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10/21/87 Charles F. Piro Et Al., v. Pekin Insurance Company

October 21, 1987





514 N.E.2d 1231, 162 Ill. App. 3d 225, 113 Ill. Dec. 220 1987.IL.1573

Appeal from the Circuit Court of Madison County; the Hon. George J. Moran, Jr., Judge, presiding.


JUSTICE WELCH delivered the opinion of the court. KARNS, P.J., and HARRISON, J., concur.


Plaintiffs Charles F. Piro and Piro TV, Heating and Air Conditioning, Inc., commenced this action to recover the proceeds of a fire insurance policy based on the destruction by fire of the business premises. The circuit court entered summary judgment against both plaintiffs, who appeal.

Fire destroyed the premises of the corporate plaintiff on October 19, 1982. Mr. Piro owned the corporation. The fire insurance policy for the premises entitled defendant (1) to examine and audit the insured's books and records "as far as they relate to the subject matter of this insurance," and (2) in the event of a loss, to examine the insured under oath and to examine "all books of account, bills, invoices and other vouchers, or certified copies thereof . . ., at such reasonable time and place as may be designated by the Company or its representative." In the three days following the fire, defendant's investigator inspected the premises and took Mr. Piro's statement which, when transcribed, spanned 85 pages. On defendant's request Mr. Piro completed and submitted a proof-of-loss form and signed a release-of-information form authorizing his bank to release copies of Mr. Piro's banking records to defendant. In February 1983, a certified public accountant employed by defendant inspected financial records at Mr. Piro's place of business. Later that month an attorney employed by defendant requested by letter that Mr. Piro appear for examination under oath and bring

"any and all documents, papers or other materials whatsoever which you have to support this claim and which you have not previously given to the insurance company. That includes your personal tax returns for the last five years, bank records, credit records or any other evidence of your financial position at the time of this fire."

According to the transcript of the March 10, 1983, examination under oath, Mr. Piro did not produce his personal income tax returns or a copy of the contract concerning his sale of the business which occupied the destroyed premises to (and later repurchase from) a former employee. He also refused to answer questions regarding the location, value of and income from his rental property, his personal mortgages, and the concerns of another business he owned, asserting those matters were irrelevant to the claim. In a letter dated April 19, 1983, defendant's attorney wrote to plaintiff's attorney that the claim was still under "active investigation" and that "among the items" defendant needed for a "final determination" was the return of the transcript of the examination under oath with Mr. Piro's signature. In a letter to defendant's attorney dated May 6, 1983, accompanying the transcript, plaintiff's attorney wrote:

"Since my client has now complied with all the requirements and conditions of his fire insurance policy and provided the insurance company with a proof of loss, a sworn statement and other miscellaneous information and since the loss occurred over six months ago I hereby make demand on you to pay all sums due my client for his fire loss."

After receiving the transcript and this letter, defendant notified Mr. Piro by letter dated May 17, 1983, that his claim was refused because (1) the policy was "void due to concealment, misrepresentation and fraud"; (2) the fire was incendiary in nature; and (3) the amount of the claimed loss grossly exceeded the actual loss. The letter concluded:

"The Pekin Insurance Company hereby expressly reserves our rights to assert all other defenses that we may have to your claim even though not enumerated above, as they may become known to us, or as counsel may advise.

If you intend to proceed with litigation, strict compliance with all policy provisions will be required. We do not waive or relinquish any of our rights or defenses under our policy of insurance.

Plaintiffs filed this action July 25, 1983, seeking the proceeds of the policy. On July 29 and August 24, 1983, Mr. Piro submitted to polygraph examinations with respect to the origin of the fire, and after each examination the examiner stated that in his opinion Mr. Piro answered truthfully that he did not set fire to the premises or know who did. Defendant moved for summary judgment on the basis that Mr. Piro's responses to questions in the examination under oath and his failure to produce requested documents at that examination constituted a breach of a condition precedent to recovery under the policy. In response plaintiffs filed documents ...

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