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70th Court Condo Association v. Ohio Security Insurance Co.

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

November 7, 2016

70th Court Condo Association, Plaintiff,
Ohio Security Insurance Company, and DONAN ENGINEERING CO., INC., Defendants.


          Manish S. Shah United States District Judge

         Plaintiff 70th Court Condo Association had an insurance policy with defendant Ohio Security Insurance Company for a building the Condo Association owned in Orland Park, Illinois. Severe wind and hail storms significantly damaged the building, which prompted the Condo Association to file an insurance claim with Ohio Security. After an appraisal determined the value of the damage to the building, Ohio Security paid the Condo Association per the insurance policy. The Condo Association claims the appraisal was rigged and not binding, but Ohio Security has refused to reopen the claim or to pay additional funds to the Condo Association. As a result, the Condo Association brings this action against Ohio Security for breach of contract and for statutory damages under Section 155 of the Illinois Insurance Code. 215 ILCS 5/155 (2004). Ohio Security moves to dismiss those two claims. For the following reasons, Ohio Security's motion is granted in part and denied in part.

         I. Legal Standards

         A complaint may be dismissed if it fails to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6); see Avila v. CitiMortgage, Inc., 801 F.3d 777, 781 (7th Cir. 2015). Federal notice pleading standards require a complaint to "state a claim to relief that is plausible on its face." McReynolds v. Merrill Lynch & Co., 694 F.3d 873, 885 (7th Cir. 2012) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Courts are confined to the pleadings, but they may also consider documents attached to a motion to dismiss if those documents are referred to in the complaint and are central to the plaintiffs claim.[1] Yassan v. J.P. Morgan Chase & Co., 708 F.3d 963, 975 (7th Cir. 2013) (quoting Wright v. Associated Ins. Companies, Inc., 29 F.3d 1244, 1248 (7th Cir. 1994)). In reviewing the pleadings and any related documents, courts must construe all factual allegations as true and draw all reasonable inferences in the plaintiffs favor. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011). Legal conclusions and conclusory allegations do not receive that same treatment. Virnich, 664 F.3d at 212.

         Subject-matter jurisdiction exists because there is complete diversity between the parties-the Condo Association's members are citizens of Illinois, Ohio Security is a citizen of New Hampshire and Massachusetts, Donan Engineering is a citizen of Indiana and Kentucky-and the amount in controversy exceeds $75, 000. 28 U.S.C. § 1332. The parties agree that Illinois law applies to their dispute. Given that the alleged injury occurred in Illinois and that the Condo Association filed a claim under the Illinois Insurance Code, Illinois law will control.

         II. Background

         Severe wind and hail storms damaged the Condo Association's building on May 20, 2014. [1-3] ¶ 8.[2] The building was a "single story, steel framed structure over a concrete slab on grade, " [1-3] ¶ 6; its exterior walls were covered with concrete masonry units and the roof was "clad with a modified bitumen roof membrane." [1-3] ¶ 7. The Condo Association filed a claim for damage in excess of $50, 000 with Ohio Security, with which the Condo Association had an active insurance policy. [1-3] ¶¶ 4-5.

         The Condo Association's insurance policy included an appraisal clause:

If we and you disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal, we will still retain our right to deny the claim.

[11-1] at 136. Pursuant to this policy, the parties participated in an appraisal. [11-1] at 8-9, 11. Ohio Security retained Donan Engineering as its appraiser to determine the cause of damage to the building. [1-3] ¶ 10. Donan Engineering observed dents in the furnace flue caps as well as on doors and downspouts; six fresh fractures on the building's roof; and cracked skylights. [1-3] ¶¶ 13-15. Donan Engineering did not take any core samples from the roof and only relied on its observations to conclude that wind did not damage the roof and that "[l]ong-term, ongoing age-related deterioration [was] the primary distress to the building's roof." [1-3] ¶¶ 12, 16-17.

         The appraisal award listed a "Replacement Cost" of $14, 065.16 and an "Actual Cash Value" of $10, 648.48. [11-1] at 11. On October 13, 2015, Ohio Security sent the Condo Association a check for the "Actual Cash Value, " less the amount Ohio Security had previously paid the Condo Association. [11-1] at 13.[3] More than six months later, the Condo Association engaged a licensed public adjusting company to perform an investigation of the building's damage. [1-3] ¶¶ 18-19. This company took core samples from the roof and concluded that hail caused extensive damage to the roof. [1-3] ¶¶ 20-21. Next, this company contacted Ohio Security to share its video and photographic evidence of additional property damage to the building as cause for reopening the Condo Association's claim. [1-3] ¶¶ 21-23. Ohio Security declined the company's offer to review the evidence because the Condo Association's claim was closed. [1-3] ¶ 23. Ohio Security also declined to reopen the Condo ...

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