicable to the following loss
payment provisions:
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a.
For the Demolition Cost, we will not pay more than the
amount you actually spend to demolish and clear the site of
the described premises.
b.
With respect to the Increased Cost of Construction;
(1)
We will not pay for the increased cost of
construction:
(a)
Until the property is actually repaired or
replaced, at the same or another premises,
and
(b)
Unless the repairs or replacement are made
as soon as reasonably possible after the loss
or damage, not to exceed two years. We
may extend this period in writing during the
two years.
(Ordinance and Law Endorsement).
In January 2004, a pipe in Dr. Fox’s building froze and burst. The broken pipe caused
water damage to the first floor of Dr. Fox’s building. Dr. Fox notified American, which, among
other things, paid Dr. Fox $33,651.74 for the physical damage to the building.
When it came time for Dr. Fox to repair the damage to the building, the applicable
building code stood in the way. Coal City had implemented the 2000 International Building
Code and its requirement that a building be constructed such that its foundation extends at least
42 inches above the frost line. Dr. Fox’s building was built slab on grade, such that the floor
joists were a few inches above the ground. The parties agree that in order to repair the damaged
first floor of the building, Dr. Fox would have to bring the building into compliance, i.e.,
increase the foundation to 42 inches.
Dr. Fox hired an architect, Gregory Lyons (“Lyons”). According to Lyons, in order to
raise the foundation of Dr. Fox’s building, Dr. Fox would have to shore up the perimeter of the
building and the interior support walls in order to prevent the building from collapsing while the
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foundation was replaced. Dr. Fox believed that shoring up the building was dangerous, and he
decided, instead, to demolish the building. At no time did Lyons tell Dr. Fox that the building
code mandated that he demolish the building. Nor did Coal City issue a notice or otherwise
inform Dr. Fox that he was required to demolish the building. It is undisputed that the building
code did not mandate the demolition of either the damaged or undamaged portions of the
building. Still, Dr. Fox hired a demolition company to demolish the building and paid them
$12,900 for their services. American reimbursed Dr. Fox for the cost of demolition.
Along the way, Dr. Fox and American communicated via letter, phone call and in person.
A few times, Dr. Fox met an American claims adjuster at a Home Depot parking lot in order to
exchange documents. The parties dispute how well they communicated.
On March 5, 2004, American sent Dr. Fox a letter. In the letter, American stated that,
under the Ordinance or Law Coverage Endorsement, Dr. Fox’s maximum coverage was
$150,000 less the $12,900 for the demolition, leaving $137,100. In the letter, American also
quoted the policy language, which states, “We will not pay for the Increased Cost of
Construction (a) until the property is actually repaired or replaced . . . as soon as reasonably
possible after the loss or damage, not to exceed two years.” American noted that it expected the
building to be reconstructed within four months.
On April 20, 2004, American sent another letter to Dr. Fox. The letter requested from
Dr. Fox specific documents, including a copy of repair estimates from his contractor, an estimate
of the time of completion of the repairs and a copy of repair bills. The letter also asked Dr. Fox
to contact American when the repairs were 80% completed. Dr. Fox telephoned American. Dr.
Fox told the claims adjuster that the construction company had already given her a repair
estimate and that his architect (Lyons) had already given her an estimate on the timing of
construction.
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On May 25, 2004, American sent Dr. Fox another letter. In this letter, American asked
Dr. Fox to let the claims adjuster know when he obtained work permits and when the work
would start. The letter also requested the documents American had requested in the April 20,
2004 letter. The parties dispute whether Dr. Fox ever provided the documents. Dr. Fox put forth
evidence that he did, and American put forth evidence that he did not.
On July 7, 2004, American sent Dr. Fox another letter. This time, American stated that it
expected the repairs to be completed within four months after the building was demolished and
permits secured. American also requested documents and asked for a signed Proof of Loss. This
was the first time American requested that Dr. Fox sign a Proof of Loss. The parties dispute
whether Dr. Fox sent American a signed Proof of Loss and the other documents requested in the
July 7, 2004 letter. Dr. Fox put forth evidence that he did, and American put forth evidence that
he did not.
American sent another letter to Dr. Fox on August 9, 2004. In the letter, American
requested that Dr. Fox comply with its previous requests within 30 days. The parties dispute
whether Dr. Fox responded.
On November 6, 2004, American sent Dr. Fox another letter. In this letter, American
stated that Dr. Fox had not complied with American’s prior requests for documents and a signed
Proof of Loss. In the letter, American also stated that if Dr. Fox did not comply within thirty
days, then American would deny further liability for Dr. Fox’s claim. It is undisputed that Dr.
Fox did not respond to the November 6, 2004 letter.
