Filed 2/21/08 NO. 4-07-0488
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
JACOB SAATHOFF, ) Appeal from
Plaintiff-Appellant, ) Circuit Court of
v. ) Piatt County
COUNTRY MUTUAL INSURANCE COMPANY and ) No. 06L6
COUNTRY CASUALTY INSURANCE COMPANY, )
Defendants-Appellees. ) Honorable
) Chris E. Freese,
) Judge Presiding.
_________________________________________________________________
JUSTICE MYERSCOUGH delivered the opinion of the court:
Plaintiff, Jacob Saathoff, filed a complaint against
defendants, Country Mutual Insurance Company (Country Mutual) and
Country Casualty Insurance Company (Country Casualty) seeking to
recover money he claimed was owed him under an insurance policy.
Defendants filed respective motions to dismiss that were granted
by the trial court. Saathoff appeals. We affirm.
I. BACKGROUND
Saathoff owned a multiunit residential apartment
building at 198 Commercial Street in White Heath, Illinois.
Saathoff purchased a policy of insurance, policy No. AM1921670,
issued by Country Mutual.
On January 4, 2005, while the policy was in effect, the
property was substantially destroyed by fire. Saathoff submitted
his claim for loss; and after investigating the claim, Country
Mutual issued a $128,576.01 check to Saathoff for settlement of
the claim. Saathoff refused Country Mutual's check because he
thought the loss was substantially greater than the amount
offered. Defendants then notified Saathoff of their demand for
an appraisal pursuant to the terms of the insurance policy.
Condition 1 of section 3 of the policy states as
follows:
"Appraisal: If you and we fail to agree
on the amount of the loss, either may demand
that the amount of the loss be set by ap-
praisal. If either makes a written demand
for appraisal, each will select a competent,
independent appraiser and notify the other of
the appraiser's identity within 20 days of
receipt of the written demand. The two ap-
praisers will then select a competent, impar-
tial umpire. If the two appraisers are un-
able to agree on an umpire within 15 days,
you or we may ask a judge of a court of re-
cord in the state where the insured premises
is situated to select an umpire. The ap-
praisers will then set the amount of the
loss. If the appraisers submit a written
report of an agreement to us, the amount
agreed on will be the amount of the loss. If
the appraisers fail to agree within a reason-
able time, they will submit their differences
to an umpire. A written agreement signed by
any two of these three will set the amount of
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the loss. For properties other than residen-
tial properties occupied by four or less
families covered by this policy, each ap-
praiser will be paid by the party selecting
that appraiser. Other expenses of the ap-
praiser and the compensation of the umpire
will be paid equally by you and us."
Defendants selected John Mackling as their appraiser,
while Saathoff selected David Gard. The two appraisers selected
Jody Wesley as the umpire. On November 22, 2005, the appraisers
and umpire reached an agreement. The replacement cost of the
property was set at $311,856. After depreciation, the actual
cash value was set at $240,358. On December 22, 2005, Country
Mutual issued a check to Saathoff in the amount of $239,358,
which constituted the actual cash value set by the appraisal
process minus a $1,000 deductible. Saathoff cashed the settle-
ment check in January 2006.
In a letter dated January 24, 2006, after Saathoff
cashed the settlement check, Saathoff's attorney sent a letter
addressed to Roger Loyd of Country Insurance. The letter re-
quested payment in the amount of $7,647 for personal property
lost in the fire because the appraisers and umpire excluded
personal property from the appraisal process. The letter also
noted the fire loss required certain code updates, which was
fixed at $12,741. Next, Saathoff's attorney requested reimburse-
ment for the $8,916.59 Saathoff paid for the umpire and his
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appraiser. Saathoff's letter also requested $37,400 for lost
rent because repair or replacement had been delayed by a year
because of Country Insurance's refusal to pay the correct amount
of the loss. Saathoff also claimed he was not paid the amount
set by the appraisal process. He alleged defendants violated
Illinois laws pertaining to improper claims practices and that he
was owed $60,000 in statutory penalties plus $15,000 in attorney
fees. In total, the letter claimed Saathoff was still due
$213,202.59.
Defendants refused to comply with Saathoff's demand.
On April 20, 2006, Saathoff filed a one-count complaint alleging
breach of contract against defendants. The complaint alleged the
parties entered into an insurance contract and, during the policy
period, Saathoff suffered a loss of $368,000 as a result of the
fire, including building damage, personal property, and loss of
rental income. The complaint alleged defendants still owed in
excess of $200,000. Finally, the complaint alleged Saathoff was
entitled to $60,000 in attorney fees.
