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Camelback Properties, Terry Wilbourn, and James Lantz v. Phoenix Insurance Company

January 6, 2012


The opinion of the court was delivered by: Magistrate Judge P. Michael Mahoney



Plaintiffs originally filed this case in state court seeking a declaratory judgment that Plaintiffs' loss is a covered loss under the policy of insurance issued by Defendant. Defendant removed the case to the Eastern Division of the Northern District of Illinois on March 5, 2010, and it was subsequently transferred to Western Division on March 9, 2010. The court denied Plaintiffs' motion to remand the case back to state court on June 15, 2010, finding there to be complete diversity among the parties. The parties proceeded with discovery and filed cross-motions for summary judgment now before the court.


Plaintiff Camelback Properties ("Camelback") is an Illinois corporation engaged in the purchasing, constructing, remodeling, property management, maintaining, renting, and selling of several real estate properties. Plaintiffs, Terry Wilbourn ("Wilbourn") and James Lantz ("Lantz"), are partners in Camelback. Camelback owns a number of properties, including an office building (hereinafter referred to as "the Property") containing multiple units and common areas that is the subject of the parties' motions. At all times relevant to this case, the Property was insured through a policy issued by Defendant.

On December 19, 2008, the Property sustained water damage (hereinafter referred to as "the loss") as a result of a broken pipe. Defendants believe the damage to the pipe was caused by the pipe freezing. Plaintiffs maintain that the cause of the break is unknown. Plaintiffs reported the loss to their insurance broker, McHenry Insurance Services, on December 22, 2008 and also directly to an Outside Claim Representative for Travelers, Michelle Taylor ("Taylor"), on December 30, 2008. Taylor inspected the property and conducted an additional background investigation regarding the loss. Taylor determined that all units at the Property were vacant between September 30, 2008 and the date of the loss.

The insurance policy issued by Defendant (hereinafter referred to as "the policy") contained an exclusion of coverage where the insured building was vacant for more than 60 consecutive days before the loss or damage occurs. Specifically, the policy stated:

d. We will not pay for any loss or damage caused by any of the following even if they are Covered Causes of Loss, if the building where loss or damage occurs has been "vacant" for more than 60 consecutive days before that loss or damage occurs: . . .

(4) Discharge or leakage of water; (Def's Local Rule 56.1 Statement of Facts., Dkt. No. 53, Ex. I, p. 4.) The terms of the policy indicated that the Property was considered vacant unless at least 31% of its total square footage was "(a) Rented to a lessee or sub-lessee and used by the lessee or sub-lessee to conduct its customary operations; or (b) Used by the building owner to conduct customary business operations." (Id. at 39.) Based on Taylor's investigation, Defendant determined that the Property had been vacant for more than 60 days prior to the water leak, and therefore denied coverage for Plaintiffs' claim.

Defendant's decision to deny coverage was based in part on its findings that the Property had no lessees as of late August or early September 2008. The only paying tenants at the Property in 2007 and/or 2008 were Natalie Luce ("Luce"), Robert Burke ("Burke"), Tom Atkins ("Atkins"), Peter Kouzes ("Kouzes"), and a man known only as John. Kouzes entered into a 12-month lease in December 2007, but paid for only two months before breaching the lease in February 2008. Kouzes only entered the building one time when he brought in two ladders. The ladders were left in the building and Kouzes never returned. Atkins leased space at the Property beginning in June 2005 and vacated the premises in June 2007 without leaving any personal or business property. John entered into a 12-month lease, but stayed 13 months at the property before vacating in the Spring or Summer of 2008. Burke leased space to operated a law practice at the Property beginning in 1993. Burke ceased practicing law at the Property on July 1, 2008, and made no further rent payments. Burke left a number of items at the Property, but he retrieved everything but a desk during the Fall of 2008. Luce began operating an orthodontics practice at the Property beginning in 2003. She stopped seeing patients at the property in late August or early September 2008, and her last rent payment was for the month of September 2008.

After September 1, 2008, Plaintiff submits that certain parts of the Property continued to be in use. Burke continued to use several units and the basement for storage of his business property after he ceased practicing law at the Property. Items that remained at the property included client files. Burke retained a key to the property and returned periodically to remove items after July 1, 2008. Wilbourn used the Property as an office and storage space for his other real estate investment properties. Camelback also used units on the first floor, second floor, and in the basement. One second floor unit continued to operate as an office for Camelback, while a first floor unit and the basement were used for storage through the date of the loss.


A. Legal Standards

The parties' cross-motions for summary judgment turn on the question of whether the facts presented by the parties create a genuine issue of material fact as to whether the Property was vacant under the terms of the policy at the time of the loss. A genuine issue of material fact exists when, viewing all evidence in a light most favorable to the non-movant and drawing all justifiable inferences in the non-movant's favor, the court finds that a reasonable jury could return a verdict for the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). On cross-motions for summary judgment, the court should consider each movant's motion separately and must "construe all inferences in favor of the party against whom the motion under consideration is made." Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998). Because this case is in federal court based on ...

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