Sims v. Allstate Ins. Co.

• Decision Date: 31 May 2006
• Docket Number: No. 5-04-0525.,5-04-0525.
• Citation: 851 N.E.2d 701
• Parties: Michael SIMS and Tiffany Sims, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellants, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

851 N.E.2d 701

Michael SIMS and Tiffany Sims, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellants, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.

No. 5-04-0525.

Appellate Court of Illinois, Fifth District.

May 31, 2006.

Mark C. Goldenberg, Elizabeth V. Heller, Goldenberg, Miller, Heller & Antognoli, Edwardsville, Michael B. Hyman, Melinda J. Morales, Much Shelist Freed Denenberg Ament & Rubenstein, P.C., Chicago, Robert E. Becker, Kevin T. Hoerner, Becker Paulson Hoerner & Thompson, P.C., Belleville, Elizabeth J. Cabraser, Scott P. Nealey, Lieff, Cabraser, Heimann & Bernstein, LLP, San Francisco, CA, for Appellants.

Jeffrey P. Lennard, Richard L. Fenton, Margo Weinstein, Sonnenschein Nath & Rosenthal LLP, Chicago, Gordon R. Broom, Troy A. Bozarth, Burroughs Hepler Broom MacDonald Hebrank & True LLP, Edwardsville, H. Sinclair Kerr, Jr., Kerr & Wagstaffe LLP, San Francisco, CA, for Appellee.

Justice HOPKINS delivered the opinion of the court:

The plaintiffs, Michael and Tiffany Sims, on behalf of themselves and all others similarly situated, filed a class action for a breach of contract against the defendant, Allstate Insurance Company (Allstate). The circuit court certified the class, determined that Allstate's insurance policy was ambiguous, and submitted the case to a jury. The jury returned a verdict in favor of Allstate.

On appeal, the plaintiffs argue that the circuit court erred in allowing the jury to construe the insurance policy; that the circuit court abused its discretion in allowing Allstate to present evidence regarding its unilateral subjective intent; that the circuit court erred in instructing the jury regarding ambiguity, the burden of proof, and the principle of contra proferentem; that, as a matter of law, the insurance policy's limit-of-liability provision was ambiguous and therefore covered the plaintiffs' claims for a loss of value; and that Allstate improperly attacked the ethics and integrity of the plaintiffs' counsel. We affirm on other grounds.

FACTS

The plaintiffs' automobiles were damaged while insured by Allstate. Allstate paid the cost to repair each vehicle but did not compensate the plaintiffs for its diminished value (a repaired vehicle's loss in market value resulting from the fact that it suffered property damage). The plaintiffs initiated this class action, alleging that by failing to compensate them for their damaged but repaired vehicle's diminished value, Allstate breached its contract.

Allstate's collision and comprehensive coverages for an insured's automobile are governed by section six of its insurance policy. Section six is entitled "Protection Against Loss To The Auto," is substantially the same in each class state, and states as follows:

"COVERAGE DD

Auto Collision Insurance

ALLSTATE will pay for direct and accidental loss to YOUR insured AUTO * * * (including insured loss to an attached trailer) from a collision with another object or by upset of that AUTO or trailer. * * *

* * *

COVERAGE HH

Auto Comprehensive Insurance

ALLSTATE will pay for direct and accidental loss to YOUR insured AUTO * * * not caused by collision. * * *

* * *

Payment Of Loss By Allstate

ALLSTATE may pay for the loss in money, or may repair or replace the damaged or stolen property. * * *

Limits of Liability

ALLSTATE'S limit of liability is the actual cash value of the property or damaged part of the property at the time of loss. The actual cash value will be reduced by the deductible for each coverage as shown on the declarations page. However, OUR liability will not exceed what it would cost to repair or replace the property or part with other of like kind and quality."

Prior to the trial, Allstate moved to dismiss the plaintiffs' action on the basis that the "Payment of Loss" and "Limits of Liability" provisions of the policy did not require Allstate to pay for diminished value. The circuit court determined that the insurance policy was ambiguous, and the court denied Allstate's motion to dismiss. The case was tried before a jury, and the jury rendered a general verdict in favor of Allstate. The circuit court denied the plaintiffs' posttrial motion, and the plaintiffs filed a timely appeal.

ANALYSIS

The plaintiffs argue that the diminished value of an adequately repaired vehicle is a "direct and accidental loss" that Allstate is required to compensate under the policy's insuring provision. Allstate does not dispute that the term "loss" could encompass a vehicle's diminished value, but it contends that the insuring language must be construed in light of the "Limits of Liability" and "Payment of Loss" sections. Allstate argues that these provisions are clear and unambiguous and preclude an insured's recovery for a vehicle's diminished value.

