United States District Court, N.D. Illinois, Eastern Division
Jerome T. Casserly, Plaintiff,
American Security Insurance Company, Defendant.
MEMORANDUM OPINION & ORDER
RONALD A. GUZMÁN United States District Judge.
Court denies Plaintiff's motion to enforce settlement
. Intervenor Gregg Rzepczynski & Associates'
motion for attorney fees  is denied as moot. Citizens
Bank's motion for leave to file cross-claim  is
granted. A status hearing is set for May 3, 2017 at 9:30 a.m.
to set a trial date and resolve any pending issues.
a breach of contract case related to a fire at plaintiff
Jerome T. Casserly's home. He claims that defendant
American Security Insurance Company breached its obligations
under his homeowner's insurance policy (“the
Policy”) by failing to respond to two claims he made
for property damage. Recently, however, Plaintiff insists
that the parties have agreed on all material terms of a
settlement; an agreement he seeks to enforce through the
difficulty, though, is that the disagreement is hardly
immaterial: it centers on whether Defendant should make
checks payable to Plaintiff only or to Plaintiff and
a third party - Citizens Bank (Plaintiff's former
mortgagee and current intervenor in this case). According to
Citizens Bank, it has an interest in the insurance proceeds
because it was a payee under the Policy at the time of the
fire, whereas Plaintiff claims that the bank lost any
interest it had by releasing its mortgage in 2015. On this
score, Citizens Bank is correct.
contract law governs issues concerning the formation,
construction, and enforcement of settlement agreements.
Sims-Madison v. Inland Paperboard & Packaging,
Inc., 379 F.3d 445, 448 (7th Cir. 2004). Under Illinois
law, which the parties agree governs in this instance, the
existence of a valid and enforceable contract is a question
of law when the basic facts are not in dispute. Echo,
Inc. v. Whitson Co., 121 F.3d 1099, 1102 (7th Cir.
1997). A settlement agreement is accordingly enforceable if
there was a meeting of the minds or mutual assent to all
material terms. Abbott Labs. v. Alpha Therapeutic
Corp., 164 F.3d 385, 387 (7th Cir. 1999).
material term in dispute in this instance is who gets paid.
The relevant Policy language provides as follows:
Loss Payment. We will adjust all losses with you. Payment for
loss will be made within 60 days after we reach agreement
with you, entry of a final court judgment, or the filing of
an approved award with us. Loss will be made payable to you
and mortgagee as their interest appear.
(Policy [Dkt. # 36, Ex. A] at 9.) It is undisputed that
Citizens Bank was a payee under the Policy at the time of the
fire. The only issue is whether Citizens' subsequent
release of the mortgage also extinguished its interest in any
current payments under the Policy.
Plaintiff's view, the Policy's plain language and
well-settled principles of Illinois law dictate that Citizens
Bank has no interest whatsoever: the Policy itself states
that loss will be made payable to Plaintiff and the mortgagee
(which Citizens no longer is), and Illinois courts have been
clear that a creditor without an insurable interest in a
property (i.e., a mortgage) is not entitled to payments under
a property insurance policy. (See Pl.'s Mot.
[Dkt. # 36] at 4) (citing Ins. Co. of North Am. v.
Citizens Ins. Co. of N.J. 425 F.3d 1180, 1182 (7th Cir.
1970) (holding that “upon satisfaction and release of
the note and mortgage, the mortgagee's rights in the
[insurance policy] terminate.”).
Citizens Bank explains, however, although it may have
released the mortgage in 2015, the debt Plaintiff owes on the
note still remains (upwards of $200, 000). Moreover, the
relevant timeframe for determining whether a mortgagee has a
perfected interest in an insurance policy is at the time of
loss, not payment. See Murphy v. State Farm Fire &
Cas. Co., 978 N.E.2d 649, 653 (Ill.App.Ct. 2012). This
result is further supported by the Policy language itself;
particularly, the phrase “as interests may
appear” - a standard term of art in homeowners'
insurance policies “mean[ing] that the insurer
undertakes to pay the mortgagee to the extent of its lien or
charge on the premises as it exists on the date of
loss.” 12 Lee R. Russ in consultation with Thomas
F. Segalla, Couch on Insurance § 178:58 (3d ed. 2011)
(emphasis added); see also Edgewood Manor
Apartment Homes, LLC v. RSUI Indem. Co., 733 F.3d 761,
773 (7th Cir. 2013) (describing Couch as a leading
treatise on insurance). Taken together, these principles
suggest that Citizens Bank indeed has an interest the Policy
proceeds and therefore in the settlement, and Plaintiff's
motion to enforce is accordingly denied.
similar reasons, the Court also grants Citizens' motion
to file a cross-claim for Plaintiff's remaining
indebtedness on the note. Rule 24 provides two possible paths
for intervention: intervention of right and permissive
intervention, either of which may be pursued by a timely
motion. Fed.R.Civ.P. 24. A party has a right to intervene
when (1) it has an interest to the property or transaction
that is the subject of the action, and (2) disposing of the
action would otherwise impair or impede the movant's
ability to protect its interest. Fed.R.Civ.P. 24 (a)(2).
Similarly, a party may seek permissive intervention where (1)
it has a claim or defense that shares a common question of
law or fact with the main action, (2) intervention will not
unduly delay or prejudice the adjudication of the original
parties' rights, and (3) the Court has independent
jurisdiction over the claims. Fed.R.Civ.P. 24(b). Citizens
wins on either front: it has a clear interest in the
underlying note, which Plaintiff indisputably has not paid;
deciding this case without Citizens' presence would
surely impair its ability to collect what it is owed; the law
and the facts pertaining ...