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

Filing 49

MEMORANDUM AND ORDER,The Court GRANTS Tri-States motion for summary judgment (Doc. 42 ) and DIRECTS the Clerk of Court to enter judgment accordingly. Signed by Judge J. Phil Gilbert on 2/9/2016. (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

v.
TRI-STATE FIRE PROTECTION, INC.,
Defendant.
MEMORANDUM AND ORDER
This matter comes before the Court on the motion for summary judgment filed by
defendant Tri-State Fire Protection, Inc. (“Tri-State”) (Doc. 42). Plaintiff Cincinnati Insurance
Co. (“Cincinnati”) has responded to the motion. (Doc. 43), and Tri-State has replied to that
response (Doc. 46).
I.

Summary Judgment Standard
Summary judgment must be granted “if 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); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels
Int’l-Ind., Inc., 211 F.3d 392, 396 (7th Cir. 2000). The court must construe the evidence in the
light most favorable to the nonmoving party and draw all reasonable inferences in favor of that
party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Chelios v. Heavener, 520
F.3d 678, 685 (7th Cir. 2008); Spath, 211 F.3d at 396. If the moving party bears the burden of
persuasion on an issue at trial, he must present evidence that conclusively establishes he is
entitled to a judgment as a matter of law and that no reasonable jury could find for the opposing
party.

II.

Facts and Procedural History
Viewed in the light most favorable to Cincinnati, the relevant evidence and the

reasonable inferences that can be drawn from that evidence establish the following facts.
Cincinnati is the insurer of Richland Memorial Hospital, Inc. (“RMH”), based in Olney,
Illinois. In early 2009, RMH contracted with Tri-State to install a new sprinkler system on the
first floor of the RMH facility at a cost of approximately $100,000. The new sprinkler system
was to be part of an expansion of RMH’s existing fire suppression system. At that point, more
than half of the first floor – approximately 38,376 square feet – was not protected by such a
system (“unsprinkled,” in the industry argot), and Tri-State’s work would hook new pipes,
pendant sprinklers and upright sprinklers into the existing sprinkler system to cover the
unsprinkled area. The area to be newly sprinkled included parts of RMC’s out-patient clinic,
laboratory, emergency room, office areas and same-day surgery patient rooms. At the
conclusion of Tri-States work, the entire first floor of RMH’s facility would be sprinkled,
making the building safer than it had been before. No change in activities occurred in the newly
sprinkled area after the sprinkler installation, and neither Michael Stoverink, RMH’s chief
financial officer, nor Les Harrison, RMH’s director of plant services, could testify that the new
sprinkler system added value to RMH’s facility.
On October 20, 2009, Harrison inspected the area in which Tri-State was to be working
that day and spoke to a Tri-State employee about that work. At some time that day, the old
sprinkler system was shut off to permit Tri-State to finish its work and was then turned back on
before Harrison left for the day.
Later that evening, Harrison returned to the RMH facility after being notified by a
security guard of a major water leak from a sprinkler line. Harrison was quickly able to identify

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the source of the leak as the area where Tri-State had been working earlier in the day. He saw
that a glue joint had failed and that a pipe had separated from a fitting. He also knew that a TriState employee was the only person who had worked on the glue joint that day.
Cincinnati paid RMH’s insurance claim for the damage caused by the leak and on
January 24, 2014, filed this lawsuit against Tri-State as RMH’s subrogee. Cincinnati alleges
causes of action for negligence, breach of contract and breach of express warranty. Tri-State
moved to dismiss the case on the grounds that it was filed beyond the four-year statute of
limitations for actions concerning “construction of an improvement to real property.” See 735
ILCS 5/13-214(a). The Court denied the motion because the allegations in Cincinnati’s
complaint did not plead sufficient facts to plausibly suggest that Tri-State’s work constituted an
“improvement” (Doc. 26). Tri-State raises the limitations issue again in this motion for summary
judgment, and Cincinnati continues to argue that a longer limitations period applies or,
alternatively, that the limitations period did not begin to run on October 20, 2009.
III.

Analysis
A.

Limitations Period

As the Court noted in its order denying Tri-State’s motion to dismiss, if Tri-State’s work
constituted “construction of an improvement to real property,” it is governed by the four-year
statute of limitations set forth in 735 ILCS 5/13-214(a), which states:
Actions based upon tort, contract or otherwise against any person for an act or
omission of such person in the . . . construction of an 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 omission.
Whether an item is an “improvement to real property” is a question of law, although it is a
conclusion grounded in fact. Ambrosia Land Investments, LLC v. Peabody Coal Co., 521 F.3d
778, 781 (7th Cir. 2008) (citing St. Louis v. Rockwell Graphic Sys., Inc., 605 N.E.2d 555, 556
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(Ill. 1992)). Because the Court is exercising diversity jurisdiction, it applies Illinois substantive
law to determine what constitutes an “improvement to real property.” Ambrosia, 521 F.3d at
781.
In St. Louis, the Illinois Supreme Court adopted Black’s Law Dictionary’s definition of
an “improvement” as “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,” Black’s Law Dictionary 682 (5th ed. 1979). St. Louis, 605 N.E.2d at 556; Ambrosia,
521 F.3d at 781-82. The St. Louis court stated that the relevant criteria to decide what constitutes
an “improvement to real property” include (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 the Court’s order denying Tri-State’s motion to dismiss, the Court found that, as pled,
the installation of the sprinkler system at RMH’s facility was meant to be permanent and an
integral component of the fire suppression system of the building as a whole. The parties
therefore focus on the last two factors listed in St. Louis – whether the addition of the sprinkler
system increased the value of the property and whether the use of the property was enhanced.
In its prior order, the Court noted that the pleadings did not say enough to establish that
the installation of the sprinkler system increased the property value or enhanced the property’s
use. For example, if the new system had replaced a well-functioning older system, the property
would not necessarily have been worth more than before its installation or used more, better or
differently than it had been in the past.

