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Medina v. Public Storage, Inc.

United States District Court, N.D. Illinois, Eastern Division

April 30, 2014

PUBLIC STORAGE, INC., et al., Defendants.


JOHN J. THARP, Jr., District Judge.

This putative class action challenges certain practices related to the insurance of goods stored in self-storage units rented from defendant Public Storage.[1] The plaintiffs contend that they were wrongly denied insurance coverage for items they say were stolen from the storage unit leased by plaintiff Gross at a Public Storage facility in Chicago. They contend that Public Storage not only breached its rental agreement, but also engaged in unfair business practices by concealing its role as the reinsurer under the policies offered to Public Storage customers, which are underwritten by defendant New Hampshire Insurance Company (NHIC) and obtained through defendant Willis Insurance Services. On behalf of a putative class, the plaintiffs seek compensatory and punitive damages as well as declaratory and injunctive relief.


On March 13, 2010, Plaintiff Gross entered into a "Lease/Rental Agreement" with the Public Storage facility located at 4430 N. Clark Street in Chicago. Her husband (then boyfriend) Daniel Medina, also a plaintiff, was not present when Gross rented the storage unit, but Gross listed him on the rental agreement as an "alternate contact" and an "authorized access person." Gross also executed the Insurance Election Addendum to Rental Agreement, whereby she purchased $2000 worth of insurance for the property stored in her unit. The policy is offered by Willis Insurance Services and is underwritten by New Hampshire Insurance Company; however, as part of the Public Storage Insurance Program, Public Storage makes the insurance available to its customers at the time of the rental, and it collects the premiums. Tenants who elect the insurance receive an Illinois Certificate of Insurance that evidences their coverage under the Master Policy; however, Gross alleges that she was not given a Certificate of Insurance.

The insurance policy provides coverage for burglary, which it defines and limits as follows:

The term Burglary means the act of stealing property by forcible entry into the storage space described in the Rental Agreement, and must be evidenced by visible signs of forced entry. However, this coverage only applies when such storage space is securely locked at the time of the forcible entry, and does not apply to the lien enforcement procedures by the Owner. A missing lock, or the presence of lock different than the lock placed by you on the storage space, is not sufficient, standing alone, to establish forcible entry.

The insurance contract also contains a so-called "conformity clause" set forth on the Certificate of Insurance, which states: "If the terms of this Certificate are in conflict with the laws of the state wherein the Certificate is issued, they are hereby amended to conform to such statutes."

Public Storage earns revenue through the Public Storage Insurance Program; it turned a profit of nearly $58 million from the program in 2011. PS Insurance Company-Hawaii LTD acts as a reinsurer of the Master Policy pursuant to a contract with NHIC. However, this fact is not disclosed to consumers who purchase insurance through the program, who are offered coverage "available through Willis Insurance Services of California, Inc., " the insurance broker. Claims are handled by a third-party administrator hired by Public Storage. The plaintiffs have not contested the evidence that Public Storage has no input into whether claims are granted or denied.

On April 27, 2011, when Gross and Medina visited the storage unit for the first time after Gross rented it more than a year earlier, they learned that the lock had been cut on October 20, 2010, and replaced (at some later, but unknown, time) with a Public Storage lock. They were informed that this action had been taken in response to delinquencies in the account. Gross and Medina allege that they did not receive any notice that Public Storage was taking that action. They were given access to the storage unit, at which time they discovered that "many items" were missing and "their belongings were not as they had left them." When the plaintiffs filed a claim for $8000 under the insurance policy, it was denied due the absence of "forcible entry." The plaintiffs also directly appealed to Public Storage for compensation, but they were denied based upon Paragraphs 7 and 8 of the Rental Agreement, which provide:

