Western World Ins. Co. v. Majercak, 06 C 3102.
| Decision Date | 20 June 2007 |
| Docket Number | No. 06 C 3102.,06 C 3102. |
| Citation | 490 F.Supp.2d 937 |
| Parties | WESTERN WORLD INSURANCE, COMPANY, Plaintiff, v. Jan MAJERCAK d/b/a J and J Construction, J and J Construction Corporation of Burbank, J. Murphy Ltd. d/b/a Conrad Roofing and Construction Company, Pilgrim Baptist Church, Church Mutual Insurance Company, Loop Lab School, Inc., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Christopher J. Bannon, Sean M. Anderson, Aronberg, Goldgehn, Davis & Garmisa, Chicago, IL, for Plaintiff.
Peter Burban, Law Office of Peter Burban, Mitchell H. Frazen, Brian M. Reid, Daniel Patrick Johnston, Litchfield Cavo, Michael A. Pope, Myriam Pierre Warren, McDermott, Will & Emery LLP, Chicago, IL, for Defendants.
On or about January 6, 2006, Jan Majercak d/b/a J & J Construction ("Majercak") was employed as a subcontractor by Conrad Roofing and Construction Company ("Conrad") to service the roof of the Pilgrim Baptist Church ("Pilgrim"). .) A fire broke out, which gutted the church and collapsed the roof and steeple. (Id. ¶ 37.) The fire also destroyed Loop Lab School ("Loop") which was adjacent to Pilgrim. (Id. ¶ 39.) Conrad tendered property damage claims to Western World Insurance Company ("Western World") that were being made against Conrad arising from the fire. (Id. ¶ 38.) Subsequently, Western World filed this diversity lawsuit seeking a declaration that the Western World Policy Number NPP883896 ("Policy") issued to Majercak is void and should be rescinded due to material misrepresentations he made in applying for the Policy. (R. 1, Compl.) Western World joined Conrad, Pilgrim, Church Mutual Insurance Company ("Church Mutual"), and Loop as defendants due to their potential interest in the controversy.1 (R. 51, Conrad Roofing Resp. to Pl.'s Facts ¶ 9.) Presently before the Court is Western World's motion for summary judgment. )2 For the following reasons, we grant Western World's motion for summary judgment and declare the Policy void and rescinded.
On or about December 1, 2004, Majercak's duly authorized representative, Pawel Gainski ("Gainski") of the insurance agency Handzel & Associates ("Handzel"), completed an Artisan Contractors Application ("Application") on behalf of Majercak for the purpose of purchasing liability insurance. .)4 The completed Application states the Applicant's Name as "Jan Majercak DBA J. & J. Construction." (Id. ¶ 13.) In the space asking for a "description of all work performed," Gainski wrote "carpentry — residential — 91340." (Id. ¶ 14.) The Application also states that Majercak will perform work on buildings "3 stories" in height. (Id. ¶ 15.) The Application was left blank where it asked for "subcontractor cost" and "subcontracted work." (Id. ¶ 16.) In addition, the Application was left blank where it asked for "Number of Employees." (Id. ¶ 17.) The Application is signed "Jan Majerak." (R. 1, Compl., Ex. 1, Application.)
On or about January 12, 2005, Gainski completed a Supplemental Application for Artisan Contractors ("Supplemental Application") on behalf of Majercak. .) The Supplemental Application states that the "business name" is "Jan Majercak DBA J. & J. Construction." (Id. ¶ 21.) Directly above the signature line, the Supplemental Application states, "The above applicant warrants that the above statements and particulars, together with any attached or appended documents, are true and complete and do not misrepresent, mistake, or omit any material facts." (Id. ¶ 22.) The Supplemental Application states "no" next to the following questions: "Do you do roofing?"; "Do you do re-roofing?"; and "Do you use any subcontractors?" (Id. ¶¶ 23-25.) The Supplemental Application also states: "ISO Class: Carpentry-91340; # of Employees: 0; Payroll: $33,500." (Id. ¶ 26.) The code 91340 is used to reflect residential carpentry work on buildings less than 3 stories. (Id.) The Supplemental Application is also signed "Jan Majercak." (R. 1, Compl., Ex. 2, Supp'l Application.)
