Lumbermen's Mut. Cas. Co. v. Sykes
| Decision Date | 20 June 2008 |
| Docket Number | No. 1-07-0860.,1-07-0860. |
| Citation | 890 N.E.2d 1086 |
| Parties | LUMBERMEN'S MUTUAL CASUALTY COMPANY, Plaintiff and Counterdefendant-Appellant, v. Gloria SYKES, Defendant and Counterplaintiff-Appellee. |
| Court | United States Appellate Court of Illinois |
Thomas J. Finn, Leahy, Eisenberg & Fraenkel, Ltd., Chicago, IL, for Appellant.
Gene Moskowitz, Gene Moskowitz and Associates, Ltd.; Kevin B. Salam, P.C., Chicago, IL, for Appellees.
This is a case concerning coverage under a homeowner's insurance policy. In early 2001, homeowner Gloria Sykes discovered water entering her home and submitted a claim for water damage under her homeowner's insurance policy with Lumbermen's Mutual Casualty Company (Lumbermen's). Lumbermen's paid the claimed damages and closed the file. Subsequently, in November 2001, Sykes reported toxic mold growth in her home which she alleged was a result of the prior occurrence. She later alleged that due to this mold growth, her home became uninhabitable and she was forced to move out. After sending various experts to Sykes' home to investigate the damage over the course of several months, Lumbermen's denied coverage. It filed a declaratory judgment action, seeking a ruling that it was not required to pay Sykes for the mold-related damage under the terms of her policy. Sykes countersued, alleging, among other things, that Lumbermen's had breached its contract with her by refusing to pay and that waiver and estoppel prevented it from asserting non-coverage as a defense.
The trial court granted summary judgment for Sykes on count I of her counterclaim, breach of contract, and on count II, estoppel. It also issued a preliminary mandatory injunction ordering Lumbermen's to pay Sykes' additional living expenses that she incurred due to being unable to stay in her home. On appeal, Lumbermen's challenges the injunction and the partial summary judgment upon which it is predicated. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings.
On July 26, 2002, Lumbermen's filed its complaint in the circuit court seeking declaratory relief against Sykes. In its complaint, it avers that it issued a homeowner's insurance policy to Sykes effective from June 5, 2000, to June 5, 2001. It further avers that in February 2001, Sykes notified Lumbermen's that her house had sustained water damage as a result of melting snow in January 2001; Lumbermen's paid Sykes for that damage. Subsequently, in November 2001, Sykes notified Lumbermen's that she had mold in her home. Lumbermen's thereupon sent various experts to investigate the alleged mold damage, meanwhile sending multiple letters to Sykes notifying her that Lumbermen's was reserving its rights under her policy. The complaint then alleges that after the investigation, Lumbermen's concluded that Sykes' claim for mold damage was not covered under her policy, and it sent her a letter denying coverage on July 24, 2002. Thus, Lumbermen's requested that the court declare that it was not required to pay Sykes' claim.
Attached to the complaint was a copy of Lumbermen's July 24, 2002, letter to Sykes. In the letter, Lumbermen's stated that its experts found "water infiltration and wood decay [that] have been occurring over a period of many years prior to the December 2000 ice damning [sic] occurrence."1 It further stated that "the observed conditions of mold growth and fungal decay have been caused by water infiltration ... due to defective roof construction and not due to conventional ice damming conditions." According to Lumbermen's, this kind of long-term water infiltration caused by design defects in the house was not within the scope of the policy. The letter proceeded to list various policy conditions which purportedly showed that the damage was excluded from coverage. In particular, the letter stated that "the damage pre-dated the inception of your insurance policy."
On October 21, 2002, Sykes filed a counterclaim against Lumbermen's in ten counts, of which Counts I and II are at issue in this appeal. Her complaint recites the following preliminary allegations.
In February 2001, due to heavy snowfall, ice dams formed on the roof of Sykes' house. Sykes alleges that these ice dams caused water to enter her house and cause damage, and in turn, this water intrusion eventually caused the house to become contaminated with toxic mold. Sykes notified Lumbermen's of the water damage. Lumbermen's determined that the water damage was a covered loss under Sykes' policy and paid for various repair costs. It closed its file in July 2001. Because Sykes had filed "too many claims," Lumbermen's declined to renew her policy for the following year.
