Cincinnati Insurance Company v. Tri-State Fire Protection, Inc.

Filing 26

MEMORANDUM AND ORDER, denying 14 MOTION to Dismiss for Failure to State a Claim filed by Tri-State Fire Protection, Inc. Signed by Judge J. Phil Gilbert on 7/23/2014. (jdh)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
CINCINNATI INSURANCE CO,
as subrogee of Richland Memorial
Hospital, Inc.
Plaintiff,

Case No. 3:14-cv-86-JPG-PMF

vs.
TRI-STATE FIRE PROTECTION, INC.,
Defendant.

MEMORANDUM AND ORDER
This matter comes before the Court on the motion to dismiss filed by defendant Tri-State Fire
Protection, Inc. (“Tri-State”). (Doc. 14). Plaintiff Cincinnati Insurance Co. has responded to the
motion. (Doc. 19). For the following reasons, the Court will deny Defendant’s motion to dismiss.
I.

Standard for Dismissal

When determining whether a complaint is sufficiently pled to survive a Rule 12(b)(6)
motion to dismiss, the court must “construe it in the light most favorable to the nonmoving party,
accept well-pleaded facts as true, and draw all inferences in [the non-movants favor].” Reger
Dev., LLC v. National City Bank, 592 F.3d 759, 763 (7th Cir. 2010). A well-pleaded complaint
“must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(citing Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. at 556. Such a standard does not require a demonstration that the
alleged action probably occurred, but it does require more than a “sheer possibility” that the

defendant acted unlawfully. Ashcroft, 556 U.S. at 678. A plaintiff must provide “only enough
detail to give the defendant notice of what the claim is and the grounds upon which it rests, and
through his allegations show that it is plausible, rather than merely speculative, that he is entitled
to relief.” Reger, 592 F.3d at 764 (citing Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir.
2008).
II.

Facts and Procedural History

The facts, taken from Cincinnati’s complaint, and the reasonable inferences that can be
drawn from them are as follows. Cincinnati is the insurer and subrogee of Richland Memorial
Hospital, Inc., based in Olney, Illinois. (Doc. 2). On March 13, 2009, Richland entered into a
written contract with Tri-State to repair and modify the fire suppression system at the hospital.
(Doc. 2-1). The agreement required Tri-State complete the work in accordance with National
Fire Protection Association 13 (Standard for the Installation of Sprinkler Systems (2013)), state
and local codes, and all specifications required by Richland. Id. The contract itself called for an
extension of the existing fire sprinkler system. (Doc. 2-1). The existing system was also to be
disconnected and reconnected to the new sprinkler piping areas. Id. Further, the system was to
include black steel pipes for the exposed areas, along with pendent sprinklers for areas with
finished ceilings and brass upright sprinklers for all exposed areas. Id. In sum, the new sprinkler
system was to cover a single floor consisting of 38,376 square feet. Id.
The repairs and modifications began on October 20, 2009. (Doc. 2). During
Tri-State’s repairs and modifications one evening, “a fitting on the system failed, causing gallons
of water to escape into the subject building and damage the structure, and personal property kept
therein.” Id. Initially, Richland did not discover the cause of the damage. Id. Indeed, it was only
after an investigation that Cincinnati discovered that the pipe fitting failed due to Tri-State’s

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work. Id. After paying for the damage, Cincinnati seeks judgment for $293,246.35 it paid for
repairs or replacements of the damaged or destroyed property, along with a deductible loss
suffered by Richland for $2,500. Id.
Plaintiff filed this case against Tri-State in federal court alleging: negligence (Count I),
breach of contract (Count II), and breach of express warranty (Count III). (Doc. 2). Plaintiff
asserts diversity jurisdiction under 28 U.S.C. § 1332 (a). (Doc. 2). Thereafter, Defendant filed
the instant motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 15).
Tri-state claims that the negligence, breach of contract, and breach of express warranty claims
fail to state a claim for which relief can be granted because the claims are barred by the statute of
limitations. (Doc. 15).
III.

