Sieron v. Hanover Fire and Cas. Ins. Co.

• Decision Date: 27 April 2007
• Docket Number: No. 06-cv-501-JPG.,06-cv-501-JPG.
• Citation: 485 F.Supp.2d 962
• Parties: E.J. SIERON, et al., Plaintiffs, v. HANOVER FIRE AND CASUALTY INSURANCE COMPANY, a subsidiary of Hanover Holdings, Inc., and Thomas Ripperda, respondent in discovery, Defendants.
• Court: U.S. District Court — Southern District of Illinois

485 F.Supp.2d 962

E.J. SIERON, et al., Plaintiffs, v. HANOVER FIRE AND CASUALTY INSURANCE COMPANY, a subsidiary of Hanover Holdings, Inc., and Thomas Ripperda, respondent in discovery, Defendants.

No. 06-cv-501-JPG.

United States District Court, S.D. Illinois.

April 27, 2007.

Brian T. Kreisler, Becker, Paulson et al., Belleville, IL, for Plaintiffs.

Catherine A.T. Nelson, Cozen & O'Connor, Chicago, IL, William B. Starnes, II, Reed, Armstrong et al., Edwardsville, IL, for Defendants.

MEMORANDUM AND ORDER

GILBERT, District Judge.

This matter comes before the Court on cross-motions for partial summary judgment (Does. 63, 65). The defendant, Hanover Fire and Casualty Insurance Company (Hanover), has responded to plaintiffs' motion (Doc. 68), and plaintiffs have replied to the response (Doc. 69). Plaintiffs did not file a separate response to Hanover's motion. Hanover claims, however, that they responded in their reply to its response. Hanover has thus filed a reply in opposition to the arguments raised in plaintiffs' reply (Doc. 70). Plaintiffs contend that Hanover's reply is really a surreply, and have moved to strike the motion pursuant to Southern District of Illinois Local Rule 7.1(c) (Doc. 71). Hanover has responded to the motion to strike (Doc. 72). For the following reasons, the Court will GRANT Hanover's motion for partial summary judgment (Doc. 63) and DENY plaintiffs' cross motion for summary judgment and plaintiffs' motion to strike (Does. 65, 71).

BACKGROUND

Fire destroyed the homes of Theresa Harriel, Angela and Oka Williams, and Curtis Warner on October 20, 2005, November 11, 2005, and December 5, 2005. Harriel, the Williams, and Warner (plaintiff-applicants) obtained insurance policies from Hanover. On their applications, they initialed the following statement: "I am the owner of record and occupant of the property described above. ____ (initial)." (Doc. 64, Exs. A, B, C). They also signed this certification:

I hereby apply for the amount to be insured and declare that the answers to the questions on this Application are complete and true to the best of my knowledge and belief. It is understood and agreed that, upon payment of the initial premium with this application, the insurance will be effective on the date of issue of the Policy.

(Id.)

The essential dispute in this case is whether plaintiff-applicants made material misrepresentations on their applications for insurance. Because plaintiff-applicants entered into unrecorded contracts for deed with certain entities — Harriel with Golden Properties, Inc. (Golden), the Williams with Arrow Realty, Inc. (Arrow), and Warner with E.J. Sieron (Sieron) (collectively the Sieron Entities) — Hanover claims plaintiff-applicants were not the owners of record. As plaintiff-applicants did not hold their properties subject to mortgages, Hanover also contends they falsely listed the Sieron Entities as mortgagees. Relying on an affidavit from the underwriter who approved plaintiff-applicants' applications, Ross Miller (now its current president), Hanover contends that it would not have issued the plaintiff-applicants' policies if it had known they were not owners of record. (Doc. 64, Ex. M).

Plaintiff-applicants contend that they did not materially misstate their interests in their respective properties on their insurance applications. They argue that a contract for deed is the functional equivalent of, if not the same as, a mortgage. Given their possession of the properties and other incidents of ownership, they claim they were the owners for all practical purposes. Even if their representations were false, plaintiff-applicants claim they were not material to the risk involved or the hazard assumed. Finally, plaintiffs maintain Hanover waived its right to rescind the policies under the Illinois Conformative Amendment Rider, which states, "[I]n no event may this policy be rescinded after the policy has been in effect for one year, or on policy period, whichever is less." (Doc. 51 Ex. K at 8).

