Nationwide Mut. Fire Ins. Co. v. T&N Master Builder & Renovators

• Decision Date: 25 October 2011
• Docket Number: No. 2–10–1143.,2–10–1143.
• Citation: 2011 IL App (2d) 101143,959 N.E.2d 201,355 Ill.Dec. 173
• Parties: NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, as Subrogee of Michael Markowitz, Plaintiff–Appellant, v. T AND N MASTER BUILDER AND RENOVATORS, d/b/a TN Construction, and Tony Deligio, Individually and d/b/a TN Construction, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

2011 IL App (2d) 101143

355 Ill.Dec. 173

959 N.E.2d 201

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, as Subrogee of Michael Markowitz, Plaintiff–Appellant,

v.T AND N MASTER BUILDER AND RENOVATORS, d/b/a TN Construction, and Tony Deligio, Individually and d/b/a TN Construction, Defendants–Appellees.

No. 2–10–1143.

Appellate Court of Illinois, Second District.

Oct. 25, 2011.

Stuart M. Brody, Sneckenberg, Thompson & Brody, LLP, Chicago, for Michael Markowitz, Nationwide Mutual Fire Insurance Company.

Daniel P. Costello, James C. Barrow, Daniel P. Costello & Associates, Chicago, for Tony Deligio, T&N Master Builder and Renovators.

OPINION

Justice HUDSON delivered the judgment of the court, with opinion.

[355 Ill.Dec. 175] ¶ 1 Plaintiff, Nationwide Mutual Fire Insurance Company (as subrogee of Michael Markowitz), appeals an order of the circuit court of Lake County granting judgment on the pleadings (735 ILCS 5/2–615(e) (West 2008)) in favor of defendants T & N Master Builder and Renovators and Tony Deligio. Plaintiff had issued an insurance policy covering property owned by Markowitz. Defendants were tenants upon the property. While the property was occupied by defendants, a fire occurred, damaging the building. The trial court determined that plaintiff could not maintain an action as subrogee against defendants, because they were coinsureds under Markowitz's policy with plaintiff. For the reasons that follow, we affirm.

¶ 2 I. BACKGROUND

¶ 3 On February 9, 2007, a fire occurred in a building rented by defendants. The property was insured under a policy issued by plaintiff. As a result of the fire, plaintiff was obligated to pay the owner of the property $140,328.98. Plaintiff now brings this action in subrogation to recover the $140,328.98 from defendants. Plaintiff alleges that the fire resulted from defendants' negligence.

¶ 4 On December 11, 2005, Markowitz entered into a commercial leasing agreement with defendants. At the time of the fire, the lease was expired. A holdover tenancy resulted. Plaintiff alleges 11 counts in all, including negligence, spoliation of evidence, and breach of contract. Defendants filed a motion for judgment on the pleadings pursuant to section 2–615(e) of the Civil Practice Law (735 ILCS 5/2–615(e) (West 2008)), which the trial court granted. It found that defendants were coinsureds under the terms of the lease and therefore plaintiff could not maintain an action against them, relying on Dix Mutual Insurance Co. v. LaFramboise, 149 Ill.2d 314, 173 Ill.Dec. 648, 597 N.E.2d 622 (1992).

¶ 5 The relevant provisions of the lease are as follows:

“4. REPAIR. The Lessee covenants and agrees with Lessor to take good care of and keep in clean and healthy condition the Premises and their fixtures, and to commit or suffer no waste therein; that no changes or alterations of the Premises shall be made or partitions erected, nor walls papered without the consent in writing of Lessor; that Lessee will make all repairs required to the walls, windows, glass, ceilings, paint, plastering, plumbing work, pipes, and fixtures belonging to the Premises, whenever damage or injury to the same shall have resulted from misuse or neglect; and Lessee agrees to pay for any and all repairs that shall be necessary to put the Premises in the same condition as when he entered therein, reasonable wear and loss by fire excepted, and the expense of such repairs shall be included within the terms of the lease.

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8. HOLDING OVER. If the Lessee retains possession of the Premises or any part thereof after the termination of the term by lapse of time or otherwise, then the Lessor may at Lessor's option within thirty days after the termination of the term serve written notice upon Lessee that such holding over constitutes either (a) renewal of this lease for one year, and from year to year thereafter, at double the rental specified under Section 1 for such period, or (b) creation of a month to month tenancy, upon the terms of this lease except at double the monthly rental specified under Section 1, or (c) creation of a tenancy at sufferance, at a rental of $75.00 dollars per day for the time Lessee remains in possession. If no such written notice is served then a tenancy at sufferance with rental as stated at (c) shall have been created. In such a case if specific per diem rental shall not have been inserted herein at (c) such per diem rental shall be one-fifteenth of the monthly rental specified under Section 1 of this lease. Lessee shall also pay to Lessor all damages sustained by Lessor resulting from retention of possession by Lessee.

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15. FIRE AND CASUALTY. In case the Premises shall be rendered untenantable [ sic ] by fire or other casualty, Lessor may at his option terminate this lease, or repair the Premises within thirty days, and failing so to do, or upon the destruction of the Premises by fire, the term hereby created shall cease and determine.”

