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Zubi v. Acceptance Indemnity Insurance Co.

May 21, 2001

BASHAR ZUBI, PLAINTIFF-APPELLANT,
v.
ACCEPTANCE INDEMNITY INSURANCE COMPANY, A NEBRASKA CORPORATION, AND HULL AND COMPANY (MIDWEST), INC., AN ILLINOIS CORPORATION, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. No. 97 L 3519 The Honorable David Lichtenstein, Judge Presiding.

The opinion of the court was delivered by: Justice Cohen

Not Released For Publication

BASHAR ZUBI, PLAINTIFF-APPELLANT,
v.
ACCEPTANCE INDEMNITY INSURANCE COMPANY, A NEBRASKA CORPORATION, AND HULL AND COMPANY (MIDWEST), INC., AN ILLINOIS CORPORATION, DEFENDANTS-APPELLEES.

Appeal from the Circuit Court of Cook County. No. 97 L 3519 The Honorable David Lichtenstein, Judge Presiding.

The opinion of the court was delivered by: Justice Cohen

Appellant Bashar Zubi owned a grocery store known as American Food & Liquor, located at 1511-1515 West Roosevelt Road in Chicago. In December 1993, Zubi placed an application for insurance on the store premises with an insurance broker, Intermodal Insurance Agency. Intermodal placed Zubi's application with appellee Hull & Company (Midwest), Inc., for purposes of contracting with an insurance carrier. Hull was the managing general agent for appellee Acceptance Indemnity Insurance Company, an insurance carrier located in Nebraska, and had full authority to bind coverage and cancel policies on Acceptance's behalf. In December 1993, John Szczesny, an account executive at Hull, secured a policy of insurance on Zubi's behalf through Acceptance. In December 1994, Zubi renewed his policy with Acceptance through its agent, Hull. During the renewal period (in December 1994, and July 1995, respectively), Zubi's property sustained two minor arson fires. Acceptance paid both of these losses. Following notification of the July 1995 fire to Acceptance, Paula Flemming-Irons, an underwriter for Acceptance, contacted Szczesny and advised him to cancel Zubi's policy. On July 17, 1995, Acceptance, through Szczesny at Hull, mailed to Zubi a notice of Acceptance's election to cancel the policy. The notice of cancellation stated an effective cancellation date of August 19, 1995, at 12:01 a.m. The notice was sent to Zubi at his last known mailing address of 1000 South Loomis, Chicago, Illinois 60609, the address reflected on the relevant policy declarations. Acceptance obtained a receipt of mailing from the United States Postal Service. Acceptance also returned the remaining amount of his premium to Zubi. On September 5, 1995, Zubi's store premises suffered a fire loss in excess of the $225,000 policy limit. Acceptance denied coverage for the September 5 loss predicated on the August 19 policy cancellation.

 Zubi filed a four-count complaint in the circuit court of Cook County against Acceptance, Hull and Intermodal. Count I alleged breach of contract against Acceptance for failure to pay Zubi's claim. Count II alleged unreasonable and vexatious delay in settling Zubi's claim against Acceptance under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1998)). Count III alleged negligent misrepresentation against Intermodal. *fn1 Count IV alleged negligent misrepresentation against Hull.

Zubi moved for summary judgment against Acceptance on count I. Acceptance filed its response to Zubi's summary judgment motion and a cross-motion for summary judgment on count I, asserting as an affirmative defense that the contract had already been canceled at the time Zubi sought payment of his claim. The trial court denied Zubi's motion and entered summary judgment in favor of Acceptance on count I.

Zubi then moved for leave to amend his complaint by adding a proposed count V. Count V further alleged breach of contract against Acceptance in the manner and method by which his policy was cancelled as opposed to alleging the lack of a contractual basis for cancellation as alleged in count I. Following briefing and argument, the court denied Zubi's motion to amend. Zubi then filed a second motion, seeking leave to file an amended count V, which the court subsequently denied. Acceptance then moved for summary judgment on count II of the complaint, which was granted. Hull moved for summary judgment on count IV, which was also granted.

On appeal, Zubi argues that the trial court erred: (1) in granting summary judgment to Acceptance on counts I and II of the complaint; (2) in granting summary judgment to Hull on count IV of the complaint; and (3) in denying Zubi leave to file an amended count V. We affirm.