Sykes further states that in November 2001, Lumbermen's began to investigate Sykes' claims of mold at her house. Experts hired by Lumbermen's conducted an inspection of the house on January 22, 2002, and they confirmed the presence of mold in the house, likely caused by water accumulation due to roof leaks. Sykes learned of the possible dangerousness of the mold situation in February 2002, from speaking with representatives of one of these hired experts. Sykes then relocated to a hotel. Also in February 2002, Sykes signed an authorization form to allow Purofirst, a preferred company of Lumbermen's, to begin remediation work on her house and on the contaminated personal property within.
Sykes then avers that on March 7, 2002, she received a letter from Lumbermen's stating that the insurer required additional information to determine whether her claim was covered. However, Sykes alleges that on March 14, 2002, Lumbermen's admitted that the mold was a result of a covered loss — namely, the ice dam event of January 2001 — and that it would therefore be paid for. As evidence, she refers to an attached March 14, 2002, letter sent to Sykes by Susan Johansen, Lumbermen's home office claims consultant. In the letter, Johansen said:
Johansen then said that Lumbermen's would compensate Sykes for various personal property items of hers that would be discarded, as well as for necessary increases in living expenses that she had incurred due to being out of her home. However, regarding a small area of mold in the basement, Johansen said, "[Y]ou indicated that you would take care of the repairs in this area as it was not related to the ice dam related repairs." She also said:
"As you are aware, the policy does not insured [sic] for loss caused by, among other things, wear and tear, deterioration, wet or dry rot, mold, birds, insects, etc. In this claim, the mold was a result of a covered loss (the ice dams) and therefore it was covered.
Let me give you an example of mold that would not be covered under this claim. You advised out this morning that the remediators found mold in an area that was not related to the ice dams. (You stated that you would take responsibility for it as it is not part of this claim but is probably related to the water loss from last summer/fall.) That is an example of mold damage that is not covered by our policy or this claim as it is unrelated to the ice dams.
It is our intent to remediate the mold in your home from the ice dam of January 2001 and get you back into your home as soon as possible. * * * [L]et me assure you that if mold is found outside the ice dam areas, we will address the cause of that mold and let you know if it is covered or not."
Sykes alleges that, as a result of this letter, she believed that her policy would cover at least a portion of her losses, and possibly all her losses, as well as her additional living expenses.
Lumbermen's continued to investigate the cause of the mold damage through the following months. In addition, it requested Sykes' compliance in being present as her property was removed from the house in April 2002, and it requested that she appear for an examination under oath and produce certain documents in May 2002. Sykes contends that these actions further lulled her into a belief that she was covered under her policy and that the damage to her home would be repaired. Nevertheless, on July 24, 2002, Lumbermen's denied her claim. Five days later it informed the hotel where she was staying that it would not be paying her hotel expenses past July 31, 2002. Sykes finally alleged that the remediation began by Lumbermen's vendor was never completed, the microbial contamination was never removed, and her home remained uninhabitable to the present day.
Count I of Sykes' counterclaim, predicated upon the foregoing allegations, seeks damages on the theory that Lumbermen's breached its contract with her by refusing to pay her the sums due under her insurance policy for the mold damage. Count II avers that Lumbermen's was estopped from denying coverage, because Sykes relied to her detriment on statements by Lumbermen's that mold damage in areas where ice damming had previously occurred would be covered under her policy. The remaining counts, which are not material to this appeal, seek relief predicated upon allegations of intentional and reckless infliction of emotional distress, negligence, and consumer fraud, as well as seeking relief under the Illinois Insurance Code.
Attached to Sykes' counterclaim is a report dated February 12, 2001, which was prepared for Lumbermen's by ICA, Inc., a company that provided site inspection services for Lumbermen's. Regarding the water damage reported by Sykes in February 2001, the report states that the damage...
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