¶ 6 II. ANALYSIS

¶ 7 Plaintiff raises two main issues on appeal. First, it contends that the rule announced by the supreme court in Dix, 149 Ill.2d 314, 173 Ill.Dec. 648, 597 N.E.2d 622, should not apply in this case, because Dix involved a residential lease and the instant case involves sophisticated, commercial parties. Second, plaintiff asserts that certain provisions of the lease make defendants liable for the damages to the building. We find neither contention well founded.

¶ 8 As this appeal comes to us following a grant of a motion for judgment on the pleadings (735 ILCS 5/2–615(e) (West 2008)), review is de novo. Wakulich v. Mraz, 203 Ill.2d 223, 228, 271 Ill.Dec. 649, 785 N.E.2d 843 (2003). When a defendant makes a motion for judgment on the pleadings, he concedes the truth of the well-pled facts of the plaintiff's complaint. Parkway Bank & Trust Co. v. Meseljevic, 406 Ill.App.3d 435, 442, 346 Ill.Dec. 215, 940 N.E.2d 215 (2010). In reviewing the motion, we must draw all reasonable inferences in favor of the nonmovant ( Parkway, 406 Ill.App.3d at 442, 346 Ill.Dec. 215, 940 N.E.2d 215) and construe the allegations strictly against the movant ( Pioneer Bank & Trust Co. v. Austin Bank of Chicago, 279 Ill.App.3d 9, 13, 215 Ill.Dec. 785, 664 N.E.2d 182 (1996)). We must determine whether there is an issue of material fact presented by the pleadings. Pioneer, 279 Ill.App.3d at 13, 215 Ill.Dec. 785, 664 N.E.2d 182. If no such issue is presented, then we determine whether the movant is entitled to judgment. Pioneer, 279 Ill.App.3d at 13, 215 Ill.Dec. 785, 664 N.E.2d 182.

¶ 9 We further note that this is an action in subrogation. As the supreme court explained in Dix, subrogation is an action in chancery. Dix, 149 Ill.2d at 319, 173 Ill.Dec. 648, 597 N.E.2d 622. It is “designed to place the ultimate responsibility for the loss upon the one on whom in good conscience it ought to fall and to reimburse the innocent party who is compelled to pay.” Reich v. Tharp, 167 Ill.App.3d 496, 500–01, 118 Ill.Dec. 248, 521 N.E.2d 530 (1987). As an action in equity, a claim may be subrogated only in order to prevent injustice or unjust enrichment and will not be maintained when it would be inequitable to do so. Dix, 149 Ill.2d at 319, 173 Ill.Dec. 648, 597 N.E.2d 622. Subrogation is not allowed against a tenant where the tenant is considered a coinsured under the landlord's insurance policy. Reich, 167 Ill.App.3d at 501, 118 Ill.Dec. 248, 521 N.E.2d 530. With these principles in mind, we now turn to the issues raised by plaintiff.

¶ 10 A. Whether This Action Can Proceed in Light of Dix

¶ 11 The first issue presented in this appeal is rather straightforward. If the rule our supreme court announced in Dix, 149 Ill.2d 314, 173 Ill.Dec. 648, 597 N.E.2d 622, controls, as the trial court held, this action cannot proceed. Quite simply, it is well settled that an insurer may not subrogate against a coinsured. Chubb Insurance Co. v. DeChambre, 349 Ill.App.3d 56, 60, 283 Ill.Dec. 487, 808 N.E.2d 37 (2004). In Dix, 149 Ill.2d at 323, 173 Ill.Dec. 648, 597 N.E.2d 622, our supreme court held that a “tenant, by payment of rent, has contributed to the payment of the insurance premium, thereby gaining the status of co-insured under the insurance policy.” Hence, unless Dix does not apply for some reason, defendants are coinsureds and plaintiff cannot subrogate against them.

¶ 12 Plaintiff believes that it has identified such a reason. It points out that Dix involved a residential lease, while in the instant case, a commercial lease is at issue. As sophisticated parties, plaintiff and defendants could have allocated risks and costs of insurance as they saw fit. Moreover, as commercial tenants, defendants were in a better bargaining position to negotiate the question of insurance coverage. It is certainly true that the law often distinguishes between sophisticated and nonsophisticated parties. See, e.g., McRaith v. BDO Seidman, LLP, 391 Ill.App.3d 565, 575–76, 330 Ill.Dec. 597, 909 N.E.2d 310 (2009); Tower Investors, LLC v. 111 East Chestnut Consultants, Inc., 371 Ill.App.3d 1019, 1037, 309 Ill.Dec. 686, 864 N.E.2d 927 (2007); Topps v. Unicorn Insurance Co., 271 Ill.App.3d 111, 115, 207 Ill.Dec. 758, 648 N.E.2d 214 (1995). Thus, the distinction plaintiff seeks to draw finds support in the law. Indeed, plaintiff calls our attention to substantial foreign authority in support of its position. See, e.g., State Farm Florida Insurance Co. v. Loo, 27 So.3d 747, 750 n. 4 (Fla.Dist.Ct.App.2010) (collecting cases).

¶ 13 Defendants respond that the supreme court drew no such distinction in Dix. Moreover, they point out, Dix relies extensively on Cerny–Pickas & Co. v. C.R. Jahn Co., 7 Ill.2d 393, 131 N.E.2d 100 (1955), which involved a commercial lease. In that case, the court stated:

“While the cases are not in accord, we believe that the result here reached is supported by better reasoned decisions. Seventy years ago in Lothrop v. Thayer, 138 Mass. 466, 475 [ (1883) ], the court said: ...