Great Am. Ins. Co. of N.Y. v. Mallers Bldg., L.L.C.
| Decision Date | 26 May 2021 |
| Docket Number | No. 19 C 3831,19 C 3831 |
| Parties | GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, Plaintiff, v. MALLERS BUILDING, L.L.C., and SPECTRUM PROPERTIES GROUP, INC., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
This action concerns insurance claims made to Great American Insurance Company of New York ("Great American") following a 2018 fire at the high-rise building located at 5 South Wabash Street in Chicago, commonly known as the Jeweler's Center ("Mallers Building"). The building is owned by Mallers Building, LLC and operated by Spectrum Properties Group, Inc. (together, "Mallers"). Before the Court are five motions for partial summary judgment: (1) Mallers' motion regarding the interpretation of the relevant insurance policy as related to the expenses Mallers incurred to reconstruct floors 2-4 of the Mallers Building within 120 days versus six months, R. 72 ("Mallers' Expediting Expense Motion"); (2) Mallers' motion regarding its affirmative defenses of estoppel and waiver as to certain claims for coverage, R. 69 ("Mallers' Estoppel Motion"); (3) Great American's motion regarding the interpretation of the insurance policy as to certain claims that are the subject of Mallers' Estoppel Motion, R. 89 ("Great American's Policy-Based Cross Motion"); (4) Great American's motion regarding code or ordinance-related issues, R. 80 ("Great American's Code-Related Motion"); and (5) Mallers' cross motion regarding some of the same code or ordinance-related issues, R. 101 ("Mailers' Code-Related Cross Motion"). For the following reasons, Mallers' Expediting Expense Motion is granted, Mallers' Estoppel Motion is denied, Great American's Policy-Based Cross Motion is granted, Great American's Code-Related Motion is granted in part and denied in part, and Mallers' Code-Related Cross Motion is denied.
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The Court considers the entire evidentiary record and must view all of the evidence and draw all reasonable inferences from that evidence in the light most favorable to the nonmovant. Horton v. Pobjecky, 883 F.3d 941, 948 (7th Cir. 2018). To defeat summary judgment, a nonmovant must produce more than a "mere scintilla of evidence" and come forward with "specific facts showing that there is a genuine issue for trial." Johnson v. Advocate Health and Hosps. Corp., 892 F.3d 887, 894, 896 (7th Cir. 2018). Ultimately, summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Four of the five motions at issue concern the interpretation of the insurance policy issued by Great American to Mallers, which was in effect at the time of the fire."Under Illinois law, the interpretation of an insurance policy is a question of law that is properly decided by way of summary judgment." BASF AG v. Great Am. Assur. Co., 522 F.3d 813, 818-19 (7th Cir. 2008) (citing Crum & Forster Managers Corp. v. Resolution Trust Corp., 620 N.E.2d 1073, 1077 (Ill. 1993)) (other citations omitted). "A court's primary objective in construing the language of an insurance policy is to ascertain and give effect to the intentions of the parties as expressed by the language of the policy." Valley Forge Ins. Co. v. Swiderski Elec., Inc., 860 N.E.2d 307, 314 (Ill. 2006) (citing Crum & Forster, 620 N.E.2d at 1078). Like any other contract, insurance policies are construed as a whole, "giving effect to every provision, if possible, because it must be assumed that every provision was intended to serve a purpose." Valley Forge, 860 N.E.2d at 314 (citing Central Ill. Light Co. v. Home Ins. Co., 821 N.E.2d 206, 213 (Ill. 2004)). In construing an insurance policy in particular, the court also should consider "the type of insurance for which the parties have contracted, the risks undertaken and purchased, the subject matter that is insured and the purposes of the entire contract." Crum & Forster, 620 N.E.2d at 1078. If the words in the insurance policy, "given their plain and ordinary meaning, are unambiguous, they must be applied as written." Valley Forge, 860 N.E.2d at 314. However, ambiguous terms "will be strictly construed against the insurer, who drafted the policy, and liberally in favor of coverage." Nicor, Inc. v. Assoc. Elec. & Gas Ins. Servs. Ltd., 860 N.E.2d 280, 286 (Ill. 2006).
