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Temperature Service Co. Inc. v. Acuity, a Mutual Insurance Co.

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

October 14, 2016

Temperature Service Company, Inc., and SSV Partners, LLC Plaintiffs,
Acuity, a Mutual Insurance Company Defendant.


          Thomas M. Durkin, Judge

         Defendant Acuity, a mutual insurance company, moves this Court for entry of summary judgment in its favor. R. 22. Though discovery in the matter is not yet complete, R. 16, Acuity argues based on a single response to interrogatories that the declaratory judgment and breach of contract claims brought by Plaintiffs Temperature Service Company, Inc. and SSV Partners, LLC fail as a matter of law. For the reasons that follow, Acuity's motion is denied.


         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The Court considers the entire evidentiary record and must view all of the evidence and draw all reasonable inferences from that evidence in the light most favorable to the nonmovant. Ball v. Kotter, 723 F.3d 813, 821 (7th Cir. 2013). To defeat summary judgment, a nonmovant must produce more than “a mere scintilla of evidence” and come forward with “specific facts showing that there is a genuine issue for trial.” Harris N.A. v. Hershey, 711 F.3d 794, 798 (7th Cir. 2013). Ultimately, summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).


         The Plaintiffs' commercial property[1] in Elk Grove, Illinois was insured by Acuity from January 1, 2013 to January 1, 2014. R. 29 (Pls.' R. 56.1 Response) ¶ 4. The commercial building on the property was constructed in or around 1980. R. 29 ¶ 10. In August 2013, Plaintiffs excavated around the building for the construction of a storage addition. Id. ¶ 7. During the excavation process, Plaintiffs discovered that the soil around and under the insured property contained “urban backfill”- construction debris, asphalt, concrete and other man-made materials that cause “differential settlement” of the earth. Id. ¶ 8. In October 2013, Plaintiffs retained a consultant to perform a subsurface soil investigation of the premises. R. 31 (Def. R. 56.1 Reply) ¶ 1. The consultant documented cracks in the building foundation, steps and drywall, as well as damage to the window frames and doors. Id. ¶ 2. A third-party contractor then conducted an engineering and geotechnical investigation of the premises, which revealed, among other damage, cracks in the exterior masonry. Id. ¶¶ 3, 5. Based on the work of the consultant and independent contractor, as well as on their own observations of the deterioration of the property, Plaintiffs contend that the urban backfill caused and continues to cause damage to the insured premises. Id. ¶ 9.

         Plaintiff submitted a proof of loss claim to Acuity seeking coverage for stabilization measures, structural upgrades, and other property repairs. Id. ¶ 11. Acuity hired its own expert to investigate the insured premises in connection with Plaintiffs' claim. Id. ¶ 12. Following the investigation, Acuity denied coverage pursuant to certain exclusions and limitations[2] in the insurance policy. R. 1 (Complaint) and R. 11 (Answer) ¶ 8. This lawsuit followed.

         During discovery, Acuity issued the following interrogatory to Plaintiffs: “State the date on which the direct physical loss you claim is covered pursuant to the Acuity policy first occurred.” R. 29 ¶ 11. Plaintiffs responded:

[Plaintiffs] object[ ] to this interrogatory on the grounds that the term “first occurred” is vague and overly broad. Without waiving said objection, due to the nature, complexity, and circumstances surrounding the type of direct physical Loss, [Plaintiffs] at this time cannot state when the direct physical loss “first occurred”, but the direct physical loss is ongoing and occurred after January 1, 2013, the inception date of the Acuity policy.

Id. ¶ 12. “Acuity admits that the damage to the building continues to progress.” R. 31 ¶ 10.

         The Acuity policy insures Plaintiffs against “loss or damage commencing [d]uring the policy period . . . [w]ithin the . . . United States of America.” R. 29 ¶ 5. The parties dispute the meaning of the term “commencing” within this coverage provision. According to Acuity, if the term is construed to refer to the single moment in time when all of the alleged damage to the insured property began or originated, Plaintiffs' claims fail as matter of law because Plaintiffs have not, and likely cannot, establish that the date falls within the period of coverage. The Court examines that position below.


         The interpretation of an insurance policy is a question of law that is properly decided by way of summary judgment. BASF AG v. Great Am. Assur. Co., 522 F.3d 813, 818-19 (7th Cir. 2008) (quoting authority). “A court's primary objective in construing the language of an insurance policy is to ascertain and give effect to the intentions of the parties as expressed by the language of the policy.” Id. at 819 (quoting authority). “In performing that task, the court must construe the policy as a whole, taking into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract.” Id. (quoting authority). Where the terms of an insurance policy are ambiguous, they will be strictly construed against the drafter. Id. Ambiguity exists where a provision is susceptible of more than one interpretation and “reasonably intelligent persons would honestly differ as to its meaning.” Sentinel Ins. Co., Ltd. v. Cogan, 2016 WL 4270213, at *3 (N.D. Ill. Aug. 15, 2016) (citing Nat'l Ben Franklin Ins. Co. of Ill. v. Calumet Testing Servs., Inc., 191 F.3d 456, 1999 WL 594926 at *4 (7th Cir. May 11, 1999)).

         Acuity's argument is simple-because Plaintiffs concede in their interrogatory response that they do not now (and may not ever) know when, precisely, the damage to the insured property “commenced” their claims fail as a matter of law. R. 23 at 4-6. In support of this argument, Acuity relies primarily on St. Michael's Orthodox Catholic Church v. Preferred Risk Mutual InsuranceCompany,496 N.E.2d 1176 (Ill.App.Ct. 1986), a widely-cited Illinois appellate court opinion that teaches that “the existence of coverage is an essential element of the insured's case, and the insured has the burden of proving that his loss falls within the terms of his policy.” Id. at 1178. St. Michael's involved flood damage sustained by a church over several years, including the year in which the plaintiff was insured by the defendant. The policy at issue covered only property damage “occurring” during the policy period. The ...

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