Sims v. Mid-Century Ins. Co.
| Decision Date | 17 November 2022 |
| Docket Number | 1:21-cv-01056 |
| Parties | JOHN W. SIMS, JR., JOHN W. SIMS, JR., d/b/a Maxx Wireless, Plaintiffs, v. MID-CENTURY INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Central District of Illinois |
This matter is before the Court on Defendant's Motion for Summary Judgment. (Doc. 30). Plaintiff[1] has responded (doc. 32), and Defendant has filed a response to Plaintiff's Statement of Additional Material Facts, as directed by the Court (doc. 33). This matter is therefore ripe for review. For the following reasons, the Motion is granted in part and denied in part.
Background[2]
Plaintiff leased a building out of which he operated multiple businesses. (Doc. 32 at 5). The building was destroyed in a fire, and the owner of the property thereafter elected to sell the property for salvage value rather than rehabilitate the building. (Doc. 32 at 4-5, 7).
Following the fire, Plaintiff submitted a claim to his insurer Defendant, seeking payment for the following alleged losses (1) the destruction of the building, (2) the destruction of his personal and business property in the building, and (3) the interruption of his businesses. (Docs. 32 at 6). Defendant denied the claim (doc. 33 at 2), and Plaintiff filed the instant lawsuit.
“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A genuine dispute of material fact exists ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.' ” Skiba v. Ill. Cent. R.R. Co., 884 F.3d 708, 717 (7th Cir. 2018) (quoting Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248 (1986)).
The record is viewed in the light most favorable to the nonmovant, and the Court must draw all reasonable inferences from the evidence in the nonmovant's favor. BRC Rubber & Plastics, Inc. v. Cont'l Carbon Co. 900 F.3d 529, 536 (7th Cir. 2018). “The nonmovant bears the burden of demonstrating that . . . a genuine issue of material fact exists.” Aregood v. Givaudan Flavors Corp., 904 F.3d 475, 482 (7th Cir. 2018). The parties must support their assertions that a fact is disputed or cannot be genuinely disputed by citing to admissible evidence in the record. Horton v. Pobjecky, 883 F.3d 941, 948 (7th Cir. 2018).
Defendant argues it is entitled to summary judgment because Plaintiff cannot prove an insurable interest in the claimed losses or the amount of his damages. (Doc. 31 at 11-19). The Court will thus evaluate whether Plaintiff has, as a matter of law, an insurable interest at issue and, if so, whether he has cited sufficient evidence to create a triable issue of fact as to the valuation of his claimed damages.
Defendant opens its argument with the erroneous assertion that Plaintiff, as a year-to-year tenant, lacks any insurable interest in the property at issue. “It is well settled that any person has an insurable interest in property, by the existence of which he will gain an advantage, or by the destruction of which he will suffer a loss, whether he has or has not any title in, or lien upon, or possession of the property itself.” Breece Veneer & Panel Co. v Comm'r, 232 F.2d 319, 324 (7th Cir. 1956) (). Put another way, “if by a loss the holder of the interest is deprived of the possession, enjoyment, or profit of the property, or a security or lien resting thereon, or other certain benefits growing out of or depending upon it, he has an insurable interest.” Mendenhall, 164 Ill. 458, 46566.
Defendant's argument seems to forget Plaintiff also seeks damages for business property loss and business interruption. It cannot be seriously maintained that Plaintiff lacked an insurable interest in the continuation of his business, see Lessees, 3 Couch on Ins. § 42:51 (3d ed.), and his tangible business and personal property on the leased premises.
Further, as an undisputed tenant,[3] Plaintiff had an insurable interest in the building he leased. None of the cases cited by Defendant dispute this fact; rather, they support it. In Whitten v. Cincinnati Ins. Co., 189 Ill.App.3d 90, 92, 544 N.E.2d 1169, 1170 (1989), the plaintiffs were tenants of property owned by an individual who went bankrupt and forfeited ownership in the property to a bank; the plaintiffs renewed their lease with the bank and entered into an agreement to purchase the property. Id. at 92-93. The plaintiffs then obtained a homeowners insurance policy covering the property; the bank also held an insurance policy on the property, but the plaintiffs were not named insureds under that policy. Id. at 93, 94. In January 1987, before the purchase could be completed (the bank missed several closing dates due to a failure to perfect title) the dwelling on the property was destroyed in a fire. Id. at 93.
