Stendera v. State Farm

ILLINOIS OFFICIAL REPORTS
Appellate Court
Stendera v. State Farm Fire & Casualty Co., 2012 IL App (1st) 111462Appellate Court AGNIESZKA STENDERA and MATT DAJEWSKI, Plaintiffs and
Caption Counterdefendants-Appellants, v. STATE FARM FIRE AND
CASUALTY COMPANY, Defendant and Counterplaintiff-Appellee.
District & No. First District, Sixth Division
Docket No. 1-11-1462
Filed June 15, 2012
Held In an action arising from a dispute over plaintiffs’ claims under their
(Note: This syllabus homeowners’ policy for the fire damage to their house, the trial court
constitutes no part of properly determined that defendant insurer was entitled to set off against
the opinion of the court plaintiffs’ personal property claim defendant’s advance payment under
but has been prepared the personal property coverage, the payment of the security deposit for a
by the Reporter of temporary dwelling under the dwelling coverage and the amount paid
Decisions for the pursuant to the mortgagee’s proof of loss for damages to the dwelling less
convenience of the the amount of the receipts plaintiffs submitted for the repair of the
reader.)
dwelling, but summary judgment was improperly entered for defendant,
since a genuine issue of material fact existed as to the cost of the repairs.
Decision Under Appeal from the Circuit Court of Cook County, No. 09-L-4284; the Hon.
Review Bill Taylor, Judge, presiding.
Judgment Reversed and remanded with directions.
Counsel on Peter C. Morse, Matthew J. Kowals, and Daniel J. James, all of Morse
Appeal Bolduc & Dinos, of Chicago, for appellants.
Daniel J. Nolan, Elizabeth M. Dillon, Luke P. Sheridan, and Kevin C.
Rasp, all of O’Hagan Spencer, LLC, of Chicago, for appellee.
Panel JUSTICE PALMER delivered the judgment of the court, with opinion.
Presiding Justice R. Gordon and Justice Garcia concurred in the judgment
and opinion.
OPINION
¶1 Plaintiffs Agnieszka Stendera and Matt Dajewski appeal the trial court’s entry of
summary judgment in favor of defendant State Farm Fire and Casualty Company. The trial
court’s ruling was based on its finding that plaintiffs suffered no loss following a fire that
damaged their home because defendant had overpaid under its policy and was entitled to a
setoff in the amount it had paid to plaintiffs’ mortgagee less the amount actually expended
to repair the home. We reverse and remand.
¶2 BACKGROUND
¶3 Defendant issued plaintiffs a homeowner’s insurance policy (Policy) containing three
coverages of relevance to this case: “Coverage A–Dwelling” (Dwelling coverage), with a
separate limit of $390,000; “Coverage B–Personal Property” (Personal Property coverage),
with a separate limit of $292,500; and “Coverage C–Loss of Use,” with the amount being the
actual loss sustained. “Coverage A–Dwelling” provides:
“1. A1–Replacement Cost Loss Settlement–Similar Construction.
a. We will pay the cost to repair or replace with similar construction and for the same
use on the premises shown in the Declarations, the damaged part of the property covered
under SECTION 1–COVERAGES, COVERAGE A–DWELLING, except for wood
fences, subject to the following:
(1) until actual repair or replacement is completed, we will pay only the actual
cash value at the time of the loss of the damaged part of the property up to the
applicable limit of liability shown in the Declarations, not to exceed the cost to repair
or replace the damaged part of the property;
(2) when the repair or replacement is actually completed, we will pay the covered
additional amount you actually and necessarily spend to repair or replace the
damaged part of the property, or an amount up to the applicable limit of liability
shown in the Declarations, whichever is less[.]”
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¶4 The Policy also contains a “Mortgage Clause” (Mortgage clause), which states: “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.” The Mortgage clause further provides that if the
insured’s claim is denied, “that denial shall not apply to a valid claim of the mortgagee.”
¶5 A fire subsequently damaged plaintiff’s residence located at 1205 Wilmot Road in
Deerfield, Illinois (Property). Plaintiffs informed defendant, which issued plaintiffs a check
for $5,000 as an advance on their personal property claim. Defendant also issued plaintiffs
a check for $3,395 to use as a security deposit for temporary housing. Plaintiffs claimed
$123,765.68 in damages to their personal property under the Personal Property coverage of
the Policy. Defendant refused to provide plaintiffs with further payments, alleging that
plaintiffs had intentionally caused the fire.
¶6 On April 9, 2009, plaintiffs filed suit alleging defendants breached the terms of the Policy
by denying coverage for their claims.