On December 15, 2004, American sent a final letter to Dr. Fox. In it, American stated:
Due to your systematic and repeated failure to comply with your duties and
obligations under Policy 02 BO 729315, American Economy Insurance Company
denies any and all liability to you for additional payments or claims arising from
or related to the loss of January 19, 2004. In communications and correspondence
including, but not limited to February 4, 2004, March 18, 2004, April 20, 2004,
July 7, 2004, August 9, 2004 and November 6, 2004, all of which are
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incorporated by reference, you have been informed of your duties under the
policy and of your repeated failures in compliance. In correspondence dated
November 6, 2004, you were extended one final opportunity to cure your
previous refusals to discharge your policy obligations. You chose to disregard the
November 6th correspondence as well. Accordingly you are in material breach of
the insurance policy and American Economy denies any and all further liability to
you for the loss of January 19, 2004.
(December 15, 2004 letter).
Once he had received the December 15, 2004 letter, Dr. Fox stopped trying to rebuild his
building. He decided that he could not take the risk of spending money to build without the
assurance that American would reimburse him under the Policy. Dr. Fox did not construct a new
building and, thus, did not incur increased construction costs. Dr. Fox still intends to rebuild, but
only if he will be reimbursed under the Policy.
Dr. Fox filed a two-count complaint. In Count I, Dr. Fox seeks a declaration that
American “committed an anticipatory repudiation of the Policy on December 15, 2004, and
thereby excused Fox from the condition precedent that he repair or replace the building within
two years of January 19, 2004, and that therefore Fox is still entitled to the funds available under
Coverages A, B, and C of the Ordinance or Law Coverage endorsement.” In Count II, Dr. Fox
seeks damages for anticipatory repudiation.
II.
Summary Judgment Standard
In a diversity case, such as this one, the Court applies state substantive law and federal
procedural law. Erie RR v. Tompkins, 304 U.S. 64, 78 (1938).
Summary judgment should be granted when “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(c). When making such a determination, the Court must construe the
evidence and make all reasonable inferences in favor of the non-moving party. See Anderson v.
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Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Summary judgment is appropriate, however,
when the non-moving party “fails to make a showing sufficient to establish the existence of an
element essential to the party’s case, and on which that party will bear the burden of proof at
trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “A genuine issue of material fact
arises only if sufficient evidence favoring the nonmoving party exists to permit a jury to return a
verdict for that party.” Brummett v. Sinclair Broadcast Group, Inc., 414 F.3d 686, 692 (7th Cir.
2005).
III.
Discussion
A.
Anticipatory breach
Dr. Fox’s theory in this case is that he can still recover under the policy–despite not
meeting the condition precedent of building within a reasonable time (not to exceed two
years)–because American committed an anticipatory repudiation of the insurance contract,
thereby relieving Dr. Fox of the requirement that he build within a reasonable time (not to
exceed two years). Dr. Fox’s theory is based on language in Bituminous Casualty Corp. v.
Commercial Union Ins. Co., 652 N.E.2d 1192, 1197 (Ill.App.Ct. 1st Dist. 1995) (“When one
party to a contract repudiates his contractual duties before time for performance, the other party
may elect to treat the contract as ended. In such cases the nonbreaching party is not required to
tender performance or to comply with conditions precedent.”). American does not argue that Dr.
Fox’s theory is wrong or inapplicable to these circumstances. Instead, American argues that, as
a matter of law, its conduct did not constitute anticipatory repudiation of the insurance policy.
The parties agree that under Illinois law, “anticipatory repudiation is actionable as a
breach of contract when–and only when–the repudiating party unequivocally and without
justification renounces its duty to perform the contract on its date of performance.” Draper v.
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Frontier Ins. Co., 638 N.E.2d 1176, 1181 (Ill.App.Ct. 2nd Dist 1994); Busse v. Paul Revere Life
Ins. Co., 793 N.E.2d 779, 783 (Ill.App.Ct. 1st Dist. 2003). Dr. Fox believes that American’s
December 15, 2004 letter constituted anticipatory repudiation. In the letter, American stated:
Due to your systematic and repeated failure to comply with your duties and
obligations under Policy 02 BO 729315, American Economy Insurance Company
denies any and all liability to you for additional payments or claims arising from
or related to the loss of January 19, 2004. In communications and correspondence
including, but not limited to February 4, 2004, March 18, 2004, April 20, 2004,
July 7, 2004, August 9, 2004 and November 6, 2004, all of which are
incorporated by reference, you have been informed of your duties under the
policy and of your repeated failures in compliance. In correspondence dated
November 6, 2004, you were extended one final opportunity to cure your
previous refusals to discharge your policy obligations. You chose to disregard the
November 6th correspondence as well. Accordingly you are in material breach of
the insurance policy and American Economy denies any and all further liability to
you for the loss of January 19, 2004.
(December 15, 2004 letter).
American argues that its December 15, 2004 letter does not constitute anticipatory
repudiation, because the letter was justified. American has put forth evidence that it repeatedly
requested that Dr. Fox provide documents in support of his claim and to show progress toward
rebuilding the building. American has put forth evidence that Dr. Fox failed to do so. American
also put forth evidence that it asked Dr. Fox to provide a signed Proof of Loss and that he never
did so. These facts, however, are disputed. Dr. Fox has put forth evidence that he provided
documents and that he telephoned American to discuss most of the letters American sent him.
