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State Farm Fire & Casualty Co. v. Dubrovsky

Court of Appeals of Illinois, First District, First Division

March 30, 2018

STATE FARM FIRE & CASUALTY COMPANY, Plaintiff-Appellant and Counterdefendant-Appellant,
v.
PAUL DUBROVSKY; JEFF DUBROVSKY; and, SETERUS, INC., f/k/a IBM Lender Business Processes, Inc. Services, Defendants, Paul Dubrovsky and Jeff Dubrovsky, Defendants-Appellants; Seterus, Inc., Defendant-Appellee and Counterplaintiff-Appellee.

          Appeal from the Circuit Court of Cook County 13 CH 4880 The Honorable Rita Novak and Sanjay Tailor, Judges Presiding.

          MIKVA JUSTICE delivered the judgment of the court, with opinion. Presiding Justice Pierce and Justice Simon concurred in the judgment and opinion.

          OPINION

          MIKVA JUSTICE

         ¶ 1 Plaintiff State Farm Fire & Casualty Company (State Farm) filed this action against defendants Seterus, Inc. (Seterus), Paul Dubrovsky, and Jeff Dubrovsky, seeking a declaration that it owed no coverage under a homeowner's insurance policy issued to Jeff Dubrovsky for a certain property owned by Paul Dubrovsky, subject to a mortgage executed by Paul Dubrovsky, and currently serviced by Seterus as the mortgagee. The circuit court granted summary judgment in favor of Seterus, finding that the policy's standard mortgage clause created a separate and distinct contract, under which Seterus was entitled to coverage. The circuit court also granted summary judgment to Seterus as to the distribution of the insurance proceeds. For the following reasons, we affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 A. The Parties

         ¶ 4 Paul Dubrovsky purchased a residential property at 1826 Park Avenue in North Chicago, Illinois (the Property), and executed a mortgage on the Property in 2007. Jeff Dubrovsky is Paul's father and the named insured on the insurance policy, which was issued by State Farm. Seterus is the current mortgagee of the mortgage and loan issued to Paul and secured by the Property.

         ¶ 5 B. The Policy

         ¶ 6 The relevant policy provision states as follows:

"10. Mortgage Clause. The word 'mortgagee' includes trustee.
a. If a mortgagee is named in this policy, any loss payable under Coverage A shall be paid to the mortgagee and you, as interests appear. If more than one mortgagee is named, the order of payment shall be the same as the order of precedence in the mortgages.
b. If we deny your claim that denial shall not apply to a valid claim of the mortgagee, if the mortgagee:
(1) notifies us of any change in ownership, occupancy, or substantial change in the risk of which the mortgagee is aware;
(2) pays on demand any premium due under this policy, if you have not paid the premium; and
(3) submits a signed, sworn statement of loss within 60 days after receiving notice from us of your failure to do so. Policy conditions relating to Appraisal, Suit Against Us and Loss
Payment apply to the mortgagee.
***
d. If we pay the mortgagee for any loss and deny payment to you:
(1) we are subrogated to all the rights of the mortgagee granted under the mortgage on the property; or
(2) at our option, we may pay to the mortgagee the whole principal on the mortgage plus any accrued interest. In this event, we shall receive a full assignment and transfer of the mortgage and all securities held as collateral to the mortgage debt.
e. Subrogation shall not impair the right of the mortgagee to recover the full amount of the mortgagee's claim."

         ¶ 7 C. The Present Action

         ¶ 8 State Farm filed its complaint against the Dubrovskys and Seterus on February 19, 2013. This case was resolved on cross-motions for summary judgment. The following facts were undisputed on summary judgment, except where noted.

         ¶ 9 Paul purchased and executed a mortgage on the Property on August 21, 2007. Paul had, in the past, obtained an insurance policy for the Property through Country Mutual Insurance Company. Country Mutual insured Paul from August 2007 through September 2009. But, according to State Farm, Paul "submitted multiple claims with Country Mutual" during that time period, and Country Mutual ultimately either "non-renewed or cancelled the policy."

         ¶ 10 On September 9, 2009, Jeff, Paul's father, applied for a homeowner's insurance policy with State Farm for the Property. State Farm alleged that, as a part of the application, Jeff provided the Property address as his own. Jeff admitted this in his answer, but the application itself does not appear in the record. That same ...


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