Corday's Dept. Store, Inc. v. New York F. & M. Under., Inc.
| Decision Date | 01 June 1971 |
| Docket Number | 18368.,No. 18367,18367 |
| Parties | CORDAY'S DEPARTMENT STORE, INC., Plaintiff-Appellant, v. NEW YORK FIRE AND MARINE UNDERWRITERS, INC. and Certain Underwriters at Lloyd's London, Signatories to Cover Note No. FT402426CS, Defendants-Appellees. CENTRAL NATIONAL BANK as Trustee Under Trust No. 5249, Plaintiff-Appellant, LaSalle National Bank as Trustee Under Trust No. 5251; Sol Kaplan, Sam Kaplan and Morris Kaplan, Plaintiffs, v. STATE FIRE AND CASUALTY COMPANY, Defendant, and New York Fire and Marine Underwriters, Inc., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
George C. Rabens, Chicago, Ill., for plaintiff-appellant.
Norman A. Miller, John W. Morrison, Chicago, Ill., for defendants-appellees; Clausen, Hirsh, Miller & Gorman, Chicago, Ill., of counsel.
Before SWYGERT, Chief Judge, CASTLE, Senior Circuit Judge, and KERNER, Circuit Judge.
These consolidated appeals are prosecuted from summary judgments entered for defendants-appellees, New York Fire and Marine Underwriters, Inc. and certain underwriters at Lloyd's, London, in two actions brought by plaintiffs-appellants, Corday's Department Store, Inc. and Central National Bank as trustee, to recover for fire loss and damage under insurance policies issued by the insurance company and a cover note issued by underwriters at Lloyd's to Corday's.1 In No. 18367 the insured's claim is for an alleged business interruption loss, which resulted from damage to its property. In No. 18368 the claim is for damage to the insured's building. The respective business and property were located on West Roosevelt Road in Chicago, Illinois. In both cases the property damage which gave rise to the claims asserted occurred on April 5, 1967, in the wake of the civil unrest which followed the assassination of the Rev. Martin Luther King, Jr. Each of the insurance policies here involved was a "Fire and Limited Extended Coverage" policy, and bore a "Special Exclusion Endorsement" as follows:
"In consideration of the rate and premium charged, this policy specifically excludes all loss (including ensuing fire loss) or damage, caused directly or indirectly by Riot, Riot Attending a Strike, Civil Commotion, Civil Rights Demonstrations and all disturbances of a similar nature."2
The insurers declined liability to the insureds on the ground that the endorsement specifically excludes from the policies' coverage loss by the perils which caused damage to the insureds' properties.3 It is conceded by the appellant insureds that the losses and damage they sustained "by fire" occurred "in the course of riot and civil commotion" but they contend that the District Court erred in concluding that the special exclusionary endorsement is valid and enforceable.
On the record made by the pleadings, affidavits, and admissions before the court for consideration on the motions for summary judgment it is apparent that if the exclusionary endorsement is valid and enforceable the District Court was correct in entering the summary judgments in favor of the defendant-appellee insurance carriers.
The insureds point out that the Illinois Director of Insurance acting under his statutory powers4 and in conformity with the mandate of Section 397 of the Illinois Insurance Code (Ill.Rev.Stat. 1969, ch. 73, § 1009) to:
"* * * promulgate such rules and regulations as may be necessary to effect uniformity in all basic policies of fire and lightning insurance issued in this State, to the end that there be concurrency of contract where two or more companies insure the same risk"
promulgated Illinois Department of Insurance Rule 23.01 which designated, effective January 1, 1946, a standard form policy for fire and lightning insurance. The rule provides in part that:
The standard form policy so prescribed for use in Illinois insures against "direct loss by fire" and contains the following provision:
The insureds contend that the exclusionary endorsement constitutes an impermissible deviation from the standard form policy and is therefore invalid and unenforceable against them. In this connection they additionally urge that the endorsement contains a condition which "unreasonably or deceptively affects the risks that are purported to be assumed by the policy" in contravention of the requirements of Section 143(2) of the Illinois Insurance Code (Ill.Rev.Stat.1969, ch. 73, § 755(2)) which Section further provides that such a violation shall not "in any way affect the legality of any policy that has been issued and found to be in conflict with this subsection, but such policies shall be subject to the provisions of section 442". Section 442 of the Code (ch. 73, § 1054) provides, in effect, that when any policy contains a provision or endorsement which conflicts with any provision of the Code, the rights, and the obligations of the company thereunder shall not be less favorable to the insured than is required by the applicable Code provisions. Thus, the insureds conclude that the statutes referred to, and Rule 23.01 adopted pursuant thereto, require that the exclusionary endorsement be excised from each of the policies involved with the result that such endorsement would not bar recovery on the respective loss claimed by each insured. No claim is made that if the endorsement is valid and binding the insureds' claims would not be barred.
The record discloses that the defendants-appellees were not authorized to do business in Illinois and that the policies here involved were issued under the provisions of the Illinois Insurance Code relating to what is known as "surplus line insurance". The defendant insurers contend that Section 397 of the Code, supra; Illinois Department of Insurance Rule 23.01, which prescribes the standard form of policy for fire and lightning insurance; and Section 143(2) of the Code, upon which the plaintiff insureds rely, are not applicable to policies issued in conformity with the surplus line provisions of the Code. These latter provisions are contained, primarily, in Section 445 of the Code (Ill.Rev.Stat.1969, ch. 73, § 1057) which provides, in part, that any insurance agent or broker licensed in Illinois may be additionally licensed:
"to procure policies or contracts covering the kind or kinds of business specified in Classes 2 and 3 of Section 4 of Article I of this Code Class 3 includes fire insurance from companies which are not authorized to do business in this State and which have complied with Section 445.1, where such agent or broker is, after diligent effort unable to procure policies or contracts to cover the kind or kinds of business required from the companies duly authorized and licensed to transact business in this State."
Section 445.1 of the Code (ch. 73, § 1057.1) provides that no surplus line licensee shall procure such insurance from such unauthorized company unless the company meets certain qualifying requirements which are set forth.
The policies here involved were procured by a licensed surplus line broker in conformity with the requirements of Section 445, and the defendant insurers were in compliance with the qualifying requirements fixed in Section 445.1. And, surplus line insurance so procured is exempt from the proscription of Section 121 of the Code (ch. 73, § 733) against the transaction of insurance business without an Illinois certificate of authority. In this respect Section 121 provides, in part:
"It shall be unlawful for any company to enter into a contract of insurance as an insurer or to transact insurance business in this State, without a certificate of authority from the Director; provided that this subsection shall not apply to contracts procured by...
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