United States District Court, Northern District of Illinois, E.D
February 12, 1982
GEORGETOWN ASSOCIATES, ET AL., PLAINTIFFS,
CHEROKEE INSURANCE COMPANY, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Georgetown Associates ("Georgetown") sues Cherokee Insurance Co.
("Cherokee") and Nordstrom Agency of Illinois, Inc. ("Nordstrom"),
claiming Cherokee breached its contract of insurance by refusing to pay
for loss sustained when Georgetown's outdoor swimming pool unexpectedly
popped out of the ground. Georgetown and Cherokee have filed cross-motions
for summary judgment. Because there are material fact issues, both
motions are denied.
Georgetown is a real estate limited partnership. One of its
developments is Georgetown of Willow Bend ("Willow Bend"), an apartment
complex in Rolling Meadows, Illinois. Willow Bend's outdoor swimming pool
is adjacent to the living units, shaped like a trapezoid (60 feet long,
40 feet wide at the shallow end narrowing to 20 feet at the deep end) and
surrounded by a concrete deck.
Before April 30, 1980 substantial amounts of ground water had collected
around and beneath the pool,*fn1 creating hydrostatic pressures whose
force ultimately exceeded the weight of the pool. On April 80 the excess
force caused the pool to thrust upward more than 12 inches, shattering
the concrete deck, destroying the pool's plumbing connections and
substantially damaging the pool.
There is a dispute as to why the water pressure had been unrelieved
before the occurrence:
Georgetown presents the affidavits of experts Richard Hults and Lewis
Blue. Hults, president of a local construction company who has worked in
the industry for 11 years, inspected the pool shortly after the
accident. He concluded that the pool's "hydrostatic gravity valve failed
to release hydrostatic external ground water forces, which caused
pressure to build up around the pool, and which ultimately forced the pool
to rise above ground level." Blue, housing inspector for the City of
Rolling Meadows, came to the same conclusion based on substantially the
Cherokee counters with the affidavit of its own expert Ruben J. Baer, a
registered structural engineer. Baer too examined the swimming pool
shortly after the accident. He concluded that the "uplifting . . . was
caused by a loss of pool water through a crack or cracks in the pool wall
or floor and that said cracks were caused either by faulty operation or
maintenance of the pool and/or as a result of poor design of the pool
Baer's conclusion is thus directly at odds with that of Hults and
Blue. Both of them chalk up the accident to failure of a valve to relieve
pressure caused by unfavorable weather. Baer rather ascribes the accident
to negligence in operation, maintenance or design.
Sharp differences also exist as to the existence of insurance coverage
for the loss. Nordstrom had told Georgetown that the usual multi-peril
("all risks" in common parlance) policy did not cover swimming pools.
Georgetown ordered and paid an extra premium for extended coverage
including swimming pools and other structures apart from the residential
buildings (to a maximum limit of $25,000).
Unfortunately the policy as delivered to Georgetown, though it did
include the swimming pool rider (Endorsement E), omitted the very
coverage form (MP 101) to which it was a rider.*fn2 Had anyone studied
the package delivered to Georgetown in detail, the gap in documentation
would have been apparent, for:
(1) Among the eight "forms and endorsements" listed
on the cover sheet as "applying to Section I"
(property coverage) was "MP 101." That form was
missing while the other seven were in the package.
(2) Endorsement E itself was captioned "Special
Conditions and extensions to MP 101 MP 126." It
specified that its "conditions and Extensions apply
only when the aforementioned forms are attached to and
made a part of this Certificate." Its swimming pool
coverage was specified as an extension of "coverage
under MP 101."
But of course no one did study the package or discover the omission
until the loss was incurred and the claim was made and refused. This
action must determine both the effect of the omission and the effect of
MP 101 if it were in fact deemed part of the policy despite its
Georgetown urges that the undelivered MP-101 cannot apply to defeat its
claim under the policy, and alternatively that if MP 101 were to apply,
its provisions do not bar Georgetown's claim. Its summary judgment motion
must be denied because both propositions are unclear at this point.
There is law in other jurisdictions — not Illinois*fn3 —
that an endorsement or amendment referred to in, but not attached to, an
insurance policy is inoperative as to the insured, American Family Mutual
Insurance Group v. Claggett, 472 S.W.2d 669, 670 (Mo.App. 1971); Moore
v. Home Indemnity Co., 274 A.2d 705, 706 (Del.Super. 1971); Hartford
Accident & Indemnity Co. v. Shaw, 273 F.2d 133, 138-39 (8th Cir. 1959)
(Missouri law). of course such cases — even if reflective of
Illinois law — would not govern the facts here.
