Icarus Holdings 2, LLC v. Amguard Ins. Co.
| Citation | 601 F.Supp.3d 314 |
| Decision Date | 05 May 2022 |
| Docket Number | 20 CV 4334 |
| Parties | ICARUS HOLDINGS 2, LLC, Plaintiff, v. AMGUARD INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Christina M. Phillips, Edward Eshoo, Jr., Merlin Law Group, Chicago, IL, for Plaintiff.
Craig A. Jacobson, Christina Maria Flores, John Matthew Buscemi, Gordon Rees Scully Mansukhani, LLP, Chicago, IL, for Defendant.
Plaintiff Icarus Holdings 2, LLC owned an apartment building, and insured it under a policy with defendant AmGUARD Insurance Company. The building's tenants moved out, and Icarus renovated the property. After renovations were complete, a pipe separated in one of the apartments causing water damage. Icarus filed a claim with AmGUARD, but the company denied coverage, citing the policy's vacancy condition and frozen plumbing exclusion. Icarus then filed this lawsuit, alleging that AmGUARD breached the parties’ contract in bad faith. Both parties move for summary judgment. For the reasons that follow, the motions are granted in part and denied in part.
A party moving for summary judgment must show there is no genuine dispute about any material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. The moving party must demonstrate that, after construing all facts and drawing all reasonable inferences in favor of the nonmovant, a reasonable jury could not return a verdict for the nonmoving party. Birch Rea Partners, Inc. v. Regent Bank , 27 F.4th 1245, 1249 (7th Cir. 2022) ; Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Or the moving party must show that the nonmoving party has failed to establish an essential element of their case and could not carry their burden of proof at trial. Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). I need only consider the cited materials, but I may consider "other materials in the record." Fed. R. Civ. P. 56(c)(3). These standards apply equally to cross-motions for summary judgment, Blow v. Bijora, Inc. , 855 F.3d 793, 797 (7th Cir. 2017), and I consider evidence from both motions to ensure that there is no material dispute. Torry v. City of Chicago , 932 F.3d 579, 584 (7th Cir. 2019).
Icarus bought an apartment building on the south side of Chicago. See [44] ¶¶ 2–3, 5; [42] ¶ 12.1 According to Icarus's managing member, [42] ¶ 3, Icarus intended to either hold the building as an income-generating rental property or renovate and sell. Id. ¶ 13. Icarus's property manager, id. ¶ 6, said that Icarus generally purchased, held, and sold real estate, and that renovating buildings was part of the company's usual operations. Id. ¶ 14. An insurance broker said that Icarus told him that the building was "fully occupied" and directed him to purchase landlord's insurance. See [44] ¶ 6; [39-2] at 9, 81–82; [39-3]. Later, Icarus and the insurance broker discussed the possibility that the building could become vacant in the future. See [44] ¶ 7; [39-2] at 50–51, 82.2
AmGUARD issued a "Businessowner's Policy" to Icarus, providing property coverage for Icarus's building from October 2019 to October 2020. [44] ¶¶ 1–3; [42] ¶ 15; [1-1]. The policy declarations classified the building as "Apartment Buildings – 4 families or fewer – NO office occupancy" and characterized Icarus as "Lessors of Residential Buildings and Dwellings[.]" [44] ¶¶ 3–4; [1-1] at 3–5. The AmGUARD policy covered "physical loss" and "damage" to Icarus's building, and was limited to $520,000 in replacement costs. [42] ¶¶ 17–18, 21; [44] ¶ 2.
The policy contained an exclusion for "loss or damage caused directly or indirectly by" "Frozen Plumbing" meaning "water ... that leaks or flows from plumbing ... caused by or resulting from freezing unless" certain exceptions applied. [1-1] at 26, 29; [44] ¶ 56. The policy also included a vacancy condition:
[44] ¶ 8; [1-1] at 36–37. Elsewhere in the policy, the word "operations" was defined as "your business activities occurring at the described premises," and "water damage" as "accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of any part of a system or appliance." [1-1] at 41–42; see id. at 13 ().
