2837-55 Irving Park, LLC v. Total Insurance Services, Inc. ( 2021 )

2021 IL App (1st) 200655-UNo. 1-20-0655
September 7, 2021
FIRST DIVISION
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1)
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
Appeal from the Circuit Court
2837-55 IRVING PARK, L.L.C. ) Of Cook County.
)
Petitioner-Appellant, )
) Circuit Number 2019 009254
v. )
) The Honorable
TOTAL INSURANCE SERVICES, INC.; ) Michael F. Otto
CRANDALL, DUBOW & HARNER, INC.; ) Judge Presiding.
SELECTIVE INSURANCE COMPANY )
OF AMERICA; and JOHN )
TOLIOPOULOS )
)
Defendant-Appellees. )
JUSTICE WALKER delivered the judgment of the court.
Presiding Justice Hyman and Justice Pierce concurred in the judgment.
ORDER
Held: We reverse and remand the trial court’s section 2-619 dismissal of the complaint where
there were genuine issues of material fact as to whether a reasonable customer, informed
by an agent that the policy includes coverage for lost business income, would understand,
after reading, that the policy did not provide the coverage.
No. 1-20-0655
¶1 2837-55 Irving Park, LLC (Irving Park), filed a complaint against Total Insurance Services,
Inc. (Total Insurance), Crandall, Dubow & Harner, Inc. (CDH), John Toliopoulos, and
Selective Insurance Company of America (Selective) for damages arising from a fire at real
property Irving Park owned. The trial court dismissed the counts against Total Insurance, CDH,
and Toliopoulos as untimely. On appeal, Irving Park contends that its complaint adequately
stated facts bringing it within the time allowed by the statute of limitations. We reverse and
remand.
¶2 I. BACKGROUND
¶3 Because the trial court dismissed the complaint on the pleadings, we take our facts from
the complaint and take as true all well pleaded facts for purposes of our review. Cochran v.
Securitas Security Servicing USA, Inc., 2017 IL 121200, ¶ 11.
¶4 Irving Park bought insurance from The Hanover Insurance Group through John
Toliopoulos, who worked as an insurance agent for Total Insurance and CDH. In 2013, near
the expiration of the Hanover policy, Toliopoulos obtained a property insurance quote from
Selective. When Martha Monastero of Irving Park discussed the Selective quote with
Toliopoulos, “he informed her there were no changes in the new policy and it would have the
same coverages, including the Business Income and Extra Expense Endorsement, as previous
property insurance policies Toliopoulos had procured on Irving Park’s behalf.” Subsequently,
Irving Park purchased the Selective policy.
¶5 On October 16, 2018, a fire damaged Irving Park’s property. Irving Park made a claim for
loss of business income, and Selective advised that Irving Park’s policy did not cover lost
business income. In August 2019, Irving Park sued Total Insurance, CDH, and Toliopoulos for
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No. 1-20-0655
negligence, negligent misrepresentation, and violation of the Illinois Consumer Fraud and
Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2012)). Irving Park later
amended the complaint to add a count against Selective for reformation of the contract.
¶6 Total Insurance, CDH, and Toliopoulos filed motions to dismiss the counts against them
as untimely. See 735 ILCS 5/2-619 (West 2018). Irving Park responded to the motions to
dismiss by attaching a copy of the Selective contract in effect at the time of the fire. The trial
court dismissed the counts against Total Insurance, CDH, and Toliopoulos, leaving only the
count against Selective unresolved. The court found no just cause to delay enforcement or
appeal of its dismissal of three counts of the complaint. Irving Park now appeals.
¶7 II. ANALYSIS
¶8 Supreme Court Rule 304(a) gives this court jurisdiction over the appeal. Ill. S. Ct. R. 304(a)
(eff. March 8, 2016). On appeal, Irving Park argues the facts pled in the complaint show that
it filed the complaint within the applicable limitations period, and the statute of limitations for
its cause of action violates the constitutional prohibition against special legislation. Ill. Const.
1970, art. IV, § 13.
¶9 A motion to dismiss pursuant to section 2-619 admits the legal sufficiency of the complaint
but asserts another affirmative matter that defeats the claim. American Family Mutual
Insurance Co. v. Krop, 2018 IL 122556, ¶ 13. Such a motion also admits as true all well-
pleaded facts and all reasonable inferences that can be drawn from them. Id. An action on the
pleadings should not be dismissed unless it is clearly apparent that no set of facts can be proven
which will entitle the plaintiff to relief. Perelman v. Fisher, 298 Ill. App. 3d 1007 (1998).
When the legal sufficiency of a complaint is challenged, a reviewing court must determine
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whether the allegations set forth in the complaint, interpreted in a light most favorable to the
plaintiff, are sufficient to set forth a cause of action upon which relief may be granted. Id. We
review the dismissal of the complaint de novo. Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351,
361 (2009).
