2015 IL App (1st) 142169
No. 1-14-2169
FIFTH DIVISION September 30, 2015
IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT ______________________________________________________________________________
ROBERT LYTLE, ) Appeal from the ) Circuit Court of Plaintiff-Appellant, ) Cook County. ) v. ) No. 12 CH 22846 ) COUNTRY MUTUAL INSURANCE COMPANY, ) Honorable ) Thomas Allen, Defendant-Appellee. ) Judge Presiding. ______________________________________________________________________________
JUSTICE LAMPKIN delivered the judgment of the court, with opinion. Presiding Justice Rochford and Justice Hall concurred in the judgment and opinion.
OPINION
¶1 Plaintiff Robert Lytle challenges the trial court’s dismissal of his second amended
complaint alleging breach of contract and seeking costs and penalties against defendant Country
Mutual Insurance Company (Country Mutual). The trial court found that there was no genuine
issue of material fact and the clear and unambiguous terms of the insurance policy established that
Lytle was not entitled to replacement costs because he never made any repairs or replacements.
For the reasons that follow, we affirm the judgment of the trial court.
¶2 I. BACKGROUND
¶3 In February 2011, plaintiff Lytle purchased a homeowner’s insurance policy from No. 1-14-2169
defendant Country Mutual to insure his home in Elmhurst, Illinois. The home was built around
1903. On June 21, 2011, Lytle discovered damage to his home as a result of a severe storm and
shortly thereafter made a claim to Country Mutual for insurance proceeds.
¶4 The policy contained a depreciation holdback provision, which provided that the insurer
would not pay more than actual cash value until the actual repair or replacement was complete.
Furthermore, the insured could choose to accept actual cash value instead of replacement cost. If
the insured elected to accept actual cash value, he would have one year from the date of the loss to
repair or replace the damaged property and request the difference between the actual cash value
and the replacement cost.
¶5 Lytle hired an insurance adjuster to represent him in the claims process. On August 25,
2011, Country Mutual informed Lytle’s adjuster that Country Mutual’s adjuster did not have
authority to make any verbal agreements or commitments on behalf of Country Mutual, all
agreements must be in writing, and Country Mutual would not waive any of the policy
requirements concerning the insured’s duties.
¶6 On August 31, 2011, Country Mutual issued to Lytle an actual cash value payment of
$42,911.84. On October 21, 2011, Country Mutual sent Lytle a letter advising him that his claim
remained open; Country Mutual was waiting—in accordance with the depreciation holdback
provision of the policy—for the work to be completed; and Lytle’s one-year date to replace or
repair the damaged property and request the difference between actual cash value and replacement
cost would expire on June 21, 2012. On January 21, 2012, Country Mutual sent Lytle another letter
containing this same information.
¶7 Lytle’s adjuster negotiated with Country Mutual to increase the amount of the actual cash
value payment to include damage to the foundation. The parties reached an agreement on this
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matter, and, on January 24, 2012, Country Mutual issued Lytle a supplemental actual cash value
payment of $16,024.70.
¶8 On April 24, 2012, Lytle’s adjuster notified Country Mutual that the repair and
construction process was at a standstill because the Village of Elmhurst required necessary
upgrades under its building code. The adjuster stated that he could not compel the Village to put its
upgrade requirements in writing and the Village suggested that the parties meet at the property
instead.
¶9 On May 15, 2012, Lytle’s adjuster wrote Country Mutual and suggested that it contact
village representatives and meet them at the jobsite. In a June 18, 2012 letter to Country Mutual,
Lytle’s adjuster complained that Country Mutual’s explanations were not specific. The adjuster
also referred to a demand by Lytle in October 2011 for an appraisal and Country Mutual’s
response that the demand was premature.
¶ 10 On June 11, 2012, Country Mutual wrote Lytle, informing him that it could not grant an
extension on his claim and his one year period in which to complete the repairs would expire on
June 21, 2012.
¶ 11 In a June 18, 2012 letter to Country Mutual, Lytle’s adjuster complained that Country
Mutual would not attend meetings with village representatives, explain its prior correspondence,
or name an appraiser.
¶ 12 Country Mutual denied Lytle’s request for additional payment of the depreciation
holdback, and Lytle filed suit. In his second amended complaint, Lytle sought damages, alleging
Country Mutual breached the insurance contract by failing to pay the replacement costs and
additional living expenses. Lytle also sought attorney fees, costs and penalties pursuant to section
155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2012)), alleging Country Mutual
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engaged in acts of bad faith. Lytle did not request an appraisal or any type of equitable relief.
