Abbey Ridge LLC v. Addison Insurance Company

Filing 55

ORDER finding as moot 39 Motion in Limine; granting in part and denying in part 26 Motion for Summary Judgment; denying 27 Motion for Summary Judgment; denying 31 Motion to Strike. See attached Order for details. Signed by Magistrate Judge Mark A. Beatty on 9/18/2019. (jer)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
ABBEY RIDGE LLC,
Plaintiff,
vs.
ADDISON INSURANCE COMPANY,
Defendant.

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Case No. 3: 18-CV-93-MAB

MEMORANDUM AND ORDER
BEATTY, Magistrate Judge:
Pending before the Court are the following motions: Plaintiff Abbey Ridge LLC’s
(“Plaintiff”) motion for summary judgment (Doc. 26), Defendant Addison Insurance
Company’s (“Defendant”) motion for summary judgment (Doc. 27), Defendant’s motion
to strike (Doc. 31), and Plaintiff’s motion in limine (Doc. 39). Both parties filed a response
in opposition to the motions for summary judgment (Docs. 30 and 33). Defendant filed a
reply brief to Plaintiff’s response in opposition (Doc. 51). Plaintiff filed a response to the
motion to strike (Doc. 36). After the pending motions were fully briefed by the parties,
the Court heard oral arguments on the motions on April 4, 2019, and each of the motions
were taken under advisement.
For the reasons set forth below, Plaintiff’s motion for summary judgment is
GRANTED in part, DENIED in part; Defendant’s motion for summary judgment is
DENIED; Defendant’s motion to strike is DENIED; and, Plaintiff’s motion in limine is
DENIED as moot.
Page 1 of 25

I.

FACTUAL BACKGROUND

Plaintiff is a brewery and restaurant located in the Shawnee National Forest.
Defendant insured Plaintiff’s establishment through a commercial property policy of
insurance (Policy number: 6041008) (“the Policy”) that insured against direct physical
loss to both real and personal property (Doc. 27-1). Sometime prior to May 2016, Plaintiff,
acting through its managers, decided to expand its commercial footprint (Doc. 28). Terri
Addison, Plaintiff’s principal, elected to expand by constructing a new reception
hall/event center that would serve as overflow for its bar and restaurant (Doc. 26-3, p. 56). On May 13, 2016, Jon Jackman of Consolidated Insurance Agency, Inc. emailed
Michael Meisheid, Defendant’s representative, by stating, in part, “[Plaintiff] is building
on to their existing structure. I will get limits needed to you.” (Doc. 28. p. 2). Mr. Jackman
then emailed his colleague, Betty Wilson, on June 27 informing her, in part, that “[w]e
need to initiate the builder’s risk for [Plaintiff’s] addition.” (Id.). The new
building/addition abutted Plaintiff’s existing building with roof purlins physically
attached to the existing building for aesthetics (Doc. 26-4, p. 16). The new
building/addition had separate and stand-alone load bearing walls, truss system,
electric, plumbing, and HVAC systems, along with its own restrooms, bar, kitchen, and
exterior doorways (Doc. 26-5, p. 2-3). It also was constructed with the same height, shape,
and materials as the original building (Doc. 26-5). The surface area of the new
building/addition was 2,570.48 sq. ft; the surface area of the existing building was
3,221.10 sq. ft. (Id.).

Page 2 of 25

Prior to October 2016, contractors began site preparation and concrete work
necessary to erect the new building/addition (Id.). Erection and framing of it commenced
in October 2016 and, as of November 2, 2016, contractors had framed and sheathed walls,
set the trusses, installed walk-in coolers, and began installing sheet metal roofing (Id.).
Construction on many other parts of the new building/addition had not begun including,
interior doors, the bar, countertops, cabinets, shelving, plumbing system, electric system,
and HVAC system (Id. at p. 54-73).
On December 9, 2016, Defendant commenced insuring Plaintiff under a second
policy of insurance, being an inland marine policy, that provided in part, Builder’s Risk
coverage for the new building/addition during construction (Doc. 26-2). As of February
1, 2017, construction of Plaintiff’s new building/addition was not done, as the interior
finish work had not been completed (Doc 26-3, p. 8). That night, the fire loss occurred
which resulted in a total loss of the existing building, the new building/addition, and the
contents within both areas.
Plaintiff submitted a fire claim to Defendant, which it accepted, in part, but
rejected coverage under the NACP provisions of the Policy. Specifically, Plaintiff
presented a claim for damages sustained to the new building/addition in the amount of
$360,948.07. Defendant paid Plaintiff $150,000 under the Builder’s Risk coverage part of
the inland marine policy, which left $210,948.07 in unpaid damages to the new
building/addition. Plaintiff also submitted a claim for what it believed to be its newlyacquired personal property lost in the fire, which totaled $307,064.79. In a June 14, 2017
letter, Defendant denied coverage for the newly acquired business personal property in
Page 3 of 25