APS Insurance Agency, Inc. ("APS") quoted, bound, and issued the Policy on Western World's behalf to "Jan Majercak DBA J. & J. Construction" with an effective date of January 12, 2005. .) The liability coverage states that it is for: "Carpentry — construction of residential property not exceeding three stories in height." (R. 1, Compl., Ex. 3, Policy.) If Majercak's Application had stated that he did roofing or re-roofing work, APS would not have had authority to quote insurance coverage to Majercak on Western World's behalf. (R. 54, Pilgrim Resp. to Pl.'s Facts ¶¶ 39-40.)
At the time the Application and Supplemental Application were executed, approximately 90% or more of all work performed by Majercak was as a subcontractor for Conrad. .) During the period immediately preceding and including the Application Period, approximately 75% of Majercak's work as a subcontractor for Conrad consisted of shingling roofs, and most of the rest consisted of gutter work for the drainage of roofs. (Id. ¶ 30.) Conrad disputes that 75% of the Majercak's work consisted of shingling roofs, but admits that it was more than 50%. (R. 51, Conrad Roofing Resp. to Pl.'s Facts ¶¶ 31-32.) During this time, approximately 10% of Majercak's work was performed on buildings over three stories tall. .) Approximately five to seven people besides Jan Majercak and his brother, Jozef Majercak, were performing work for Majercak at any given time. (Id. ¶ 34.) Conrad states that this number fluctuated between two and six. (R. 51, Conrad Roofing Resp. to Pl.'s Facts ¶ 36.) Majercak had an annual payroll substantially greater than $33,500 during the Application period. .)
During this time, the remainder of Majercak's work was as a subcontractor for Bell Builders. (Id. ¶ 31.) Most of Majercak's work for Bell Builders consisted of shingling roofs and working on the soffits and fascia of roofs. (Id. ¶ 32.)
Summary judgment is appropriate when 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); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must "construe all facts in the light most favorable to the nonmoving party and draw all reasonable and justifiable inferences in favor of that party." King v. Preferred Tech. Group, 166 F.3d 887, 890 (7th Cir.1999). Summary judgment is not appropriate if there are disputed issues of fact remaining, or if the court must make "a choice of inferences" arising from undisputed facts. Harley-Davidson Motor Co., Inc. v. PowerSports, Inc., 319 F.3d 973, 989 (7th Cir.2003). "Speculation does not create a genuine issue of fact; instead, it creates a false issue, the demolition of which is a primary goal of summary judgment." Piscione v. Ernst & Young, L.L.P., 171 F.3d 527, 544 (7th Cir.1999) (internal citations and quotations omitted).
All parties involved agree that Illinois substantive law applies in this diversity case. See, e.g., Tanner v. Jupiter Realty Corp., 433 F.3d 913, 915 (7th Cir.2006) (). In Illinois, rescission of an insurance policy is governed by the Illinois Insurance Code, which states:
No misrepresentation or false warranty made by the insured or in his behalf in the negotiation for a policy of insurance, or breach of a condition of such policy shall defeat or avoid the policy or prevent its attaching unless such misrepresentation, false warranty or condition shall have been stated in the policy or endorsement or rider attached thereto, or in the written application therefore. No such misrepresentation or false warranty shall defeat or avoid the policy unless it shall have been made with actual intent to deceive or materially affects either the acceptance of the risk or the hazard assumed by the company.
215 ILCS 5/154 (emphasis added.) In the case before us, Western World does not allege that Majercak intended to deceive, but rather claims that alleged misrepresentations made in the written application materials permits rescission of the Policy because these misrepresentations materially affected the risk or hazard assumed by Western World. (R. 47, Pl.'s Mem. In Supp. Of Summ. J. at 7.) Defendants Pilgrim and Conrad disagree, arguing that questions of material fact exist as to whether Majercak made material misrepresentations that can void the Policy.
Under Illinois law, "[a] misrepresentation in an application for insurance is a statement of something as a fact which is untrue and affects the risk undertaken by the insurer." Methodist Med. Cent. of Ill. v. Am. Med. Sec. Inc., 38 F.3d 316, 319-20 (7th Cir.1994) (citing Ratcliffe v. Int'l Surplus Lines Ins. Co., 194 Ill.App.3d 18, 141 Ill.Dec. 6, 11, 550 N.E.2d 1052, 1057 (1990); N. Life Ins. Co. v. Ippolito Real Estate P'ship, 234 Ill.App.3d 792, 176 Ill. Dec. 75, 81, 601 N.E.2d 773, 779 (1992)). "Incomplete answers or a failure to disclose material information on an application for insurance may constitute a misrepresentation when...
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