It is one thing to say that an amendment that would vary, add to or
subtract from a policy — otherwise complete in itself — but
is never delivered to the insured cannot be
binding on the latter (even though the amendment is referred to in the
policy proper). But without more factual support the principle can hardly
be stretched to hold ineffective a part of the policy, like MP 101 here,
that identifies the basic coverage — what property is insured and
to what extent. After all, what remained after ignoring the omitted
amendment in each of the other cases was a self-contained policy. If MP
101 is omitted here, what would remain is not self-contained at all.
J. M. Corbett Co. v. Insurance Co. of North America, 43 Ill. App.3d 624,
627, 2 Ill.Dec. 148, 151, 357 N.E.2d 125, 128 (1st Dist. 1976) does not
counsel a different result. Corbett teaches that where information
contained in a certificate of insurance conflicts with the terms of the
undelivered policy, the terms specified in the certificate must govern.
It proceeded from the premise "that all uncertainty should be resolved in
favor of the insured" (id. at 626, 127, 2 Ill.Dec. 148, 357 N.E.2d 125).
But here there is no conflict between the provisions delivered to
Georgetown and MP 101. Instead they are complementary. On the record
before the Court Georgetown has not conclusively negated the proposition
that it was on notice that (1) MP 101 contained the substantive policy
provisions and (2) those provisions naturally included limitations on
Georgetown goes on to argue that even if MP 101 must be considered, its
exclusions do not defeat the claim. That contention requires little
discussion. Four MP 101 exclusions would arguably block Georgetown's
(1) Section III, Paragraph E states, "The following
property is subject to these additional limitations:
. . . outdoor swimming pools, and related equipment .
. . are not covered against loss by freezing or
thawing, . . . or by pressure or weight of ice or
water, whether driven by wind or not."
(2) Section VI, Paragraph D states, "This policy
does not insure under this form against . . . Loss
caused by, resulting from, contributing to or
aggravated by any of the following: . . . (4) Water
below the surface of the ground. . . ."
(3) Section VI, Paragraph E states, "This policy
does not insure under this form against . . . Loss
caused by: (1) wear and tear, deterioration. . . ."
(4) Section VI, Paragraph E also states, "This
policy does not insure under this form against: . . .
Loss caused by: . . . (7) continuous or repeated
seepage or leakage of water or steam from within a
plumbing, heating, or air conditioning system . . ."
Resolution of the possible applicability of one or more of these
exclusions must await further factual development. Whichever expert's
version of the accident's cause is accepted by the trier of fact (as well
as any other evidence bearing on the issues) may lead to a different
conclusion. Certainly at this stage, taking all reasonable factual
inferences in Cherokee's favor (as is required on Georgetown's motion)
the Court could find at least one of the exclusions applies. That
suffices to defeat Georgetown's motion.
All reasonable factual inferences are taken the other way on Cherokee's
summary judgment motion.*fn4 So taken they preclude a definitive
resolution of the policy exclusions in Cherokee's favor at this time.
Though Cherokee would seem to have the better of the argument at this
time on one or more, that is not enough for summary judgment. In that
respect, moreover, it may well be relevant — for which purpose
evidence would have to be adduced — whether the policy is indeed
one covering "all risks": meant to insure against fortuitous losses of
all sorts, and that exclusions of
particular risks from such policies will only be allowed where a provision
is present "excluding the specific loss from coverage." Dow Chemical Co.
v. Royal Indemnity Co., 635 F.2d 379, 386 (5th Cir. 1981).
Even more significant, the state of the record forbids the conclusion
that in all events MP 101's limitations are binding on Georgetown. It may
well be that an estoppel situation is posed here, for the parties have
not addressed what discussions preceded or accompanied the ordering of
the rider.*fn5 Even absent meaningful discussions, evidence as to the
reasonable expectations of a business purchaser of insurance coverage may
be relevant. Neither party has dealt with whether such a purchaser is
necessarily placed on notice of the gap in the document package — a
bulky package, impressive on its face — delivered by Cherokee.*fn6
If evidence is that the reasonable purchaser might be obligated to read
what was tendered but not necessarily to analyze the contents to detect
what was missing, such a purchaser might be misled into not seeking to
protect itself by other means against uninsured risks not identified
because of Cherokee's fault in omitting MP 101.*fn7
It is unnecessary to multiply the examples or prolong the discussion.
Cherokee's summary judgment motion must also be denied.
Each party's motion is denied. Both parties are directed to address any
further discovery expeditiously. This case is set for a further status
report March 30, 1982 at 9:15 a. m.