its entirety because “the renovation being added to the existing building would not apply
to that coverage. The ‘Newly Acquired or Constructed Property’ only applies to the
construction not previously in existence.” (Doc. 26-6, p. 1). The Ultra Property Plus
endorsement, CP 7088, and more specifically the newly acquired or constructed property
coverage extension increases the building coverage and business personal property limits
to $500,000 and $250,000 respectively (Id.).
In a June 16 letter, Southern Illinois Public Adjusters (“SIPA”), on behalf of
Plaintiff, challenged Defendant’s coverage position by stating, in part, “the structure
being built at the time of a fire was an entirely new building which was to be adjoined an
existing building. The insured was not ‘renovating’ any structure. The building being
constructed was at all times new construction . . ..” (Doc. 26-7, p. 1-3). Additionally, the
letter stated that “your company has already concluded that the insured was constructing
a new building as it paid the coverage limit under the insured’s Builders’ Risk policy. As
you are certainly aware, the Builders’ Risk and Installation Coverage For, CM 70 50 02
16, only provides coverage for new construction and does not provide coverage for
renovations outside of a (sic) pre-existing buildings.” (Id. at p. 3). SIPA further contends
in the letter that “in order for your company to have determined that the work being
performed was new construction and not a ‘renovation being added to the existing
building’, as it now contends.” (Id.). Defendant argues Plaintiff’s new building/addition
is not covered under the building and personal property coverage form because coverage
exists under the builders’ risk policy (Id. at p. 4). The relevant policy provision provides,
in part, “Covered Property does not include: k. [p]roperty that is covered under another
Page 4 of 25

coverage form of this or any other policy in which it is more specifically described, except
for the excess of the amount due (whether you can collect on it or not) from that other
insurance.” (Id.).
In a July 11, 2017 letter, Defendant reasserted its denial for coverage under the
NACP provisions for the new building/addition because it contends, in part, that “[t]he
addition to the main building, despite containing ‘all the components of a stand-alone
structure,’ was in fact not a stand-alone structure. It was connected to, and depended on,
the exterior wall of the existing main building; it was an addition to the main structure.”
(Doc. 26-8, p. 1). Additionally, in the letter, Defendant denied Plaintiff’s newly acquired
business personal property claim because “[the new building/addition] was not a (i)
‘newly acquired location; nor was it a (ii) ‘newly construction or acquired building’ as
addressed above. Therefore, the Newly Acquired Business Personal Property coverage
extension will not apply to this loss.” (Id. at p. 2). The relevant policy provides, in part:
(2) Your Business Personal Property
(a) if this policy covers Your Business Personal Property, you may
extend That insurance to apply to:
(ii) Business personal property, including such property that
you newly acquire, located at your newly constructed or
acquired buildings at your newly constructed or acquired
buildings at the location described in the Declarations.
(Id.).
Because both parties dispute what the Policy at issue provides, Plaintiff filed this
lawsuit seeking declaratory relief (Count I), money damages (Count II), and statutory
damages under Section 155 of the Illinois Insurance Code (Count III).
Page 5 of 25

At the motion hearing regarding Defendant’s motion to strike Plaintiff’s experts
and Plaintiff and Defendant’s cross motions for summary judgment, both parties
presented oral arguments, and then the Court took all pending motions under
advisement.
II.

DISCUSSION

In short, Plaintiff argues the new building/addition at issue qualifies as a new
building as it relates to the Policy, therefore, the NACP provisions provide up to $500,000
in coverage for newly constructed property. Plaintiff further argues the NACP provisions
also provide up to $250,000 in coverage for newly-acquired business personal property
that was located within the new building/addition at the time of the loss. Conversely,
Defendant argues it is entitled to summary judgment because the new building/addition
was not a “new building” but rather an addition to Plaintiff’s existing building at the
described premises, therefore, the NACP does not provide coverage. Defendant further
argues that even if the new building/addition qualified as a “new building,” the specific
policy provisions providing up to $500,000 in coverage for newly constructed property
and up to $250,000 for newly acquired business personal property were not in force and
effect at the time of the loss, having expired 90 days after commencement of construction
of the new building/addition which was prior to the date of the loss. Plaintiff contends
the policy provisions were in force and effect at the time of the loss as it relates to parts
of the new building/addition constructed within 90 days prior to the loss because the
provision at issue provides that coverage terminates “90 days after you acquire the

Page 6 of 25

property or begin construction of that part of the building that would qualify as covered
property.” (Doc. 33)(emphasis in original).
Before addressing the cross motions for summary judgment and the merits of
Plaintiff’s underlying claims, the Court must first address Defendant’s motion to strike
Plaintiff’s experts (Doc. 31).
A.