The plaintiffs counter that the phrase "repair or replace * * * with other of like kind and quality" in the "Limits of Liability" section encompasses an inherent concept of value, is at the least ambiguous, and therefore requires Allstate to compensate the plaintiffs for their vehicles' diminution in value. The plaintiffs argue that because the policy requires that a repair or replacement be of "like kind and quality," the vehicle must be repaired so that there is no remaining physical damage and no loss in value and that, otherwise, Allstate must pay to compensate its insured for the vehicle's diminished value.

While a vehicle's diminished value may be a "loss" under the policy's insuring provision, we agree with Allstate that its obligation to compensate the insured for that loss is circumscribed by the plain language of the policy's "Limits of Liability" and "Payment of Loss" sections.

"The construction of an insurance policy is a question of law." Pekin Insurance Co. v. Estate of Goben, 303 Ill. App.3d 639, 642, 236 Ill.Dec. 689, 707 N.E.2d 1259 (1999). "When construing the language of an insurance policy, the court's primary objective is to ascertain and give effect to the intentions of the parties as expressed in their agreement." Pekin Insurance Co., 303 Ill.App.3d at 642, 236 Ill.Dec. 689, 707 N.E.2d 1259. When determining the parties' intentions as expressed in the contract, the court must construe the policy as a whole, giving effect to every part. Hartford Accident & Indemnity Co. v. Case Foundation Co., 10 Ill.App.3d 115, 121, 294 N.E.2d 7 (1973); Miller v. Madison County Mutual Automobile Insurance Co., 46 Ill.App.2d 413, 417, 197 N.E.2d 153 (1964). An insurance policy must be construed according to the sense and the meaning of the terms, and if the language is clear and unambiguous, it must be given its plain, ordinary, and popular sense. Pekin Insurance Co., 303 Ill. App.3d at 642, 236 Ill.Dec. 689, 707 N.E.2d 1259.

"Although it is true that limitations on an insurer's liability must be construed liberally in favor of the policyholder [citation], the rule comes into play only where there is an ambiguity." Menke v. Country Mutual Insurance Co., 78 Ill.2d 420, 424, 36 Ill.Dec. 698, 401 N.E.2d 539 (1980). "A provision in an insurance policy is deemed ambiguous if it is subject to more than one reasonable interpretation." Economy Fire & Casualty Co. v. Bassett, 170 Ill.App.3d 765, 769, 121 Ill.Dec. 481, 525 N.E.2d 539 (1988). A contract provision is not rendered ambiguous simply because the parties do not agree on its meaning. Johnstowne Centre Partnership v. Chin, 99 Ill.2d 284, 288, 76 Ill.Dec. 80, 458 N.E.2d 480 (1983). "While it is highly important that ambiguous clauses should not be permitted to serve as traps for policy[ ]holders, it is equally important to the policy[ ]holders, as well as to the insurer, that definite and clear provisions, upon which the calculations of the company are based, should be maintained unimpaired by loose or ill-considered interpretation." Coons v. Home Life Insurance Co. of New York, 368 Ill. 231, 238, 13 N.E.2d 482 (1938). The touchstone in determining whether an ambiguity exists is whether the relevant portion of the policy is subject to more than one reasonable interpretation, not whether creative possibilities can be suggested. Bruder v. Country Mutual Insurance Co., 156 Ill.2d 179, 193, 189 Ill.Dec. 387, 620 N.E.2d 355 (1993). "[T]he rule construing ambiguous provisions strictly against the insurer will not permit perversions of plain language to create an ambiguity where none in facts exists." Miller, 46 Ill.App.2d at 418, 197 N.E.2d 153; see also Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill.2d 11, 17, 291 Ill.Dec. 269, 823 N.E.2d 561 (2005).

The "Limits of Liability" section of the policy states that Allstate's liability "will not exceed what it would cost to repair or replace the property or part with other of like kind and quality." Allstate has promised "to repair or replace the property or part with other of like kind and quality," but there is no promise to restore the value of the vehicle. See Allgood v. Meridian Security Insurance Co., 836 N.E.2d 243, 247 (Ind.2005). The plain and ordinary meanings of "repair" and "replace" connote the remedying of tangible, physical damage. See Webster's Third New International Dictionary 1923 (1993) ("repair" means "to restore by replacing a part or putting together what is torn or broken"); Black's Law Dictionary 1298 (6th ed.1990) ("repair" means "[t]o mend, remedy, restore, renovate" or "[t]o restore to a sound or good state after decay, injury, dilapidation, or partial destruction"); Webster's Third New International Dictionary 1925 (1993) ("replace" means to "restore to a former place, position, or condition"); Black's Law Dictionary 1299 (6th ed.1990) ("replace" means "to restore to a former condition"). By their definitions and the common understanding of the terms, "repair" and "replace" mean to restore something to its former condition, not to its former value. See Allgood, 836 N.E.2d at 247-48 ("[d]iminution in value can be compensated, but it cannot be `repaired' or `repla...