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Cimco Communications, Inc v. National Fire Insurance Company

February 8, 2011

CIMCO COMMUNICATIONS, INC.,
AND VASCOM, INC.,
PLAINTIFFS-APPELLANTS,
v.
NATIONAL FIRE INSURANCE COMPANY
OF HARTFORD,
DEFENDANT-APPELLEE AND CROSS-APPELLANT.



Appeal from the Circuit Court of Cook County Honorable James R. Epstein Judge Presiding.

JUSTICE CONNORS delivered the judgment of the court, with opinion.

Presiding Justice Cunningham and Justice Harris concurred in the judgment and opinion.

OPINION

Plaintiffs CIMCO Communications, Inc., and Vascom, Inc., appeal from an order of the circuit court denying plaintiffs' motion for summary judgment and granting defendant National Fire Insurance Company of Hartford's cross-motion for summary judgment. Defendant cross-appeals portions of the circuit court's summary judgment order, and it also appeals the circuit court's order denying defendant leave to amend its counterclaim. We affirm.

BACKGROUND

Plaintiffs collectively provide phone, Internet, and other data services to companies by leasing equipment from other telecommunications carriers, purchasing services from those carriers, and then reselling the services to its customers. Plaintiffs determined that they could increase their profits by purchasing their own equipment, so in 2004 they leased a facility in downtown Chicago and contracted with a third party to install the necessary equipment. However, on June 6, 2004, the facility and the equipment that had been installed there were damaged by a flood. The damaged equipment was not repaired and replaced until about three months later.

Plaintiffs had previously purchased an insurance policy from defendants that plaintiffs believed covered such an occurrence, and plaintiffs submitted a claim under the policy for their losses. Among other damages, plaintiffs' claim included loss of "business income" that plaintiffs incurred as a result of the flood and the damage to the facility. In their claim, plaintiffs' included the losses that they sustained between the date of the flood and December 2005.

It was at this point that the disagreement that is the subject of this appeal arose. Defendant willingly paid plaintiffs' claimed losses for the three-month period between the date of the flood and the date that the equipment was repaired, but defendant refused to pay for any claimed losses beyond that point, arguing that the business income provision of the insurance policy only applied to losses incurred during the three-month "period of restoration." Plaintiffs disagreed, arguing that the provision encompassed all losses incurred for up to 12 months after the date of the flood. The parties had the damage appraised by an expert and attempted to resolve the controversy, but they were unable to do so because of their disagreement about several matters, including the categorization of damages and the meaning of the business income provision.

Consequently, on May 22, 2007, plaintiffs filed a declaratory judgment action in the circuit court and defendant counterclaimed. Plaintiffs argued that they were entitled under the policy's business income provision to recover all losses that were incurred between the June flood and December 2005. Defendants argued that the business income provision did not apply because plaintiffs (1) had not incurred a "business income loss" as defined by the policy and (2) had not suspended their operations during the period of restoration as required by the business income provision. Defendants further argued that, even if the business income provision did apply, the provision did not cover any losses incurred after the three-month period of restoration.

After discovery, the parties filed cross-motions for summary judgment. In an extensive written opinion, the trial court found that (1) whether plaintiffs had suffered a business income loss is an issue of fact, (2) plaintiffs had suspended their operations as required by the business income provision, and (3) the business income provision only applied to losses suffered within the three-month period of restoration. The trial court accordingly granted summary judgment to defendant.

Following summary judgment, defendant immediately moved to amend its counterclaim in order to obtain a judicial determination that the portion of plaintiffs' claim that defendant had already paid (that is, for losses during the three-month period of restoration) completely satisfied defendants' obligations under the policy. The circuit court denied defendants' motion to amend, as well as plaintiffs' contemporaneous motion to reconsider the court's summary judgment decision.

The circuit court adopted its summary judgment opinion in a final declaratory judgment order entered on October 14, 2009. Plaintiffs timely filed a notice of appeal, and defendant timely filed a notice of cross-appeal.

On appeal, plaintiffs contest only the circuit court's interpretation of the business income provision of the policy as limiting recovery to only those losses sustained during the three-month period of restoration. On cross-appeal, defendant reasserts its arguments on summary judgment below, namely, that it is entitled to summary judgment because (1) plaintiff did not suffer a business income injury within the meaning of the policy, (2) plaintiff did not suspend its operations as required by the business income provision of the policy, and (3) the business income provision only applies to losses incurred within the three-month period of restoration. Defendant further cross-appeals from the circuit court's order denying defendant leave to amend its counterclaim.

We will first examine the summary-judgment-related issues. Summary judgment is appropriate only where the pleadings, depositions, admissions and affidavits, viewed in the light most favorable to the non-movant, show that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. See 735 ILCS 5/2-1005(c) (West 2008). "The construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the court which are appropriate subjects for disposition by way of summary judgment." Crum & Forster Managers Corp. v. Resolution Trust ...


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