Motion to Strike
On December 21, 2018, Defendant filed a motion to strike “Opinions of Plaintiff’s

Purported ‘Experts’, Kirk Freels and Dustin Freels” (Id.). Plaintiff then filed a response in
opposition to the motion (Doc. 36). In its response, Plaintiff argues Defendant waived this
argument regarding the 90-day exclusion because it failed to timely notify Plaintiff of its
reliance on the exclusion (Doc. 26, p. 12-13). However, Plaintiff’s waiver argument fails
pursuant to the doctrine of unclean hands.
Under Illinois law, “the doctrine of unclean hands applies if a party seeking
equitable relief is guilty of misconduct, fraud, or bad faith toward the party against whom
relief is sought and if that misconduct is connected with the transaction at issue in the
litigation.” Zahl v. Krupa, 365 Ill. App. 3d 653, 658, 850 N.E.2d 304, 309 (2006). The unclean
hands doctrine bars “only equitable remedies and does not affect legal rights.” Id.
Specifically, Plaintiff contends Defendant should be estopped from asserting the
90-day exclusion defense for failing to timely notify Plaintiff of its reliance on it. At first
glance, Plaintiff’s waiver argument appears tenable. However, a review of the record
indicates Plaintiff has unclean hands connected to when Defendant believed it necessary
to assert the 90-day exclusion defense. Specifically, Plaintiff alleged in its complaint that
Page 7 of 25

“[a]fter Thanksgiving in late November 2016, the plaintiff commenced construction of the
new building.” (Doc. 1, p. 3). Additionally, Philip Royster, a manager for Plaintiff,
testified that work on the new/building addition started “some time after Thanksgiving.”
(Doc. 26-4). In contrast, Defendant contends photographs depicting a crane erecting the
new building/addition initially provided by Plaintiff did not contain a date stamp. It was
only after Defendant subpoenaed the crane company’s records that it determined the
erection of the new building/addition likely occurred well before late-November 2016
making the 90-day exclusion defense more apparent to Defendant. These facts
demonstrate misconduct as contemplated by the doctrine of unclean hands and Plaintiff
cannot now argue that Defendant waived the 90-day exclusion defense.
Because Defendant has not waived its motion to strike, the Court must now
address the merits of it. Defendant argues the Court should strike Plaintiff’s experts for
two reasons: (1) the experts’ valuations are not ripe for determination; and, (2) the
valuations are not admissible under Federal Rule of Evidence 702 and Daubert.
i.

Ripeness of Valuations
Defendant contends Plaintiff’s experts’ valuations are not ripe for two reasons: (1)

Defendant did not have time to evaluate the experts’ valuation calculation and (2)
Plaintiff did not object to Defendant’s contention that the experts’ deposition be limited
in scope to only include the issue of valuation if overall coverage was found to exist.
On November 1, two weeks before Plaintiff’s valuation experts, Dustin and Kirk
Freels (“the Freels”) scheduled deposition and pursuant to the parties’ stipulation,
Plaintiff filed its expert disclosures, either on the subject of damages or liability. The Freels’
Page 8 of 25

disclosure indicated they would render an opinion that the value of that part of the
addition was constructed after November 3, 2016, i.e. within 90 days of the date of loss,
was $189,598 which should be adjusted for inflation to $191,000. Defendant first argues
the valuation is not ripe because it did not have time to evaluate the calculation. However,
the Court does not find Defendant’s first argument convincing as indicated below.
a. Time for Evaluation
First, Defendant received Plaintiff’s expert disclosures two weeks prior to the
Freels’ scheduled deposition. If Defendant took issue with the Freels’ proposed opinion
because it contends “this new theory of the case was disclosed on the same day the
ADDISON’S disclosure of expert witnesses was due, thereby providing no opportunity to
ADDISON to evaluate the new damage calculation or to adequately prepare prior to the
depositions of the experts or the deadline to file dispositive motions” then Defendant
could have requested the deposition be reset. (Doc. 32, p. 2) (emphasis added).
Defendant’s contention it had no opportunity to address the Freels’ proposed opinions is
not accurate because the record indicates Defendant had two weeks to request
rescheduling of the Freels’ deposition. If moving the deposition conflicted with the
dispositive motion deadline then Defendant could have filed a motion to continue the
deadlines for discovery and dispositives. However, Defendant chose to do neither.
Accordingly, Defendant’s contention that the valuation is not ripe is unavailing.

