Milligan v. Grinnell Mutual Reinsurance Company
Filing
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ORDER DENYING 14 Motion for Summary Judgment; DENYING 16 Motion for Hearing. Signed by Judge William D. Stiehl on 12/16/2013. (bjw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
BETHEL MILLIGAN,
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Plaintiff,
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v.
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GRINNELL MUTUAL REINSURANCE )
COMPANY,
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Defendant.
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No. 12-CV-947-WDS
ORDER
STIEHL, District Judge:
Plaintiff Bethel Milligan brings this action seeking a declaratory judgment that defendant Grinnell Mutual Reinsurance Company’s insurance policy provides coverage for
plaintiff’s storage units that were destroyed by a tornado. The original policy, issued years
before, covered another set of storage units at a different address, but defendant accidentally changed the address to that of the units that were later destroyed. Plaintiff now moves
for summary judgment (Doc. 14) seeking to exploit defendant’s mistake. 1 Defendant responds (Doc. 18) that the intent of the parties is a factual dispute that should be left for the
trier of fact to settle. Plaintiff has filed a reply (Doc. 21). He also moves for a hearing on
his motion for summary judgment (Doc. 16).
The Court finds that it has subject-matter jurisdiction in this action. Plaintiff originally filed his complaint in the Circuit Court of the First Judicial Circuit in Saline County,
Illinois. Defendant removed it here based on diversity jurisdiction. See 28 U.S.C.
§§ 1332(a)(1), 1446. Plaintiff, an individual, is a citizen of Illinois. Defendant, a corporation, was incorporated under the laws of Iowa, with its principal place of business in Iowa,
1
Plaintiff calls his motion a motion for partial summary judgment. However, there is only one count in the
complaint against a single defendant, so the motion is not partial.
so it is a citizen of Iowa. Thus the parties are completely diverse. See, e.g., Market St. Assocs. Ltd. P’ship v. Frey, 941 F.2d 588, 589 (7th Cir. 1991). As to the matter in controversy, the policy limit on the insurance for plaintiff’s property was $42,000 per storage unit,
and all three were destroyed. Plaintiff also seeks consequential and incidental damages,
and attorney’s fees. The Court therefore finds that the matter in controversy exceeds the
sum or value of $75,000. See § 1332(a). The requirements of diversity jurisdiction are met.
BACKGROUND
Plaintiff Bethel Milligan operated a business called Energy Mart and 45 - Self Storage. In 2007, plaintiff used a broker to take out a business owner’s insurance policy on
three of his storage units. He instructed the broker to apply for insurance on the storage
units next to the Energy Mart store, which was at 911 South Commercial Street in Harrisburg, Illinois. However, the broker instead applied for insurance on a different set of storage units owned by plaintiff, located outside the Harrisburg city limits on U.S. Highway
45, or Route 45. As it happens, South Commercial Street and Route 45 are the same road
(Milligan Dep. 53:24–25, 55:1–5, Ex. 3, Doc. 18). 2 Defendant Grinnell Mutual Reinsurance Company issued plaintiff a policy covering the three storage units on Route 45. 3
In 2008, when the policy was renewed for the following year, defendant accidentally changed the address of the storage units to 911 South Commercial, apparently because
that reflected plaintiff’s mailing address (Letter from Bill Cocagne, Ex. 3, Doc. 14). As the
policy was renewed each year after that, the address remained 911 South Commercial, including when the policy was renewed for the 2011–2012 term (Renewal Declaration, Ex.
A, Doc. 15). Meanwhile, plaintiff continued to pay the premiums. He received premium
notices from time to time, and each year would receive a coverage sheet reflecting any
2
As plaintiff explained in his deposition, “If anybody asked where [the storage property] was at, I might say
it was Route 45 south. A lot of people know 45 and Commercial are the same one by this” (id.).
3
The parties do not include the original policy as an exhibit. They both accept the letter from Bill Cocagne
saying the original policy insured the property at Route 45, though (Ex. 3, Doc. 14).
