Hoover v. Country Mut. Ins. Co.

• Decision Date: 18 July 2012
• Docket Number: No. 1–11–0939.,1–11–0939.
• Citation: 975 N.E.2d 638,2012 IL App (1st) 110939
• Parties: Brian HOOVER and Julie Hoover, Plaintiffs–Appellants, v. COUNTRY MUTUAL INSURANCE COMPANY and Michael Spann, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

2012 IL App (1st) 110939
975 N.E.2d 638

Brian HOOVER and Julie Hoover, Plaintiffs–Appellants,
v.
COUNTRY MUTUAL INSURANCE COMPANY and Michael Spann, Defendants–Appellees.

No. 1–11–0939.

Appellate Court of Illinois,
First District, Third Division.

July 18, 2012.

[975 N.E.2d 640]

Torshen, Slobig, Genden, Dragutinovich & Axel, Ltd., Chicago (James K. Genden and Robert J. Slobig, of counsel), for appellants.

McKnight, Kitzinger & Pravdic, LLC (Kevin Q. Butler, Cornelius E. McKnight, and Courtney A. Adair, of counsel), and Litchfield Cavo LLP (Alan I. Becker and Steven M. Brandstedt, of counsel), both of Chicago, for appellees.

OPINION
Justice NEVILLE delivered the judgment of the court, with opinion.

¶ 1 In March 2010, Brian and Julie Hoover (Hoovers), the plaintiffs, filed a complaint against their home insurer, Country Mutual Insurance Company (Country Mutual), and Michael Spann (Spann), a Country Mutual insurance agent. According to the complaint, Spann promised to provide the Hoovers with an insurance policy that would cover the cost of replacing their home and its contents, but Country Mutual refused to pay the replacement cost when an explosion completely destroyed the Hoovers' home in 2008. Country Mutual and Spann filed separate motions to dismiss the Hoovers' amended complaint, pursuant to section 2–619 of the Code of Civil Procedure (735 ILCS 5/2–619 (West 2010)), claiming, inter alia, that the Hoovers failed to file their complaint within the applicable statutory limitations period and within the one-year limitation provision delineated in the policy. The trial court granted both motions, but the court granted the Hoovers leave to amend their complaint. When the Hoovers elected to stand on their verified amended complaint, the trial court entered a final order that dismissed the Hoovers' complaint against Country Mutual and Spann. On appeal, we must decide whether the trial court erred when it granted the defendants' motions to dismiss all the counts in the Hoovers' complaint as time barred.

¶ 2 We hold (1) that the insurance policy's one-year limitation period bars counts I and II against County Mutual for breach of contract and bad faith; (2) that count III of the complaint fails to state a cause of action for negligent misrepresentation; and (3) that count IV, the negligence count, was untimely under the applicable statute of limitations because the plaintiffs were given a copy of their policy and, therefore, they knew or reasonably should have known more than two years before they filed their complaint that the liability limits in their policy were inadequate to

[975 N.E.2d 641]

cover the replacement cost of their house and its contents. Accordingly, we affirm the trial court's order that dismissed all counts of the plaintiffs' complaint.

¶ 3 BACKGROUND

¶ 4 In 1998, the Hoovers and their family built a house on their land near Pittsfield, Illinois. In 2004, the Hoovers purchased a homeowners' insurance policy from the defendant, Country Mutual, to insure against a loss in the event of a fire or other casualty. In May 2007, the Hoovers met with Spann, a Country Mutual insurance agent, to obtain additional coverage that would cover the replacement cost of their home and its contents in the event of a loss.

¶ 5 Spann obtained a new insurance policy from Country Mutual which contained (1) definitions, (2) covered loss provisions, (3) provisions explaining how covered losses are settled, (4) personal property provisions, (5) an inflation rider, and (6) conditions that are relevant to this case and were delineated in the policy as follows.

¶ 6 The policy defined replacement cost and actual cash value for buildings and structures as follows:

“Replacement Cost

The cost actually and necessarily incurred to repair or replace the damaged property using standard new construction materials of like kind and quality and standard new construction techniques.

* * *

1. ‘Actual cash value’ means:

a. For buildings or structures the lesser of the following, as determined by ‘us':

(1) The cost actually and necessarily incurred to repair or replace the damaged property using standard new construction materials of like kind and quality and standard new construction techniques, less depreciation; or

(2) Fair market value.

b. For property other than buildings and structures the lesser of the following, as determined by ‘us':

(1) The cost to repair or replace the damaged property using materials of like kind and quality, less depreciation; or

(2) Fair market value.”

¶ 7 The policy delineated the following covered losses:

“Loss settlement

‘We’ settle covered losses according to Loss Settlement 1, Loss Settlement 2 or Loss Settlement 3 * * *, depending on what number appears on the Declarations in the ‘LOSS STLMT’ column for applicable coverage * * *.”