Page 9 of 25

b. Scope of Freels’ Deposition
Defendant’s argument as to scope fares no better. Defendant contends it conferred
with Plaintiff to request the scope of the Freel’s deposition be:
[L]imited to the issue of the existence of coverage and that any discovery
concerning the value of the loss be reserved to be addressed only if the
requested coverage is found to exist. There was no objection to this
procedure voiced by Plaintiff’s counsel and the depositions of Plaintiff’s
experts proceed on that understanding.
Id. at 2-3.
In contrast, Plaintiff contends the parties did not put “any limitations” on the scope
of the Freels’ depositions. Clearly there was confusion among the parties regarding the
scope. While there is nothing in the record to corroborate either party’s specific
contention, the Court finds Plaintiff’s contention more plausible because it coincides with
the Freels’ opinion concerning the value of loss contained within their expert disclosures.
It is perplexing to think Plaintiff hired an expert to render an opinion, the Freels’
submitted a disclosure that included a valuation opinion, yet Plaintiff agreed to limit the
Freels’ deposition to address the issue of valuation only if the requested coverage is found to
exist. We are here today because the main issue in this case is whether coverage existed at
the time of loss. Why would Plaintiff hire experts to render a valuation opinion but then
agree those opinions are beyond the scope of their experts’ depositions unless coverage
is found to exist? Therefore, the second argument is not convincing. The Court must now
turn to Defendant’s second argument related to its motion to strike.

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ii.

Daubert Challenge
The Court finds the Freels’ valuation opinions admissible under Federal Rule of

Evidence 702 and Daubert. Defendant argues the Freels’ valuation opinions, and the
methodology employed to arrive at those values, is without basis and, therefore, the
opinions should be stricken pursuant to Rule 702.
The admissibility of expert testimony is governed by Rule 702 and the Supreme
Court's opinion in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). See Kumho Tire
Co. v. Carmichael, 526 U.S. 137, 147 (1999) (holding that the Daubert analysis applies to all
expert testimony under Rule 702, not just scientific testimony). Under Rule 702 and
Daubert, district courts have a “gatekeeping” obligation to ensure that expert testimony
is both relevant and reliable. Kumho Tire, 526 U.S. at 147. This requires the district court
to ensure the following before admitting expert testimony:
First, the expert must be qualified by knowledge, skill, experience, training,
or education; second, the proposed expert testimony must assist the trier of
fact in determining a relevant fact at issue in the case; third, the expert's
testimony must be based on sufficient facts or data and reliable principles
and methods; and fourth, the expert must have reliably applied the
principles and methods to the facts of the case.
Lees v. Carthage Coll., 714 F.3d 516, 521–22 (7th Cir. 2013) (citing FED. R. EVID. 702 and Smith
v. Ford Motor Co., 215 F.3d 713, 717–19 (7th Cir. 2000)). The party offering the expert
testimony bears the burden of establishing that it meets these admissibility requirements.
Brown v. Burlington N. Santa Fe Ry. Co., 765 F.3d 765, 772 (7th Cir. 2014); Lewis v. CITGO
Petroleum Corp., 561 F.3d 698, 705 (7th Cir. 2009).
Defendant does not challenge the Freels’ qualifications or the relevance of their
Page 11 of 25

opinions. Instead, Defendant focuses on the reliability of the experts’ opinions. “A
district court enjoys broad latitude both in deciding how to determine reliability and in
making the ultimate reliability determination.” Higgins v. Koch Dev. Corp., 794 F.3d 697,
704 (7th Cir. 2015) (quoting Bryant v. City of Chicago, 200 F.3d 1092, 1098 (7th Cir. 2000)).
In assessing the reliability of expert testimony, courts can consider the non-exhaustive
list of guideposts set forth in Daubert: (1) whether the scientific theory can be or has
been tested; (2) whether the theory has been subjected to peer review and publication;
and (3) whether the theory has been generally accepted in the relevant scientific,
technical, or professional community. Am. Honda Motor Co. v. Allen, 600 F.3d 813, 817 (7th
Cir. 2010) (citing Daubert, 509 U.S. at 593–94). Additionally, the 2000 Advisory
Committee's Notes to Rule 702 list additional factors for gauging expert reliability,
including whether: (1) the testimony relates to matters growing naturally and directly
out of research that was conducted independently from the instant litigation; (2)
the expert has unjustifiably extrapolated from an accepted premise to an unfounded
conclusion; (3) the expert has adequately accounted for obvious alternative explanations;
(4) the expert is being as careful as she would be in her regular professional work outside
of paid litigation consulting; and (5) whether the expert's field of expertise is known to
reach reliable results for the type of opinion the expert is giving. Am. Honda, 600 F.3d at
817 (quoting FED. R. EVID. 702, Advisory Committee's Notes (2000 Amends.)).
Here, Defendant takes issue will the Freels’ reliability because they “bas[e] their
estimate of the value of the completed addition as of November 3, 2018 solely upon four
photographs which are made part of the Freels’ report.” (See Doc. 36-3). Plaintiff argues
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the Freels’ value calculations are competent evidence making Daubert inapplicable.
Neither party provides the Court with any guiding precedent regarding adjusters using
photographs to determine the value of insured property subject to loss. 1 However, in this
Court’s view, it is reasonable for public adjusters to rely on photographs as a basis for a
loss estimate because many times the physical object subject to the loss is no longer in
existence. Certainly, the Freels could have done more if the property at issue was still in
existence, but Defendant has not given the Court any reason to believe that their damages
models are so patently unreliable that they are inadmissible under Rule 702 and Daubert.
Therefore, Defendant’s motion to strike is denied.
B.