2
changes in the value of the storage units and changes in the premiums (Milligan Dep.
58:2–16).
On February 29, 2012, a tornado blew through Harrisburg and destroyed the Energy Mart and all of plaintiff’s buildings at 911 South Commercial, including the three storage units there. Perhaps knowing it was Leap Day, the tornado left the storage units at
Route 45 untouched. Plaintiff called his broker’s office at Williams & Associates Insurance Agency, LLC, and spoke with Judy Robinson. 4 He asked her for a quote for coverage
on a piece of commercial property (Judy Robinson Aff. 2, Ex. B, Doc. 18). Robinson said
she would have to get back to him after the chaos involving the tornado had calmed down.
By the time she called him back, she’d heard that plaintiff had had buildings destroyed in
the tornado. She asked him about the property and whether it was insured. Plaintiff replied
that he had no insurance on the storage units that were destroyed. He told her Williams &
Associates had coverage on a different set of units on a separate piece of property.
About a month after the tornado, on March 24, 2012, an employee of defendant’s,
Bill Cocagne, met with plaintiff about the tornado damage (Bill Cocagne Aff. 1, Ex. A,
Doc. 18). They first met at 911 South Commercial. Cocagne saw that all five buildings had
been destroyed. He asked plaintiff why he had waited a month to turn in a claim. Plaintiff
responded that he did not think he had coverage on the destroyed property; he believed his
policy covered the property at Route 45. They then went to the Route 45 property and inspected it. Cocagne looked at the photographs that had been taken when the initial policy
was written. They matched the Route 45 property in appearance and also in the number of
buildings on the property (three) (Cocagne Aff. 2–3).
Plaintiff received a letter about three weeks later, on April 16, 2012, from Cocagne
denying coverage for plaintiff’s losses. The letter said that, after an investigation into
plaintiff’s policy, the original properties insured were the three storage buildings south of
4
Williams & Associates Insurance Agency, LLC is the successor to Kurt Williams & Associates Insurance
Agency, LLC.
3
Harrisburg on Route 45. It said defendant had no intent to provide coverage for the buildings located at 911 South Commercial. “For the 2008–2009 policy renewal,” Cocagne explained, “it appears the insured location was accidentally changed to reflect the mailing
address rather than the covered properties” (Ex. 3, Doc. 14).
Plaintiff brings this action seeking a declaratory judgment that defendant’s policy
provides coverage for the storage units at 911 South Commercial Street, Harrisburg, Illinois as a result of the tornado damage, and an order directing defendant to provide coverage for his loss, as well as to pay plaintiff’s consequential and incidental damages resulting
from defendant’s breach of the insurance policy.
DISCUSSION
The court must grant summary judgment where “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a). The movant “always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of ‘the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material
fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56(c)). A
party asserting that a fact cannot be, or is, genuinely disputed must support the assertion by
“citing to particular parts of materials in the record” or “showing that the materials cited do
not establish the absence or presence of a genuine dispute.” Fed. R. Civ. P. 56(c)(1).
The Court must determine whether any factual issues exist that may reasonably be
resolved in favor of either party and therefore must be submitted to the finder of fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The substantive law determines
which facts are material and which are immaterial. “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of
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summary judgment.” Id. at 248.
After the moving party has satisfied its burden, the burden shifts to the nonmoving
party. The nonmoving party “‘must do more than raise some metaphysical doubt as to the
material facts; [it] must come forward with specific facts showing that there is some genuine issue for trial.’” Argyropoulos v. City of Alton, 539 F.3d 724, 732 (7th Cir. 2008) (quoting Keri v. Bd. of Trs. of Purdue Univ., 458 F.3d 620, 628 (7th Cir. 2006)). A genuine issue for trial exists “only if sufficient evidence favoring the nonmoving party exists to permit a jury to return a verdict for that party.” Argyropoulos, 539 F.3d at 732 (quoting Sides
v. City of Champaign, 496 F.3d 820, 826 (7th Cir. 2007)).