Plaintiffs and the Bank entered a new lease agreement after the fire under which plaintiffs paid $50 per month rent. The parties terminated the real estate sales contract and the Bank returned plaintiffs' earnest money and additional monies plaintiffs had paid toward the purchase price. Plaintiffs expressed continuing interest in purchasing the property and on May 12, 1987, the parties entered a new purchase agreement and closed shortly thereafter. The Bank reduced the purchase price by the $51,000 it received from its insurer and sold the property to Airtroll, a company owned by plaintiffs, for $16,500.
Id. at 94. From this, the Illinois Appellate Court held the plaintiffs “had an insurable interest in the property at the time of the loss.” Id. at 98. Similarly, in Beman v. Springfield Fire & Marine Ins. Co., 303 Ill.App. 554, 555, 25 N.E.2d 603, 604 (Ill.App.Ct. 1940), the parties stipulated the plaintiff's “option to repurchase [the insured property] constituted an insurable interest in said premises,” and the Wisconsin Supreme Court case cited in Beman and noted by Defendant held a lessee has an insurable interest in the property she leases, Ramsdell v. Ins. Co. of N. Am., 197 Wis. 136, 221 N.W. 654, 655 (1928).[4]
The stipulation in Beman and the holdings in Whitten and Ramsdell are for good reason: a lessee certainly suffers a pecuniary loss if the property she leases is destroyed, as the lessee is “deprived of the possession, enjoyment, or profit of the property,” Mendenhall, 164 Ill. 458, 465-66; see also, e.g., Griffin v. W.L. Pfeffer Lumber Co., 285 Ill. 19, 24, 120 N.E. 583, 585 (1918) (). Defendant's quarrel lies with the value of Plaintiff's interest, not whether the interest exists. It is therefore not entitled to summary judgment on the basis that tenants lack an insurable interest in the property they lease.
That said, it must be determined precisely what insurable interest Plaintiff possessed in the leased property. The parties take an all-or-nothing stance on this point: Plaintiff seeks reimbursement for the full fair market value of the building while Defendant argues Plaintiff possesses no interest in the building at all. The Court has already rejected Defendant's stance, but Plaintiff's stance is likewise untenable.
“A person who enters into possession of property under an agreement with the owner to pay taxes and insurance on the buildings, and to . . . do business there, has an insurable interest in the property as a tenant at will to the extent of the term, as he or she is entitled to notice before dispossession.” Tenants at will or sufferance, 3 Couch on Ins. § 42:53 (3d ed.). That “insurable interest can consist of a business interruption loss under a lease for a definite term, improvements made or the right to make improvements, the right or obligation to make repairs, or other interests, but recovery after loss is limited,” both in the value of the interest and in the time for which the interest exists. Lessees, 3 Couch on Ins. § 42:51 (3d ed.). Generally, a lessee's interest is “limited to its remaining interest in the leased property [and terminates] on expiration of the lease.” Id.
Plaintiff took possession of the building in 2008 pursuant to a written lease by which he was responsible for the annual property tax and costs to maintain and upkeep the premises. (Doc. 31-1 at 75-76). The parties did not execute any subsequent written leases, but their leasehold arrangement continued through May 2019, at which time Plaintiff and the owner appeared to reach a different agreement as to payment due to the owner's stated intent to list the property for sale. (Doc. 311 at 77). Plaintiff's and the owner's actions created an implied year-to-year tenancy by which Plaintiff was entitled to possession of the leased premises through the end of the annual lease in effect at the time of the July 2019 fire, see 735 ILCS 5/9-205 (“[I]n all cases of tenancy from year to year, 60 days' notice, in writing, shall be sufficient to terminate the tenancy at the end of the year.”). Thus, per Illinois law, Plaintiff's insurable interest in continued possession of the building continued through the end of the annual lease in effect at the time of the July 2019 fire, provided the fire occurred more than 60 days before the expiration thereof.[5] Further, Plaintiff's deposition suggests he made improvements to the property over the course of his possession thereof, including a new roof, annual blacktopping, and “that type of stuff.” (Doc. 31-1 at 79). As stated, tenants like Plaintiff may have an insurable interest in the...
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