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Royal Glen Condo. Ass'n v. S.T. Neswold & Assocs., Inc.

Court of Appeals of Illinois, Second District

September 2, 2014

ROYAL GLEN CONDOMINIUM ASSOCIATION, Plaintiff-Appellee,
v.
S.T. NESWOLD AND ASSOCIATES, INC., Defendant-Appellant

Appeal from the Circuit Court of Du Page County. No. 11-L-818. Honorable Patrick J. Leston, Judge, Presiding.

SYLLABUS

The appellate court, in response to a question certified by the trial court pursuant to Supreme Court Rule 308, stated that section 12 of the Condominium Property Act does not create a duty on the part of an insurance producer giving rise to a statutory cause of action against such an insurance producer that issues, delivers or renews an insurance policy to a condominium association that provides insurance coverage in a total amount less than the full insurable replacement cost of the insured property, less deductibles, but including coverage for the increased costs of construction due to building code requirements, at the time the insurance was purchased and at each renewal date.

Brian C. Rocca, Michael A. Barry, and Scott L. Howie, all of Pretzel & Stouffer, Chtrd., of Chicago, for appellant.

Nicholas R. Mitchell, of Kovitz Shifrin Nesbit, P.C., of Buffalo Grove, for appellee.

PRESIDING JUSTICE BURKE delivered the judgment of the court, with opinion. Justices Zenoff and Schostok concurred in the judgment and opinion.

OPINION

BURKE, PRESIDING JUSTICE.

Page 138

[¶1] This interlocutory appeal presents three certified questions regarding a suit by plaintiff, the Royal Glen Condominium Association, against defendant, S.T. Neswold & Associates, Inc., pursuant to section 12 of the Condominium Property Act (Condo Act) (765 ILCS 605/12 (West 2010)). We answer the first certified question in the negative. Specifically, we find that section 12 does not impose on an insurance producer a duty giving rise to a statutory cause of action against that insurance producer. Our answer to the first certified question is dispositive of the remaining two certified questions.

[¶2] I. BACKGROUND

[¶3] The following facts are alleged in the pleadings. The Royal Glen Condominiums are comprised of two separate buildings located in the Village of Glen Ellyn, Illinois (Village). The buildings were constructed around 1978 and did not include sprinkler systems, as they were not required by the Village at the time. Effective as of March 1, 2004, the Village code required installation of NFPA-approved sprinkler systems to remodeled areas only.

[¶4] Defendant has served as the insurance broker for plaintiff since approximately 1999. On June 11, 2009, based on defendant's recommendation, plaintiff purchased from Travelers a " Condominium Pac Plus" insurance policy, which includes coverage for the complete replacement cost of the insured buildings. Plaintiff also purchased an " Ordinance or Law Coverage" endorsement, with a $1 million limit. Defendant served as the insurance producer for this policy.[1]

[¶5] On October 20, 2009, a fire destroyed substantial portions of one of the condominium buildings. The Village determined that its restoration must include installation

Page 139

of a sprinkler system, as required by the code.

[¶6] Plaintiff undertook a bidding process for the renovation, including the sprinkler system, the total cost of which was estimated to be $1.3 million. Plaintiff advised defendant of the fire and sought coverage under the insurance policy for the cost of the renovation.

[¶7] Travelers accepted coverage of the renovation cost but only for a total of $1 million, citing the $1 million limit in the endorsement as the basis for denying full coverage.

[¶8] Based on the $1.3 million estimated cost of the renovation, plaintiff alleges that it was left $300,000 short of the necessary funds. Plaintiff alleges that, at the time of purchase, it did not know that the policy, when coupled with the endorsement, would not serve to provide the " full insurable replacement cost of the insured property, less deductibles, but including coverage for the increased costs of construction due to building code requirements, at the time the insurance [was] purchased and at each renewal date," as required by section 12(a)(1) of the Condo Act. 765 ILCS 605/12(a)(1) (West 2010).

[¶9] Plaintiff alleges that, even though the Village code required installation of sprinkler systems to remodeled areas as of March 1, 2004, well before it purchased the insurance policy, the full insurable replacement cost of the insured property, including the increased costs of construction based on the code as it existed when plaintiff purchased the policy, exceeded the coverage by $300,000.

[¶10] Plaintiff sued defendant. Count I of the complaint alleged failure to procure sufficient insurance coverage for the " full insurable replacement cost of the insured property *** including coverage for the increased costs of construction due to building code requirements," as mandated by section 12(a)(1). Count II alleged that, pursuant to section 2-2201(a) of the Insurance Placement Liability Act (Insurance Placement Act) (735 ILCS 5/2-2201(a) (West 2010)), defendant failed to exercise ordinary care and skill in procuring a Condo Act-compliant insurance policy and in assessing the sufficiency of the ...


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