1. Summary Judgment

"Where the matter or issue may be decided as a question of law, such as where the only issue concerns the construction of an insurance policy, including its exclusionary provisions, summary judgment is a proper remedy." University of Illinois v. Continental Casualty Co., 234 Ill. App. 3d 340, 343 (1992). Our review of an order granting summary judgment is de novo. North American Insurance Co. v. Kemper National Insurance Co., No. 1-98-2673, slip op. at 6 (March 16, 2001). "Summary judgment is proper 'where the pleadings, affidavits, depositions, admissions and exhibits on file, when viewed in the light most favorable to the non-movant, reveal that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law.' " Natale v. Gottlieb Memorial Hospital, 314 Ill. App. 3d 885, 888 (2000), quoting Busch v. Graphic Color Corp., 169 Ill. 2d 325, 333 (1996). The function of a reviewing court on appeal from a grant of summary judgment is limited to determining whether the trial court correctly concluded that no genuine issue of material fact was raised and, if none was raised, whether judgment as a matter of law was correctly entered. Malanowski v. Jabamoni, 293 Ill. App. 3d 720, 724 (1997). "A court of review's determination as to whether the record supports a grant of summary judgment is one of law *** and may be based on any grounds called for by the record." In re Marriage of Palacios, 275 Ill. App. 3d 561, 568 (1995). "Summary judgment is a drastic means of disposing of litigation and therefore should be allowed only when the right of the moving party is free from doubt." North American Insurance Co., slip op. at 6. "Reversal of [an order granting] summary judgment *** is warranted where, on review, a material issue of fact or an inaccurate interpretation of the law exists." North American Insurance Co., slip op. at 6.

A. Counts I and II

"When a contract is the subject of a summary judgment motion, 'the appropriateness of summary judgment will turn on the clarity of the contract terms under scrutiny.' " Old Republic Insurance Co. v. Federal Crop Insurance Co., 947 F.2d 269, 274 (7th Cir. 1991), quoting International Surplus Lines Insurance Co. v. Fireman's Fund Insurance Co., No. 88-C320 (N.D. Ill. May 4, 1991). Before addressing the contract terms at issue, we first consider general principles involved in the construction of contracts of insurance:

"An agreement reduced to writing must be presumed to reflect the intention of the parties who signed it. [Citations.] To ascertain the meaning of [a] policy's words and the intent of the parties, the court must construe the policy as a whole with due regard to the risk undertaken, the subject matter that is insured, and the purposes of the contract in its entirety. [Citations.] Illinois law governing the construction of insurance contracts dictates that, if a policy term is subject to more than one reasonable interpretation, any ambiguity must be construed in favor of the policyholder. [Citation.] Where the terms of an agreement are plain and unambiguous, a court must afford them their plain, ordinary and popular meaning. [Citations.] In addition, the absence of a definition does not render a policy term ambiguous, nor is it ambiguous simply because the parties can suggest creative possibilities for its meaning. [Citations.] The alternate interpretation must also be reasonable. [Citation.] Although ambiguities in an insurance policy will be construed against the insurer, courts will not distort the language of a policy to create an ambiguity where none exists. [Citation.] Whether an ambiguity exists is a question of law for the trial court to determine." (Emphasis in original.) Smith v. Neumann, 289 Ill. App. 3d 1056, 1064 (1997). See Board of Education of Maine Township High School District 207 v. International Insurance Co., 292 Ill. App. 3d 14, 17 (1997); International Surplus Lines Insurance Co. v. Pioneer Life Insurance Co., 209 Ill. App. 3d 144, 148 (1990).

Count I of Zubi's complaint alleged breach of contract against Acceptance for failure to pay Zubi's claim. *fn2 Acceptance asserted as an affirmative defense that the contract had already been canceled prior to the occurrence of the fire damage for which Zubi sought payment. In ruling on Zubi's and Acceptance's cross-motions for summary judgment on count I, the trial court stated in its order:

"Counsel *** agree[] that they have pointed the court to no decision directly on point and what is here called for is a determination as a matter of law as to the terms of the subject contract. The court finds that there is no ambiguity in the contract terms and that any ambiguity about possible surplusages [sic] in the written notice of cancellation does not affect the substantive right of the defendant, Acceptance ***, to cancel the surplus lines insurance policy as here that policy was cancelled. In short, on this record there are no genuine issues of material fact in dispute and plaintiff is not, and defendant, Acceptance *** , is entitled to the judgment sought as a matter of law."

Thus, the trial court found as a matter of law that Acceptance's cancellation of Zubi's coverage was proper under the terms of the contract.

The question before the trial court in construing the terms of the policy (which is now before us de novo) was whether Acceptance had a contractual right to cancel Zubi's coverage. The contract provisions at issue in this case are as follows:

"COMMON POLICY CONDITIONS

All Coverage Parts included in this policy are subject to the following conditions.

A. CANCELLATION.

1. The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance ...


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