Wysoczan v. Cambridge Mut. Fire Ins. Co.

• Docket Number: 1:23-CV-00905
• Decision Date: 28 August 2023
• Parties: MICHAEL WYSOCZAN, Plaintiff, v. CAMBRIDGE MUTUAL FIRE INSURANCE, Defendant.
• Court: U.S. District Court — Northern District of Illinois

1

MICHAEL WYSOCZAN, Plaintiff, v. CAMBRIDGE MUTUAL FIRE INSURANCE, Defendant.

No. 1:23-CV-00905

United States District Court, N.D. Illinois, Eastern Division

August 28, 2023

MEMORANDUM OPINION AND ORDER

HONORABLE EDMOND E. CHANG, UNITED STATES DISTRICT JUDGE

Cambridge Mutual Fire Insurance issued a business-owner insurance policy to Michael Wysoczan, which was effective from March 2020 to March 2021. R. 1, Compl. ¶ 5.^[1] The policy insured Wysoczan's interest in an apartment building from several different types of loss. Id. ¶ 6. The current insurance dispute between Wysoczan and Cambridge Mutual involves structural damage to a porch; Wysoczan claims that the damage was caused by ice formation and damming, and thus is covered by the policy. Id. ¶¶ 7-8 11.

Wysoczan does not ask for an outright declaration that the policy covers the damage. Instead, he seeks a judgment declaring that the coverage dispute must be resolved by an appraisal process that is set forth in the insurance agreement. Compl. ¶¶ 15-16. In response, Cambridge Mutual contends that the dispute does not trigger the appraisal process.^[2] R. 8, Answer, Defenses, and Countercl at22 ¶ 41.^[3] The parties have cross-moved for judgment on the pleadings. R. 11, Mot. J. Pleadings; R. 15., Def.'s Resp. For reasons discussed below, the Court grants Wysoczan's motion and correspondingly denies Cambridge Mutual's motion.

I. Factual Background

Wysoczan owns an apartment building in the Ukrainian Village neighborhood of Chicago. Compl. ¶ 1. Wysoczan alleges that, on around February 15, 2021, his porch was damaged by “ice damming/ice formations and resulting water from melting ice.” Id. ¶ 7. Two days later, on February 17, Wysoczan notified Cambridge Mutual of the damage. Answer ¶ 8. Cambridge Mutual then retained L.J. Shaw & Company to assist in the investigation of the claim. Id. ¶ 9. Initially, no dispute over coverage arose: L.J. Shaw sent Wysoczan a letter acknowledging the “claim for water damage resulting from an ice dam occurring in an enclosed porch area.” Id. ¶ 12. Based on L.J. Shaw's analysis, Cambridge Mutual paid Wysoczan for these interior damages, and the insurer admitted that “that water damaged interior surfaces of the enclosed porch” were covered by the insurance policy. Id. ¶¶ 7, 9.

The timeline concerning the disputed category of damages is a bit longer. Around February 23, Wysoczan expressed to L.J. Shaw that he was claiming additional structural damage under the insurance policy from the ice. Answer, Defenses, and Countercl. at 13 ¶ 11. This time, SEA, Ltd., on behalf of Cambridge Mutual, inspected the porch to investigate this second claim. Id. at 14 ¶ 13. SEA concluded that the formation of ice had not caused any structural damage. Id. at 14 ¶ 14. Based on this investigation, Cambridge Mutual determined that only the interior surfaces of the porch had “plausibly sustained” damage from the ice. Id. at 14 ¶ 15. After the denial of coverage, a few months later, on July 20, Wysoczan sent photographs to Cambridge Mutual “depicting damage to the enclosed porch that Cambridge Mutual's investigation had missed.” Id. at 15 ¶ 18.

The factual record goes silent for several months. Then, on February 15, 2022-after attempts to schedule a reinspection of the alleged structural damages failed-Cambridge Mutual received a “Demand for Appraisal” from Wysoczan's designated appraiser. Answer, Defenses, and Countercl. ¶ 19. This demand sought to utilize the appraisal process specified in the insurance agreement. Here is the pertinent provision:

If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire equally.

If there is an appraisal, we will still retain our right to deny the claim. R. 8-1, Ins. Policy at 51.^[4] In early April 2022, SEA reinspected the porch on behalf of Cambridge Mutual and again found that none of the structural damage to the porch could be traced to the ice event. Answer, Defenses, and Countercl. ¶ 23. In early May 2022, Cambridge Mutual sent a letter repeating the decision to deny coverage for all damages other than the interior damage and rejecting Wysoczan's demand for appraisal. Id. ¶ 26. The following year, in February 2023, Wysoczan's designated appraiser sent Cambridge Mutual an email renewing the appraisal request. Id. ¶ 27. This email included a $166,732.55 estimate from Cera Restoration, which Wysoczan alleges is the cost of repairing the structural damage from the ice event. Id.; Compl. ¶ 10. Wysoczan then filed this case in February 2023, claiming that the insurance agreement required them to resolve this dispute through appraisal. Id. ¶ 16.

