Whitten v. Cincinnati Ins. Co., 4-89-0123

• Decision Date: 28 September 1989
• Docket Number: No. 4-89-0123,4-89-0123
• Parties: , 136 Ill.Dec. 394 Dan L. WHITTEN and Leona Whitten, and Topline Systems, Inc., Plaintiffs- Appellees and Cross-Appellants, v. CINCINNATI INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee.
• Court: United States Appellate Court of Illinois

Page 1169

544 N.E.2d 1169 189 Ill.App.3d 90, 136 Ill.Dec. 394 Dan L. WHITTEN and Leona Whitten, and Topline Systems, Inc., Plaintiffs-
Appellees and Cross-Appellants,
v.
CINCINNATI INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee. No. 4-89-0123. Appellate Court of Illinois,
Fourth District. Sept. 28, 1989.

Page 1170

[189 Ill.App.3d 92] [136 Ill.Dec. 395] Heyl, Royster, Voelker & Allen, Springfield, Michael C. Upperman, Jr. of counsel, for defendant-appellant and cross-appellee.

Law Office of Timothy D. Sturm, Springfield, Timothy D. Sturm, of counsel, for plaintiffs-appellees and cross-appellants.

Presiding Justice McCULLOUGH delivered the opinion of the court:

Topline Systems, Inc. (Topline), contracted to purchase three acres of land, a house, and a barn from Federal Land Bank (Bank). Closing was conditioned on plaintiffs Dan and Leona Whitten, officers and common shareholders of Topline, procuring an insurance policy for $70,000 on the property and the Bank obtaining clear title. The Whittens purchased homeowner's insurance from defendant effective September 15, 1986. Defendant knew plaintiffs did not own the property at that time. Topline was listed on the policy as an additional insured. Due to problems in obtaining clear title, the Bank postponed closing on numerous occasions. On January 19, 1987, prior to closing, fire destroyed the house. The Bank recovered from its insurer but defendant refused to pay plaintiffs, claiming they had no insurable interest. The Whittens sued for declaratory judgment. They later moved for summary judgment, which the Sangamon County circuit court granted. The court awarded plaintiffs $26,000. Defendant appeals the finding that plaintiffs had an insurable interest and the award of $26,000. Defendant also claims the lower court erred in allowing the Whittens to amend their complaint to add Topline as a plaintiff. Plaintiffs cross-appeal, claiming they are entitled to $70,000, the policy amount.

The plaintiffs, Dan and Leona Whitten, began leasing the property in question from Kenneth Taft in July of 1984. They paid $450 per month rent and had renters' insurance on the property through defendant. Plaintiffs intended to use the property for residential and business purposes and purchased Topline Systems, Inc., an energy management firm, in January of 1985.

The plaintiffs moved the firm's physical assets to the leased property and stored equipment and parts in the barn. The company had an office in the home and stored computer equipment and sales information in the basement. The insurance policy issued by defendant covering Topline applied only to assets stored in the barn, not to equipment located in the house. That policy is not in issue here.

[189 Ill.App.3d 93] Taft, lessor of the property, went bankrupt in November of 1984 and the Bank foreclosed on the property. Plaintiffs continued renting the property for $450 per month under a lease with the Bank.

In November of 1985 plaintiffs began negotiating with the Bank to purchase the property. Topline entered a written contract with the Bank on November 28, 1985, to purchase the property for $67,500. Plaintiffs made a $1,500 down payment on that date. Plaintiffs had renewed their lease agreement with the Bank on November 1, 1985, for a six-month period (through April 30, 1986), the time believed necessary for closing. They also began making

Page 1171

[136 Ill.Dec. 396] monthly payments toward the purchase price, in addition to monthly rent payments.

The Bank could not produce clear title by April 30, 1986. Plaintiffs and the Bank did not renew the lease and plaintiffs stopped paying rent on April 30. Plaintiffs and the Bank orally agreed the lease would continue in effect. The Bank did not require plaintiffs to pay rent but did require them to maintain the property.

The Bank continued to assure plaintiffs they would get clear title and set closing for September 21, 1986. In August or September of 1986, the Bank sent plaintiffs a letter requiring them to present a certificate of insurance on the property for a minimum of $70,000 as a condition of closing the transaction.

Plaintiffs contacted defendant through its agent, Robert Brown, to obtain homeowner's insurance. Plaintiffs explained they were in the process of buying the property and expected to close on September 21, 1986. Brown issued a homeowner's policy effective September 15, 1986, through September 15, 1989. Plaintiffs cancelled their renter's insurance on the date the homeowner's policy became effective.

The policy showed Dan and Leona Whitten as the insureds and Topline as an additional insured. The policy valued the covered property as follows: dwelling $70,000, other structures $7,000, and personal property $35,000.

Once again the Bank failed to obtain clear title and the September 21 closing date passed. The Bank indicated closing would occur within a few days and Dan Whitten testified Brown told him they would just leave things as they were with the homeowner's policy. The transaction did not close in late September and Whitten again called Brown. He told Brown he would keep him apprised of progress in closing the transaction and Brown consented to such an arrangement. Two subsequent closing dates were set, one in December of 1986 and one in January of 1987. The Bank failed to meet both deadlines.

On January 19, 1987, the home was hit by lightning and burned to the ground. Plaintiffs were en route to Chicago at the time and due [189 Ill.App.3d 94] to the severity of the storm, they were unable to return home until January 21, 1987. They immediately notified Robert Brown and the Bank of the loss. Brown informed plaintiffs they would have to deal with defendant's agent Pat...