¶ 13 Country Mutual filed its answer and affirmative defenses and thereafter moved for
summary judgment pursuant to section 2-1005 of the Code of Civil Procedure (735 ILCS 5/2-1005
(West 2012)). Country Mutual argued that there was no genuine issue of material fact to be
determined because Country Mutual paid Lytle his actual cash value payment; the policy provided
that Lytle had one year to complete the property repairs and request the difference between the
actual cash value paid and the replacement costs necessary to repair the storm damage; and Lytle
did not complete any repairs or replacements within the one year period. Moreover, the additional
amounts Lytle sought were excluded building ordinance costs, which Lytle never actually
incurred. Attached to the motion were the relevant pleadings, a copy of the policy, evidence of
payment of the actual cash value, an affidavit from Country Mutual’s claims handler, and
correspondence between the parties regarding the necessity of completing the repairs within one
year from the date of loss.
¶ 14 In his response, Lytle argued there were issues of fact concerning whether Country Mutual
breached its duty of good faith and fair dealing and violated section 155 of the Insurance Code by
failing to meet with representatives from the village and not abiding by the appraisal provision of
the policy.
¶ 15 On June 11, 2014, the trial court held a hearing on Country Mutual’s motion and granted
summary judgment in favor of Country Mutual. The court found that Lytle’s request for an
appraisal related solely to a dispute over coverage, which was not subject to the appraisal provision
of the policy. The court also found that Lytle had negotiated a settlement of the actual cash value
payment, failed to timely complete repairs or replacements, and did not incur any building code
upgrade costs. Lytle timely appealed.
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¶ 16 II. ANALYSIS
¶ 17 “Summary judgment is appropriate only when the pleadings, depositions, 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.” (Internal quotation
marks omitted.) JPMorgan Chase Bank, N.A. v. Earth Foods, Inc., 238 Ill. 2d 455, 460-61
(2010). We review a grant or denial of a summary judgment de novo. Id. at 461. A reviewing
court’s function in reviewing a trial court’s entry of summary judgment is to ensure that no
genuine issue of material fact was raised and to determine whether the judgment was correctly
entered as a matter of law. Comtrade, Inc. v. First National Bank of Highland Park, 146 Ill. App.
3d 1069, 1072-73 (1986). A nonmoving party need not prove its case, but must present some
factual basis entitling it to judgment. Parker v. House O’Lite Corp., 324 Ill. App. 3d 1014, 1019
(2001).
¶ 18 The construction of the provisions of an insurance policy is a question of law, subject to de
novo review. Illinois Famers Insurance Co. v. Marchwiany, 222 Ill. 2d 472, 476 (2006). Insurance
policies are subject to the same rules of construction applicable to other types of contracts. See
Continental Casualty Co. v. McDowell & Colantoni, Ltd., 282 Ill. App. 3d 236, 241 (1996). A
court’s primary objective is to ascertain and give effect to the intention of the parties as expressed
in the agreement. Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 391
(1993). In performing that task, the court must construe the policy as a whole, taking into account
the type of insurance purchased, the nature of the risks involved, and the overall purpose of the
contract. Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278, 292 (2001).
The words of a policy should be accorded their plain and ordinary meaning. State Farm Mutual
Automobile Insurance Co. v. Villicana, 181 Ill. 2d 436, 441 (1998). Where the provisions of a
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policy are clear and unambiguous, they will be applied as written (United States Fire Insurance
Co. v. Schnackenberg, 88 Ill. 2d 1, 4 (1981)) unless doing so would violate public policy
(Villicana, 181 Ill. 2d at 442).
¶ 19 Lytle argues that the loss payable provision of the insurance contract is ambiguous and
should be construed most strongly against Country Mutual, the party that prepared the contract.
However, we find no ambiguity in the language of the instant policy of insurance. The contract
indicates Lytle purchased dwelling coverage subject to Loss Settlement 1, which provides that
replacement cost is paid in the following manner and circumstances:
“a. We pay replacement cost unless paragraph b. applies. If a building or
structure is rebuilt at a new location, replacement cost may not exceed the cost of
restoring the property at the original location.
b. If the applicable limit of liability for the damaged property is less than
80% of its replacement cost at the time of the loss, we will pay actual cash value.
c. We will not pay more than actual cash value until actual repair or
replacement is complete, unless the replacement cost is less than $2,500 and less
than 5% of the applicable limit of liability. With respect to losses as a result of peril
4. Windstorm Or Hail we will not pay more than actual cash value until actual
repair or replacement is complete, unless the replacement cost is less than $15,000.
d. You may choose, at your election, to accept actual cash value instead of
replacement cost. If you do so, you will have one year from the date of the loss to
repair or replace the damaged property and request the difference between actual
cash value and replacement cost.
e. We will pay actual cash value for damage to wood fences.”
