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Indian Harbor Insurance Co. v. Randolph Partners

August 10, 2010


The opinion of the court was delivered by: Judge Joan H. Lefkow


Indian Harbor Insurance Company ("Indian Harbor") filed suit against Randolph Partners, LLC-740 Series ("Randolph Partners") and Giordano's Enterprises, Inc. ("Giordano's) (collectively, "defendants").*fn1 Count I seeks rescission of the parties' 2006-2007 insurance contract based on alleged misrepresentations of fact by defendants that were material to Indian Harbor's decision to enter the contract. Alternatively, counts II and III seek a declaratory judgment that Indian Harbor has no obligations to defendants for losses arising from a December 30, 2006 incident caused by a burst sprinkler head because defendants breached the insurance contract or alternatively because the damages were caused by an excluded cause of loss. Defendants counterclaimed, alleging that coverage is warranted, that Indian Harbor breached the insurance contract in denying their claim, that Indian Harbor has engaged in unfair settlement practices, and that the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/2, was violated. Before the court are the parties' cross-motions for partial summary judgment. Indian Harbor seeks summary judgment as to Count II of its second amended complaint, while defendants seek summary judgment generally on Indian Harbor's liability. For the following reasons, Indian Harbor's motion [#122] is granted, and defendants' motion [#117] is denied.


Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). To determine whether any genuine fact exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Id. While the court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986), where a claim or defense is factually unsupported, it should be disposed of on summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed. 2d 265 (1986). The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Id. at 323. In response, the non-moving party cannot rest on bare pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000).


Randolph Partners owns, manages, and develops commercial property, including a building at 740 N. Rush Street in Chicago, Illinois. The building has two sections, one with four stories and the other with seven. Giordano's leases the first floor of the building, where it operates a restaurant. During the relevant time period, the only other tenant of the building was On Airr Productions, which occupied the second floor. John Apostolou is the president of both Giordano's and Randolph Partners, and has an ownership interest in On Airr Productions.

I. The Insurance Policy

A. Background

During the relevant time period, defendants obtained their insurance policies through Tom Maniotis of the Maniotis Insurance Agency. Maniotis requested quotes from the Jack Nebel Companies, who received quotes for policies from Indian Harbor. Defendants authorized Maniotis to bind coverage pursuant to the quotes.

Some of the applications contained representations that the property had a central station alarm. The quote and binder for defendants' 2004-2005 policy contain warranties reading "100% sprinklered. Central station alarm." Exs. 8--9 to Ex. F to Def.'s Mot. This same phrase is contained in the protective safeguards endorsement and location schedule of that policy. Ex. 10 to Ex. F to Def.'s Mot.The quote and binder for defendants' 2005-2006 policywarrant "100% sprinklered. C/S alarms." Exs. 11--12 to Ex. F to Def.'s Mot. The protective safeguard endorsement for that year's policy states "100% sprinklered. Central station b&f alarms." Ex. 13 to Ex. F to Def.'s Mot. The 2006 quote for insurance and the subsequent binder contain the warranty "100% sprinklered, central station burglar and fire alarm." Exs. 14--15 to Ex. F to Def.'s Mot. Maniotis testified that the representations in the quotes and binders for these policies meant that the property had a central station alarm and a sprinkler system for the entire building. None of the quotes or binders was signed by defendants.

B. 2006-2007 Insurance Policy

Indian Harbor issued defendants an insurance policy for the 740 N. Rush property effective from January 30, 2006 to January 30, 2007. This policy was a renewal of prior policies for the same property. The policy had a $5,000 deductible. Indian Harbor agreed to pay for "direct physical loss of or damage to Covered Property at the premises... caused by or resulting from any Covered Cause of Loss." Ex. A to Second Am. Compl. at 5, hereinafter "Policy No. FCI 003 3007." Loss or damage caused by sprinkler leakage was covered. Id. at 20. The policy excluded from coverage damage caused by or resulting from, among other things, "wear and tear," "rust or other corrosion, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself," and "faulty, inadequate or defective... maintenance of part or all of any property on or off the described premises." Id. at 20, 22. In the event of loss, defendants were required to:

(2) Give [Indian Harbor] prompt notice of the loss or damage, including a description of the property involved.

(3) As soon as possible, give [Indian Harbor] a description of how, when and where the ...

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