The court must consider the record as a whole, in a light most favorable to the nonmoving party, and draw all reasonable inferences that favor the non-moving party. Anderson, 477 U.S. at 255.
ANALYSIS
Plaintiff argues in various ways that defendant is responsible for the mistake in
changing the address to 911 South Commercial in the 2008 policy renewal, which remained thereafter, and defendant should now be held to the express terms of the policy,
particularly since defendant continued accepting plaintiff’s premium payments. Plaintiff
argues ratification, waiver, and unilateral mistake. He also opposes reformation of the policy. Defendant responds that a contract should be interpreted to give effect to the parties’
intentions, and there is a genuine dispute as to which property the parties intended to insure, the storage units at Route 45 or at 911 South Commercial.
Before discussing those issues, the Court will briefly address an evidentiary matter.
Defendant includes an affidavit from Dana Hasselbrink, who states that she is familiar with
plaintiff’s insurance policy, and that the document attached to her affidavit is a true and
correct copy of plaintiff’s billing history on the policy. Using that billing history, defendant
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claims, among other things, that plaintiff continued paying premiums on the policy even
after he was denied coverage for the tornado damage, which shows plaintiff’s assent to the
policy. Plaintiff objects to Hasselbrink’s affidavit. He claims it is not made on personal
knowledge and does not establish that she is competent to testify to the billing history. “An
affidavit or declaration used to support or oppose a motion must be made on personal
knowledge, set out facts that would be admissible in evidence, and show that the affiant or
declarant is competent to testify on the matters stated.” Fed. R. Civ. P. 56(c)(4); accord
Luster v. Ill. Dep’t of Corr., 652 F.3d 726, 731 & n. 2 (7th Cir. 2011). The Court agrees
with plaintiff’s objection that Hasselbrink does not establish that she is competent to testify. The affidavit does not say who Hasselbrink is and how she would know the billing history is accurate. The Court elects not to use Hasselbrink’s affidavit or the billing history.
Plaintiff also objects that Judy Robinson’s affidavit is based on hearsay to the extent that she relies on records left from plaintiff’s original broker. Robinson’s testimony
based on those records, however, merely gives information that is already admitted by both
parties; for instance, that the original insurance policy covered the storage units at Route
45 (Ex. 3, Doc. 14). So those portions of Robinson’s testimony are redundant. The new evidence Robinson adds are her conversations with plaintiff after the tornado, and she does
not rely on records. Plaintiff does not object to those.
Intent
Defendant argues that summary judgment cannot be granted because there is a genuine dispute as to which property the parties intended to insure. Defendant believes both
parties intended to insure the storage units on Route 45. The original policy gave the Route
45 address; defendant’s photographs of the property correspond to that address; and plaintiff told both Cocagne and Robinson after the tornado hit that he did not believe the policy
covered the storage units at 911 South Commercial. Yet plaintiff states in his deposition
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that he intended to insure 911 South Commercial; plaintiff believes the broker went to the
wrong location when he obtained insurance for Route 45.
One of the difficulties here is that plaintiff does not discuss the elements of breach
of contract. The substantive law determines which facts are material and which are immaterial. The elements are (1) the existence of a valid and enforceable contract, (2) performance by the plaintiff, (3) breach of contract by the defendant, and (4) resultant injury to
the plaintiff. Lake Cnty. Grading Co., LLC v. Vill. of Antioch, 985 N.E.2d 638, 644 (Ill.
App. Ct. 2013); Timan v. Ourada, 972 N.E.2d 744, 751 (Ill. App. Ct. 2012). A valid and
enforceable contract requires an offer, acceptance, and consideration. Sheth v. SAB Tool
Supply Co., 990 N.E.2d 738, 754 (Ill. App. Ct. 2013). It also requires a meeting of the
minds, or mutual assent to the terms of the contract. E.g., Urban Sites of Chi., LLC v.
