Court of Appeals of Illinois, First District, Sixth Division
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Appeal from the Circuit Court of Cook County. No. 11 L 003598. Honorable Raymond Mitchell, Judge Presiding.
For APPELLANT(S): Peter E. Kanaris, Jefferson D. Patten, Christopher Henning, Fisher Kanaris, P.C., Chicago, IL.
For APPELLEES(S): Michael R. Collins, John P. Collins, Collins & Collins, Chicago, IL.
PRESIDING JUSTICE HOFFMAN delivered the judgment of the court, with opinion. Justices Hall and Rochford concurred in the judgment and opinion.
[¶1] This is an appeal from orders of the circuit court awarding a judgment in favor of Old Second National Bank (Old Second or " the bank" ) in the sum of $816,833.13 plus prejudgment interest against Peerless Indemnity Insurance Co. (Peerless). Peerless argues that the circuit court erred in granting summary judgment in favor of Old Second on its claim for breach of contract arising from its denial of coverage under a policy of insurance it issued. Peerless contends that the court misinterpreted the provisions of the insurance policy to require coverage of Old Second under the policy's mortgage clause when the loss at issue was not covered in the first instance. Alternatively, Peerless argues that the circuit court abused its discretion in awarding interest to Old Second on its judgment. For the reasons that follow, we affirm.
[¶2] The underlying facts of this case are not in dispute. The Swissland Packing Company (Swissland), a slaughterhouse and meat-packing business, formerly occupied a 35,500 square foot building in Askum, Illinois (the building). In 2005, Swissland sold the business, and all operations at the building ceased. In late 2007, ownership of the building was acquired by Brothers Future Holdings, LLC[*] (Brothers), a limited liability company owned by Arthur and David Follenweider, with the intention that a portion of the building would be used in a new custom contract cooking venture to be conducted by Custom Gourmet Concepts, LLC. (Gourmet Concepts). However, in 2008, David died unexpectedly, and no business operations were ever established or conducted in the building. The building was vacant from 2005 throughout the proceedings in this case.
[¶3] In August of 2007, the existing mortgage covering the indebtedness for the building was transferred to Old Second. In June of 2008, Brothers applied for insurance on the building through Assurance Agency, Ltd. (Assurance), its insurance broker. Assurance had a relationship with Peerless whereby it could solicit and process applications for coverage with Peerless and could bind Peerless to certain types of insurance agreements. In this case, Brothers' insurance application was processed and submitted electronically by Wendy Coleman, an employee of Assurance, and contained several erroneous statements regarding the building. Specifically, the application sought coverage for the building, premises and office space, but incorrectly characterized the building as 100% owner-occupied and comprised of only 3990 square feet rather than nearly 35,500. Based upon this application, a policy was issued by Peerless effective June 17, 2008, through June 17, 2009 (initial policy). Brothers had no role in the completion of the electronic application and was never provided with a copy of the application or the initial policy. Old Second was not designated as a mortgage holder on the initial policy.
[¶4] In June of 2009, the Peerless policy was automatically renewed for the period of June 17, 2009, through June 17, 2010 (renewal policy). In July 2009, Old Second's collateral department contacted Assurance
and requested that Old Second be added to the policy as a mortgage holder. However, Old Second was never asked to complete any type of insurance application or renewal form, nor did Old Second ever receive a copy of the renewal policy. Rather, to memorialize the bank's addition to the policy, Assurance sent Old Second a document entitled " Evidence of Property Insurance," which stated that the identified insurance " has been issued, is in force, and conveys all the rights and privileges afforded under the policy," *** " and is subject to the premiums, forms and rules in effect for each policy period." The document further provided that Old Second would be given 30 days' notice in the event of the policy's termination and would be informed of any changes to the policy that would affect its interest.
[¶5] Brothers and Gourmet Concepts maintained that they had expressly informed Assurance and its employees that Brothers was required, as a condition of its existing mortgage, to maintain insurance on the building to cover property damage. It was undisputed that neither Brothers nor Old Second ever saw or approved the application for coverage submitted by Assurance on their behalf. However, there was testimony by Robert Kennedy, a senior vice president at Old Second and the loan officer for the Brothers's account, that he had inspected the building in August of 2007, and he was aware that it was vacant and that no business was being conducted there.
[¶6] Similarly, Peerless maintained that it was never notified that the building was vacant and had remained vacant since 2005. According to the testimony of Julie Brown, the primary underwriter for Peerless, she had never inspected the property prior to preparing the initial policy because she had relied upon Coleman's representation in the application that the building was 100% owner-occupied.
[¶7] With regard to coverage for a physical loss of, or damage to, property, both the initial and renewal policies issued by Peerless provided as follows:
" E. Property Loss Conditions.
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a. Description of Terms.
(1) As used in this Vacancy Condition, the term building and the term vacant have the meanings set forth in Paragraphs (a) and (b) below:
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(b) When this policy is issued to the owner or general lessee of a building, building means the entire building. Such building is vacant unless at least 31% of its total square footage is:
(i) Rented to a lessee or sub-lessee and used by the lessee or sublessee to conduct its customary operations; and/or
(ii) Used by the building owner to conduct customary operations.
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b. Vacancy Provisions
If the building where loss or damage occurs has been vacant for more than 60 consecutive days before ...