¶7 On or about May 6, 2009, Wells Fargo submitted a sworn proof of loss to defendant,
making a claim as the mortgagee. Defendant paid $174,191.24 to Wells Fargo under the
Mortgage clause section of the Policy on August 7, 2009. In their briefs the parties contest
whether this amount was the “actual cash value” of the damage to plaintiffs’ home
(plaintiffs’ argument) or an “estimate of the actual cash value of the repairs to the property
necessitated by the fire” (defendant’s argument). In its brief defendant states that the
“estimate of the actual cash value of the repairs was based on plaintiffs’ misrepresentations
relating to the remodeling of their residence prior to the fire.” At oral argument counsel for
defendant also argued that the $174,191.24 payment defendant made to Wells Fargo was
based on plaintiffs’ misrepresentations that they remodeled their home prior to the fire. We
note that the issue regarding the allegation of misrepresentations concerning the cost of
remodeling was not briefed below and we will not address it here.1
¶8 On December 17, 2009, plaintiffs submitted to Wells Fargo a “Certificate of Completion
of Repairs” wherein plaintiffs certified that all necessary repairs resulting from damage
sustained at the Property had been completed and the house was “restored to the condition
existing prior to the date of damage.”
¶9 On January 4, 2010, Wells Fargo transferred the $174,191.24 it received under the
Mortgage clause to plaintiffs.
¶ 10 During written discovery defendant requested “[a]ll records and documents relating to
the repair of any portion of the [Property] damages as a result of the August 1, 2008 fire.”
Plaintiffs objected to the request on relevance grounds, stating: “[Defendant] has already
disbursed payment for the structural damages to Wells Fargo in the amount of $174,191.24,
and as such the structural damages are no longer in issue.”
¶ 11 Plaintiffs eventually provided defendant with copies of receipts totaling 30,837.61
regarding the repair of the Property. In a June 25, 2010 letter, counsel for plaintiffs informed
1
See Forest Preserve District v. First National Bank of Franklin Park, 2011 IL 110759, ¶ 67
(issues not presented to the trial court are forfeited and will not be considered by the appellate court).
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defendant that plaintiffs would not appear for further depositions on the issue of the repair
costs of the Property because that information was irrelevant to plaintiffs’ claim for damage
to their personal property. Defendant subsequently filed a motion to bar additional evidence
of the expenses plaintiffs incurred for repairs above the $30,837.61 in receipts plaintiffs
provided defendant. The court did not rule on the motion.
¶ 12 On August 4, 2010, defendant filed a counterclaim for setoff, alleging it was entitled to
set off any judgment entered in favor of plaintiffs by the amount defendant paid to Wells
Fargo as well as the $5,000 payment defendant made to plaintiffs as an advance toward their
personal property claim.
¶ 13 On September 23, 2010, defendant moved for summary judgment on the setoff claim.
Defendant contended that plaintiffs had received $182,586.24: $5,000 advance payment from
defendant under the Personal Property coverage; $3,395 from defendant for the security
deposit on plaintiffs’ temporary home under the Dwelling coverage; and $174,191.24 from
Wells Fargo for the damage to plaintiffs’ home. Defendant argued that it was entitled to set
off the amount it had paid to Wells Fargo, less the $30,837.61 expended for repairs, against
plaintiffs’ $123,765.68 personal property claim. The court denied defendant’s motion for
summary judgment, and defendant moved to reconsider. Plaintiffs filed a cross-motion for
summary judgment on defendant’s claim for setoff.
¶ 14 On April 14, 2011, the court issued a written order granting defendant’s motion to
reconsider and entered summary judgment in its favor. The court found defendant was
entitled to a setoff and, as a result, had overpaid in the amount of $27,982.95, which is the
difference between the $182,586.24 plaintiffs received for damages caused by the fire
($174,191.24 paid to Wells Fargo plus $8,395 defendant issued directly to plaintiffs) and the
$154,603.29 in damages plaintiffs actually claimed ($123,765.68 in personal property
damages plus $30,837.61 plaintiffs had provided in receipts for repairs to their home). The
court concluded that pursuant to the Policy, and as the undisputed damages did not exceed
the amount of the setoff, summary judgment in favor of defendant was proper. The court also
denied plaintiffs’ cross-motion for summary judgment.
