## I L L I N O I S 

## O F F I C I A L 

## RE P O R T S Appellate Court

Area Erectors, Inc. v. Trave lers Property Casualty Co. of Am erica ,

2012 IL App (1st) 111764

Appellate Court Caption AREA ER ECTORS, I NC., an I llinois Corporation, P laintiff-Appe llant,

v

. T RAV E L E RS PR O P E RT Y CA SUA L T Y CO M PA N Y O F A M E RI CA
, a Connec ticut I nsuranc e Company , Def endant- Appellee

.

District & N o. First District, F ifth Division
Docke t No. 1-11-1764

Rule 23 Order

filed
Rule 23 Order withdrawn Opinion filed October 12, 2012

Dec ember

4, 2012
Dec ember

7, 2012

Held (Note : Thi s sy ll abus

con st i t ute s no par t of the opi nio n of the cour t but has bee n pre

par ed b y the Repo rt er of D e c i s i o n s f

o r t h e

c o n v e n i e n c e o

f t h e

rea der

. ) I n an action seeking a decla ration that plaintiff was entitled to t h e repla ceme nt cost of its damag ed cr anes and statutory penalties for its insurer’ s vexatious ref

usal to settle the claim, the g rant of the insurer’ s motion for judgme nt on the pleading s was aff irmed, since the insurer was not vexatious or unrea sonable and the policy unambig uously provided only for the pay

ment of the cra

nes’ actua l cash v al u e, n ot their repla ceme nt costs.

Dec ision Under
Review Appea l from the Circuit Court of Cook County
, No.10-CH-13192; the Hon. Kathlee n M. Pantle, J udg e, pre siding.J udg ment Affir med.

Counsel on Appea l J ennife r L

. Turiello and Kevin J

. Caplis, both of Quer rey & Har row, L td., of Chicag o, for a

ppellant.

J ean M. Golden, and Melissa A. Ander son, both of Cassiday Schade L L P, of Chicag o, for a

ppellee.

Panel J USTI CE HOWSE delivered the judg ment of the c ourt, with opinion.
J ustices Palmer a

nd Taylor conc urre d in the judgme nt and opinion.

OP INION

¶ 1 Pla i n t i ff Ar ea E re ct o rs , Inc., appea ls from a circ uit court order g rantingdefe ndant Trave lers Property Casualty Company of Americ a’s motion for judgme nt on the pleading s. For the re asons set for

th below, we a ffirm the judgment of the c ircuit court.

¶ 2 BA CKGROUND ¶ 3 Plaintiff Are a Erec tors, Inc. (AEI ), filed a complaint for dec l ar at o ry j u d g ment in the circ uit cou rt o f Cook County
, ag ainst defe ndant Trave lers Property Casualty Company of Americ a (Tra

veler s), seeking a decla

ration that it is entitled to rec over the repla ceme nt costs of its damag ed proper

ty and seeking statutory penalties fr om Trave lers for its vexatious ref usal to se ttle its claim. At issue is the measure of the valuation of the proper ty under the policy

. ¶ 4 In its complaint for decla ratory judgme nt, AEI alleg es that on J uly 21, 2008, an Amer ican 7150 cra ne it owned was damag ed when an unexpect ed m i cr oburst storm came throug h a construction site and toppled concr ete walls onto the cra ne. Two day s later, on J uly 23, 2008,

a L ink-Be lt cra

ne owned by AEI was damag ed in an unrelated incident when the boom hoist cable snapped a

nd fell onto the manlift. ¶ 5 AEI is the insured under a commerc ial i n l an d m ar i n e i n s u ra n ce policy issued by Trave lers. AEI

filed cla ims under the policy for the two da

mag ed cr anes. ¶ 6 AEI argues it is entitled to rec over the repla ceme nt cost for the loss of the Americ an 7150

cra ne. Trave lers arg

ues AEI is enti t l ed to rec over the actua l cash value of the equipment under the policy , a lesser

sum than replac ement cost. ¶ 7 On September 19, 2008, Trave lers deter mined the 7150 cra

ne to be a total loss. In a letter dated October 2, 2008, Trave lers offere d $ 3 7 9
, 8 6 8 .75 in settlement of AEI ’s claim on the Americ an 7150 cra

