Atwood v. St. Paul Fire and Marine Ins. Co.

• Decision Date: 08 March 2006
• Docket Number: No. 2-05-0590.,2-05-0590.
• Citation: 300 Ill.Dec. 647,845 N.E.2d 68
• Parties: Marjorie ATWOOD, Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

845 N.E.2d 68

300 Ill.Dec. 647

Marjorie ATWOOD, Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee.

No. 2-05-0590.

Appellate Court of Illinois, Second District.

March 8, 2006.

James S. Tukesbrey, Law Office of James S. Tukesbrey, Waukegan, for Marjorie Atwood.

Warren J. Marwedel, William P. Ryan, Stephanie Ziemba, Marwedel, Minichello & Reeb, P.C., Chicago, for St. Paul Fire & Marine Insurance Company.

Justice O'MALLEY delivered the opinion of the court:

Nearly two years after she was denied insurance coverage for the loss of her pleasure boat, plaintiff, Marjorie Atwood, sued defendant, St. Paul Fire & Marine Insurance Company, for breach of the parties' insurance contract (Policy). Defendant moved for summary judgment, arguing that, based on a one-year limitations period in the Policy, plaintiff's suit was untimely. The trial court agreed and granted defendant's motion. Plaintiff appeals, and we affirm.

I. BACKGROUND

The relevant facts are undisputed. The Policy provided coverage in the event of certain losses associated with plaintiff's 28-foot pleasure boat.¹ For example, the Policy covered salvage and towing costs. Also, the Policy covered many items of personal property on the boat. However, the Policy did not cover loss due to the boat's deterioration.

The Policy outlined steps for plaintiff to follow in the event of a loss. In particular, the Policy detailed how plaintiff should go about obtaining coverage. Additionally, the Policy spelled out what plaintiff needed to do if coverage was denied and if she believed that the denial was improper. Specifically, plaintiff could sue defendant to recover for the damage, but she needed to do so within one year of the date on which the damage occurred, unless state law provided her more time (Policy Limitations Period). This requirement appeared in the Policy under a bold heading:

"Lawsuits to recover under physical damage coverage. Any lawsuit to recover on a physical damage claim must begin within one year after the date on which the direct physical loss or damage occurred. If a state law provides you more time, we'll conform to that law."

On September 6, 2002, plaintiff's pleasure boat sank. Several days later, on September 9, the loss was reported to defendant, and a coverage investigation began. The investigation determined that the sinking was due to the boat's deterioration, which had allowed water to enter the boat's hull. Based on this conclusion, and based on the Policy's exclusion of loss resulting from deterioration, coverage was denied. Plaintiff was notified of this result in a letter to her attorney, dated November 20, 2002.

On September 7, 2004, almost two full years after being notified of the denial of coverage, plaintiff sued defendant for breach of contract. In her complaint, plaintiff did not respond to the conclusion that deterioration had caused her boat to sink; she simply stated that the loss was covered and that defendant had therefore wrongfully denied coverage. In response, defendant filed a motion for summary judgment, arguing that plaintiff's claim was untimely under the Policy Limitations Period. The trial court granted that motion. Plaintiff appeals.

II. ANALYSIS

We begin with the standard of review. The use of the summary judgment procedure is to be encouraged as an aid in the expeditious disposition of a lawsuit. Adams v. Northern Illinois Gas Co., 211 Ill.2d 32, 43, 284 Ill.Dec. 302, 809 N.E.2d 1248 (2004). However, summary judgment is a drastic means of disposing of litigation and, therefore, should be allowed only when the right of the moving party is clear and free from doubt. Adams, 211 Ill.2d at 43, 284 Ill.Dec. 302, 809 N.E.2d 1248. Summary judgment is appropriate when the pleadings, depositions, admissions, and affidavits on file establish that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. See Chatham Foot Specialists, P.C. v. Health Care Service Corp., 216 Ill.2d 366, 376, 297 Ill.Dec. 268, 837 N.E.2d 48 (2005). We review de novo the trial court's decision on a motion for summary judgment. Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 215 Ill.2d 121, 128, 293 Ill.Dec. 677, 828 N.E.2d 1175 (2005).