¶ 15 ANALYSIS
¶ 16 On appeal, plaintiffs contend that nothing in the Policy allows defendant to set off the
amount it owes under the Personal Property coverage by the amount it had paid under the
Dwelling coverage. Specifically, plaintiffs argue that their $123,765.68 personal property
claim must be evaluated independently of the $174,191.24 defendant paid to Wells Fargo
under the Dwelling coverage, and that defendant had no independent cause of action to
recover any overpayment on the Dwelling coverage. Plaintiffs also argue in the alternative
that if defendant was entitled to bring a cause of action against them for setoff, summary
judgment was inappropriate because there is at least a question of fact regarding the amount
plaintiffs spent on repairs and the value of their labor.
¶ 17 Summary judgment is only appropriate where the “pleadings, depositions, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law.”
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735 ILCS 5/2-1005(c) (West 2010); Williams v. Manchester, 228 Ill. 2d 404, 417 (2008).
Summary judgment is a drastic measure and should only be allowed where the right of the
moving party is clear and free from doubt. Williams, 228 Ill. 2d at 417. We review the trial
court’s grant of summary judgment de novo. Merca v. Rhodes, 2011 IL App (1st) 102234,
¶ 40 (citing Williams, 228 Ill. 2d at 417).
¶ 18 An insurance contract is a contract of indemnity. West American Insurance Co. v.
Yorkville National Bank, 238 Ill. 2d 177, 200 (2010) (citing Imperial Fire Insurance Co. of
London v. Coos County, 151 U.S. 452, 462 (1894)). The purpose of damages stemming from
a contract breach is to place the nonbreaching party in the position he would have been in
had the contract been performed, but not to place him in a better position or provide him with
a windfall recovery. Feldstein v. Guinan, 148 Ill. App. 3d 610, 613 (1986). The law does not
allow for an insurance loss to turn into a profit because doing so would encourage arson or
neglect. See, e.g., Farmers Automobile Insurance Ass’n v. St. Paul Mercury Insurance Co.,
482 F.3d 976, 978-79 (7th Cir. 2007) (“[n]o insurance company would knowingly write a
policy that would enable the insured to trigger coverage any time it wanted a windfall”).
¶ 19 As a preliminary matter, we address plaintiffs’ argument that defendant is not entitled to
set off the amount it had paid to Wells Fargo, less the $30,837.61 expended for repairs,
against plaintiffs’ $123,765.68 personal property claim. Because this is a contract action, a
setoff ordinarily would be allowed if a plaintiff was paid more than his damages. See Walker
v. Ridgeview Construction Co., 316 Ill. App. 3d 592, 596 (2000) (compensation awarded in
a breach of contract action should not provide a plaintiff with a windfall). The term “setoff
“ has two distinct meanings. First, a “setoff” may refer to a situation when a defendant has
a distinct cause of action against the same plaintiff who filed suit against him, which is
subsumed procedurally under the concept of counterclaim. See Thornton v. Garcini, 237 Ill.
2d 100, 113 (2009). Under this meaning, a setoff may refer to a situation where the defendant
claims that the plaintiff has done something that results in a reduction in the defendant’s
damages. Thornton, 237 Ill. 2d at 113. “When a defendant pursues this type of setoff, the
claim must be raised in the pleadings.” Thornton, 237 Ill. 2d at 113.
¶ 20 Under its second meaning, a “setoff” may refer to a defendant’s request for a reduction
of the damage award because a third party has already compensated the plaintiff for the same
loss. Thornton, 237 Ill. 2d at 113. For example, this may occur when a codefendant who
would be liable for contribution settles with the plaintiff. Thornton, 237 Ill. 2d at 113. A
defendant may raise this type of setoff at any time. Thornton, 237 Ill. 2d at 113.
¶ 21 Plaintiffs argue that the trial court erred in crediting defendant with a setoff in the amount
defendant paid to Wells Fargo under the Policy less the amount actually expended for repairs.
In setting forth this argument, plaintiffs rely on Fittje v. Calhoun County Mutual County Fire
Insurance Co., 195 Ill. App. 3d 340 (1990).
¶ 22 In Fittje, a married couple entered into a contract for deed to purchase a home. Fittje, 195
Ill. App. 3d at 342. The couple procured an insurance policy that named both themselves and
the sellers. Fittje, 195 Ill. App. 3d at 342-43. Less than a year later, the home was destroyed
by a fire. Fittje, 195 Ill. App. 3d at 343. The insurer paid $56,930 to the sellers under the
policy but denied coverage to the couple because the insurer’s investigation suggested that
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the fire had been intentionally started by the wife. Fittje, 195 Ill. App. 3d at 343. The couple
filed suit, seeking enforcement of the coverage under the policy. Fittje, 195 Ill. App. 3d at
343. The insurer filed a counterclaim against the couple in the amount of $56,930, the sum
it had paid to the sellers. Fittje, 195 Ill. App. 3d at 343. The trial court found that the husband
was an innocent insured who was not responsible for the fire and, under the innocent-insured
doctrine, awarded him half of the coverage due under the policy ($50,992), then set off the
amount paid to the sellers ($56,930). Fittje, 195 Ill. App. 3d at 345. The couple appealed.