Crown Castle USA, 979 N.E.2d 480, 496 (Ill. App. Ct. 2012); Nat’l Prod. Workers Union
Ins. Trust v. Cigna Corp., 665 F.3d 897, 901 (7th Cir. 2011) (Illinois law).
The issue of the parties’ intent calls into question whether the insurance policy was
a valid and enforceable contract to begin with. In his deposition, plaintiff says he intended
to insure the storage units at 911 South Commercial. If that is true, and defendant intended
to insure the storage units at Route 45, was the policy a valid and enforceable contract?
There could not have been mutual assent to its terms. But perhaps plaintiff’s negligence in
instructing the broker, and in not reviewing the address on the original policy, bind him.
Accordingly, defendant believes that any negligence on the part of the broker is attributable to plaintiff. It is true that an insurance broker generally acts as the insured’s
agent, not the insurer’s. See Black v. Ill. Fair Plan Ass’n, 409 N.E.2d 549 (Ill. App. Ct.
1980); Farmers Auto. Ins. Ass’n v. Gitelson, 801 N.E.2d 1064, 1068 (Ill. App. Ct. 2003).
But a broker can also act as an agent of both parties, depending on the circumstances.
Gitelson, 801 N.E.2d at 1068. Whether the broker is an agent of the insured or the insurer
depends on who first set the broker in motion, who controlled his actions, who paid him,
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and whose interests he was protecting. Id.; Young v. Allstate Ins. Co., 812 N.E.2d 741, 752
(Ill. App. Ct. 2004). Defendant claims the broker was not a captive agency of defendant’s,
but without discussing the factors above or citing facts in the record. See SDIL-LR 7.1(d),
(e) (“Any brief in support of or in opposition to a motion for summary judgment shall contain citation to relevant legal authority and to the record … .”). We know plaintiff instructed the broker to obtain insurance on the property at 911 South Commercial, but defendant
assumes from that that the broker was plaintiff’s agent. Yet we do not know who first set
the agent in motion or who controlled his actions, and so forth. Without evidence, the
Court cannot decide this question.
Plaintiff argues that, regardless of what the original policy said, or what the parties
intended, the renewal policy that was in effect when the tornado hit listed and must provide
coverage for the property at 911 South Commercial. But the original policy cannot be ignored. A renewal policy, as its name implies, is a renewal of the terms of the original policy, and those terms are included in the renewal, unless provided otherwise. Elson v. State
Farm Fire and Cas. Co., 691 N.E.2d 807, 814 (Ill. App. Ct. 1998); All Am. Roofing, Inc. v.
Zurich Am. Ins. Co., 934 N.E.2d 679, 687 (Ill. App. Ct. 2010). It is because of that principle that the insurer bears a burden of adequately informing the insured of changes in coverage at the time of renewal. All Am. Roofing, 934 N.E.2d at 686–87 (noting that the insured “is not required to search the fine print of each renewal policy”). Of course, the
change here was accidental, so defendant could not have notified plaintiff about it.
Plaintiff does not argue that he relied on or even noticed the change in address. Indeed, both Robinson and Cocagne say plaintiff told them after the tornado that he did not
believe his storage units at 911 South Commercial were covered. In other words, plaintiff
simply argues a kind of “gotcha!”—that defendant made the mistake, the tornado hit, and
now defendant must insure the losses. The Court does not believe matters are that simple.
“The subject of mistake is one of the most difficult in the law.” 1-4 ARTHUR L. CORBIN,
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CORBIN ON CONTRACTS § 4.9 (Joseph M. Perillo rev. ed. 1993).
