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Ritacca Laser Center v. Brydges

Court of Appeals of Illinois, Second District

February 13, 2018

RITACCA LASER CENTER, Plaintiff-Appellant,

         Appeal from the Circuit Court of Lake County. No. 12-L-655 Honorable Margaret J. Mullen and Michael J. Fusz, Judges, Presiding.

          JUSTICE McLAREN delivered the judgment of the court, with opinion. Justices Jorgensen and Spence concurred in the judgment and opinion.


          McLAREN, JUSTICE

         ¶ 1 Plaintiff, Ritacca Laser Center, appeals the trial court's summary judgment in favor of defendant O'Hare Engineering in this case involving a fire that occurred after defendant installed HVAC systems in plaintiff's office building. Plaintiff argues that the trial court erred by granting summary judgment in favor of defendant and striking affidavits attached to plaintiff's response to defendant's motion for summary judgment. We affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 On October 7, 2013, plaintiff, a medical service provider, filed a two-count third amended complaint (complaint). Count I asserted legal malpractice against plaintiff's lawyers; that claim was dismissed and is not part of this appeal. Count II, pertinent to this appeal, asserted negligence against defendant as follows. In June 2008, plaintiff entered into a contract for Ryan, Inc. (Ryan), to construct improvements to remodel plaintiff's basement into a surgical suite. Ryan hired defendant to design, furnish, and install HVAC systems in plaintiff's office building. In December 2008, a few days after the grand opening of plaintiff's remodeled office building, a fire broke out, and an investigation suggested that defendant installed an air filter "too close" to an electric heating coil. Plaintiff alleged that, due to defendant's negligence, plaintiff was unable to work out of its office building for three years, which resulted in lost business income and property damage. Plaintiff tendered its claim to its insurance carrier, Erie Insurance (Erie), and plaintiff settled with Erie, but the settlement did not cover all of plaintiff's lost business income. Plaintiff attached to its complaint the construction contract between it and Ryan, which, in article 14, contained the following relevant provisions:

"(b) Builders Risk Insurance.
(i) Owner [(plaintiff)] shall purchase and maintain, until the date of Substantial Completion, 'all-risk' builder's risk insurance covering the Project risk associated with such deductible [sic] shall be borne entirely by Owner. ***
* * *
(c) Waiver of Subrogation. Owner [(plaintiff)] and Design-Builder [(Ryan)] waive all rights against each other, and against their respective agents, employees and subcontractors, for damages caused by perils covered by the insurance to be maintained pursuant to Paragraph 14(b) hereof, except such rights as they may have to the proceeds of such insurance. If, during the Project construction period, the Owner insures properties, real or personal or both, at or adjacent to the site by property insurance under policies separate from those insuring the Project, or if after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights against the Design-Builder, and against its respective agents, employees and subcontractors, for damages caused by perils covered by this separate property insurance."

         ¶ 4 On October 9, 2015, defendant moved for summary judgment, asserting additional facts and arguing the following. When plaintiff tendered its claim to Erie, it acknowledged that its policy covered both property damage and related business-interruption losses caused by the fire. When Erie refused to pay the amount of loss plaintiff claimed, plaintiff sued Erie in August 2009. In the course of litigation, plaintiff and Erie produced widely disparate calculations of plaintiff's business-interruption damages. Plaintiff claimed that its business-interruption losses were $6.3 million whereas Erie's expert opined that plaintiff's business-interruption losses were only $1.5 million. By June 2011, plaintiff and Erie had agreed on the amount of the property losses but not the business-interruption losses. After mediation on the matter, plaintiff agreed to release all of its business-interruption claims against Erie for $3.5 million. The total settlement amount for property damage and business interruption was over $4 million. After the settlement, plaintiff learned that Erie did not intend to bring a subrogation action against defendant, because Erie's legal counsel opined that plaintiff's fire-related property damage and business-interruption losses were caused by a "peril" covered by the Erie policy and, therefore, subrogation was barred by the waiver in the construction contract. Defendant argued that plaintiff's claim could not proceed, because it waived any claims against defendant in the construction contract and plaintiff's lawsuit against defendant was frivolous.

         ¶ 5 In support of its motion for summary judgment, defendant attached the following documents: (1) plaintiff's complaint against defendant, along with the attached construction contract, and (2) plaintiff's complaint against Erie. In the latter, plaintiff alleged that its policy provided it with, inter alia, "insurance coverage for what is commonly referred to as business interruption ***. The Policy was in full force and effect at all time material hereto [namely] The Fire Loss ***." Plaintiff also alleged that "Erie promised to pay income protection loss for the shorter of 1. The time period required to build, repair, or replace such part of the building or business personal property as has been damaged or destroyed as a result of a peril; or 2. Twelve (12) consecutive months from the date of the loss." Also attached to defendant's motion were the following: (1) a letter from an Erie representative indicating that, on the date of the fire, as indicated by the enclosed declarations, plaintiff was covered for "Business Personal Property [and] Income, " (2) the settlement agreement between plaintiff and Erie, (3) Erie's counsel's letter stating that "the subrogation waiver cannot be overcome, " and (4) Erie's declaration of coverage indicating that plaintiff was covered for personal property damage and income loss.

         ¶ 6 In opposition to defendant's motion for summary judgment, plaintiff asserted that the waiver of subrogation contained in paragraph 14(c) of the construction contract applied only to "damages caused by perils covered by insurance required under [paragraph] 14(b). *** Further, [a]rticle 14[b] discussed builder's Risk Insurance, stating that [plaintiff] shall purchase this insurance, [and it clearly applied] only to property damage. *** In fact, [plaintiff] did not purchase the Builders Risk Insurance but instead purchased a commercial package policy which included income loss, not required under Article 14." The construction contract could "be construed as ambiguous because [it] does not specify that income loss is part of the builders['] risk. *** Therefore[, ] *** the Court should construe the terms in the light most favorable to the insured, [plaintiff]."

         ¶ 7 In support of plaintiff's response to defendant's motion for summary judgment, plaintiff attached the following: (1) the construction contract; (2) Erie's insurance documents; (3) the affidavit of Eric Routman, an attorney, who opined, in pertinent part, that paragraph 14(b) of the construction contract required plaintiff to obtain property insurance, commonly referred to as builders' risk insurance, and that the waiver of subrogation in paragraph 14(c) was "limited to damages caused by perils covered by [insurance] required by [paragraph] 14(b)"; (4) the affidavit of Brian Paquette, plaintiff's insurance broker, who stated that he did not issue a builders' risk policy to plaintiff; and (5) the affidavit of Daniel Ritacca, M.D., plaintiff's principal, who ...

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