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¶ 20 Furthermore, concerning building ordinance coverage, the policy provided:
“a. Under Dwelling, Coverage C and item 5. Building Additions And
Alterations, below, we will pay for the increased costs you incur due to the
enforcement of any ordinance or law that requires or regulates:
(1) The construction, demolition, remodeling, renovation or repair
of that part of a covered dwelling damaged by a Peril Insured Against;
(2) The demolition and reconstruction of the undamaged part of a
covered dwelling, when that dwelling must be totally demolished because
of damage by a Peril Insured Against to another part of that dwelling; or
(3) The remodeling, removal or replacement of the portion of the
undamaged part of a covered dwelling necessary to complete the
remodeling, repair or replacement of that part of the covered dwelling
damaged by a Peril Insured Against.
This coverage provides additional insurance up to 10% of the stated
applicable limit, but is not increased by Coverage EE or Coverage HH, if Coverage
EE or Coverage HH is purchased.
b. You may use all or part of this Building Ordinance coverage to pay for
the increased costs you incur to remove debris resulting from the
construction, demolition, remodeling, renovation, repair or replacement of
property as stated in a. above.
c. We do not cover:
(1) The loss in value to any covered dwelling due to the
requirements of any ordinance or law; or
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(2) The costs to comply with any ordinance or law which requires
any insured or others to test for, monitor, clean up, remove, contain, treat,
detoxify or neutralize, or in any way respond to or assess the effects of
pollutants or fungus in or on any covered dwelling.”
¶ 21 In addition, the policy contains the following express exclusions:
“A. We do not insure for loss caused directly or indirectly by any of the
following. Such loss is excluded regardless of any other cause or event contributing
concurrently or in any sequence to the loss. These exclusions apply whether or not
the loss event results in widespread damage or affects a substantial area or the loss
arises from natural, man-made, or external forces, or occurs as a result of any
combination of these
***
3. Water Damage
Water Damage means loss from:
c. Water or water-borne material, regardless of its source, below
the surface of the ground, including water which exerts pressure on
or seeps or leaks through a building, sidewalk, driveway,
foundation, swimming pool or other structure.
19. Any of the following:
a. Wear and tear, marring, deterioration;
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f. Settling, shrinking, bulging or expansion, including resultant
cracking, of bulkheads, pavements, patios, footings, foundations,
walls, floors, roofs or ceilings;”
¶ 22 We find no ambiguity in this contract language, and this court has construed similar
contract language and found the policy clear and unambiguous. Saathoff v. Country Mutual
Insurance Co., 379 Ill. App. 3d 398, 404 (2008); Higginbotham v. American Family Insurance
Co., 143 Ill. App. 3d 398, 400 (1986); National Tea Co. v. Commerce & Industry Insurance Co.,
119 Ill. App. 3d 195, 201 (1983). Accordingly, we conclude the trial court correctly interpreted the
clear language of the insurance policy as providing for replacement cost coverage only if actual
repairs were completed.
¶ 23 “The Replacement Cost has two components: the Actual Cash Value, which is the value of
the property at the time of loss, or an agreed or appraised value; and the Depreciation Holdback,
which is the cost of repairs that exceed the Actual Cash Value.” Novogroder Cos. v. Hartford Fire
Insurance Co., 528 Fed. App’x 644, 645 (7th Cir. 2013) (applying Illinois law). If the insured
repairs or replaces the damaged property, and if the actual cost of repairs exceeds the actual cash
value, then the insurer is obligated to reimburse the insured for the difference. Id.; accord Paluszek
v. Safeco Insurance Co. of America, 164 Ill. App. 3d 511, 516-17 (1987). Unless the insured has
actually suffered a pecuniary loss from repairing or replacing the damaged property, “the
insurance company’s liability is limited to the actual cash value.” Id. at 517.
¶ 24 Here, it is undisputed that Lytle has been paid the actual cash value of the damaged
property at the time of the loss and has not repaired or replaced the property. Moreover, it is
undisputed that the policy contains a standard depreciation holdback loss settlement provision that
states Country Mutual will not pay more than actual cash value until the actual repair or
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replacement is complete. Accordingly, Lytle is not entitled to reimbursement for the depreciation
holdback because he did not incur that pecuniary loss.