This action arose in the wake of an April 25, 2018 three-alarm fire that caused severe damage to floors 2 through 4 of the Mallers Building (among other areas) and rendered the leased spaces of 28 jewelers untenantable. The Mallers Building was insured by a Property and Inland Marine Insurance Policy through Great American at the time of the fire (the "Policy"). Mallers submitted a claim under the Policy the same day as the fire. Mallers Building manager Scott Solotorovsky worked with Great American in-house adjuster Sam Talarico and independent adjuster Ray Pawlak on the claim until May 17, 2018, when Great American in-house adjuster Daniel T. Moore and independent adjuster Jim Buckley replaced them.
The parties disagreed about certain coverage issues during the claim adjustment process, and Great American ultimately filed this lawsuit for declaratory and other relief as a result. Mallers then filed a counterclaim regarding Great American's refusal to cover certain costs. The parties have since settled various issues and claims. But the following remain in dispute for purposes of the operative complaint and are relevant to the motions here: (1) Count I, seeking a declaration that there is no coverage for the so-called expediting costs associated with the reconstruction of floors 2-4; and (2) Count III, seeking a declaration of Great American's rights with respect to claims that concern the Policy's ordinance or law coverage. R. 33.
In turn, Mallers' counterclaim includes the following counts: (1) Count I, seeking a declaratory judgment for payment of certain losses and costs under thePolicy; and (2) Count II for breach of contract for failing to pay such losses and costs under the Policy.1 R. 9. The pending summary judgment motions implicate these counts with respect to: the so-called expediting expenses; rent abatement; certain costs associated with a new central air conditioning system; certain other costs Mallers contends were treated improperly under the Policy's ordinance or law coverage; costs related to damaged flooring; and costs related to damaged basement property. The Court addresses additional background facts as relevant in the context of each of the summary judgment motions below.
At the heart of this case is a debate involving $2.8 million in costs Mallers paid to Clune Construction Company to complete the reconstruction of the displaced tenants' damaged spaces on floors 2-4 within 120 days of the fire versus six months.2 Two of the pending summary judgment motions concern those costs. The first is Mallers' Expediting Expense Motion, which seeks summary judgment on Count I ofGreat American's operative complaint and Counts I and II of Mallers' counterclaim as to liability based on Mallers' interpretation of the Policy. In sum, Mallers contends that the so-called expediting expenses are not expediting at all. Rather, they represent the commercially reasonable costs of repairing and replacing the damaged areas within the timeframe required by Mallers' leases with the tenants displaced by the fire, and sanctioned by the Policy's timing requirements. Accordingly, Mallers contends that such costs fall under the Building limit of insurance, for which there is more than enough limits remaining to cover all such costs, and that not only did Great American know this, but also it blessed reconstruction on the very timeline it now disputes.
Great American disagrees, arguing that coverage for such costs (if any) exists not under the Building limit, but rather under the Policy's Business Income and Extra Expense Coverage Form, which has a significantly lower sublimit. Great American continues that of that sublimit—because Great American paid for the construction of temporary "swing spaces" for displaced tenants' use before and during reconstruction and toward rental income losses—just over $2 million in limits remain. And Great American contends that of that approximately $2 million, at most only a small fraction is recoverable. The Court addresses the relevant Policy language and additional background facts before addressing these arguments.
Policy. The Policy provides coverage on a replacement cost basis subject to the following relevant limits: (1) Building - $80,238,264; and (2) Business Income and Extra Expense - $6,815,736. R. 9-1 at 28.
The applicable valuation provision states in pertinent part:
If replacement cost is indicated . . . as the method of valuation we will determine the value of Covered Property in the event of loss or damages as follows: (i) We will not pay on a replacement cost basis for any loss or damage: . . . (2) unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.
Id. at 40-41 (emphasis added).
The Policy's "Duties in the Event of Loss or Damages" provision also obligates Mallers to act swiftly after a loss, stating:
Id. at 36-37 (emphasis added). "Operations" are defined in relevant part as "your business activities occurring at the described location." Id. at 42. In turn, the Policy's ...
To continue reading
Request your trial