Duty
Initially, plaintiff comments that insurance companies have a duty to exercise good
faith and reasonable skill, care, and diligence in writing and issuing policies. See Central
States Joint Bd. v. Cont’l Assurance Co., 453 N.E.2d 932, 936 (Ill. App. Ct. 1983). While
that is true as a general matter, plaintiff does not establish that defendant’s change of the
address when it renewed the policy was a breach of that duty. Other than its being an accident, the circumstances of the mistake are unknown. The case plaintiff cites was decided
on appellate review after trial in the circuit court. See id. (“[W]e do not conclude in this
case that the record supports a ruling that defendant breached this duty … .”). Moreover,
both parties have some duty to review the policy. The insured has “an affirmative duty to
review the terms of a new policy,” Golf v. Henderson, 876 N.E.2d 105, 111 (Ill. App. Ct.
2007); Perry v. Econ. Fire & Cas. Co., 724 N.E.2d 151, 152 (Ill. App. Ct. 1999), which
plaintiff evidently did not do. The existence of a duty on one side or the other does not
hold sway on a motion for summary judgment.
Ratification and Waiver
Plaintiff next argues that defendant ratified the mistake in the policy by continuing
to bill plaintiff and accept his payments after the change in address to 911 South Commercial. Defendant has not refunded any of the those payments.
A contract entered into by mistake may be ratified so as to make it binding on the
parties as though they had fully understood it from the beginning. Smuk v. Hryniewiecki,
17 N.E.2d 223, 227 (Ill. 1938). However, to ratify a contract means to accept a mistake or
other defect knowingly. See, e.g., Freedberg v. Ohio Nat’l Ins. Co., 975 N.E.2d 1189, 1198
(Ill. App. Ct. 2012) (finding ratification where the plaintiff delayed his demands for rescis9
sion, continued paying premiums, and received benefits of the insurance policy after he
learned of the alleged fraud). That is noted, albeit obliquely, in Smuk v. Hryniewiecki,
which plaintiff cites. There, the party trying to enforce the contract, the appellee, demanded payment on a note almost two years after it was given, and threatened a lawsuit, instead
of returning the note because a provision of the contract had been omitted. 17 N.E.2d at
228. The Illinois Supreme Court explained that “[a]ppellee’s efforts were directed rather
toward putting appellant in default under the contract as it existed than to rescinding it.” Id.
at 228 (emphasis added).
Plaintiff here does not claim, or offer any evidence, that defendant knew about the
change in address to 911 South Commercial while it was billing plaintiff and sending policy renewals. The only evidence suggests that defendant did not discover the change until
after plaintiff filed his claim for the tornado damage. About a month after the tornado, Cocagne accompanied plaintiff to both properties and consulted photographs to find out
which property was meant to be insured when the original policy was written. Defendant
denied coverage three weeks later. So defendant did not know about the change and could
not have ratified the policy renewal. And the parties’ roles here are reversed from those in
Smuk. Unlike the appellee in Smuk, defendant here is not trying to enforce the insurance
policy as it exists (with the mistaken address). Plaintiff is. Thus the Court does not find
plaintiff’s ratification argument persuasive.
Similarly, plaintiff contends that a party that retains the fruits of a contract procured
by mistake (or fraud) waives any objections it might have made on those grounds. He believes that defendant retained the premiums he paid after the address was changed, and it
therefore waives any objections based on the mistake. As with ratification, though, waiver
assumes the waiving party knew about the mistake. See Mosbarger v. Brown, 145 N.E.
140, 143 (Ill. 1924) (“Where a party desires to rescind upon the ground of mistake or
fraud, he must, upon the discovery of the facts, at once announce his purpose and adhere to
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it.” (emphasis added)). Plaintiff does not offer any evidence that defendant knew about the
mistake until years later, after plaintiff requested coverage. Defendant denied plaintiff’s
request for coverage soon after he made it. Thus neither ratification nor waiver apply to the
facts thus far.