Cross Motions for Summary Judgment
There are five issues to consider when addressing the party’s cross motions for

summary judgment: (1) whether the new building/addition qualifies as a new building
for purposes of coverage; (2) whether the Policy provides excess coverage for amounts
not covered by other insurance; (3) whether coverage under the NACP provisions
terminated 90 days after commencement of construction of the new building/addition;
(4) whether parts of the new building/addition constructed within 90 days of the loss are
covered under the NACP provisions; and, (5) if the NACP provisions were in force and

In conducting its own research on the issue, the Court did not locate any Seventh Circuit case directly
on point. However, in NutraSweet Co. v. X-L Eng'g Co., 227 F.3d 776, 788 (7th Cir. 2000), the Seventh
Circuit found that “a district court did not abuse its discretion in concluding that photographic analysis is a
well-accepted technique in this area so as to bear a sufficient indicia of reliability.” (emphasis added).
1

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effect, whether that policy provides coverage for Plaintiff’s business personal property
contained within parts of the new building/addition.
Motion for Summary Judgment Standard
The standard applied to summary judgment motions under Federal Rule of Civil
Procedure 56 is well-settled and has been succinctly stated as follows:
Summary judgment is proper when the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law. In determining
whether a genuine issue of material fact exists, [the Court] must view the
record in a light most favorable to the nonmoving party. Because the
primary purpose of summary judgment is to isolate and dispose of factually
unsupported claims, the nonmovant may not rest on the pleadings but
must respond, with affidavits or otherwise, setting forth specific facts
showing that there is a genuine issue for trial.… A mere scintilla of
evidence in support of the nonmovant’s position is insufficient; a party will
be successful in opposing summary judgment only when it presents
definite, competent evidence to rebut the motion.
Albiero v. City of Kankakee, 246 F.3d 927, 931-32 (7th Cir. 2001) (citations and quotations
omitted). No issue remains for trial “unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely
colorable, or is not sufficiently probative, summary judgment may be granted.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) (citations omitted).
Legal Standard Under Illinois Law for Giving Effect to Insurance Policies
As this is a diversity action, Illinois substantive law applies. Erie R. Co. v. Tompkins,
304 U.S. 64 (1938); Clarendon Nat. Ins. Co. v. Medina, 645 F.3d 928, 933 (7th Cir. 2011). Under
Illinois law, insurance policies are contracts and the general rules governing the
interpretation and construction of contracts govern the interpretation and construction of
Page 14 of 25

insurance policies. Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d 561, 564 (2005).
Illinois courts “aim to ascertain and give effect to the intention of the parties, as expressed
in the policy language, so long as doing so does not contravene public policy.” Clarendon
Nat. Ins. Co., 645 F.3d at 933 (citing Hobbs, 823 N.E.2d at 564). When reading the policy,
courts “read the policy as a whole and consider the type of insurance purchased, the risks
involved, the overall purpose of the contract.” Id. (citing State Farm Mut. Auto. Ins. Co. v.
Villicana, 692 N.E.2d 1196, 1199 (1998)). Courts will apply the policy as written if the
language is unambiguous. Id. (citing Hobbs, 823 N.E.2d at 564). Policy terms that limit an
insurer’s liability “are liberally construed in favor of coverage, but only when they are
ambiguous, or susceptible to more than one reasonable interpretation.” Id.; see also Rich
v. Principal Life Ins. Co., 875 N.E.2d 1082, 1090 (2007).
Terms employed in the policy which are not specifically defined will be given their
plain, ordinary, and popular meanings. Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 860
N.E.2d 307 (2006). An insured is deemed to have read, and from that reading to
understand the terms of the insurance policy which they purchased. Am. Family Mut. Ins.
Co. v. Krop, 2018 IL 122556, ¶ 22, reh'g denied (Nov. 26, 2018). Additionally, a policy must
“be construed in conjunction with endorsements in order to determine the meaning and
effect of the insurance contract.” Pekin Ins. Co. v. Recurrent Training Ctr., Inc., 948 N.E.2d
668, 673 (2011) (citing Vole v. Atlanta International Insurance Co., 526 N.E.2d 653 (1988).
However, if the “provisions of a policy and an attached endorsement conflict, the terms
and conditions of the endorsement control and supersede the conflicting policy
provisions.” Id. (citing Tribune Co. v. Allstate Insurance Co., 715 N.E.2d 263 (1999)).
Page 15 of 25