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Now that this case is at the summary judgment stage, the Court looks at the evidence, not
just the pleadings. The evidence in the record makes clear that the installation of the new system
added sprinklers to approximately 38,376 square feet of RMH’s facility, more than half of the
first floor, that did not have sprinklers before. While Cincinnati argues that there was no
testimony that the value of the facility was increased by the addition of the sprinkler system, the
Court finds that no reasonable jury could find that the addition of a sprinkler system costing
approximately $100,000 to a previously unsprinkled area in a hospital facility did not increase
the value of the facility. The safety of a substantial area of the facility was increased, which
could only have made the facility more valuable. It is not necessary to have an affirmative
statement that the value increased, for it is common sense that, all other things being equal, a
building is more valuable if it is made safer by adding additional fire suppression equipment.
The evidence also makes clear that the installation of the new sprinkler system would
allow RMH to suppress fires with sprinklers in more than half of its first floor where it had
previously been unable to do so. While the addition of the sprinkler system might not have
allowed any new activities to occur in the newly sprinkled area on a daily basis, it certainly
enhanced the facility’s use by enabling RMH to suppress fires better than before. In that sense,
the building’s use has been enhanced. Despite Stoverink’s and Harrison’s conclusory affidavit
statements that the sprinkler system did not enhance the use of the hospital, the Court believes no
reasonable jury could find that the fire suppression benefit conveyed by the new sprinkler system
did not enhance the use of RMH’s facility.
All of these St. Louis factors weigh, some more strongly than others, in favor of finding
the sprinkler system installed by Tri-State was an improvement to RMH’s facility. Indeed,
getting back to the Illinois Supreme Court’s definition of “improvement,” the sprinkler system

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seems to qualify easily. It was “an amelioration” in the condition of the facility by making it
better able to combat fires. The installation was “more than mere repairs or replacement” of an
existing system but was an addition to previously unsprinkled areas. It cost a substantial sum of
money, and was intended to make the facility safer than it was before, which by nature enhanced
its value and utility.
For these reasons, the Court finds that Tri-State’s installation of the sprinkler system at
the RMH facility was an “improvement to real property” and that, as a consequence, the fouryear statute of limitations in 735 ILCS 5/13-214(a) applies.
B.

Accrual of Cause of Action

The Court now turns to the question of when the four-year statute of limitations began to
run. The statute indicates the four years begins to run “from the time the person bringing an
action knew or should reasonably have known of such act or omission.” 735 ILCS 5/13-214(a).
This discovery rule “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.” Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 633 N.E.2d 627, 631 (Ill.
1994). “[W]hen a party knows or reasonably should know both that an injury has occurred and
that it was wrongfully caused, the statute begins to run and the party is under an obligation to
inquire further to determine whether an actionable wrong was committed.” Nolan v. JohnsManville Asbestos, 421 N.E.2d 864, 868 (Ill. 1981). Knowing that an injury was wrongfully
caused does not mean the injured party needs to know it has a cause of action against a specific
defendant for causing the injury. Knox College v. Celotex Corp, 430 N.E.2d 976, 980 (Ill. 1981).
The evidence in the record demonstrates RMH knew or should have known on October
20, 2009, that it had been injured by a water leak and that the injury was wrongfully caused by a

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malfunction in or related to the newly performed work by Tri-State. Harrison believed on the
evening of October 20, 2009, when he was called back to the RMH facility that the water leak
had been caused by a failure of a glue joint in the area where Tri-State, and only Tri-State, had
been working that day. This was sufficient to create an obligation for RMH to inquire whether it
might have a cause of action against Tri-State based on its negligence or delinquent work.
Consequently, the four-year statute of limitations began to run on October 20, 2009, and any
cause of action based on Tri-State’s installation of the new sprinkler system must have been filed
on or before October 20, 2013. Cincinnati did not file suit until January 24, 2014, so it is timebarred.
IV.

Conclusion
For the foregoing reasons, the Court finds that Cincinnati filed this lawsuit beyond the

applicable four-year statute of limitations found in 735 ILCS 5/13-214(a) and that this suit is
time-barred. Therefore, the Court GRANTS Tri-State’s motion for summary judgment (Doc.
42) and DIRECTS the Clerk of Court to enter judgment accordingly.
IT IS SO ORDERED
Dated: February 9, 2016
s/ J. Phil Gilbert
J. PHIL GILBERT
DISTRICT JUDGE

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