Dr. Fox has also put forth evidence that he mailed in the required signed Proof of Loss.
Dr. Fox has put forth sufficient evidence from which a reasonable jury could reach a
verdict in his favor on his claim for anticipatory breach. Accordingly, summary judgment is not
appropriate.
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B.
Policy language
1.
Coverage A
Next, American argues that even if its alleged anticipatory repudiation relieves Dr. Fox
of the condition precedent of building within two years, American still is not liable to Dr. Fox
due to the language of the Policy. First, American argues that the building code did not require
demolition and that Coverage A of Ordinance or Law Coverage Endorsement does not apply
unless the code required demolition. This seems like an odd tack for American to take after
paying Dr. Fox for the demolition under Coverage B (which contains the same language). Still,
Dr. Fox does not argue that American has waived this argument or is estopped from making it,
so the Court will consider it.
The parties agree that Illinois law applies. Under Illinois law, insurance policies are
interpreted the same way as other contracts. Nicor, Inc. v. Associated Elec. & Gas Ins. Serv.
Ltd., 223 Ill.2d 407, 416 (Ill. 2006). A court must “construe the policy as a whole, taking into
account the type of insurance purchased, the nature of the risks involved, and the overall purpose
of the contract.” Nicor, 223 Ill.2d at 416. Clear and unambiguous provisions are applied as
written, and words are given their plain meaning. Id.
American argues that the language of Coverage A of the Ordinance or Law Coverage
Endorsement does not apply to Dr. Fox’s loss. Coverage A provides, in relevant part:
With respect to the building that has sustained covered direct physical damage,
we will pay under coverage A for the loss in value of the undamaged portion of
the building as a consequence of enforcement of an ordinance or law that
requires demolition of undamaged parts of the same building.
(Ordinance or Law Coverage Endorsement) (emphasis added). American argues that the
building code did not require demolition.
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The undisputed evidence supports American’s argument that the building code did not
require demolition. It is undisputed that Coal City never informed Dr. Fox that he was required
to demolish the building. The building code did, of course (as even American concedes), require
that Dr. Fox increase the foundation to 42 inches. The undisputed evidence, however, is that the
foundation could be increased to 42 inches without demolition, by shoring up the perimeter of
the building and the interior support walls so that the building would not collapse while the
foundation was replaced. That Dr. Fox did not like that option (because he thought it was
dangerous) does not mean that demolition was required by the building code.
Even though it is undisputed that the building code did not “mandate” that Dr. Fox
demolish the building and that Dr. Fox’s architect never told Dr. Fox that the building code
mandated that he demolish the building, Dr. Fox argues that the term “requires” in Coverage A
means something less than “mandates.” Dr. Fox may be partly correct: even if the building code
did not specifically mention that the only proper method of raising the foundation was to
demolish the building, the building code still might be said to “require” demolition if the only
means of raising the foundation was to demolish the building. That is not, however, the case
here. Here, there was a means other than demolition available to comply with the code: shoring
up the building. It was Dr. Fox’s fear that shoring up the building was dangerous, not the
requirements of the building code, that caused him to choose demolition.
American has shown there is no issue of material fact and that it is entitled to judgment
as a matter of law with respect to the portions of Dr. Fox’s claims that seek to recover under
Coverage A. American is granted summary judgment on those portions of Dr. Fox’s claims.
2.
Coverage B
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Next, American argues that it has already paid Dr. Fox for his loss under Coverage B,
which covers the cost of demolition itself. It is undisputed that American has already paid Dr.
Fox for the cost of demolition. Dr. Fox does not object to entry of summary judgment with
respect to Coverage B.
Accordingly, the Court concludes that American has shown that there are no material
issues of fact and that it is entitled to judgment as a matter of law with respect to the portions of
Dr. Fox’s claims that seek coverage under Coverage B of the Ordinance or Law Coverage
Endorsement.
3.
Coverage C
Finally, American argues that Dr. Fox cannot recover under Coverage C, because Dr. Fox
did not repair or replace the building “as soon as reasonably possible after the loss or damage,
not to exceed two years,” as is required by the Ordinance or Law Coverage Endorsement ¶
E(3)(b)(1)(b).
The Court rejects this argument. This is the very condition precedent that Dr. Fox seeks
to relieve himself of by making his claims for anticipatory repudiation. American does not argue
that Dr. Fox’s legal premise (that if he establishes anticipatory repudiation then he need not
comply with the condition precedent) is mistaken. This Court has already concluded that there is
an issue of fact with respect to Dr. Fox’s claims for anticipatory repudiation. For the same
reasons, there are issues of fact as to whether American is liable to Dr. Fox under Coverage C.
IV.
Conclusion
For the reasons set forth above, the Court grants in part and denies in part defendant
American Economy Insurance Company’s motion for summary judgment. American Economy
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Insurance Company is granted summary judgment with respect to the portions of Counts I and II
that seek damages under Coverage A or Coverage B of the Ordinance or Law Coverage
Endorsement.
ENTER:
George M. Marovich
United States District Judge
DATED: February 14, 2011
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