An insured must show a claim is within the coverage provided by a policy to
recover under the policy. Waste Mgmt., Inc. v. Int'l Surplus Lines Ins. Co., 579 N.E.2d 322,
333 (1991). “Once the insured has demonstrated coverage, the burden then shifts to the
insurer to prove that a limitation or exclusion applies.” Addison Ins. Co. v. Fay, 905 N.E.2d
747, 752 (2009). With all the above in mind, the Court first considers whether the new
building/addition qualified as a new building for purposes of coverage under the Policy.
i.

New Building/Addition
The Court finds the new building/addition qualifies as a “newly constructed or

acquired building” for purposes of coverage under the Policy. As previously outlined,
under Illinois law, if the words “used in the insurance policy are reasonably susceptible
to more than one meaning, they are considered ambiguous and will be construed strictly
against the insurer who drafted the policy. This is especially true with respect to
provisions that limit or exclude coverage.” Rich, 875 N.E.2d at 1090 (citations omitted).
“A court will consider only reasonable interpretations of the policy language and will not
strain to find an ambiguity where none exists.” Id.
Here, the Court finds both parties present reasonable interpretations of the Policy
language. The relevant provision at issue provides, in part:
(2) Your Business Personal Property
(a) if this policy covers Your Business Personal Property, you may
extend That insurance to apply to:
(ii) Business personal property, including such property that
you newly acquire, located at your newly constructed or
acquired buildings at your newly constructed or acquired buildings
at the location described in the Declarations.
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(Doc. 26-8, p. 2) (emphasis added). Plaintiff argues the new building qualifies as such
because it had separate and stand-alone load bearing walls, truss system, electric,
plumbing, and HVAC systems, along with its own restrooms, bar, kitchen, and exterior
doorways. It also was constructed with the same height, shape, and materials as the
original building. Meanwhile, Defendant contends the new building was actually an
addition to Plaintiff’s existing structure, therefore, the Policy does not provide coverage.
Defendant argues the new building is an addition because “[t]he addition to the main
building, despite containing ‘all the components of a stand-alone structure,’ was in fact
not a stand-alone structure. It was connected to, and depended on, the exterior wall of
the existing main building; it was an addition to the main structure.” (Doc. 26-8, p. 1).
The Court agrees with Plaintiff’s contentions and analysis as to why this is a new
building rather than an addition. Defendant focused on, among other things, the fact that
the new building abutted the existing structure with roof purlins physically attached to
the existing building. However, Plaintiff correctly contends (and Defendant fails to
dispute) that the roof purlins were for aesthetics only and did not provide any structural
support for the new building. Because the provision at issue is written to limit
Defendant’s coverage commitments and because both parties present reasonable
interpretations making the provisional language ambiguous, the Court must construe it
against Defendant and in favor of Plaintiff. As such, the new building qualifies as a
“newly constructed or acquired building” for purposes of coverage under the Policy. The

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Court will next address the issue of whether the Policy provides excess coverage for
amounts not covered by other insurance.
ii.

Excess Coverage
The $210,948.07, as excess, is covered under the NACP provisions under the Ultra

Property Plus endorsement. The issue is whether the $210,948.07 in excess not covered
by the builders’ risk policy is covered under the NACP provisions under the Ultra
Property Plus endorsement. Illinois courts will apply the policy as written if the language
is unambiguous. Hobbs, 823 N.E.2d at 564. Here, the relevant policy provision provides:
2. Property Not Covered
Covered Property does not include:
k.

Property that is covered under another coverage form of this
or any other policy in which it is more specifically described,
except for the excess of the amount due (whether you can collect on
it or not) from that other insurance.