ne. This sum repr esente d what T ra v el ers calc ulated as the actua l cash

-2-value of the cr ane le ss a $25,000 deduc tible. ¶ 8 Trave lers alleg ed it tender ed the proper amount due under the policy
, which is the actua l cash value of the cra

ne as s p ec i fi ed under para g raphs A and B of the “ ‘Contrac tors Equipment’ Coinsurance and Va luation” endor sement. ¶ 9 AEI claims it is entitled to rec over the repla ceme nt cost of the damag ed Americ an 7150

cra ne, not actua l cash value. AEI argues that the policy is ambig uous as t o whether repla ceme nt cost or actua l cash value applies to a loss of the proper ty

. There fore
, the policy should be construed ag ainst Trave lers and AEI seeks a decla ration that Trave lers is liable to pay repla ceme nt costs. ¶ 10 In count I of AEI ’s complaint for decla ratory judgme nt, AEI is seeking a decla ration that the prope r method of va luation for the loss of the America n 7150 cra

ne is the re place ment value, not the a ctual ca sh value. ¶ 11 In count I I of AEI ’s co m p l ai n t , AE I is seeking a decla ration that Trave lers acte d in a vexatious and unrea sonable manner in handling the claim on the Americ an 7150 cra ne and brea ched the implied duty of g ood faith and fair dealing pursuant to sections 154.6 and 155 of t he I llinois Insuranc e Code (215 I L CS 5/ 154.6, 155 (West 2006)) and se ction 919.50 of title 50 of the I llinois Administrative Code (50 I l l

. Adm. Code 919.50 (2004))

. AEI is

s ee k i ng to rec over attorney fee s, costs and expenses incurre d in seeking cover ag e fr o m Trave lers. ¶ 12 In count I I I of its complaint for decla ratory judgme nt, AEI is seeking statutory penalties and attorney fee s, alleg ing it should be awa rded such penalties beca

use: (1) Trave lers failed
to ac k n o wl edg e it s liability for the L ink-Be lt cra ne claim within a reasonable time period; (2) Trave lers failed to respond with rea sonable promptness to communications from AEI ; and (3) Trave lers failed to eff ectuate a prompt, fair and equitable settlement of the L ink-Be lt

cra ne. ¶ 13 Trave lers filed an an s we r an d aff irmative defe nses and a motion for judgme nt on the pleading s. In g ranting Trave lers motion for judgme nt on the pleading s, the t ri al court deter mined that the ac tual cash va lue was the proper valuation under

the policy

. ¶ 14 The trial c ourt found:

“The re is no ambiguity in this policy

. I t is clea r from the plain rea ding of the policy
t h at replaceme nt costs is applicable to items less than five y ear s old from the d at e o f manufa cture and actua l cash value is applicable to items that are more than five y ear s old from the date of manufa cture

. As the Americ an 7150 cra ne was manufa cture d in 1993, it was over f

ive y ear s old.” ¶ 15 The trial c ourt found that pena lties unde r the I llinois Insuranc e Code are not w arr anted for Trave lers’ response to either claim beca use Trave lers did not knowing ly violate the Code,

a bona fide dispute exis t ed betwee n the parties, and the provisions of sections 919.50 and 919.20 of title 50 of the I llinois Administrative Code do not apply to inland marine policies. ¶ 16 AEI filed t his timely appea l from the trial court’s o rder g ranting Trave lers’ moti on for judgme nt on the pleading s.

-3-¶ 17 ANALYSI S

¶ 18 “Judgment on the plea dings is prope r wher e the pleading s disclose no g enuine issue of materia l fac t and the movant is ent i t l ed t o judgme nt as a matter of law, i.e.
, simil ar to a motion for summary judgme nt but limit ed to the pleading s.” Parkway Bank & Trust Co. v

. Mese ljevic , 406 I ll. App. 3d 435, 442 (2010). ¶ 19 In ruling on a motion for judgme nt on the pleading s, the court must consider only those fac ts a ppare nt f rom the fac e of the pleading s, judicial admissions in t he rec ord and matters subject to judicial notice. Illinois Tool W orks, Inc. v. Commerce & Industry Insurance Co.
, 2011 I L App (1st) 093084. We revie w the circ uit court’s g rant of judgme nt on the pleading s de novo