7. Owner and Owner's agents, affiliates, authorized representatives, and employees ("Owner's Agents") will not be responsible for, and Occupant hereby releases Owner and Owner's Agents from any responsibility for, any loss, liability, claim, expense or damage to property that could have been insured (including without limitation any Loss arising from the active or passive acts, omission or negligence of Owner or Owner's Agents) (the "Released Claims"). Occupant waives any rights of recovery against Owner or Owner's Agents for the Released Claims, and Occupant expressly agrees that the carrier of any insurance obtained by Occupant shall not be subrogated to any claim of Occupant against Owner or Owner's Agents.
8. Owners and Owner's Agents will have no responsibility to Occupant or to any other person for any loss, liability, claim, expense, damage to property or injury to persons ("Loss") from any cause, including without limitations, Owner's and Owner's Agents active or passive acts, omissions, negligence or conversion, unless the Loss is directly caused by Owner's fraud, willful injury or willful violation of law. Occupant shall indemnify and hold Owner and Owner's Agents harmless from any loss incurred by Owner and Owner's Agents in any way arising out of Occupant's use of the Premises or the Property including, but not limited to, claims of injury or loss by Occupant's visitors or invitees. Occupant agrees that Owner's and Owner's Agents' total responsibility for any Loss from any cause whatsoever will not exceed a total of $5, 000.

The Rental Agreement also contains a limited liability provision, Paragraph 18, which provides:

Owner hereby disclaims any implied or express warranties, guarantees or representations of the nature, condition, safety or security of the Premises and the Property and Occupant hereby acknowledges, as provided in paragraph 1 above, that Occupant has inspected the Premises and the Property and hereby acknowledges and agrees that Owner does not represent or guarantee the safety or security of the Premises or the Property or any personal property stored therein, and this Lease/Rental Agreement does not create any contractual obligation for the Owner to increase or maintain such safety or security.

Having failed to obtain recourse under the insurance policy or through Public Storage directly, the plaintiffs, Gross and Medina, filed this class action. The First Amended Complaint, which governs here, seeks a declaratory judgment voiding Paragraphs 7, 8, and 18 of the Rental Agreement as unlawful and contrary to public policy. The complaint alleges negligence by Public Storage in failing to adequately secure its facilities. It also claims that all defendants violated the Illinois Consumer Fraud Act by failing to disclose Public Storage's true role in the insurance program and its financial incentive to deny claims. Finally, the complaint alleges two breaches of contract, for which both damages and declaratory relief are sought: the first, that denials based on "forcible entry" are in breach of the insurance contract because that requirement was written out of the policy by operation of the conformity clause; and the second, that even if the forcible entry requirement applies, the plaintiffs' claims were wrongly denied because they met the requirement.

After class discovery, the plaintiffs moved for class certification. The defendants, in the meantime, moved to partially dismiss the First Amended Complaint. Both motions have been fully briefed. For the reasons that follow, the defendant's motion is granted in part and denied in part, and the motion for class certification is denied.

I. Motion to Dismiss

When considering a motion to dismiss under either Rule 12(b)(1) or Rule 12(b)(6), the Court accepts as true all well-pleaded facts and draws all reasonable inferences in favor of the plaintiff. E.g., Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013) (Rule 12(b)(6) motion); Scanlan v. Eisenberg, 669 F.3d 838, 841 (7th Cir. 2012) (Rule 12(b)(1) motion to dismiss for lack of standing). Exhibits attached to a complaint become part of the pleadings, see Fed.R.Civ.P. 10(c), and can be considered on a motion to dismiss. Bogie v. Rosenberg, 705 F.3d 603, 609 (7th Cir. 2013).

To survive a motion to dismiss under Rule 12(b)(6), the complaint must "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Statements of law or unsupported conclusory allegations need not be taken at face value. Yeftich, 722 F.3d at 915.

A. Plaintiff Medina's Standing

The defendants first seek to dismiss all of Plaintiff Medina's claims for lack of standing. Medina, by his own admission, was not a party to the Rental Agreement or to the insurance policy; Ms. Gross rented the ...

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