On August 10, 2006, Country Casualty filed a section 2-
619 motion to dismiss (735 ILCS 5/2-619(a)(9) (West 2006)) on the
grounds that Country Mutual was the insurer, not Country Casu-
alty, and that the policy declarations were not attached to the
complaint and therefore the complaint violated section 2-606 of
the Illinois Code of Civil Procedure (735 ILCS 5/2-606 (West
2006)). The motion noted the "General Policy Conditions," which
stated the following:
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"16. No Action Against COUNTRY Insurance
& Financial Services. Nothing in this policy
gives any person, organization,
corporation[,] or other entity any rights or
cause of action against any parent corpora-
tion, affiliate[,] or subsidiary of the com-
pany issuing the policy. No rights are cre-
ated or implied against any member of COUNTRY
other than the company described in the dec-
larations."
Attached to the motion was a copy of the declarations page and a
copy of the policy itself. A provision in the policy that
describes the agreement states, "We will provide the insurance
described in the policy through the company named in the declara-
tions if you have paid the premium and have complied with the
policy provisions." The top of the declarations page indicates
Country Mutual is the insurer.
On August 10, 2006, Country Mutual filed a section 2-
619 motion to dismiss. Country Mutual asserted the complaint
must be dismissed because it paid Saathoff the actual cash value
for the property damaged as a result of the loss. The motion
stated Saathoff was only entitled to replacement costs if he had
repaired or replaced the property, and Saathoff had not done so.
The motion also stated Saathoff accepted the check tendered by
Country Mutual in the amount of the actual cash value determined
through the appraisal process. The motion noted that the section
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of the policy regarding replacement costs states the following:
"a. Except for loss to money and securi-
ties, losses will be adjusted on the basis of
the replacement cost of the property insured
under this policy. However, we will pay no
more than the smallest of the:
(1) full cost of replacement
of the property at the same site,
using new material of like kind and
quality without deduction for de-
preciation;
(2) cost of repairing the
insured property within a reason-
able time;
(3) amount of insurance for
such property as stated in the
declarations;
(4) amount actually and neces-
sarily spent to repair or replace
the damaged property.
b. If you elect not to repair or re-
place the property, the loss settlement will
be made on an Actual[-]Cash[-]Value basis
rather than on a replacement[-]cost basis.
Even if you elect this option, you still have
the right to make a claim on a replacement[-]
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cost basis. You must, however, notify us in
writing within 180 days after the loss."
Saathoff never gave written notification that he intended to
repair or replace the property within 180 days of the loss.
Plaintiff filed a response on October 11, 2006, claim-
ing the loss was set at $324,529 by the appraisal process.
Attached were affidavits from the appraiser and umpire stating
the loss was set at that amount. All the affidavits stated the
award was filed with Country Mutual.
Following a hearing on the motions, the trial court
granted defendants' motions to dismiss. No transcript of the
hearing was included in the record on appeal.
On January 21, 2007, plaintiff filed a motion to
reconsider. The trial court denied the motion. This appeal
followed.
II. ANALYSIS
On appeal, Saathoff argues defendants' motions to
dismiss were improperly granted. "When a cause of action is
dismissed on a section 2-619 motion, the question on appeal is
whether there is a genuine issue of material fact and whether
defendant is entitled to judgment as a matter of law." Mitchell
v. State Farm Fire & Casualty Co., 343 Ill. App. 3d 281, 284, 796
N.E.2d 617, 619 (2003). A dismissal under section 2-619 is
reviewed de novo. Zahl v. Krupa, 365 Ill. App. 3d 653, 658, 850
N.E.2d 304, 309 (2006).
Plaintiff claims Country Casualty should not have been
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dismissed as a defendant because it was an insurer along with
Country Mutual. Country Casualty denies this. In respect to
Country Mutual, Saathoff claims the appraisal process set the
value at $324,597 and Country Mutual improperly reduced the loss
to $239,358. Country Mutual contends the $239,358 is all
Saathoff was entitled to under the policy and that amount re-
flects the actual cash value minus the $1,000 deductible. We
agree with both defendants.
This case turns on the interpretation of the insurance
policy at issue. "The general principles governing the interpre-
tation and construction of insurance contracts do not differ from
those controlling in other contracts." Rivota v. Kaplan, 49 Ill.
App. 3d 910, 914, 364 N.E.2d 337, 341 (1977).
"In construing insurance contracts, the
court's primary purpose is to give effect to
the intention of the parties as expressed
therein. [Citation.] Where the terms of a
policy are clear and unambiguous, their plain
meaning will be given effect. [Citation.]
Where, however, a provision in an insurance
policy is subject to more than one reasonable
interpretation, it is ambiguous and must be
construed against the insurer and in favor of
the insured. [Citations.]" Elson v. State
Farm Fire & Casualty Co., 295 Ill. App. 3d 1,
6, 691 N.E.2d 807, 811 (1998).