Unilateral Mistake
Plaintiff next argues that defendant cannot rely on its own mistake. A party cannot
rely on its own unilateral mistake to relieve itself of its obligations under the contract,
when the party’s own negligence and lack of prudence caused the mistake. Zink v. Maple
Inv. and Dev. Corp., 617 N.E.2d 1269, 1274 (Ill. App. Ct. 1993); Harney-Morgan Chevrolet Olds Co. v. Rabin, 455 N.E.2d 130, 134 (Ill. App. Ct. 1983). However, plaintiff does
not establish that defendant was actually negligent, or that any negligence caused the mistake. In the primary case cited by plaintiff, Zink v. Maple Investment and Development
Corp., the appellate court examined the asserted mistake and found that it was not a reasonable one, given the terms of the contract. 617 N.E.2d at 1274. This Court does not have
enough information to make a reasonableness determination since plaintiff does not show
any facts about the circumstances of the change in address, other than Cocagne’s statement
that it was accidental. Plaintiff himself did not notice the Route 45 address in the original
policy, or the subsequent change, so he is partly to blame himself. See Harney-Morgan,
455 N.E.2d at 134 (noting that the plaintiff’s “otherwise inexcusable mistake” was partly
induced by the actions of the defendants, who never took the time to read the document
they were signing).
Reformation
Finally, plaintiff argues that defendant cannot reform the insurance policy, since the
language of the renewal policy is clear (giving the address 911 South Commercial), and
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defendant itself made the mistake in issuing it. Plaintiff cites the Illinois Supreme Court’s
decision in Nat’l Union Fire Ins. Co. v. John Spry Lumber Co., 85 N.E. 256 (Ill. 1908). 5
For its part, defendant claims that the change of address was the result of a scrivener’s error, that both parties intended to cover the Route 45 property, but the wrong address was
inserted at the time of renewal due to a drafting error. See Hanes v. Roosevelt Nat’l Life
Ins. Co. of Am., 452 N.E.2d 357 (Ill. App. Ct. 1983).
In an action for reformation, a written contract may be changed to reflect the intention of the parties and the agreement between them. Ringgold Capital IV, LLC v. Finley,
993 N.E.d 541, 550–51 (Ill. App. Ct. 2013); Schivarelli v. Chi. Transit Authority, 823
N.E.2d 158, 165 (Ill. App. Ct. 2005). That is, the parties have reached an actual understanding, but through some error their written contract does not express that understanding.
Wheeler-Dealer, Ltd. v. Christ, 885 N.E.2d 350, 356 (Ill. App. Ct. 2008). To state a claim
for reformation, a party must allege: (1) the identity of the parties, and the existence and
substance of an agreement; (2) that the parties agreed to reduce their agreement to writing;
(3) the substance of the written agreement; (4) that a variance exists between the parties’
original agreement and the writing; and (5) mutual mistake or some other basis for reformation. Ringgold Capital, 993 N.E.2d at 551.
Defendant did not bring a counterclaim for reformation in this case. And its motion
asking for leave to do so was denied as untimely (Doc. 23). Therefore, the issue of reformation is not properly before the Court. Cf. Hanes, 452 N.E.2d at 358 (appeal from trial
court’s denial of the the defendant’s counterclaim to have the policy reformed). In any
event, plaintiff’s motion seeks a declaratory judgment; he asks the Court to issue an order
declaring that defendant’s insurance policy did insure the storage units at 911 South Commercial and that defendant is liable to plaintiff. Either the policy applied or it didn’t. To
decide that question, the Court need not decide whether the equitable remedy of refor5
Plaintiff also cites the decision made below in the court of appeals, Queen Ins. Co. v. John Spry Lumber
Co., 138 Ill. App. 620 (Ill. App. Ct. 1908).
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mation might be available to defendant (had it been raised).
CONCLUSION
The Court FINDS that plaintiff has not met his burden of showing there is no genuine dispute as to any material fact and that he is entitled to judgment as a matter of law. His
motion for summary judgment (Doc. 14) is, accordingly, DENIED. His motion for a hearing (Doc. 16) is also DENIED.
IT IS SO ORDERED.
DATED: December 16, 2013
/s/ WILLIAM D. STIEHL
DISTRICT JUDGE
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