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April 23, 1963


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 ...

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