. State Farm Fire &Casualty Co. v. Y oung , 2012 I LApp (1st) 103736, ¶ 11. ¶ 20 “To ascer

tain the m eaning of t he poli cy ’s words and t he int ent of the parties, the cour t must construe the policy as a whole [citation]
, wit h d u e re gar d to the risk undertaken, the subject matter that is insured and the purposes of the entire contra ct [citation] .” Outboard Marine Corp. v

. Liberty Mutual Insurance Co.
, 154 I ll. 2d 90, 108 (1992). “I f the words in the policy are unambig uous, a court must aff ord them their plain, ordinary
, and popular meaning .” (Emphasis omitted.) Id. Words are ambig uous if they are rea sonably susceptible
to more than one meaning

. Inland Construction Co. v. Home Indem nity Co.
, 113 I ll. App. 3d 558, 559 (1983). C o n t ra ct interpre tation is a question of law, which we revie w de novo

. Illinois Tool W

orks, Inc. v. Commerce & Industry Insurance Co.
, 2011 I L App (1st) 093084, ¶ 20. ¶ 21 AEI first claims that repla ceme nt costs of the Amer i ca n 7 1 5 0 cra ne is the appr opriate valuation for loss of the cra ne. We mus t l o o k to the endorse ment titled “ ‘Contrac tors Equipment’ Coinsurance and Va luation,” which is at the center of the dispute betwe en the parties. The rele vant portion of the insura nce policy

at issue re ads as f

ollows:
“ ‘CONTRACTORS EQUI PMENT’ COI NSURANCE AND VAL UATI ON T h is endorse ment modifies insurance provided unde r the I M PAK COVERAGE F ORM.
A. L isted I tems The Coinsurance Additional Coverag e C o n d i tion applicable to ‘Contrac tors Equipment’ in Sec tion E–A DDI TI ONAL COVERAGE CONDI TI ONS is replac ed by the following : ‘Contrac tors Equipment’ Coinsurance
a. L isted Items The L imit of Insuranc e for eac h item shown on the list on file at our premises
must e qual at least the perc entag e of its va lue shown below at the time of ‘loss’
or you will incur a pe nalty : (1) Applicable to items less than 5 y ear s o l d fr o m the date of manufa cture : 80% of its replac ement cost; and (2) Applicable to items over 5 y ear s old from the date of manufa cture : 80% of its ac tual cash va lue. The Penalty is that we will pay only the proportion of any ‘loss’ to eac h item that the L imit of Insuranc e for the item bear s to the perc entag e of its applicable

-4-value. (2) Unlisted Items The Unlisted L imit of Insuranc e shown in the Dec larations must equal at least 80% of the actua l cash value of all Unlisted I tems at the time of ‘loss’ or y ou will incur a penalty

. The Penalty is that we will pay only the proportion of any ‘loss’ that the L imit of Insuranc e for Unlisted I tems bear s 80% of the actua l cash value of all Unlisted I tems at the time of ‘loss’.
The coinsuranc e penalty does not apply to items lease d, rente d or borrowe d from others unless they

are shown as L isted I tems. B. The Valuation Additional Coverag e C o n d i t ion applicable to ‘Contrac tors Equipment’ in Section E–ADDI TI ONAL COVERAGE CONDI TI ONS is repla ced by the following : ‘Contrac tors Equipment’ Valuation
In the eve nt of ‘loss’, the value of y our ‘Cont rac tors Equipment’ as of t he ti me of ‘loss’ will be de termined a s shown below: (1) I tems to which Replace ment Cost applies at the time of loss or damag e will be the least of the following : (1) The cost to repla ce the proper ty (without deduction for depre ciation) with other prope rty : (a) of compa

rable materia l and quality ; and (b) use d for the sa

me purpose. (2) The cost of reas o n ab ly restoring that proper ty to its condition immediately

befor e loss or dama g e; or (3) The amount you actua lly spend t hat i s nece ssary to repa ir or re place the prope rty

