Boyd et al v. National Fire and Marine Insurance Company
ORDER granting in part and denying in part 21 Motion for Summary Judgment. Signed by Chief Judge Nancy J. Rosenstengel on 9/15/2020. (dhg)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
JASON BOYD and KRISTI BOYD,
Case No. 3:19-CV-00727-NJR
NATIONAL FIRE AND MARINE
MEMORANDUM AND ORDER
ROSENSTENGEL, Chief Judge:
Pending before the court is a Motion for Summary Judgment (Doc. 21) filed by
Defendant National Fire and Marine Insurance Company (“National”). For the reasons
set forth below, the Court grants in part and denies in part the Motion.
FACTUAL & PROCEDURAL BACKGROUND
This action stems from a dispute over the precise extent of an insurance policy
purchased to cover a property at 724-726 North 13th Street, East Saint Louis, IL (the
“Object”), which was substantially damaged in a fire on September 30, 2018 (Doc. 21 at
The Object was purchased by Plaintiffs Jason and Kristi Boyd (“the Boyds”) for
approximately $58,000 on March 10, 2017 (Doc. 21 at 11). Before closing, the Boyds’s
lender obtained an appraisal valuing the Object at $68,000 (Doc. 21-1). In connection with
the purchase, the Boyds went to an insurance broker, Christopher Hudlin, who helped
the Boyds to prepare an application for property insurance coverage for the Object (Doc.
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29-1). That application was then submitted to several insurance providers, including
National (Id.). National responded to the application, and Hudlin’s insurance agency
requested that National bind the coverage and issue the policy (Doc. 29-1 at 6). The
property section of that application specified that the Boyds were seeking coverage for
the Object in the amount of $500,000, described as “ACV” or actual cash value (Id. at 32).
Hudlin noted that the definition of actual cash value could vary depending on the
insurance company, but that his understanding was that “in the event of a fire, [the
insurance company] would give them pretty close to $500,000 plus or minus a few dollars
for this and that” (Id. at 10). Hudlin indicated that his main impression was that coverage
was sufficient that the Boyds would be “made whole” and that National never noted that
the property was overinsured or quoted insurance for a lower valuation (Id. at 12).
National issued Policy No. 12PRM037507-02 (“the Policy”) to the Boyds, which
insured the Object and was effective April 4, 2017 (Doc. 1-1). The Policy contains a Vacant
Building Property Coverage Form that provides certain “Loss Conditions,” including
Loss Payment and Valuation Provisions that specify how the value of Covered Property
will be determined in the event of loss or damage. Those provisions include the following:
4. Loss Payment
d. We will not pay you more than your financial interest in the Covered Property.
We will determine the value of Covered Property in the event of loss or damage as
At actual cash value as of the time of loss or damage, except as provided in b., and c.
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d. Actual Cash Value (“ACV”)
Actual cash value is defined as follows:
(1) when the damage to property is economically repairable, “actual cash value”
means the cost of repairing the damage, less reasonable deduction for wear and
tear, deterioration, and obsolescence;
(2) when the loss or damage to property creates a total loss, actual cash value means
the market value of the property in a condition equal to that of the destroyed
property, if reasonably available on the used market or
(3) otherwise actual cash value means the market value of new property of like kind
and quality, less reasonable reduction for wear and tear, deterioration, and
On September 30, 2018, a fire occurred which substantially damaged the Object.
The Object was vacant at the time. On or about March 25, 2019, the Boyds submitted a
proof of loss document from their public adjustor indicating losses amounting to
$479,486.54, based on the cost of repairs, less deductions per the Policy’s valuation
provisions. The Boyds requested that National Fire agree to an appraisal of the value of
the loss to the Object pursuant to the “Appraisal” clause of the Policy, which states that
if the parties disagree as to the value of a loss:
may make written demand for an appraisal of the loss. In this
event, each party will select a competent and impartial appraiser. The two
appraisers will select an umpire. If they cannot agree, either may request
that selection be made by a Judge of a Court having jurisdiction. The
appraisers will state separately the value of the property and amount of
loss. If they fail to agree, they will submit their differences to the umpire. A
decision agreed to by any two will be binding.”