¶ 10 Section 13-214.4 of the Code of Civil Procedure provides that "[a]ll causes of action
brought by any person or entity under any statute or any legal or equitable theory against an
insurance producer, registered firm, or limited insurance representative concerning the sale,
placement, procurement, renewal, cancellation of, or failure to procure any policy of insurance
shall be brought within 2 years of the date the cause of action accrues." 735 ILCS 5/13-214.4
(West 2012).
¶ 11 Our supreme court, in American Family Mutual Insurance Co. v. Krop, 2018 IL 122556, ¶
13, held that a cause of action for negligent failure to procure insurance usually accrues when
the customer receives the policy. The Krop majority held the earliest date of accrual for torts
arising out of contractual relationships is the date of the breach of the duty or the contract, not
the date of the damages. Indiana Insurance Co. v. Machon & Machon, Inc., 324 Ill.App.3d
300 (2001); Hoover v. Country Mutual Ins. Co., 2012 IL App (1st) 110939, ¶ 52. Here the
date of the alleged breach was March 21, 2012. In Krop, the breach occurred the day the
insurance agent procured an insurance policy for the plaintiffs that did not cover defamation,
invasion of privacy, and intentional infliction of emotional distress, for which the plaintiffs
alleged they had asked. Krop, 2018 IL 122556, ¶¶ 18-19.
¶ 12 Irving Park argues that the complaint here falls within an exception to the usual rule. Count
1 alleges Toliolpolis, acting on behalf of Total and CDH, obtained an insurance quote for
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No. 1-20-0655
Irving; informed Irving’s property manager that “there were no changes in the new policy and
it would have the same coverages, including the Business Income and Extra Expense
Endorsement, as previous property insurance policies Toliopoulos had procured on Irving’s
behalf”; that the property manager relied on those assurances; that unbeknownst to her, the
policy did not contain the endorsement; and “Reading the policy would not have availed Irving
as it could not have learned the extent of the differing coverage(s) by reading the Selective
policy.”
¶ 13 The Krop court found:
“Although customers should read their policy and discover any defects, we
recognize that there will be a narrow set of cases in which the policyholder
reasonably could not be expected to learn the extent of coverage simply by
reading the policy. In some cases, the insurance policies may contain
contradictory provisions or fail to define key terms. In others the circumstances
that give rise to the liability may be so unexpected that the typical customer
should not be expected to anticipate how the policy applies.” Krop, 2018 IL
122556, ¶ 36.
¶ 14 In support of its reasoning, the Krop court cited Groce v. American Family Mutual
Insurance Co., 5 N.E.3d 1154 (Ind. 2014) and Filip v. Block, 879 N.E.2d 1076, 1084 (Ind.
2008). In those cases, the Indiana Supreme Court asserted that “reasonable reliance upon an
agent's representations can override an insured's duty to read the policy.” Filip, 879 N.E.2d
1076, 1084; Groce, 5 N.E.3d 1154. Applying Krop to the facts of this case, we look to the
policy to determine whether a trier of fact could find that “the policyholder reasonably could
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not be expected to learn the extent of coverage simply by reading the policy.” Krop, 2018 IL
122556, ¶ 36.
¶ 15 The Selective policy in effect at the time of the fire consumes more than 120 pages of the
record on appeal. It includes many separate pages of special inclusions and exclusions, with
extensive exceptions to both the inclusions and the exclusions of the policy’s coverage. The
policy provides in part:
“Crisis Incident Business Income
*** We will pay for the actual loss of ‘crisis incident business income’ you
sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘crisis
incident period of restoration’. The suspension’ must be caused by a ‘covered crisis
incident’ at a ‘covered location’.
***
The amount of Crisis Incident Business Income loss will be determined based
on:
a. The Net Income of the business before the ‘covered crisis incident’ occurred.
b. The likely Net Income of the business if no ‘covered crisis incident’ had
occurred. ***
c. The operating expenses, including payroll expenses, necessary to resume
‘operations’ with the same quality of service that existed just before the ‘covered
crisis incident’. ***
***
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Auto Physical Damage Business Income
We will pay for the loss of Business Income you sustain due to the necessary
‘suspension’ of your ‘operations’ during the ‘period of restoration.’ The
‘suspension’ must be caused by direct physical loss or damage to a ‘covered motor
vehicle’. ***
***
Back Up of Sewer, Drain or Sump – Business Income
We will pay for the loss of Business Income you sustain due to the necessary
‘suspension’ of your ‘operations’ during the ‘period of restoration’. The
‘suspension' must be caused by direct physical loss or damage to Covered Property
at described premises. The loss or damage must be caused by or result from ***
Water or waterborne material that backs up or overflows. ***
***
Building Owner - Lessor’s Leasehold Interest
We will pay for loss of ‘leasehold interest’ in the event that your tenant(s)
cancel their lease(s) in a described premise, due to untenantability as a result of
direct physical loss or damage to the described premises caused by or resulting from
a Covered Cause of Loss.