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A. Country Casualty Was Not an Insurer
Saathoff, citing Szymkus v. Eureka Fire & Marine
Insurance Co., 114 Ill. App. 401 (1904), contends that when two
companies issue a policy of insurance, both are liable for the
loss. Thus, according to Saathoff, both Country Casualty and
Country Mutual are liable for the loss he suffered. As discussed
herein, this joint liability claim is ultimately immaterial
because Country Mutual paid Saathoff what he was due. Moreover,
Szymkus is inapplicable to this case. In Szymkus, the policy
specifically stated "'[t]his policy being a joint policy.'"
Szymkus, 114 Ill. App. at 404. Moreover, the policy in Szymkus
set forth that each company got one half of the premium and that
each of the companies insured the plaintiff. Szymkus, 114 Ill.
App. at 410. No policy at issue in the case sub judice refers to
the policy as a joint policy or states that each company received
a portion of the premium or that each defendant insured Saathoff.
This policy states "We will provide the insurance
described in this policy through the company named in the decla-
rations." (Emphasis in original.) The policy goes on to define
"we" as "the [c]ompany name in the declarations." The declara-
tions page lists only Country Mutual, not Country Casualty. The
policy further states "No rights are created or implied against
any member of COUNTRY other than the company described in the
declarations." Thus, by the terms of the policy, Country Mutual
is the sole insurer.
Further, the checks submitted in payment of the claim
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were issued by Country Mutual. The checks have three boxes with
a company's name next to each box. Country Mutual and Country
Casualty each have their own box. The check indicates that the
check is drawn by the company marked "x." The box next Country
Mutual is marked "x."
B. Rule 375(b) Sanctions Are Denied
Country Casualty argues Saathoff's appeal of the
judgment in favor or Country Casualty was not brought in good
faith and requests sanctions against Saathoff under Supreme Court
Rule 375(b) (155 Ill. 2d R. 375(b)). Rule 375(b) provides that,
if a reviewing court determines an appeal was taken for an
improper purpose such as to harass or increase the costs of
litigation or was not taken in good faith, an appropriate sanc-
tion may be entered against the party or attorney of the party.
155 Ill. 2d R. 375(b). "If, under an objective standard of
conduct, a reasonably prudent attorney in good faith could have
brought the appeal, a request for sanctions will be denied." In
re Marriage of Schneider, 298 Ill. App. 3d 103, 111, 697 N.E.2d
1161, 1167 (1998). While ultimately unsuccessful, Saathoff's
appeal with respect to Country Casualty does not appear to have
been brought in bad faith or for an improper purpose. Country
Casualty's request for sanctions is, therefore, denied.
C. Country Mutual Paid the Appraisal Award Properly
Saathoff claims Country Mutual improperly reduced the
award set by the appraisal process. Country Mutual claims that
it was only required to pay the amount it tendered, which was the
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actual cash value minus the $1,000. We agree with Country
Mutual.
After Country Mutual tendered a check to settle the
claim, which Saathoff deemed inadequate, Saathoff demanded an
appraisal pursuant to the terms of the insurance policy. The
appraisers and umpire determined the replacement cost was
$311,856 and the actual cash value was $240,358. Again, the
policy states it will pay no more than the smallest of the (1)
full cost of replacement, (2) cost of repairing the insured
property within a reasonable time, (3) amount of insurance for
such property stated in the declarations, and (4) the amount
actually and necessarily spent to repair or replace the damaged
property. As previously quoted, the policy also states the
following:
"If you elect not to repair or replace
the property, the loss settlement will be
made on an Actual[-]Cash[-]Value basis rather
than on a replacement[-]cost basis. Even if
you elect this option, you still have the
right to make a claim on a replacement[-]cost
basis. You must, however, notify us in writ-
ing within 180 days after the loss."
Clearly, under the terms of the policy, Saathoff can either (1)
repair or replace the property and receive the replacement cost
or (2) not repair or replace the property and collect the actual
cash value. Saathoff did not repair or replace the property, nor
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did he notify Country Mutual of his intent to replace the loss
within 180 days of the loss. Accordingly, under the terms of the
policy, Saathoff was entitled to the actual cash value, which is
what he received.
Although not discussed in Saathoff's brief, one of his
contentions in his demand letter was that payment for lost rent
should be extended an additional year because of unreasonable
delay in settling the claim. He claimed he was thus owed $37,400
in additional lost rent. This contention ignores the plain
language of the policy, which states "We will pay only for loss
of business income sustained, and extra expenses incurred, within
12 consecutive months from the date of direct physical loss to
covered property."
III. CONCLUSION
For the reasons stated, we affirm the trial court's
judgment.
Affirmed.
APPLETON, P.J., and McCULLOUGH, J., concur.
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