Opinion ID: 2996088
Heading Depth: 1
Heading Rank: 2

Heading: analysis

Text: We review the district court’s grant of summary judgment de novo, viewing the evidence in the light most favorable to the non-moving party. Spearman v. Ford Motor Nos. 02-1500 & 02-1501 7 Co., 231 F.3d 1080, 1084 (7th Cir. 2000). A decision granting a motion for summary judgment is proper when the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Rivera v. Grossinger Autoplex, 274 F.3d 1118, 1121 (7th Cir. 2001). Judgment as a matter of law is proper when a party “fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). This case concerns a diversity suit for breach of contract. The parties do not contest that Illinois law applies to the substantive issues. When neither party raises a conflict of law issue in a diversity case, the applicable law is that of the state in which the federal court sits. Wood v. Mid-Valley Inc., 942 F.2d 425, 426 (7th Cir. 1991). I. Interpreting PANA’s Blanket Insurance Contract In construing an insurance policy, a court must ascertain the intent of the parties to the contract. Int’l Minerals & Chem. Corp. v. Liberty Mut. Ins. Co., 522 N.E.2d 758, 764 (Ill. App. Ct. 1988). To ascertain the meaning of the policy’s words and the intent of the parties, we construe the policy as a whole with due regard to the risk undertaken, the subject matter that is insured, and the purposes of the entire contract. See, e.g., Zurich Ins. Co. v. Raymark Indus., Inc., 514 N.E.2d 150 (Ill. 1987); Dora Township v. Ind. Ins. Co., 400 N.E.2d 921 (Ill. 1980). Illinois law requires that provisions of an insurance agreement be interpreted in the factual context of the case. Putzbach v. Allstate Ins. Co., 494 N.E.2d 192, 195 (Ill. App. Ct. 1986). PANA argues that no language within Indiana’s in- surance policy or the 1996 bid specifications expressly 8 Nos. 02-1500 & 02-1501 excluded the south junior high school building from coverage. PANA quotes a Fourth Circuit decision which describes a blanket policy as one which “invariably covers and attaches to every item of property described in the policy and insures the property collectively.” Monumental Paving & Excavating, Inc. v. Penn. Mfrs.’ Assoc. Ins. Co., 176 F.3d 794, 799 (4th Cir. 1999), quoting Nat’l Bank v. Fid. and Cas. Co., 125 F.2d 920, 924 (4th Cir. 1942). PANA then notes there were no express terms specifying that claims under blanket coverage are limited to the amount identified for replacement costs on the statement of values. It concludes that there was a clear and unambiguous inclusion of the entire junior high school under the blanket coverage because any property described on a policy’s statement of values would be included under the blanket coverage provisions. In its argument, PANA is engaging in conduct it ac- cuses the district court of doing; going outside the four corners of the policy. Taken substantively, PANA’s statement that nothing expressly excluded the building from coverage is correct. However, the insurance policy and bid specifications unambiguously show that the south building was never intended to be included. PANA also ignores two important facts. First, the bid specifications provided that coverage “shall be on a blanket basis with replacement cost coverage for buildings, personal property, and property in the open to apply to all locations unless otherwise noted.” (Emphasis added). Second, the bid specifications listed each building under the policy with the corresponding replacement cost. These replacement figures ranged from a high school valued at $5,123,472.00 to a tool shed valued at $5,791.00. The north building of the junior high school had a replacement cost of $1,616,031.00 and was listed separately from the south building, which had a replacement cost of “0”. Thus, the failure to designate a replacement cost for the south building has speNos. 02-1500 & 02-1501 9 cial import, considering that “coverage shall be on a blanket basis with replacement cost coverage.” We fail to see how such coverage can be applied when no replacement cost exists for the south building. We also fail to see how PANA can downplay the significance of the fact that it chose to assign a replacement value solely to the north building while leaving the south building with a zero. It was PANA’s responsibility to prepare and submit the statement of values upon which the blanket coverage was based and to establish the replacement cost value for each building. The zero value designated for the south junior high school building was completely PANA’s responsibility. PANA cites Dash Messenger Service, Inc. v. Hartford Insurance Company, 582 N.E.2d 1257 (Ill. App. Ct. 1991), as support for its position. Dash