Analysis

In their motion to dismiss, Tri-State argues the Cincinnati claims are barred because the
initial agreement between them constituted an “improvement to real property.” (Doc. 15). If TriState's work was an improvement to real property 735 ILCS 5/13-214(a) governs, and
Cincinnati’s claims are barred. On the other hand, Cincinnati argues that Tri-State’s work was
merely repair and replacement of the previous system and governed by a five-year period for
negligence and breaches of an implied warranty (735 ILCS 5/13-205) or a 10-year period for
breaches of written contracts (735 ILCS 5/13-206) allowing for a later filing deadline. (Doc. 19).
a. For the purposes of this motion the agreement entered into between Richland
Memorial Hospital and Tri-State did not constitute an “improvement to real
property” as understood in 735 ILCS 5/13-214(a).
The language of 735 ILCS 5/13-214 (a) prescribes an “action based upon tort, contract or
otherwise against any person for an act or omission of such person in the . . . construction of an

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improvement to real property shall be commenced within 4 years from the time the person
bringing an action knew or should reasonably have known of such act or admission.”
“Whether an item constitutes an improvement to real property is a question of law. Its
resolution, however, is grounded in fact.” Ambrosia Land Investments, LLC v. Peabody Coal
Co., 521 F.2d 778, 781 (7th Cir. 2008) (citing St. Louis v. Rockwell Graphic Sys., Inc., 605
N.E.2d 555 (Ill. 1992)).
An “improvement” is “a valuable addition made to property (usually real estate) or an
amelioration in its condition, amounting to more than mere repairs or replacement, costing labor
or capital, and intended to enhance its value, beauty or utility or to adapt it for new or further
purposes. Generally, buildings.” Ambroasia, 521 F.2d at 781-82 (citing Black’s Law Dictionary
682 (5th ed. 1979)).
In St. Louis, the Supreme Court of Illinois utilized four factors to determine what
constitutes an “improvement to real property.” Known as the St. Louis factors, these factors
included (1) whether the addition was meant to be permanent or temporary; (2) whether it
became an integral component of the overall system; (3) whether the value of the property was
increased; and (4) whether the use of the property was enhanced. St. Louis, 605 N.E.2d at 556.
In Ambrosia, the Seventh Circuit used these factors to determine that a coal mine was an
improvement to real property. Ambroasia, 521 F.2d at 781-2. Specifically, the court found that
the mine—particularly the pillars—were intended to provide permanent support for the surface,
and the mine was a valuable addition to the real property, hiking up the real estate value. Id. at
783-4.
The Northern District, in Stanley, applied these factors in greater depth. The court utilized
the St. Louis factors in order to determine whether certain power plant owners and the general

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contractor were negligent for plaintiff’s exposure to asbestos dust and fibers while on the job.
Stanley, 982 F. Supp. 2d at 847. The court determined that the general contractor’s action of
installing thermal insulation was an improvement to real property. Id. at 861. The “power plants
are designed to include thermal insulation at all times and would not operate without it.” Id. at
862. Further, this insulation made it possible for workers to be present within the plant and for
equipment to survive in the presence of extreme heat. Id. Indeed, the act of not-insulating would
be “extremely inefficient” from “both an economic standpoint and from an energy-production
standpoint.” Id. at 862-3. After review, the Court was satisfied that the facts fulfilled all the St.
Louis criteria: “the insulation is meant to be permanent; it becomes an integral component of the
overall system and it increases the value of the property and enhances the use.” Id.at 862
Turning to the facts at bar, the Court must analyze whether Tri-State’s construction on
Richland Hospital, as described in the complaint, constitutes an “improvement to real property.”
As explained below, the Court finds it does not.
The installation of the sprinkler system was permanent. The Court can certainly infer that
the installation of the sprinkler system, including the pipes along with the sprinkler heads, is
considered a permanent fixture in the hospital as a whole. The contract itself clearly paints a
broad and in-depth process of the installation of a sprinkler system. (Doc. 2-1). The construction
was completed by disconnecting and connecting water supplies and reconnecting them to newly
designated waterlines. (Doc. 2). The supplies included black steel, pendent sprinklers and brass
upright sprinklers. (Doc. 2-1). The use of these specific materials does not seem to indicate a
temporary structure, but one that was intended to last many years comparable to the insulation in
Stanley and the pillars in Ambrosia.
Second, the sprinkler system was an integral component of the overall existent system.