II. Legal Standard

Under Federal Rule of Civil Procedure 12(c), “a party may move for judgment on the pleadings after the pleadings are closed.” Judgment on the pleadings in favor of a party is proper if “it appears beyond doubt that the nonmovant cannot prove facts sufficient to support its position, and that the [moving party] is entitled to relief.” Scottsdale Ins. Co. v. Columbia Ins. Grp., Inc., 972 F.3d 915, 919 (7th Cir. 2020) (cleaned up).^[5] “As with a motion to dismiss, the court views all facts and inferences in the light most favorable to the non-moving party.” Federated Mut. Ins. Co. v. Coyle Mech. Supply Inc., 983 F.3d 307, 313 (7th Cir. 2020) (cleaned up). A judgment on the pleadings can only be granted if “the moving party demonstrates that there are no material issues of fact to be resolved.” Moss v. Martin, 473 F.3d 694, 698 (7th Cir. 2007) (cleaned up).

III. Analysis

The parties' dispute turns on the scope of the appraisal provision in the insurance agreement. The key question is whether their dispute about the cause of structural damage qualifies as a dispute about “amount of loss,” the subject of the appraisal provision. See Ins. Policy at 51. Wysoczan asks the Court to declare that this causation question is covered under the appraisal provision because “determin[ing] the amount of the loss ... requires the appraisal panel to determined the damage to the Building caused by ice damming/ice formations.” Compl. ¶ 16. Meanwhile, Cambridge Mutual asks the Court to declare that “issues of causation . are not within the purview of the Appraisal Provision.” Answer, Defenses, and Countercl. at 22 ¶ 41. The cross-motions tee up the issue for decision.

According to Wysoczan, disputes about amount of loss can include-and even center on-disputes about causation. Mot. J. Pleadings at 5. Under this interpretation, Wysoczan's dispute with Cambridge Mutual about what caused structural damage to the porch is embedded in a dispute about the amount of loss from the ice event. Wysoczan urges that “once a covered peril such as ice damming/ice formation is ad-mitted[,] . determining what damage was caused by this covered peril is inherent and necessary in any . appraisal when determining the amount of the loss.” Id.. In support of his interpretation, Wysoczan relies on several cases from this District deciding the issue under Illinois law. Id. at 6 (citing 10 cases); R. 17, Pl.'s Reply, at 1 (adding two additional cases). See, e.g., Runaway Bay Condo. Assoc. v. Phila. Indem. Ins. Cos., 262 F.Supp.3d 599, 602 (N.D. Ill. 2017) (holding that appraisers could determine what damage was caused by a storm); Khaleel v. Amguard Ins. Co., 2022 WL 425733, at *1-3 (N.D. Ill. Feb. 11, 2022) (holding that appraisers could determine what damage to a roof was caused by hail); Adam Auto Group, Inc. v. Owners Ins. Co., 2019 WL 4934597, at *2 (N.D. Ill. Oct. 7, 2019) (holding that appraisers could determine the amount of damage caused by fire); Culvey v. Auto-Owners Ins. Co., 2023 WL 3074344, at *3 (N.D. Ill. Apr. 25, 2023) (dismissing an argument that appraisers cannot determine what damages were caused by a storm and noting that “the valuation of damage remains inseparable from determining what caused that damage”); River Grove Plaza Inc. v. Owners Ins. Co., 2022 WL 16782412, at *3 (N.D. Ill. Nov. 8, 2022) (holding that appraisers can determine the amount of damage to a collapsed roof caused by ice and snow).Wysoczan also relies on a Tenth Circuit decision, BonBeck Parker, LLC v. Travelers Indem. Co. of Am., 14 F.4th 1169, 1173 (10th Cir. 2021),holding that appraisers could determine what amount of roof damage was caused by hail. Mot. J. Pleadings at 4, 8. He argues that the Tenth Circuit's analysis of appraisal provisions-both in terms of dictionary definitions of “amount loss” and the purpose of such appraisal provisions-supports his interpretation. Id.

Cambridge Mutual offers a narrower interpretation of what can count as a dispute about the amount of loss. Def.'s Resp. at 7. The insurer argues that as soon as an insurance dispute turns on “whether the loss or damage was due to a covered cause of loss,” it no longer is about the amount of loss and falls outside of the appraisal provision. Id. Cambridge Mutual cites FTI Int'l, Inc. v. Cincinnati Ins. Co. 790 N.E.2d 908 (Ill.App.Ct. 2003) to support its contention. Id. at 6-7. According to Cambridge Mutual, the Court should give little weight to the federal cases cited by Wysoczan because they supposedly are “not rooted in the decisions of Illinois' appellate courts.” Id. at 8. Instead,...