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Centrust Bank, N.A., A National Banking Association, and P.G.R. v. Montpelier Us Insurance Company

May 1, 2013

CENTRUST BANK, N.A., A NATIONAL BANKING ASSOCIATION, AND P.G.R. CORPORATION, AN ILLINOIS CORPORATION, PLAINTIFFS,
v.
MONTPELIER US INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER

Plaintiffs CenTrust Bank, N.A. ("CenTrust") and P.G.R. Corporation ("P.G.R.") seek a declaratory judgment to cover losses after a fire to a commercial property insured by defendant Montpelier US Insurance Company ("Montpelier"). Montpelier moves to dismiss plaintiffs request for failure to state a claim pursuant to Fed. R. Civ. 12(b)(6). For the following reasons, Montpelier's motion to dismiss is granted.

Background

On August 1, 2007, CenTrust made a loan to P.G.R. in the amount of $3,030,000.00. The loan was secured by a mortgage covering commercial property located in Maywood, Illinois ("Maywood Property"). On May 14, 2010, Montpelier issued a Commercial Insurance Policy covering the Maywood Property from May 14, 2010 to May 14, 2011. On May 14, 2011, Montpelier renewed its coverage of the Maywood Property from May 14, 2011 to May 14, 2012. Specifically, the Policy contained an appraisal clause which provided that:

If [Montpelier] and [P.G.R.] disagree on the value or the property of the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire equally.

If there is an appraisal, [Montpelier] will still retain [its] right to deny the claim.

(Compl. at ¶23).

The policy also provides that no legal action may be brought against Montpelier unless there has been full compliance with the terms of the insurance coverage. On August 10, 2011 the Maywood Property was substantially damaged by a fire and P.G.R. submitted a claim for damages under the policy. Plaintiffs CenTrust and P.G.R. allege that the actual damages as a result of the fire total $1,201,179.31. On October 12, 2012, Montpelier attempted to invoke the appraisal clause of the insurance policy. Plaintiffs CenTrust and P.G.R. argue that because Montpelier reserves the right to deny their claims, there is no mutuality of obligations and the appraisal clause is illusory. Accordingly, the plaintiffs seek a declaratory judgment providing that its insurance claims are covered by the insurance policies, that the parties' appraisal clause is unenforceable, and that Montpelier has an obligation to cover losses under the policy in the amount of $1,201,179.31. Plaintiffs also seek reasonable attorney's fees. Defendant Montpelier moves to dismiss the plaintiffs action. Montpelier argues that the appraisal clause is valid and by the terms of the parties' agreement, the plaintiffs must submit to an appraisal prior to bringing any action against Montpelier. For the following reasons, Montpelier's motion to dismiss is granted and plaintiffs' motion for declaratory judgment is denied in its entirety.

Legal Standard

Defendant Montpelier moves to dismiss the plaintiffs' complaint for declaratory judgment pursuant to Fed. R. Civ. P. 12(b)(6) ("Rule 12(b)(6)") for failure to state a claim upon which relief can be granted. In order to survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual allegations to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662 (2009). This standard is met when the plaintiff pleads factual content that "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. A motion to dismiss is decided solely on the face of the complaint and any attachments that accompanied its filing. Miller v. Herman, 600 F.3d 726, 733 (7th Cir. 2010). Accordingly, the court must accept all well-pleaded factual allegations in the complaint as true, and draw all reasonable inferences in the plaintiff's favor. Erickson v. Pardus, 551 U.S. 89, 94 (2007).

Discussion

Illinois courts have held that "an appraisal clause is analogous to an arbitration clause and is enforceable in a court of law in the same manner as an arbitration clause." Travis v. Am. Mfrs. Mut. Ins. Co., 335 Ill. App. 3d 1171, 1174 (Ill. App. Ct. 5th Dist. 2002). Appraisal clauses are preferred over litigation and after a court determines that an appraisal clause exists, the court must next determine if the parties' dispute is covered by the particular clause. Hobbs v. State Farm Mut. Auto. Ins. Co., 2002 Ill. App. LEXIS 166 (Ill. App. Ct. 5th Dist. Mar. 8, 2002). Here, the plaintiffs do not dispute that they entered into the insurance contracts or that the insurance policy agreement and appraisal clause exist. The ...


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