On April 12, 2019, National Fire rejected the Boyds’s appraisal demand, advising
that the actual cash value definition in Valuation Provision ¶6(d)(2) applied, and
requesting additional information regarding the market value of the property to facilitate
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its review of the Claim. National Fire’s real estate appraiser, Patrick Tobin, determined
that the market value of the Building on the date of the loss, exclusive of land value, was
$120,000.00. Relying on Tobin’s initial report, and after application of the Policy
deductible, National Fire made payment to the Boyds in the amount of $107,500.00. The
Boyds’s June 5, 2019 letter also reasserted that the market value approach of ¶6(d)(2) is
inapplicable, “as the loss does not exceed” the policy limit of $500,000.00 and they
accepted the $107,500.00 payment check “as a partial payment” of the insureds’ claim.
On May 16, 2019, the Boyds filed suit in the Circuit Court of Madison County,
Illinois, seeking to compel National to participate in the appraisal process (Doc. 1-1).
National removed to this Court on July 3, 2019 (Doc. 1). Based on information
subsequently acquired in discovery, National subsequently revised its appraisal of the
value of the Object at the date of the loss, excluding land value, to $68,000 (Doc. 21-5).
The Boyds have not obtained a real estate appraisal of the market value of the Object on
the date of the loss, exclusive of land value (Doc. 21 at 14). National filed for Summary
Judgment on February 3, 2020, and the Boyds responded on July 30, with National
replying on August 28. Both parties agree that the only issue to be decided before the
Court is the correct interpretation of the valuation provisions of the Policy. National seeks
to have the Court declare that §§ 4(d) and 6(d)(2) apply and require payment of market
value, while the Boyds seek to have the Court declare that 6(d)(1) applies and that repair
costs should be paid.
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Summary judgment is only appropriate 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.” Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir. 2014) (quoting FED.
R. CIV. P. 56(a)). Once the moving party has set forth the basis for summary judgment,
the burden then shifts to the nonmoving party who must go beyond mere allegations and
offer specific facts showing that there is a genuine issue of fact for trial. FED. R. CIV. P.
56(e); see Celotex Corp. v. Catrett, 477 U.S. 317,232-24 (1986). The nonmoving party must
offer more than “[c]onclusory allegations, unsupported by specific facts,” to establish a
genuine issue of material fact. Payne v. Pauley, 337 F.3d 767, 773 (7th Cir. 2003) (citing
Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 888 (1990)).
In determining whether a genuine issue of fact exists, the Court must view the
evidence and draw all reasonable inferences in favor of the party opposing the motion.
Bennington v. Caterpillar Inc., 275 F.3d 654, 658 (7th Cir. 2001); see also Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986). A “court may not assess the credibility of witnesses,
choose between competing inferences or balance the relative weight of conflicting
evidence[.]” Reid v. Neighborhood Assistance Corp. of America, 749 F.3d 581, 586 (7th Cir.
2014) (quoting Abdullahi v. City of Madison, 423 F.3d 763, 769 (7th Cir. 2005)).
A. Applicable Law
Under Illinois law, applied here pursuant to the Court’s exercise of diversity
jurisdiction, the interpretation of an insurance policy presents questions of law that are
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suited to decision at the summary judgment stage. Nationwide Ins. Co. v. Cent. Laborers’
Pension Fund, 704 F.3d 522, 526 (7th Cir. 2013). Interpretation of an insurance policy
follows the same rules of contract construction as other contracts. Neth. Ins. Co. v. Phusion
Projects, Inc., 737 F.3d 1174, 1177 (7th Cir. 2013).
In interpreting a contract, a district court’s primary function is to give effect to the
intent of the parties, giving effect to the express language of the contract if unambiguous
and not contrary to public policy. Id. A court may, however, find a contract ambiguous if
the language is susceptible to more than one reasonable interpretation, and may consider
extrinsic evidence of the intent of the parties to resolve the ambiguity. Id. Any ambiguity
will be construed liberally in favor of the insured. Id.
B. Applicable Law
Here, the parties agree that the Boyds contracted for insurance coverage based on
actual cash value and recognize that actual cash value is defined in the Policy, but
disagree as to which definition of actual cash value should be applied. The key term at
issue here appears to be “economically repairable,” which serves as the trigger for the
6(d)(1) definition of ACV based on repair cost. The Boyds contend that “economically
repairable” means that the cost of repair is less than the value of the insurance policy, but
this does not strike the court as a logical reading of the plain wording of the policy. Taken
in a vacuum, the phrase “economically repairable” appears to indicate something that is
actually worth repair, i.e. the cost of repairing it does not outweigh the utility of the
repaired object. Apart from being common sense, this conception of the phrase
“economically repairable” does indeed appear to be the standard legal interpretation of
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that term, based on the limited jurisprudence discussing the issue. See, e.g., Sherard v.