¶ 23 The Fourth District Appellate Court affirmed the trial court’s decision but held that the
setoff could not be applied to the sum awarded to the husband for the loss of his personal
property and living expenses. Fittje, 195 Ill. App. 3d at 346. In doing so, the court noted that
the insurer would avoid liability for the innocent insured’s personal property and living
expense coverage if the insurer were permitted to set off the entire amount it paid to the
sellers. Fittje, 195 Ill. App. 3d at 346. The court in Fittje also noted that such a result would
“abrogate[ ] the innocent-insured doctrine and permit[ ] the insurer to escape a portion of its
contractual obligation.” Fittje, 195 Ill. App. 3d at 346. The court refused to “permit such a
result to stand” and applied the setoff only to the innocent husband’s recovery for damage
to the home. Fittje, 195 Ill. App. 3d at 346. In reaching this conclusion, the Fittje court
reiterated that a “setoff is not to indemnify the insurer for sums paid on behalf of the
plaintiffs, but to prevent a multiple recovery by different parties for a single loss.” Fittje, 195
Ill. App. 3d at 347.
¶ 24 Here, unlike Fittje, the innocent-insured doctrine is not implicated and we are not
confronted with the task of reaching an equitable result for an innocent spouse. Rather, this
case concerns a basic indemnity analysis under the Policy. Notably, the Policy here does not
preclude a common law setoff, regardless of whether it is across coverage lines. However,
even assuming that a setoff would not be allowed under the second definition found in
Thornton because defendant’s coverage for the third party (Wells Fargo) was not for the
“same loss,” a setoff would still be allowable under the first definition set forth in Thornton
because it is a separate action brought by way of counterclaim. We note that defendant here
pursued this type of setoff by raising it in a counterclaim against plaintiffs. As a result, the
trial court did not err in finding that defendant would be entitled to a setoff in the event that
the amount it paid exceeded the cost of repair. That said, we next consider whether the trial
court could resolve this question based on the pending cross-motions for summary judgment.
¶ 25 After carefully reviewing the record, we find that the trial court improperly entered
summary judgment as we believe there remains a genuine issue of material fact as to the
amount actually expended for repairs to the home. The court essentially ruled that plaintiffs
suffered no loss and would receive a windfall in the absence of a setoff. In coming to this
conclusion the court relied on a supposed stipulation that only $30,837.61 was expended to
restore the property. The court stated, “[f]or the purposes of summary judgment, the parties
stipulated the following: (1) the actual cash value of Plaintiffs’ personal property claim is
$123,765.68; (2) Plaintiffs spent $30,837.61 to repair the property; (3) Plaintiffs’ damages
total $154,603.29; and (4) Plaintiffs received $182,586.24 for damages caused by the fire.”
However, the parties agreed at oral argument that no such stipulation existed and there is no
written stipulation in the record. In fact, plaintiffs refused to comply with discovery requests
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with regard to repairs, claiming that it was irrelevant as they were no longer pursuing a
structural loss claim. Defendant filed a motion to bar evidence of such repairs but that motion
was not ruled upon. Plaintiffs contest the $30,837.61 figure and claim much higher costs,
including labor.
¶ 26 Whether or not plaintiffs actually spent more than the $30,837.61 claimed by defendant
is a genuine issue of material fact precluding summary judgment, as that figure must be
determined to conclude whether or not plaintiffs have received a windfall. That figure needs
to be determined in the trial court unless the court agrees that plaintiffs’ refusal to cooperate
in discovery barred them from asserting a higher number. As a result, we direct the trial court
upon remand to first decide defendant’s motion to bar and, if denied, to decide the amount
actually expended for repairs without referring to a stipulation that does not appear to be in
the record or agreed to by the parties.
¶ 27 CONCLUSION
¶ 28 We conclude that the trial court properly found that defendant was allowed to set off the
amount it paid to Wells Fargo less the amount expended for repairs but erred in granting
summary judgment to defendant because there remains a genuine issue of material fact as to
the amount actually expended for repairs. We remand for further proceedings consistent with
this opinion.
¶ 29 Reversed and remanded with directions.
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