Messenger Service noted that if an insurer does not intend to insure against a risk likely to be inherent in the insured’s business, the insurer should expressly exclude that risk from the coverage of the policy. Dash Messenger Service, Inc., 582 N.E.2d at 1263. This provision of the law, however, focuses on the type of injuries that may be incurred and risks inherent in the insured’s business. The issue in cases such as Dash Messenger Service and Bremen State Bank v. Hartford Accidental & Indemnity Co., 427 F.2d 425 (7th Cir. 1970), centered on how the loss was actually incurred and whether the type and cause of injury was intended to be covered under the policy. For example, in Bremen State Bank, this Court, interpreting Illinois law, reversed a district court’s decision in favor of a bond company because it should have specifically excluded inherent risks from the coverage of the policy. However, the question in Bremen State Bank was whether “a loss resulting from misplacement of money . . . was contemplated as being covered” by an indemnity bond. Bremen State Bank, 427 F.2d at 427. Like Dash Messenger Service, Bremen 10 Nos. 02-1500 & 02-1501 State Bank was concerned with how the underlying loss occurred. In this case, the question is not whether the type of harm suffered (fire damage) was meant to be included under the coverage but rather, whether the south building was covered under the policy. Whether the coverage includes certain property, as opposed to whether the coverage includes how the injury was sustained, are two different questions. PANA’s reliance on Dash Messenger Service is misplaced. While there was no express exclusion of the south building from coverage, we agree with the district court that the evidence shows there was no express or implied intent to include coverage of the building. In contemplating what the provisions of an insurance agreement may mean, we must consider them in the factual context of the case. See Anetsberger v. Metro. Life Ins. Co., 14 F.3d 1226, 1232 (7th Cir. 1994) (interpreting Illinois law). The bid specifications for 1996 reveal that a tool shed was important enough to be valued for the policy. The zero designated for the south building shows how PANA truly viewed the worth of this condemned storage facility. In addition, PANA requested a quote for Ordinance and Law coverage, which is designed to cover the increased cost of construction imposed by new building codes, for only the north building but not the south building. Indiana also never charged, and PANA never paid, a single premium with respect to the south building. For these reasons, we find that the district court was correct when it determined the south building was never insured under the blanket coverage. PANA next asserts that Indiana’s determination as to the meaning of the “0” on the statement of values had no basis in any insurance manuals, industry practice, or the law. PANA also faults the district court for creating what it calls “a new contractual provision out of whole cloth” when it determined the “0” represented a sublimit to which the blanket replacement cost coverage did not apply. Nos. 02-1500 & 02-1501 11 It claims that Indiana’s position and the district court’s ruling concerning the meaning of the zero designation were erroneous because they amounted to little more than a subjective interpretation of a potentially ambiguous term. If the words in an insurance policy are susceptible to more than one reasonable interpretation, they are ambiguous, United States Fid. & Guar. Co. v. Wilkin Insulation Co., 578 N.E.2d 926, 930 (Ill. 1991), and will be construed against the insurer who drafted the policy, Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212 (Ill. 1992). A provision is ambiguous if it is reasonably susceptible to multiple interpretations. In re Osborne, 763 N.E.2d 855, 857 (Ill. App. Ct. 2002). When a policy’s words are unambiguous, a court must afford them their plain, ordinary, and popular meaning. Employers Ins. v. James McHugh Constr. Co., 144 F.3d 1097, 1104 (7th Cir. 1998). A court should consider the plain meaning of the policy language and should not search for a nonexistent ambiguity. Dash Messenger Serv., Inc. v. Hartford Ins. Co., 582 N.E.2d 1257, 1260 (Ill. App. Ct. 1991). PANA makes the argument throughout its briefs that Indiana lacks authority for various propositions it makes. However, not every argument needs case law for support. When there is a dearth of case law on a point, we will often turn to notions of common sense. See Potratz v. Dep’t of Law Enforcement, 506 N.E.2d 1050, 1051 (Ill. App. Ct. 1987). In our estimation, zero means zero. Considering the facts and circumstances