Safeco Ins. Co. of Am., 2015 U.S. Dist. LEXIS 138548 at *20 (W.D. Wash. Oc. 9, 2015).
This interpretation is further supported when the term is considered in light of
other provisions in the contract, such as 4(d), which explicitly states that the insured party
will not receive more than their financial interest in the covered property. If, as the Boyds
contend, “economically repairable” costs could rise to the full value of the policy, then
any policy holders whose policy value to some degree exceeded the actual value of their
insured property would be able to receive more than their financial interest, contradicting
The Boyds make much of the fact that National willingly insured the Object for
$500,000, a sum significantly more than its value, pointing to this fact as circumstantial
evidence of intent to pay repair cost up to that value, further arguing that National should
be estopped from using the market value definition of ACV based on its own failure to
properly value the Object. While it is perhaps strange that the Object is significantly
overinsured and that National issued a policy providing significantly more coverage than
the actual value of the Object, the Court is inclined to view this as an oversight rather
than an indication as to intent. The Court further finds the Boyds’s estoppel argument to
be unpersuasive—while National did agree to insure the Object for $500,000, a cursory
reading of the Policy would have shown that the Boyds would not in fact be able to
receive anywhere near that amount, given the function of 4(d).
That provision, the Boyds argue, is unenforceable, as it conflicts with the minimum
requirements of Illinois’s Standard Fire Insurance Policy, 215 Ill Comp. Stat § 5/397. The
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Standard Policy provides that the insured will not in any event receive “more than the
interest of the insured” and this simple “interest,” the Boyds argue, is different and
somehow greater than the mere “financial interest” discussed in 4(d). This distinction is
drawn from the Illinois Supreme Court’s decision in First Nat’l Bank v. Boston Ins. Co., 160
N.E.2d 802, 805 (Ill. 1959). In that case, where the insured had signed a contract to sell the
insured property for specified consideration, the insurance provider attempted to limit
payment under the policy to the amount of the consideration remaining to be paid under
the sale contract, claiming that this constituted the insured’s sole interest in the property.
The Illinois Supreme Court affirmed a judgment in favor of the plaintiffs, finding that
their interest in the property was not limited to the agreed sale price despite the executed
contract. That case should be seen as standing for the proposition that the value of an
insured party’s interest in a property is not fixed by an executory contract, but it does not
mean that a party’s interest somehow exceeds the objective monetary value of the
property. On the contrary, the case indicates that where an executory contract applies a
price that is below market value, the market value of the property should still apply to
valuation under an insurance policy. Here, National does not appear to be seeking to pay
the Boyds a price that is arbitrarily taken from a single executory document. Rather,
National’s estimate is based on prevailing market conditions and appears to be a
reasonable estimate of the value of the Object before its destruction.
For the reasons discussed above, the Court is convinced that the position of the
Boyds is erroneous, that the property is not “economically repairable,” and that 6(d)(1)
does not apply here. Furthermore, the Court finds that 4(d) does apply. This does not
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automatically mean that 6(d)(2) applies, however. Just as 6(d)(1) is triggered by the
phrase “economically repairable,” 6(d)(2) is triggered by the phrase “total loss.” There
are a number of different tests that have been used in various jurisdictions to determine
when a total loss has occurred. 12 Couch on Ins. § 175:65; 46 C.J.S. Insurance § 1589. These
tests generally involve a determination that the property is completely destroyed to the
point that it has lost its identity as a structure, cannot be restored to use, or has lost all
but nominal value. Id. The parties have presented minimal briefing on the issue of the
current status of the structure and the proper definition of total loss, and the Court finds
that there are factual issues remaining here. Accordingly, the Court finds that summary
judgment is not warranted on the issue of whether 6(d)(2) or 6(d)(3) should be applied.
For the reasons set forth above, the Court GRANTS in part and DENIES in part
the Motion for Summary Judgment.
IT IS SO ORDERED.
DATED: September 15, 2020
NANCY J. ROSENSTENGEL
Chief U.S. District Judge
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