¶ 8 The policy also explained how Covered losses are settled:

“1. Loss Settlement 1—80% Insurance Requirement If ‘1’ appears in the Declarations under ‘Loss STLMT’:

a. ‘We’ pay ‘replacement cost’ unless paragraph b. applies * * *.

b. If the applicable limit of liability for the damaged property is less than 80% of its ‘replacement cost’ at the time of loss, ‘we’ will pay ‘actual cash value.’ ”

¶ 9 The policy contained a personal property provision:

“Property covered under Personal Property, Coverage D will be settled under Loss Settlement 3—Actual Cash value at the time of loss, unless ‘you’ purchase Coverage DD Personal Property Replacement Cost.”

¶ 10 The policy also contained an inflation rider:

“The limit of liability specified in the Declarations for those items in SECTION

[975 N.E.2d 642]

2 of the policy, which are indicated as having inflation coverage, will be increased at the same rate as the increase in Company Dwelling and Personal Property Index. * * *.”

¶ 11 Finally, the policy contained Conditions:

“Conditions—SECTION 2 through 6 (Includes Limitations)

A. Insurable Interest And Limit of Liability

‘We’ will not be liable in any one ‘occurrence’:

* * *

2. For more than the applicable limit of liability.

Suit Limitation Provision

Suit Against Us

No action can be brought against ‘us' unless there has been full compliance with all the terms under SECTION 2 through 6 of this policy and the action is started within one year after the date of the ‘occurrence.’ ”

¶ 12 The Hoovers' policy declarations listed the dwelling coverage under loss settlement 1 and their personal property coverage under loss settlement 3. According to the complaint, Spann obtained a new policy with increased liability limits for the Hoovers' home and personal property. Thereafter, the Hoovers began paying increased premiums on the new insurance policy.

¶ 13 On January 12, 2008, an explosion completely destroyed the Hoovers' home. The Hoovers' copy of their insurance policy was destroyed in the fire. In February 2008, a contractor working for the Hoovers estimated the cost of replacing their home at $513,000. The Hoovers calculated their personal property loss at $370,000. The Hoovers made a claim with Country Mutual for the replacement cost of their home and its contents.

¶ 14 In February 2008, the Hoovers received a letter from Greg Backoff, a property claims specialist at Country Mutual. The letter stated that “your homeowners policy includes ‘Replacement Costs' coverage on the building and the contents.” In late February 2008, Country Mutual sent a check to Brian Hoover in the amount of $219,180.58, accompanied by a letter which stated: “this amount reflects the actual cash value of your property at the time of the loss. Once the repairs/replacements have been completed, please submit the paid receipt(s) to my attention so we can determine what additional amount will be reimbursed under your replacement cost coverage.”

¶ 15 Country Mutual paid the Hoovers a total of $265,000 for the loss of the dwelling and $198,000 for the personal property loss as of March 2008.

¶ 16 During the first week of August 2008, Brian Hoover gave Spann the Hoovers' most recent paid receipts, but Spann informed Brian Hoover that Country Mutual would not be making any further payments on the loss.

¶ 17 Country Mutual refused to pay the Hoovers the full replacement cost for their home and personal property. Country Mutual argued that the Hoovers' insurance policy did not entitle them to full replacement cost coverage on their house because they purchased a policy with a liability limit that was less than 80% of the actual replacement cost of their home.

¶ 18 On March 3, 2010, the Hoovers filed their initial four-count complaint against Country Mutual and Spann. Country Mutual and Spann filed separate motions to dismiss the Hoovers' complaint. The court granted both motions and dismissed the complaint with leave to amend.

[975 N.E.2d 643]

¶ 19 On September 10, 2010, the Hoovers filed their verified amended complaint. The amended complaint contained the same counts as the initial complaint. In counts I and II, the Hoovers alleged that Country Mutual breached its contract and acted in bad faith. In counts III and IV, they alleged that Spann and his employer, Country Mutual, had negligently misrepresented facts and were negligent.

¶ 20 According to the Hoovers' amended complaint, Brian Hoover visited Spann in May 2007 because the Hoovers realized that in the event of a catastrophic loss, they would not be able to rebuild their home with their own labor as they had done in the past. The complaint alleged that Brian Hoover told Spann that he wanted sufficient insurance coverage to cover the replacement cost of his home and its contents in the event of a loss by fire or other casualty. Brian Hoover averred in his affidavit that Spann assured him that he had procured full replacement cost coverage for his home and its contents.

¶ 21 The Hoovers alleged that during the process of procuring their new insurance policy, Spann did nothing to ascertain what the actual costs would be to replace their home in the event of a loss and...