‘Leasehold interest’ means the difference between the:
1. Rent you were collecting at the described premises prior to the loss; and
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2. Rental Value of the described premises after loss or damage has been
repaired or rebuilt. ***
***
Denial of Service
We will pay for the loss of Business Income you sustain caused by or resulting
from a ‘denial of service attack’. ***
***
Dependent Properties
We will pay for the loss of Business Income you sustain due to the necessary
‘suspension’ of your ‘operations’ during the ‘period of restoration.’ The
‘suspension’ must be caused by direct physical loss or damage to ‘dependent
property’ caused by or resulting from a Covered Cause of Loss ***
***
Food Contamination Shutdown
We will pay for the:
1. Loss of Business Income you sustain; and
2. Extra Expense you incur from the necessary ‘suspension’ of your
‘operations’ because the Board of Health, or another government authority, has
issued an order to you in connection with the discovery of or suspicion of ‘food
contamination.’ ***
***
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Pollutant Clean-Up and Removal - Business Income
We will pay for the loss of Business Income you sustain due to the necessary
‘suspension’ of your ‘operations’ during the ‘period of restoration.’ The
‘suspension’ must be caused by the discharge, dispersal, seepage, migration, release
or escape of ‘pollutants’ to land or water at the described premises. ***
***
Unnamed Premises - Business Income
We will pay for:
1. The loss of Business Income you sustain due to the necessary
‘suspension’ of your ‘operations’ during the ‘period of restoration’; and
2. The reasonable and necessary Extra Expense you incur during the ‘period
of restoration’; as a result of direct physical loss or damage to property at ‘unnamed
premises caused by or resulting from a Covered Cause of Loss.”
¶ 16 The trial court found that the policy unambiguously excluded coverage for the loss of
business income, and no trier of fact could find that a reasonable customer reading the policy,
after an agent told the customer the policy provided coverage for loss of business income,
would think it provided coverage for loss of business income. In support of its finding, the
trial court noted that the Hanover policy’s coverage page had a separate line labeled “Business
Income and Extra Expense ALS,” with a separate premium listed, while the Selective policy
had no line so labeled. However, the Selective policy had different labels for many of the
coverages it included in common with the Hanover policy. “Identity Theft Resolution
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No. 1-20-0655
Services” from the Hanover policy probably corresponds to the Selective policy’s “Identity
Recovery Coverage,” but the “Greenpac Enhancement Endorsement” in the Selective policy
has no obvious counterpart in the Hanover list of coverages. The absence of a line specifically
labeled “Business Income and Extra Expense ALS” from the Selective policy does not, suffice
to prove unequivocally that all reasonable readers would know that similar coverage would not
show up under a different heading.
¶ 17 The trial court also noted that the list of coverages in the Selective policy has a blank next
to a line labeled “Business Income/Extra Expense Related Additional Coverages. Nonetheless,
the policy shows:
“Business Income/Extra Expense Related Additional Coverages
Auto Physical Damage Business Income $25,000
Back Up of Sewer, Drain or Sump – Business Income $100,000
Building Owner - Lessor’s Leasehold Interest……………. $25,000”
The page continues with other subheadings under the category of Business Income/Extra
Expense, all showing an amount covered for each category of loss.
¶ 18 We hold that the policy presents a question for the trier of fact as to whether a reasonable
customer, informed by an agent that the policy includes coverage for lost business income,
would understand, after reading, the 120-page policy, that the agent misrepresented the policy,
and the policy did not provide coverage for lost business income.
¶ 19 III. CONCLUSION
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¶ 20 The provisions of the insurance policy, considering the allegations of the complaint, could
support a finding that Irving Park “reasonably could not be expected to learn” that it lacked
coverage for lost business income simply by reading the policy. See Krop, 2018 IL 122556, ¶
36. Because Irving Park might prove facts showing that its reasonable reliance upon the agent’s
representations overrode its duty as the insured to read the policy, thus falling within the narrow
exception enunciated in Krop, we reverse and remand for further proceedings on the complaint.
In accord with the avoidance doctrine (see Innovative Modular Solutions v. Hazel Crest School
District 152.5, 2012 IL 112052, ¶ 38), we do not address Irving Park’s constitutional challenge
to section 3-214.4 of the Code of Civil Procedure.
¶ 21 Reversed and remanded.
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