The opinion of the court was delivered by: Robson, District Judge.
This is a declaratory judgment action brought April 27,
1960, by insured Tamco Corporation, and Ruben G. and Ben
Musikantow, its sole stockholders, managing officers, and
assignees. Plaintiffs seek to establish the insurer's
liability on an endorsement, issued May 25, 1955, covering the
depreciation value of furniture, fixtures and other supplies,
which endorsement was issued in connection with a fire
insurance policy of defendant.
A fire occurred on July 28, 1955, which destroyed the
insured Tamco Corporation's plant. Liability was determined
and paid under the fire policy,*fn1 but not under the
depreciation endorsement. On October 24, 1962, the Court
denied cross motions for summary judgments because of the
existence of fact issues.
Articles of dissolution of plaintiff Tamco Corporation were
filed September 17, 1956. It was dissolved October 2, 1956.
Theretofore, on July 25, 1956, Tamco assigned its rights under
the depreciation endorsement to plaintiffs Musikantows. The
assignment was submitted to defendant, as required by the
policy, but it took no action thereon. The stipulation of
facts, however, contains a copy of defendant's receipt of the
assignment by certified mail.
The parties have stipulated as to the facts and have
submitted the cause upon the pleadings, stipulation and
briefs. This stipulation reveals that Tamco engaged in the
manufacture of mens' and boys' sport shirts.
Paragraph 7 of the complaint alleges:
"That although the Federal Insurance Company of
New York paid the sum of $13,377.93 * * * and
entered into a compromise, settlement and
adjustment of their liability under fire
insurance policy F2324114, they have unreasonably
refused to pay the sum of $20,593.99, which is
due and owing under the depreciation insurance
rider which formed a part of said fire insurance
The complaint seeks a construction and declaration of the
coverage of the endorsement to the policy and that it be
binding upon the insurer, and prays that the proceeds be paid
to the assignees and that they not be required to repair,
rebuild or replace the destroyed machinery, fixtures and
improvements on the same or another site. In the alternative,
plaintiffs pray that:
"* * * [I]f the court adjudicates and determines
that it is necessary for the plaintiff
corporation, or its assignees to repair, rebuild
or replace the said machinery, fixtures and
improvements on another site, that the said
Federal Insurance Company of New York would then
be liable to pay for same."
The amendment of November 20, 1961, to the complaint seeks
a determination that the defendant insurer is liable on "the
adjustment, compromise and settlement set forth in paragraph
3 * * * as a matter of contractual obligation, independent of
any provisions of said policy of insurance," and is,
therefore, obligated to pay $20,593.99 to plaintiffs "based on
said adjustment, settlement and compromise."
Defendant's original answer, filed May 27, 1960, denies that
the refusal to pay the sum of $20,593.99 for depreciation is
unreasonable and that plaintiffs are entitled to said sum or
any part thereof. It fails*fn2 to make any mention of the
allegation in the complaint of the compromise or settlement.
An amended answer, filed April 3, 1962, went further, denying
that there had been a compromise settlement and stating that
there has "merely been a determination of the amount of money
for which defendant would be liable in the event that
plaintiffs had complied with the terms and conditions of the
policy of depreciation insurance."
Defendant denies all liability under the depreciation
endorsement. Insurer claims that plaintiffs-assignees have no
right to sue thereunder inasmuch as the insurer never
consented to the assignment, as required by the policy, and
plaintiff corporation has long since been legally dissolved
and so may not maintain
this suit three and a half years after dissolution. It further
asserts that plaintiffs have not met the express condition
precedent to insurer's liability under the endorsement in that
the damaged or destroyed property has never been repaired,
rebuilt or replaced,*fn3 It also contends that no action may
be maintained for a loss unless instituted within a year
thereof.*fn4 It further asserts that there is no actual
controversy within the meaning of the declaratory judgment
act*fn5 inasmuch as plaintiffs can suffer no loss until they
comply with the endorsement's condition precedent of repair or
replacement. Defendant maintains the Court would be rendering
an advisory opinion on a speculative or hypothetical situation
(Beck v. Binks, 19 Ill.2d 72, 165 N.E.2d 292 (1960); Exchange
National Bank of Chicago v. County of Cook, 6 Ill.2d 419,
129 N.E.2d 1 (1955); Spalding v. City of Granite City, 415 Ill. 274,
113 N.E.2d 567 (1953)). Finally, the insurer claims that
there was no compromise or settlement. And even if there had
been a compromise settlement by the insurer's adjusters, it
would be invalid as beyond their powers because extending
insurance coverage. (Commonwealth Insurance Co. of N.Y. v. O.
Henry Tent & Awning Co., 287 F.2d 316 (7th Cir. 1961); Peters
v. Great American Ins. Co., 177 F.2d 773 (4th Cir. 1949)).
The Court concludes that plaintiffs-assignees properly bring
this action for declaratory judgment relief and are entitled
to the alternative relief stated in paragraph 4 of the prayer
of the complaint, i.e., payment under the depreciation
endorsement upon their compliance with the rebuilding and
replacement condition of the endorsement.
The standard fire insurance policy, issued April 19, 1954,
insured plaintiff corporation
"* * * to the extent of the actual cash value of
the property at the time of the loss, but not
exceeding the amount which it would cost to
repair or replace the property with material of
like kind and quality within a reasonable time
after such loss * * * against all direct loss by
fire. * * *"
The policy and endorsement further provides:
"It shall be optional with this company to take
all, or any part, of the property at the agreed
or appraised value, and also to repair, rebuild
or replace the property destroyed or damaged with
other of like kind and quality within a
reasonable time, on giving notice of its
intention so to do within 30 days after the
receipt of proof of loss herein required.
"Assignment of this policy shall not be valid
except with the written consent of this company.
"No suit or action on this policy for the
recovery of any claim shall be sustainable in any
court of law or equity unless all the
requirements of this policy shall have been
complied with, and unless commenced ...