(Doc. 26-7, p. 4) (emphasis added).
Defendant contends Plaintiff’s new building is not covered under the NACP
provisions because coverage exists under the builders’ risk policy. Defendant reasons
that because it paid Plaintiff the new building’s replacement cost (subject to a $150,000)
under the builders’ risk policy provision k excludes coverage. However, this argument is
unavailing because it fails to consider the exception contained within provision k. The plain
language of the provision provides an exception to the exclusion. Specifically, the
provision provides, “except for the excess of the amount due (whether you can collect on
it or not) from that other insurance.” (emphasis added). There is no dispute Defendant
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provided Plaintiff coverage under the builders’ risk policy by valuing the new building’s
replacement cost at $360,948.07. However, this valuation under the builders’ risk policy
was subject to a limit of $150,000 leaving an excess of $210,948.07 which then implicates
provision k’s excess exception. Therefore, the $210,948.07, as excess, is covered under the
NACP provisions under the Ultra Property Plus endorsement. The Court will next
consider whether coverage under the NACP provisions terminated 90 days after
commencement of construction of the new building or provides coverage for part of the
building constructed within 90 days of the loss.
iii.

90 Day Period
Because both parties present reasonable interpretations of the “90-day” window

language and that language is written to limit Defendant’s coverage commitments, the
language must be construed against Defendant. Defendant argues the NACP provisions
were not in effect at the time of loss because the loss occurred more than 90 days after
commencement of the new building. Defendant reasons the 90-day limitation is
reasonable because the NACP provisions act as stop-gap insurance for the new building
until the insured purchases permanent insurance for the covered property. Plaintiff
argues the NACP provisions were in effect at the time of loss to cover parts of the new
building constructed within 90 days of the loss. The relevant policy provides that coverage
for the new building terminates “90 days after you acquire the property or being
construction of that part of the building that would qualify as covered property.” (Emphasis
added). Neither party provided the Court with guiding precedent regarding cases

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involving NACP provisions. 2 To support its position that the 90-day window began
running at the commencement of construction of the new building, Defendant cites to a
case from California’s Fourth Circuit Court of Appeals. In S. Kornreich & Sons, Inc. v.
Genesis Ins. Co., the court found the NACP provided only temporary coverage to the
covered property for 90 days from acquisition of the property because the policy
unambiguously specifies coverage “will end under the extension of temporary coverage
when any of the following first occurs: (a) the policy expires; (b) 90 days expire after
acquisition of the property . . . .” 56 Cal. App. 4th 407, 414 (1997) (emphasis added). In
arriving at its decision, the court focused on the plain language of the policy and the
sound business practice of providing stop-gap insurance. The court also considered
relevant precedent. Id. at 407 (“In interpreting insurance policies, courts should give the
policy its plain and ordinary meaning. (Reserve Ins. Co. v. Pisciotta (1982) 30 Cal.3d 800,
807 [180 Cal.Rptr. 628, 640 P.2d 764].”).
Here, the Policy at issue is easily distinguishable from the policy in S. Kornreich &
Sons, Inc. because the plain language of the NACP provision includes the unambiguous
language “of that part of the building.” Defendant interprets “part” to mean the “integral
structural components, or ‘parts’ of the building were up and completed more than 90
days before 90 days before the loss,” but that is not what the plain language
unambiguously conveys (Doc. 28, p. 16). While that may be a reasonable interpretation,
it is also equally reasonable (and in fact more reasonable) to interpret the added language

The Court briefly researched the issue but did not discover any Seventh Circuit case law regarding
interpreting NACP provisions.
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2

as 90-day stop-gap insurance for that part of the building being constructed. Therefore,
because both parties present reasonable interpretations of the 90-day window language,
and that language is written to limit Defendant’s coverage commitment, the language is
construed against Defendant resulting in the NACP provisions being in force and effect
at the time of loss. The next issue is whether the NACP provision includes a coverage
extension for newly acquired business personal property located at the new building.
iv.

Business Personal Property
The issue now becomes whether the business personal property extension

provides an additional $250,000 of coverage for Plaintiff’s business personal property
contained within the new building at the time of loss. Similar to the previous analysis,
Plaintiff presents a reasonable interpretation of business personal property coverage
extension, however, Defendant failed to rebut that interpretation. Because the coverage
extension language is written to limit Defendant’s coverage commitments and Plaintiff
presented a reasonable interpretation of how the extension applies to Plaintiff’s newly
acquired business personal property, the language must be construed against Defendant.
The relevant newly acquired business personal property coverage extension
provides:
5.

Coverage Extensions
Except as otherwise provided, the following Extensions apply to
property located in or on the building described in the Declarations
or in the open (or in a vehicle) within 100 feet of the described
premises.