ANALYSIS

I. Motion to Strike

Southern District of Illinois Local Rule 7.1(c) states: "Under no circumstances will sur-reply briefs be accepted." After reading the briefs, the Court finds that Hanover's purported sur-reply brief is, in fact, a reply brief. Plaintiffs clearly address Hanover's summary judgment arguments in their reply to Hanover's response to their motion for summary judgment. If the Court were to construe Hanover's reply as a sur-reply, it would deprive Hanover of its right to respond to these arguments — a right Hanover possesses under the Court's local rules. This ruling has no practical significance, however, because Hanover has added nothing new in its response. The Court hereby DENIES the motion to strike.

II. Hanover's Motion for Partial: Summary Judgment

A. Standard on Summary Judgment

Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Spath v. Hayes Wheels Int'l-Ind., Inc., 211 F.3d 392, 396 (7th Cir.2000). In determining the existence of a genuine dispute of material fact, the Court construes all facts in the light most favorable to the nonmoving party and draws all reasonable inferences in favor of that party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Spath, 211 F.3d at 396.

If the moving party meets its burden, the nonmoving party has the burden "to go beyond the pleadings and affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact which requires trial." Borello v. Allison, 446 F.3d 742, 748 (7th Cir.2006) (internal quotation marks and citations omitted); Celotex, 477 U.S. at 322-26, 106 S.Ct. 2548; Johnson v. City of Fort Wayne, 91 F.3d 922, 931 (7th Cir.1996). A genuine issue of material fact is not demonstrated by the mere existence of "some alleged factual dispute between the parties," Anderson, 477 U.S. at 247, 106 S.Ct. 2505, or by "some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Rather, a genuine issue of material fact exists only if "a fair-minded jury could return a verdict for the [nonmoving party] on the evidence presented." Anderson, 477 U.S. at 252, 106 S.Ct. 2505; Insolia v. Philip Morris Inc., 216 F.3d 596 (7th Cir.2000).

B. Merits

The parties have not been able to find any cases that squarely address the issues presented in this case. For its part, Hanover relies principally on two early decisions of the Supreme Court of Illinois construing "sole and unconditional ownership clauses in fire, insurance policies: Capps v. National Union Fire Ins. Co., 318 Ill. 350, 149 N.E. 247 (1925) and Pollock v. Connecticut Fire Ins. Co. of Hartford, 362 Ill. 313, 199 N..E. 816 (1936). In Capps, the plaintiffs insurance company refused to pay his claim based on a sole and unconditional ownership clause.¹ 149 N.E. at 248. Though the plaintiff made no representations as to his interest in the property when applying for insurance, the court found that the insurer permissibly denied the claim because the plaintiff obtained the property through a contract for deed and had not yet fulfilled his obligations under the contract. Id. Affirming a number of its previous decisions, the Court held "that the vendee under an executory contract of sale has neither the legal nor equitable title to the property covered by the contract." Id. As the plaintiff did not have legal or equitable title, he was not the sole and unconditional owner of the property and the policy was void.

In Pollock, the court reaffirmed Capps and reached a similar conclusion. Discussing the rationale for upholding the application of sole and unconditional ownership clauses, the court said the following:

Generally speaking, insurances against fire are made in the confidence that the assured will use all the precautions to avoid the calamity insured against, which would be suggested by his interest. The extent of this interest must always influence the underwriter in taking or rejecting the risk, and in estimating the premium. So far as it may influence him in these respects, it ought to be communicated to him. Underwriters do not rely so much upon the principles, as on the interest, of the assured; and it would seem, therefore, to be always material, that they should know how far this interest is engaged in guarding the property from loss.

Pollock 199 N.E. at 818 (quoting Columbian Ins. Co. of Alexandria v. Lawrence, 27 U.S. (2 Pet.) 25, 49, 7 L.Ed. 335 (1829)). Pollock turned on the importance, from an insurer's perspective, of the nature of the insured's interest. While the court recognized that one need not be a sole and unconditional owner to have an insurable interest in a given property, it stressed the importance of the insured making clear the precise nature of his interest when applying for insurance. Id. at 818-19. Though old, Hanover believes Pollock and Capps demonstrate both the materiality of misstatements as to an insured's interest and that a vendee under a contract for deed is not an owner for purposes of insurance.

Plaintiffs duly observe that the force of these decisions has been undercut by the Supreme Court of Illinois' recognition of the doctrine of equitable conversion. In Shay v. Penrose, 25 Ill.2d 447, 185 N.E.2d 218, 219 (1962), the court overruled one of the cases relied on in Capps, Chappell v. McKnight, 108 Ill. 570, 1884 WL 9751 (Ill.1884). Chappell had held that "[a] mere contract or covenant to convey at a future time, on the purchaser performing certain acts, does not create an...