In August 2019, Icarus decided to renovate and sell its building. [42] ¶ 25; see [44] ¶ 17. From August 24 to October 1, twenty-six percent of the building's total square footage was rented, and on October 1 the building's remaining tenant moved out, meaning that none of the building's square footage was rented. See [44] ¶¶ 18–23. Icarus's property management company hired a general contractor to renovate the basement, common hallway, first floor, and third floor. See [42] ¶¶ 4, 11, 27. The general contractor didn't complete the work itself, relying instead on subcontractors. [44] ¶ 37.
Bryan Heuer, co-owner of the general contractor, was at the building "about four times" in August and September of 2019, supervising and overseeing subcontractors. [42] ¶¶ 11, 29; [44] ¶ 39; [38-7] at 96. The general contractor received a deposit for renovation work on the hallway and upstairs units on August 20, and Heuer said that he thought the job took about a month to complete. See [44] ¶¶ 44–45; [42] ¶ 30; [38-7] at 45–47; [38-8] at 6. The general contractor received a deposit for renovations on the building's garden unit on September 4, and issued a related payment to a subcontractor on September 27. See [44] ¶ 46; [38-7] at 35; [38-8] at 3. Heuer said he thought the basement renovation work took about four weeks. See [44] ¶ 47; [42] ¶ 31; [38-7] at 108–09.3 Heuer said that the subcontractors might have a better idea of the days they worked, [44] ¶ 40; [38-7] at 109,4 but the subcontractor who worked on the garden unit couldn't recall when they were at Icarus's building and had no records of the work. [44] ¶¶ 41–42. The renovations were completed no later than October 1. See id. ¶ 29; [42] ¶¶ 32, 34.
Icarus put its building up for sale in October 2019. [42] ¶ 34. In November, Icarus called an insurance adjuster, asking him to visit the building and investigate a water issue. Id. ¶¶ 9, 36. The adjuster said he received the call on November 22 or a few days before, and a mitigation specialist first visited the building on November 22. See id. ¶¶ 9, 36; [38-5] at 27–29, 32.5 Inspections revealed that a copper
plumbing pipe in the building's third-floor ceiling separated at a joint, resulting in a leak that caused damage. [42] ¶¶ 39–44, [44] ¶¶ 10, 52–53. The plumber who repaired the pipe said that frozen pipes usually crack or break, not separate. See [42] ¶¶ 10, 46–49.
On November 25, Icarus reported the loss to its insurance broker. [42] ¶ 54; [39-4] at 2. AmGUARD assigned the claim to an independent claim adjustment company, which investigated the loss. [44] ¶¶ 48–54; [42] ¶¶ 55–60. AmGUARD's adjuster reviewed temperature records, inspected the building, and prepared a report, which he sent to AmGUARD and Icarus. [44] ¶¶ 49–54; [42] ¶¶ 58, 63.6 AmGUARD's adjuster also prepared four additional reports between March and June 2020, which were largely identical to the initial report. [42] ¶ 67; [38-4] at 100.
Based on temperature records, the lack of tenants in the building, and a lack of evidence showing that heat had been maintained, AmGUARD's adjuster concluded that the water loss was caused by pressure from frozen water within the pipe system. [44] ¶ 54. The adjuster wrote that "[f]urther investigation into the date of loss and cause of loss may be required by an expert." [42] ¶ 63. AmGUARD's adjuster didn't have a background in plumbing and said he wasn't an expert. Id. ¶ 68.7 The adjuster also said that AmGUARD never retained an expert to determine the cause and date of the loss. Id. ¶ 72; [38-4] at 71–72.8
AmGUARD denied Icarus's claim on July 10, 2020. [42] ¶ 69. In its coverage denial letter, AmGUARD explained that it didn't have to pay for the loss because the building was vacant for more than sixty days prior to the loss and because the policy excluded damages caused by frozen plumbing. See [44] ¶¶ 55–56; [39-19] at 6. About two weeks after AmGUARD denied the claim, Icarus filed this lawsuit. [1].9
Both parties move for summary judgment on Icarus's breach of contract claim. [37] at 4; [35] at 2, 9–16.10 AmGUARD also moves for summary judgment on count two—Icarus's request for damages under § 155. [35] at 16. Icarus moves for summary judgment on twelve of AmGUARD's thirteen affirmative defenses. [37] at 4–14.
Under Illinois law, a court interpreting an...
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