. We wil l n ot pay on a repla ceme nt cost basis until the proper ty has
actua lly been repa ired or repla ced. I f the proper ty is not repa ired or repla ced, we will pay

on an ac tual cash va lue basis. (2) I tems to which Actua l Cash Value a pplies at the time of loss or dama g e will be the least of the following : (1) The actua l cash va lue of that prope rty ; But in the event of partial ‘loss’, not exceeding 20% of the L imit of Insuranc e applicable to the Covered Property
, no depre ciation will be applied in the settlement of the c laim; (2) The cost of reas o n ab ly restoring that proper ty to its condition immediately

befor e loss or dama g e; or (3) The cost of repla cing that proper ty with substantia l l y identical
proper ty .”

-5-¶ 22 Paragraph A of the endorse ment establishes the minimum amount of insurance AEI was

require d to maintain on its equipment before a coinsura nce penalty is inc urre d. Reg ardle ss of t he age of t he equipment, AEI was required to insure it s proper ty for at least 8 0 % of i ts

v al u e to avoid the penalty in the event of a loss. The value of “listed” items less than fi v e y ear s old is the repla ceme nt c ost. The value of listed items over five y ear s old a nd unlisted items is the actua l cash v al u e. He re it is undisputed that both cra nes wer e more than five
y ear s old at the time of the loss. ¶ 23 Paragraph B of the endorse ment discusses the valuation of “Contrac tors Equipment” in the event of a loss. Paragraph B provides two formulas to calc ulate the value of lost proper ty depending upon which of two valuations applies: “(1) I tems to which Replace m en t C o st applies” and “(2) items to which Actual Cash Value applies.” AEI alleg es that para g raph B does not provide g uidelines for when repla ceme nt costs valuation a p p li e s o r when actua l cash value applies and, there fore
, the endorse ment cr ea t es an ambig uity
, which we should
construe a g ainst Trave lers. ¶ 24 To asce rtain the meaning of the policy ’s words and the intent of the p ar t i es, we must construe the policy as a whole. Outboard Marine Corp.
, 154 I ll. 2d at 108. We acknow ledg e subpara g raphs 1 and 2 of para g raph B, standing alone, do not provide g uidance for the rea der for whe n the re place ment cost or ac tual cash value m ethod applies. Paragraph B pre sumes the g uidelines have alre ady been provided

. When we rea d the entire “ ‘Contrac tors Equipment’ Coinsurance and Valuation” endorse ment, we conclude that g uidance has been provided in par ag raph Aof the e ndorsement, whic h immediately prec edes pa

ragraph B

. ¶ 25 In the event of a loss, para g raph A require s AEI ’s equipmen t t o b e insured for at least 80% of its value to avoid a coinsuranc e penalty

. As we noted ear lier, the v alue of “listed” items less t h an five y ear s old is the repla ceme nt cost and the value for “listed” equipment more than f

ive y ear s old and “unlisted” items is the ac tual cash va lue. ¶ 26 There is nothing in the “ ‘C o n t ra ct o rs E q u i p m en t ’ C o i n s uranc e and Va luation” endorse ment that would rea sonably lead us to conclude that the provisions in para g raph A of the endorse ment should be rea d in a vacuum and not considere d when rea ding para g raph B of the ver y same e ndorsement. ¶ 27 I f we wer e to adopt AEI ’s interpre tation of the policy
, the result would be the Amer ican 7150 cra ne would be valued at a ctual ca sh value for purposes of de termining whether AEI

car ried the minimum amount of insurance to avoid the coinsuranc e penalty and valuing the

same cra ne at repla ceme nt cost to deter mine the loss. We ag ree with the trial court that when the policy is rea d as a whole, including para g raphs A and B of the “ ‘Contrac tor’s Equipment’ Coinsurance and Valuation,” the endorse ment is not ambiguous and the actua l cash va lue is the proper

method of valuation for the dama g ed Amer ican 7150 c rane

. ¶ 28 AEI next claims the trial court err ed when it g rante d judge ment on the pleading s on the alleg ations of counts I I and I I I that Trave lers acte d in a vexatious or unrea sonable manner in handling AEI ’s claims under sections 154.6 and 155 of the Insuranc e Co d e (2 1 5 I L CS 5/154.6, 155 (West 2006)). AEI claims the alleg ations of the complaint, if taken as true, are sufficie nt to defeat a motion for judg ment on the pleading s. ¶ 29 In ruling on a motion for judgme nt on the pleading s, the court must consider only those

