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Sagar Megh Corporation v. United National Insurance Co.

United States District Court, Seventh Circuit

November 6, 2013

SAGAR MEGH CORPORATION, Plaintiff,
v.
UNITED NATIONAL INSURANCE CO., Defendant. NATIONAL REPUBLIC BANK OF CHICAGO, Intervening Plaintiff.

MEMORANDUM OPINION AND ORDER

JOHN W. DARRAH, District Judge.

Plaintiff, Sagar Megh Corporation, filed a Complaint against Defendant, United National Insurance Co. ("United"), on June 21, 2012, asserting United breached its obligations to Sagar Megh under an insurance policy it issued and that United acted in bad faith. Sagar Megh moves for partial summary judgment, seeking: summary judgment on its breach of contract claim and awarding Sagar Megh $1, 740, 042.67, plus pre-judgment interest accruing on and after July 6, 2011, arising from the coverage under the policy and further reserving all rights of Sagar Megh to pursue its claims relating to Count II of the Complaint, which seeks declaratory relief and Count III, which asserts bad faith on the part of United. United filed a cross-motion for summary judgment, seeking judgment entered on its behalf for all three claims asserted in the Complaint, on the basis that Sagar Megh failed to comply with the protective safeguard condition set out in the Insurance Policy. These motions have been fully briefed.

BACKGROUND

Local Rule 56.1(a)(3) requires a party moving for summary judgment to provide "a statement of material facts as to which the moving party contends there is no genuine issue...." Local Rule 56.1(b)(3) requires the nonmoving party to admit or deny each factual statement proffered by the moving party and concisely designate any material facts that establish a genuine dispute for trial. See Schrott v. Bristol-Myers Squibb Co., 403 F.3d 940, 944 (7th Cir. 2005). A litigant's failure to dispute the facts set forth in an opponent's statement in the manner dictated by Local Rule 56.1 results in those facts' being deemed admitted for purposes of summary judgment. Smith v. Lamz, 321 F.3d 680, 683 (7th Cir. 2003). Local Rule 56.1(b)(3)(C) further permits the non-movant to submit additional statements of material facts that "require the denial of summary judgment...."

To the extent that a response to a statement of material fact provides only extraneous or argumentative information, this response will not constitute a proper denial of the fact, and the fact is admitted. See Graziano v. Village of Oak Park, 401 F.Supp.2d 918, 937 (N.D. Ill. 2005). Similarly, to the extent that a statement of fact contains a legal conclusion or otherwise unsupported statement, including a fact which relies upon inadmissible hearsay, such a fact is disregarded. Eisenstadt v. Centel Corp., 113 F.3d 738, 742 (7th Cir. 1997).

Here, United's cross-motion fails to comply with the requirements of Local Rule 56.1, which provides that a statement of material facts be filed in addition to the supporting memorandum of law. Instead, United simply included eight statements of "undisputed material facts" in the middle of its supporting memorandum of law with its cross-motion for summary judgment. The statement of facts required in Local Rule 56.1 has been described as such:

It is a document separate from the supporting memorandum; it is neither a supplement to nor a surrogate for the memo. Rule 56.1 statements should contain neither a narrative section nor a recitation of the summary judgment standards.... Likewise, 56.1 statements do not abrogate a party's obligation to recite its version of the facts in its supporting memorandum; it is inappropriate in one's memo to simply refer the Court to the 56.1 statement. The purpose of the 56.1 statement is to identify for the Court the evidence supporting a party's factual assertions in an organized manner: it is not intended as a forum for factual or legal argument.

Malec v. Sanford, 191 F.R.D. 581, 585 (N.D. Ill. 2000) (emphasis added). "Courts in this district have broad discretion to enforce the rule, and the Seventh Circuit regularly upholds strict enforcement of Local Rule 56.1." Mach Mold v. Clover Associates, Inc., 383 F.Supp.2d 1015, 1025 (N.D. Ill. 2005) (citation omitted). Accordingly, these purportedly undisputed facts submitted in United's brief in support of its cross-motion for summary judgment is stricken. United did, however, submit a separate set of undisputed material facts in conjunction with its cross motion, and Sagar Megh had the opportunity to respond to those facts; the facts asserted properly under the Local Rules will be considered.

The following facts[1] are taken from the parties' statements of undisputed material facts submitted in accordance with Local Rule 56.1. Sagar Megh is an Illinois corporation; United is a Pennsylvania insurance company licensed to do business in Illinois. (Pl.'s SOF ¶¶ 1-2.) Personal jurisdiction is proper as Sagar Megh is domiciled in Illinois and United regularly conducts business in Illinois, and venue is appropriate pursuant to 28 U.S.C. § 1391(b)(2). (Pl.'s SOF ¶¶ 4, 6.) Subject matter jurisdiction exists on the basis of diversity. 28 U.S.C. § 1332.

Sagar Megh and the Lake Motel

Sagar Megh was created by Dipak Patel and his father, Ramanlal Patel, in 2003. (Def.'s SOF ¶ 1.) Sagar Megh purchased a motel building located at 9101 South Stony Island Avenue in Chicago, Illinois, and operated the Lake Motel at that property. (Def.'s SOF ¶ 1; Pl.'s SOF ¶ 7.) Sagar Megh was run as a family business, with Dipak and his wife, Alka, managing the day-to-day business of the Lake Motel and Ramanlal being involved in occasional activities. (Def.'s SOF ¶ 2.) At the time of the event in question, Dipak and Alka resided at the Lake Motel. (Def.'s SOF ¶ 16.)

To purchase the property, Sagar Megh obtained a loan from the National Republic Bank of Chicago (the "NRB"), a loan from the Small Business Administration, and a loan from TCB Investments, with all three creditors taking mortgages on the property. (Def.'s SOF ¶ 6.) When Sagar Megh applied for the NRB loan, Dipak indicated he had a net worth of $1, 069, 188.00 and an annual income of $51, 939.00; he had a credit bureau rating of "fair." (Def.'S SOF ¶ 11.) When Sagar Megh applied for a loan modification in 2010, Dipak indicated his net worth was $34, 408.00. (Def.'s SOF ¶ 11.) Beginning in 2008 or 2009, Dipak stopped receiving any payroll compensation from Sagar Megh. (Def.'s SOF ¶ 39(a).)

In 2004, Sagar Megh obtained another loan with another mortgage from the NRB, to perform renovations to the property. ( Id. ) Some of these loans were secured with personal guaranties by the Patel family. (Def.'s SOF ¶ 9.) Prior to the fire in March 2011, Sagar Megh had large outstanding loan balances, declining revenue, and increasing late loan payments. (Def.'s SOF ¶ 7.) In 2009, Sagar Megh was sued by the City of Chicago for violating the city's municipal building code. (Def.'s SOF ¶ 8.)

On or about September 30, 2010, United issued a commercial property insurance policy (the "Policy") to Sagar Megh. (Pl.'s SOF ¶ 11.) Subject to the Policy's provisions, fire is a covered loss under the Policy, including fire damages caused to the Lake Motel as the result of an intentional fire. (Pl's SOF ¶¶ 13-14.) A Policy endorsement provides that "as a condition of this insurance, [Sagar Megh is] required to maintain" "functional smoke detectors" in "all buildings, occupancies, or units." (Def.'s SOF ¶ 3; Policy at 52.) The policy further provides that United would not pay Sagar Megh "for loss or damage caused by or resulting from fire, if, prior to the fire, you: (1) Knew of any suspension or impairment in any protective safeguard listed in the Schedule above ...


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