Here, plaintiff argues that the trial court erred in finding that, based on the Policy Limitations Period, plaintiff's suit was untimely. To evaluate plaintiff's argument, we must construe the Policy Limitations Period. An insurance policy is a contract, and, accordingly, its interpretation is governed by the familiar rules that govern the construction of contracts in general. Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill.2d 11, 17, 291 Ill. Dec. 269, 823 N.E.2d 561 (2005). Pursuant to these rules, our primary goal is to ascertain and give effect to the intention of the parties, as expressed in the policy language. American States Insurance Co. v. Koloms, 177 Ill.2d 473, 479, 227 Ill.Dec. 149, 687 N.E.2d 72 (1997). If the policy language is unambiguous, we must apply it as written, unless it contravenes public policy. Central Illinois Light Co. v. Home Insurance Co., 213 Ill.2d 141, 176, 290 Ill.Dec. 155, 821 N.E.2d 206 (2004). Policy language is ambiguous only if it is susceptible to more than one reasonable interpretation. Gillen v. State Farm Mutual Automobile Insurance Co., 215 Ill.2d 381, 393, 294 Ill.Dec. 163, 830 N.E.2d 575 (2005). That is to say, policy language is not ambiguous simply because the parties disagree on its meaning. Central Illinois Light, 213 Ill.2d at 153, 290 Ill.Dec. 155, 821 N.E.2d 206. Rather, we may consider only reasonable interpretations. Hobbs, 214 Ill.2d at 17, 291 Ill.Dec. 269, 823 N.E.2d 561.

The Policy Limitations Period limits the time within which a lawsuit may be brought. In particular, it states that "[a]ny lawsuit to recover on a physical damage claim must begin within one year after the date on which the direct physical loss or damage occurred. If a state law provides you more time, we'll conform to that law."

At the outset, we note that there is no suggestion that the Policy Limitations Period contravenes public policy. Nor could there be. See Village of Lake in the Hills v. Illinois Emcasco Insurance Co., 153 Ill.App.3d 815, 817, 106 Ill.Dec. 881, 506 N.E.2d 681 (1987) (stating that "[p]arties to a[n] [insurance] contract may validly agree to set a reasonable time limit within which a suit on the contract must be filed"); see also McMahon v. Millers National Insurance Co., 131 Ill.App.2d 339, 340, 266 N.E.2d 714 (1971) (upholding a one-year time limit on filing suit). Instead, the parties disagree as to the meaning of the Policy Limitations Period. According to plaintiff, the words "[i]f a state law provides you more time, we'll conform to that law" refer to the statute of limitations applicable to contract actions in general, which is 10 years (735 ILCS 5/13-206 (West 2002)).

Under plaintiff's interpretation, the Policy Limitations Period is a nullity in every state where a general statute of limitations on contract actions gives a party more than one year to file suit. This appears to be every state. See, e.g., Conn. Gen.Stat. Ann. § 52-576 (West 2002) (six years in Connecticut); Minn.Stat. Ann. § 541.05 (West 2002) (six years in Minnesota); N.C. Gen.Stat. Ann. § 1-52 (West 2002) (three years in North Carolina); N.D. Cent.Code § 28-01-16 (West 2002) (six years in North Dakota); Vernon's Tex. Civ. Prac. & Rem.Code Ann. § 16.004 (Vernon 2002) (four years in Texas). Accordingly, if plaintiff's interpretation is correct, then the Policy's reference to state law renders wholly meaningless the one-year limitation on filing suit.

There are three serious problems with this interpretation. First, it offends a well-settled principle of contract construction: a contract must not be interpreted in a manner that nullifies provisions of that contract. See, e.g., Smith v. Burkitt, 342 Ill.App.3d 365, 370, 277 Ill.Dec. 18, 795 N.E.2d 385 (2003) (stating that "[a] court is not to interpret an agreement in a way that would nullify any of the provisions in the agreement or render them meaningless"); First Bank & Trust Co. of Illinois v. Village of Orland Hills, 338 Ill.App.3d 35, 40, 272 Ill.Dec. 485, 787 N.E.2d 300 (2003) (stating that "[a] court will not interpret an agreement in a way that would nullify its provisions or render them meaningless"); Coles-Moultrie Electric Cooperative v. City of Sullivan, 304 Ill.App.3d 153, 159, 237 Ill.Dec. 263, 709 N.E.2d 249 (1999) (stating that "[i]n interpreting a contract, meaning and effect must be given to every part of the contract including all its terms and provisions, so no part is rendered meaningless or surplusage"). Thus, plaintiff's interpretation of the Policy cannot be squared with a fundamental tenet of contract construction.

Second, plaintiff's interpretation suggests a post hoc reading of the Policy that cannot reasonably be said to be consistent with the intent of the parties at the time they entered into the contract. For its part, defendant certainly did not intend the Policy's one-year time limit to be meaningless in every state, and plaintiff could not have reasonably read the Policy as suggesting such an intent on defendant's part. Therefore, plaintiff's interpretation of the policy is unreasonable. See Schwinder v. Austin Bank of Chicago, 348 Ill.App.3d 461, 474, 284 Ill.Dec. 58, 809 N.E.2d 180 (2004) (noting that, in interpreting a contract, "[g]reat weight is to be given to the principal, apparent purpose and intention of the parties at the time that they entered into the contract").

Third, plaintiff's interpretation is undermined by the weight of authority. For example, in Wabash Power Equipment Co. v. International Insurance Co., 184 Ill. App.3d 838, 133 Ill.Dec. 94, 540 N.E.2d 960 (1989), the court rejected a claim that a limitations provision similar to the...