-6-fac ts a ppare nt f rom the fac e of the pleading s, judicial admissions in t he re cord and matters subject to judicial notice. Illinois Tool W orks, Inc. v. Commerce & Industry Insurance Co.
, 2011 I L App (1st) 093084. In this case , AEI attache d exhibi ts to the complaint that AEI alleg ed acc urate ly documented the commun i ca t i o n that took place betwee n the parties relative to the losses. Since AEI alleg ed in the complaint that the exhibi ts constitute an

acc urate acc ount of the neg otiation s, they constitute a judicial admission and we will consider the pleading s as well as the exhibi ts to deter mine whe t h er j u d gment on the pleading s was appropr iate here

. Bank of Chicago v. Park National Bank
, 2 7 7 I l l

. App. 3d 167, 172 (1995). ¶ 30 In respe ct to AEI ’s claims under section 154.6 of the Insuranc e Code, we find that section 154.6 does not g ive rise to a private reme dy or cause of action by a policy holder ag ainst an insurer but is instead regulatory in nature

. American Servic e Insurance Co. v. Passarelli
, 323 I ll. App. 3d 587, 590 (2001). Section 154. 6 l i sts acts commit ted by an ins uranc e company that constitute improper claims prac t i ce s

. Id. Under section 154.7, the State Direc tor of In s u ra nce is vested with the authority to char g e a company with section 154.6 improper claims prac tices and serve the company with notice of a he aring date. Id. “I f a company is found at the he aring

to have eng ag ed in imprope r claims prac tices, the Direc tor is require d
to order the company to cea se such prac tices and has the discretion to suspend the company ’s

cer tificate of authority and/or impose a civil penalty of up to $250,000.” Id. AEI
, there fore
, cannot pe rsonally

seek da mag es fr om Trave lers under section 154.6. Id. ¶ 31 Howeve r, a private cause of action does exis t unde r section 155 when “ther e is in issue the liability of a company on a policy or policies of insurance or the amount of the loss
pay able there under, or for unrea sonable delay in settling a claim, and it appea rs to the court that such ac tion or delay

is vex atious and unre asonable .” 215 I L CS 5/ 155 (West 2006). ¶ 32 “Section 155 wa s en ac t ed b y t h e l egis lature to provide a reme dy to an insured who
encounte rs unnece ssary difficulties when an insurer withh o l d s policy benef its.” Uhlich Children’s Advantage Network v. N ational Union Fire Co. of Pittsburgh, 398 I ll. App. 3d 710, 722 (2010). “ ‘The atto rney fee s, costs, and li mited penalty provisions of section 155

a r e a n e xtr a c o ntr a c tu a l r e me dy intended to make suits by policy holders economica lly fea sible and punis h insurance companies for m iscon d u ct

. ’ ” Id. at 722-23 (quoting McG ee v. St ate Farm Fire &Casualty Co. , 315 I ll. App. 3d 673, 681 (2000)). ¶ 33 “A cour t s h o u l d consider the totality of the circ umstances when deciding whether an insurer’ s conduct is vexatious and unrea sonable, including the in s u rer ’s attitude, *** and whether the insured was deprive d of the u s e o f h i s proper ty .” Statewide Insurance Co. v. Houston Gene ral Insurance Co.
, 397 I ll. App. 3d 410, 426 (2009). “I f a bona fide cover ag e dispute exis ts, an insurer’ s delay in settling a claim wi l l n o t be deeme d vexatious or

unrea sonable for

purposes of se ction 155 sanctions.” Id. ¶ 34 “The g ranting of attorney fee s and penalties pursuant to section 155 is usually entrusted to the sound discretion of the trial court [citation] .” Id