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If a Coinsurance percentage of 80% or more, or a Value Reporting
period symbol is shown in the Declarations, you may extend the
insurance provided as follows:
(2)

Your Business Personal Property
(a) If this policy covers Your Business Personal Property, you may
extend that insurance to apply to:
(ii) Business personal property, including such property that you
newly acquire, located at your newly constructed or acquired
buildings at the location described in the Declarations.

(Doc. 26-6, p. 1)
Plaintiff argues that “[b]y virtue of the property plus endorsement, this newly
acquired personal property coverage extension provides an additional $250,000.00 of
business personal property coverage.” (Id.). Defendant argues Plaintiff’s newly acquired
business personal property does not fall within the scope of coverage because Plaintiff
was not constructing a “new building” under the terms of the Policy. As previously
determined, Plaintiff’s property subject to loss qualifies as a new building under the
terms of the Policy. Additionally, Defendant does not directly dispute Plaintiff’s claimed
business personal property does not fall within the scope of the coverage extension.
Rather, Defendant argues again that the NACP provisions were not in force and effect at
the time of loss. However, as previously determined, said provisions were in effect at the
time of loss. Further, Defendant does not dispute Plaintiff’s lost property damage
calculation of $307,064.79. Therefore, Plaintiff is entitled to the full $250,000 extension
coverage for newly acquired business personal property under the Policy.

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v.

Section 155 Damages
The final issue the Court must address is whether Plaintiff is entitled to damages

under Section 155 of the Illinois Insurance Code. The narrow question is whether an
insurer’s conduct is “vexatious and unreasonable.” 215 ILCS 5/155. Here, Defendant’s
conduct does not warrant damages under Section 155.
Illinois courts have established a totality of the circumstances test to determine
whether an insurer’s conduct was “vexatious and unreasonable” by setting out a number
of factors. Golden Rule Ins. Co. v. Schwartz, 203 Ill. 2d 456 (2003). These factors include: (1)
Knowingly misrepresenting relevant facts or policy provisions; (2) Settling a claim for
less than it is worth; (3) Forcing an insured to litigate to obtain his or her benefits; (4)
Failing to properly investigate a claim or basing a denial on improper investigative
grounds; (5) The attitude of the insurer; and, (6) Whether the insured was deprived of use
of its property for any length of time. Whether an insurer’s conduct is vexatious and
unreasonable is a matter committed to the trial court’s discretion. McGee v. State Farm Fire
& Cas. Co., 315 Ill. App. 3d 673, 681 (2000).
Here, a review of the totality of the circumstances shows Defendant’s conduct does
not warrant damages under Section 155. First, Defendant provided reasonable
interpretations of the Policy provisions. Second, a delay in settling a claim does not
violate Section 155 if the delay results from a bona fide dispute regarding coverage. Id. at
681. There was a clear bona fide dispute as evidenced by both parties’ reasonable
interpretations of the relevant Policy provisions. Defendant’s conduct regarding

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Plaintiff’s claim does not rise to the level “vexatious and unreasonable” when there is a
clear bona fide dispute. Therefore, Plaintiff is not entitled to damages under Section 155.
III.

CONCLUSION

Defendant’s motion to strike is denied for the reasons previously stated.
Regarding the cross-motions for summary judgment, Plaintiff’s property subject to loss
qualifies as a new building under the terms of the Policy; the $210,948.07, as excess, is
covered under the Ultra Property Plus endorsement; the NACP provisions were in force
and effect at the time of loss; Plaintiff is entitled to the full $250,000 extension for newly
acquired business personal property under the Policy. However, Plaintiff is not entitled
to damages under Section 155.
Accordingly, Defendant’s motion to strike (Doc. 31) is DENIED; Defendant’s
motion for summary judgment (Doc. 27) is DENIED; Plaintiff’s motion for summary
judgment (Doc. 26) is GRANTED in part, DENIED in part; and, Plaintiff’s motion in
limine (Doc. 39) is DENIED as MOOT.
Plaintiff’s damages are $460,948.07. In accordance with Federal Rule of Procedure
58(a), judgment for this matter will be entered on a separate document. In the complaint,
Plaintiff seeks an amount in excess of $460,948.07, plus pre-judgment interests, costs of
suit, and for all other relief this Court deems just and proper under the circumstances,
but the Parties’ motions for summary judgment are silent on these issues. Before the
Court can enter judgment, the parties must brief these issues.
Plaintiff is therefore DIRECTED to brief the above issues regarding pre-judgment
interests, costs of suit, and all other proper relief on or before September 25, 2019. Once
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Plaintiff files its brief, Defendant is DIRECTED to respond to Plaintiff’s brief within 7
days of its filing.
IT IS SO ORDERED.
DATED: September 18, 2019

s/ Mark A. Beatty
MARK A. BEATTY
United States Magistrate Judge

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