¶ 25 Lytle also contends Country Mutual violated the policy by failing to comply with his
demand for an appraisal. Lytle argues that he sought an appraisal over a disputed amount of a
covered loss.
¶ 26 The policy’s appraisal provision reads as follows:
“If you and we fail to agree on the amount of loss, either may demand an
appraisal of the loss. In this event, each party will choose a competent and impartial
appraiser within 20 days after receiving a written request from the other. The two
appraisers will choose an umpire, who shall be competent in the trade or skill
necessary to assess the loss. If they cannot agree upon an umpire within 15 days,
you or we may request that the choice of an umpire be made by a judge of a court of
record in the state where the residence premises is located. The appraisers will
separately set the amount of loss. If the appraisers submit a written report of an
agreement between them to us, the amount agreed upon will set the amount of loss
and be final. If they fail to agree, they will submit their differences to the umpire. A
decision agreed to by any two will then be the amount of loss and be final.
Each party will:
1. Pay its own appraiser; and
2. Bear the other expenses of the appraisal and umpire equally.”
¶ 27 Contrary to Lytle’s assertion on appeal, he presents this court with a coverage dispute
rather than a dispute over the amount of a loss. Specifically, Lytle disputes whether certain costs
associated with complying with building ordinances would be covered under his policy.
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Consequently, Lytle was not entitled to an appraisal on the issue of insurance coverage or contract
interpretation. See Lundy v. Farmers Group, Inc., 322 Ill. App. 3d 214, 219 (2001) (the resolution
of the issue of whether the defendant insurance company misrepresented the quality of repair parts
it would cover under its policies fell outside the scope of an appraisal process and required the
construction of the policy).
¶ 28 Furthermore, Lytle asks this court to determine the scope of his written appraisal request,
but that document is missing from the record on appeal. The burden of providing a sufficient
record on appeal rests with the appellant (Corral v. Mervis Industries, Inc., 217 Ill. 2d 144, 156
(2005)), and in the absence of a complete record, this court presumes that the order entered by the
trial court was in conformity with the law and had a sufficient factual basis (Moenning v. Union
Pacific R.R. Co., 2012 IL App (1st) 101866, ¶ 38). Any doubts arising from the incompleteness of
the record will be resolved against the appellant. Foutch v. O’Bryant, 99 Ill. 2d 389, 392 (1984).
According to the record, the trial court determined that the issue raised in Lytle’s appraisal request
was not subject to the appraisal provision. Based on the insufficient record on appeal concerning
this issue, we conclude that the trial court’s decision concerning Lytle’s appraisal demand
conformed with the law and had a sufficient factual basis.
¶ 29 To the extent that Lytle appears to ask this court to determine the rights of the parties
regarding the policy’s building ordinance coverage, we find that Lytle has forfeited review of this
issue by failing to raise it in the trial court. Haudrich v. Howmedica, Inc., 169 Ill. 2d 525, 536
(1996) (issues not raised in the trial court are deemed waived and may not be raised for the first
time on appeal).
¶ 30 Lytle also asserts that Country Mutual had a duty to meet with representatives from the
village to learn firsthand what ordinances the village might or might not enforce. We disagree;
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Lytle cites no relevant authority to support the proposition that Country Mutual had a duty to act as
an agent for Lytle in making a claim. Moreover, the correspondence in the record establishes that
Lytle’s own insurance adjuster already met with the village representatives and possessed
knowledge about the necessary building code upgrades, and the parties do not dispute that Lytle
never provided Country Mutual with any information delineating any necessary building code
upgrades. Instead, after Lytle accepted the actual cash value payments, he asked Country Mutual
to cover the difference between the actual cash value and replacement cost despite never having
repaired or replaced the property and, thus, never incurring those costs. The insurance policy at
issue provides coverage only for incurred costs, and the equitable principles of waiver and estoppel
may not be used to create or extend coverage where none exists. Schuster v. Occidental Fire &
Casualty Co. of North America, 2015 IL App (1st) 140718, ¶ 29.
¶ 31 Finally, Lytle was not entitled to damages pursuant to section 155 of the Insurance Code
because his bad faith claim against Country Mutual was dependent on the success of his breach of
contract action, and he did not succeed in that action on the policy. Cramer v. Insurance Exchange
Agency, 174 Ill. 2d 513, 524 (1996); Hoover v. Country Mutual Insurance Co., 2012 IL App (1st)
110939, ¶ 40.
¶ 32 We affirm the judgment of the circuit court granting Country Mutual’s motion for
summary judgment.
¶ 33 Affirmed.
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