. at 425. Howe ver, when sec tion 155 fee s and costs are awa

rded as a judgme nt on the pleading s, the standard of revie w is de novo

. Id. ¶ 35 Ba sed on the rec ord, we cannot say Trave lers acte d i n a v ex atious and unre asonable

-7-m an n er i n s ettling the claim on the Americ an 7150 cra ne beca use a bona fide cover age dispute exis ts. Acc ording to the record, Travele rs offere d AEI the actual ca s h v al u e of the Americ an 7150 cra

ne shortly afte r it was damag ed. AEI responde d by disputing whether the
actua l cash v al u e was the proper method of valuation for the claim, claiming repla ceme nt cost is the proper method. This bona fide cover ag e dispute ultimately resulted in the instant action. There fore
, we find the trial court did not err in denying AEI ’s claims for section 155 penalties on the A merica

n 7150 cra

ne cla im. ¶ 36 In respe ct to the L ink-Be lt cra ne, AEI claims in its appellate brief that it is disputing the coinsuranc e penalty assessed by Trave lers. However, in its complaint for decla ratory judgme nt, AEI did not reque st a declaration that the imposi tion of the coinsura nce pe nalty

was improper. The trial court did not rule on this issue. “A trial court cannot err in failing to decide an issue not prese nted to it for decision.” Shilli Leasing, Inc. v. Forum Insurance Co.
, 254 I ll. App. 3d 731, 736 (1993). AEI has for feited the issue on appea l. ¶ 37 Next, AEI claims it should be awa rded section 155 penalties beca use Trave lers failed to aff irm or deny

liability on the L ink-Be lt crane within a rea sonable time. ¶ 38 The rec ord shows AEI repor ted the claim on J uly 23, 2008. Trave lers inspected the cra ne

on August 4, 2008, then sent a repa ir estimate on August 29, 2008, i n t h e amount of $104,166.37, and ad v i s ed that it would pay 89% of that estimate ($92,708.07) due to a coinsuranc e provision in the insuranc e policy

. ¶ 39 AEI obtained alternate repa ir information and submitt ed its fi n d i n gs t o T ravelers on J anuar y 12, 2009. Trave lers issued a chec k to AE I o n J anuary 20, 2009, in the amount of $92,708.07. AEI re s ponded on Fe bruar y 26, 2009, claiming the chec k was insufficient beca use the repa ir cost was $235,422.62. Trave lers responde d by email the same day ind i cating it would revise its offe r based on the information provided by AEI

. Trave lers revised its offe r from $92,708.07 to $202,597.30. To arr ive at this amount, Trave lers deducte d $7,785.20 as d ep re ciation from the AEI repa ir estimate of $235,422.62, then assessed an 11% coinsuranc e penalty
, there by
, reduc ing the net amount to 89% of the costs. ¶ 40 Trave lers paid an additional portion of the claim on the L ink-Be lt cra ne on May 22, 2008, in the amount o f $ 1 4 2
, 8 9 0.23. Trave lers made supplemental pay ments on the claim on October 26, 2010, and January

14, 2010. ¶ 41 Thus, in approximately five wee ks fr o m t h e d at e the cra ne was damag ed, Tra

veler s informed AEI of its repa ir estimate and the amount it would pay under the policy

. We cannot say this action by

Trave lers wa s vexatious or unreasona ble. ¶ 42 The rec ord shows that Trave lers responde d in a rea sonable time to AEI ’s initial claim on the L ink-Be lt claim. I t also responde d acc ording ly when AEI disputed the amounts Trave lers

o ff er ed in settlement of the claim and provided documentation that the repa irs wer e m o re costly than Trave lers estimated. They ultimately settled the claim afte r re ce i v ing the additional information. Ba sed on the rec ord befor e us, we cannot say Travel er s ref used to

rec og nize liability or acte d in a vexatious and unrea sonable manner

. T he rec ord shows a bona fide cover ag e dispute exis ted; there fore
, section 155 pen al t i es are not war rante d for Trave lers’ ha

ndling of the L ink-Be lt crane

.

-8-¶ 43 CONCL USI ON

¶ 44 For

the fore g oing r easons, we aff irm the judg ment of the trial c ourt.

¶ 45 Affir

med.

-9-