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Smith v. Union Automobile Indemnity Company

July 17, 2001

WARREN D. SMITH AND JOYCE M. SMITH, PLAINTIFFS-APPELLANTS
v.
UNION AUTOMOBILE INDEMNITY COMPANY, DEFENDANT-APPELLEE



Appeal from the Circuit Court of Kane County. No. 97--L--575 Honorable Patrick J. Dixon, Judge, Presiding

The opinion of the court was delivered by: Justice Bowman

UNPUBLISHED

Plaintiffs, Warren and Joyce Smith, filed suit against defendant, Union Automobile Indemnity Company (Union), following Union's denial of a claim plaintiffs submitted under their homeowner's policy. The circuit court of Kane County granted summary judgment in Union's favor. Plaintiffs appeal, arguing that the trial court (1) should have denied Union's motion for summary judgment and granted plaintiffs' cross-motion for partial summary judgment pursuant to the "mend the hold" doctrine; (2) incorrectly determined that the damage to plaintiffs' home was caused by surface water and was thus excluded from coverage; (3) misallocated the burden of proof; and (4) should have barred Union from filing its counterclaim for declaratory judgment.

BACKGROUND

During a 24-hour period on July 17 and 18, 1996, northeastern Illinois was deluged with 17 inches of rain. During this storm, the window wells in the basement of plaintiffs' Aurora home filled with water, causing the windows to break and the basement to fill with five feet of water. Water also came into the basement through the sewer drain. At the time of the storm, plaintiffs had a homeowner's policy with Union. The policy included a special endorsement with a policy limit of $5,000 that provided coverage for loss caused by sewer or drain backup. Plaintiffs did not purchase flood insurance from Union. When plaintiffs filed a claim with Union for the damage caused by the water that flooded their basement, Union paid them $5,000 pursuant to the special endorsement but denied full coverage for plaintiffs' loss pursuant to the following exclusion:

"1. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss

c. Water Damage, meaning:

(1) flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind[.]"

In the letter denying coverage, Union's representative, Frederic Lauher, set forth the water damage exclusion and stated that Union's understanding was that the damage to plaintiffs' home was caused "when sewage backed up through the drains of your house; the sump pump was not capable of handling the subsurface water causing water to back up through the sump; and surface water entered the dwelling from flooding of Blackberry Creek."

After Union denied full coverage, plaintiffs filed suit against Union. Count I of plaintiffs' first amended complaint alleged breach of contract and count II sought attorney fees, costs, and damages under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1998)). Following discovery, Union moved for summary judgment. The basis of the motion was that the damage to plaintiffs' home was caused by flood and surface water so no coverage existed pursuant to the policy's water damage exclusion. Union also filed a counterclaim for declaratory judgment based upon the water damage exclusion. Plaintiffs filed a cross-motion for partial summary judgment that argued that (1) Union should be barred, pursuant to the "mend the hold" doctrine, from asserting that surface water caused plaintiffs' loss because it had not previously specified that part of the exclusion as a defense; and (2) the water that flooded plaintiffs' basement was not surface water.

The trial court rejected plaintiffs' arguments and granted summary judgment in Union's favor as to count I of the first amended complaint. The court also denied plaintiffs' cross-motion for partial summary judgment and dismissed Union's counterclaim. Subsequently, the trial court denied plaintiffs' motion to reconsider and dismissed count II of the first amended complaint with prejudice. This appeal followed.

ANALYSIS

We begin by noting the appropriate standard for reviewing a trial court's decision to grant a motion for summary judgment. Summary judgment is appropriate if the pleadings, depositions, and admissions on file, together with any affidavits, demonstrate that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2--1005(c) (West 1998). A court considering a motion for summary judgment must construe the pleadings, depositions, admissions, and affidavits strictly against the moving party and liberally in favor of the nonmoving party. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 131-32 (1992). A court should grant summary judgment only when the movant's right to judgment is clear and free from doubt. When reasonable people could draw divergent inferences from undisputed facts, summary judgment should be denied. Outboard Marine, 154 Ill. 2d at 102. Our review of a trial court's summary judgment ruling is de novo. Outboard Marine, 154 Ill. 2d at 102.

First, we address plaintiffs' assertion that the "mend the hold" doctrine precluded Union from presenting the defense that the water that entered plaintiffs' basement was surface water. The doctrine's name, which is derived from a nineteenth-century wrestling term (Harbor Insurance Co. v. Continental Bank Corp., 922 F.2d 357, 362 (7th Cir. 1990)), prohibits a party who has repudiated a contract on one ground from changing his ground after litigation has begun and thus " 'mend[ing] his hold.' " Larson v. ...


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