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Berkshire Hathaway Homestate Insurance Co. v. Chicago Metropolitan Hospital, LLC

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

January 2, 2020

BERKSHIRE HATHAWAY HOMESTATE INSURANCE COMPANY, Plaintiff,
v.
CHICAGO METROPOLITAN HOSPITAL, LLC, ROBERT DIELEMAN, and KATHLEEN DIELEMAN, Defendants.

          OPINION AND ORDER

          Joan H. Lefkow, U.S. District Judge

         In this insurance coverage action, plaintiff Berkshire Hathaway Homestate Insurance Company (“Berkshire”) insured a property that sustained fire damage in 2017. Berkshire initially denied coverage and sued the property owner Chicago Metropolitan Hospital LLC (“Chicago Metropolitan”) and the mortgagees Robert and Kathleen Dieleman (“the Dielemans”) for a declaratory judgment. (Dkt. 1.) The Dielemans counterclaimed for breach of contract and unreasonable and vexatious delay. (Dkt. 55.) Well into this litigation, Berkshire offered to pay the Dielemans the then-current balance of their mortgage note, but the Dielemans declined. Berkshire amended its complaint to seek a declaratory judgment that its offer to the Dielemans satisfied its obligations under the policy. (Dkt. 65.) Berkshire and the Dielemans now file cross-motions for summary judgment on Count III of Berkshire's amended complaint (for declaratory judgment against the Dielemans) and Count I of the Dielemans' counterclaim (for breach of contract). For the reasons below, Berkshire's motion (dkt. 69) is granted and the Dielemans' motion (dkt. 67) is denied.[1]

         BACKGROUND[2]

         Chicago Metropolitan owns a building in Chicago that was once operated as Sacred Heart Hospital (the “Property”). (Dkt. 88 ¶¶ 3, 17.) In 2014, the Dielemans lent Chicago Metropolitan $500, 000, secured by a mortgage on the Property and three other parcels of land. (Id. ¶¶ 41-42.) Berkshire issued a $7, 500, 000 commercial property insurance policy (the “Policy”) to Chicago Metropolitan covering the Property from September 26, 2016 to September 26, 2017. (Id. ¶ 21.) The Policy lists the Dielemans as loss payees. (Id. ¶ 30.)

         The Policy provides that under certain circumstances, the Dielemans could be entitled to coverage even if Chicago Metropolitan is not. The Policy's Loss Payable Provisions Endorsement provides:

2. Lender's Loss Payable Clause
* * *
b. For Covered Property in which both [you, i.e. Chicago Metropolitan] and a Loss Payee have an insurable interest:
* * *
(3) If we deny your claim because of your acts or because you have failed to comply with the terms of the Coverage Part, the Loss Payee will still have the right to receive loss payment if the Loss Payee:
(a) Pays any premium due under this Coverage Part at our request if you have failed to do so;
(b) Submits a signed, sworn proof of loss within 60 days after receiving notice from us of your failure to do so; and
(c) Has notified us of any change in ownership, occupancy or substantial change in risk ...

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