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The job required installation of new pipes intended to encompass the entirety of the first floor,
precisely 38,376 square feet. (Doc. 2-1). The contract also required Tri-State to connect the new
addition to the older system to work as a single unit. (Doc. 2-1). This new system was to work as
a fire suppression system for the entire first floor which is approximately 38,000 square feet.
(Doc. 2-1). From these facts, it is evident that Tri-State’s construction was integral to the
sprinkler system as a whole.
Proceeding, there are too few facts pled to infer that the installation of the sprinkler
system increased the property value. The pleadings did not contain any reason for the installation
of a partially new sprinkler system. (Doc. 2). For that reason, the inference cannot be drawn that
the newer system was any more or less valuable than the one that preceded it.
Lastly, the Court cannot determine that the sprinkler addition enhanced the property. As
explained above, there is no indication in the complaint that the previous system was out-of-date,
in desperate need of refurbishment, or even old. Instead, the Court can only deduce that Richland
wanted a new sprinkler system. Since no more than that understanding is present in the
pleadings, the Court cannot determine whether the new sprinkler system enhanced the property.
Therefore, the Court cannot say based on the facts in the complaint that Tri-State’s work
was an improvement to real property.
b. Even if 735 ILCS 5/13-214 (a) did apply to the work done by Tri-State, Cincinnati or
Richland did not know about the cause of the accident until after an investigation.
Tri-State argues that the date the damage occurred, October 20, 2009, is a drop dead date in
which the plaintiff should have known or been put on notice of the cause of the damage. (Doc.
15). On the other hand, Cincinnati argues that they did not know the cause of the damage until a
later date after an investigation. (Doc. 2).

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The law of Illinois explains that “[w]hen the discovery rule is applied, it ‘delays the
commencement of the relevant statute of limitations until the plaintiff knows or reasonably
should know that he has been injured and that his injury was wrongfully caused.” Hermitage
Corp v. Contractors Adjustment Co., 651 N.E.2d 1132, 1135 (Ill. 1995)(citing Jackson Jordan,
Inc. v. Leydig, Voit & Mayer, 633 N.E.2d 627, 631 (Ill. 1994)). According to the Supreme Court
of Illinois, “[a]t some point the injured person becomes possessed of sufficient information
concerning his injury and its cause to put a reasonable person on inquiry to determine whether
actionable conduct is involved. At that point, under the discovery rule, the running of the
limitations period commences.” Knox College v. Celotex Corp, 430 N.E.2d 976, 980-81 (Ill.
1981).
Turning to the particular facts, the only inference drawn from the complaint is that the water
damage occurred on October 20, 2009, and Cincinnati determined the cause of the damage at a
later date, after an investigation. (Doc. 2). There are no facts in the complaint showing that
Richland or Cincinnati possessed sufficient information concerning their injury causing them to
be put on notice of Tri-State’s negligent action on the October 20, 2009 date. Since all inferences
are to be held in the light most favorable to the non-moving party, the court cannot agree that the
discovery rule applies.
Given these conclusions, the Court cannot say that Richland or Cincinnati knew or had
reason to know of Tri-State’s negligence in causing the water damage on October 20, 2009.
Thus, the statute of limitations began to accrue at a later date.
IV.

Conclusion
In sum, although two of the St. Louis factors were fulfilled, the two remaining factors

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remain an unknown. The installation of a new fire suppression system was permanent and an
integral part of the existing system; however, the Court is unable to infer whether or not the work
improved the property’s value or enhanced the property. Viewing these unknowns in a light
favorable to the Plaintiff (non-moving party), the Court cannot say that the work done by TriState constituted an “improvement to real property.” Further, even if 735 ILCS 5/13-214 (a)
governs the work, Tri-State has still failed to show that Cincinnati or Richland should have
known of the damage on October 20, 2009. Thus, Cincinnati is not barred from filing because on
statute of limitation grounds.
The Defendant may present further evidence in support of these arguments at the
summary judgment stage, or at trial. Thus, the Defendant’s motion to dismiss (Doc. 14) is
DENIED.
IT IS SO ORDERED
Dated: July 23, 2014
s/J. Phil Gilbert
J. PHIL GILBERT
DISTRICT JUDGE

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