surrounding the contract, designating the replacement cost of something as “0” leads to no other conclusion except that the building is of nominal value. The inherent meaning of the figure “0” on a statement of values is fairly obvious in delineating that item’s lack of worth. We can see no other reasonable interpretation of such an unambiguous term. Thus, the district court’s straightforward determination 12 Nos. 02-1500 & 02-1501 about what an unambiguous figure means does not imply the court read something into the contract, as PANA suggests. To disallow a court to do what the district court did in this case would confound the process of reviewing contract disputes. In fact, PANA’s argument is asking us to do something which Dash Messenger Service specifically warned against: searching for a nonexistent ambiguity. See Dash Messenger Serv., 582 N.E.2d at 1260. To determine that the figure “0” is ambiguous would be an analytical leap of faith. Because the “0” is unambiguous, we give the figure its ordinary meaning, which means the south building had no replacement cost and thus the building was not part of the blanket coverage. No insurance manual, policy, industry standard, or case law is needed to understand the meaning of “0.” When interpreting an insurance policy, the parties’ intent is the most significant factor. Weeks v. Aetna Ins. Co., 501 N.E.2d 349, 352 (Ill. App. Ct. 1986). Intent may be ascertained from the circumstances surrounding the issuance of the policy, including the situation of the parties and the reason the insured obtained the policy. Dora Township v. Ind. Ins. Co., 400 N.E.2d 921, 922 (Ill. 1980). The entire insurance contract, rather than an isolated part, should be read to determine whether an ambiguity exists. See Cobbins v. Gen. Accident Fire & Life Assurance Corp., 290 N.E.2d 873 (Ill. 1972). Despite the obvious meaning of the figure “0,” we also point out that the building in question was condemned fifteen years ago and was used merely for storage. To then claim that this obsolete building was intended to be within the coverage is too big a stretch. Considering the building’s decrepit state and the clear indication that Indiana never intended to charge PANA for its coverage, it is evident that the parties did not intend to include the building under the policy. For these reasons, we affirm the Nos. 02-1500 & 02-1501 13 district court’s ruling that the zero designation was an unambiguous term which clearly limited the liability of Indiana. II. Reformation PANA finally claims that it was entitled to have the contract reformed because of a mutual mistake by the parties. PANA argues that when it accepted Indiana’s bid, there had been a meeting of the minds, but the 1996 policy demonstrates that both parties were mistaken as to coverage issues. “Reformation is available when the parties, having reached an agreement and having then attempted to reduce it to writing, fail to express it correctly in the writing.” Restatement (Second) of Contracts § 155 cmt. a. The purpose of reformation is “to make a writing express the agreement that the parties intended it should.” Id. A party can obtain a contract reformation by showing through clear and convincing evidence that: (1) there has been a meeting of the minds resulting in an actual agreement between the parties; (2) the parties agreed to reduce their agreement to writing; and (3) at the time the agreement was reduced to writing and executed, some agreed upon provision was omitted or one not agreed upon was inserted either through mutual mistake or through mistake by one party and fraud by the other. Alliance Syndicate v. Parsec, Inc., 741 N.E.2d 1039, 1048 (Ill. App. Ct. 2000). PANA’s reformation claim relies heavily on the flawed position that the zero designation for the south building was ambiguous. This takes us full circle; “0” on the statement of values is clear and unambiguous. Perhaps realizing the obstacles this argument poses, PANA highlights Indiana’s insertion of a contractual provision not agreed upon into the policy. It is undisputed 14 Nos. 02-1500 & 02-1501 that Indiana added a demolition and debris removal provision that was not included in the 1996 bid specifications.1 PANA, however, never questioned or objected to Indiana providing demolition and debris removal coverage of $50,000.00. More importantly, we fail to see the significance of Indiana’s error in including debris and removal coverage. PANA makes a futile attempt to link the debris coverage with the zero designation for the south building. PANA argues that Indiana added the debris removal provision based on Indiana’s own erroneous interpretation of the zero designation. We fail to see any correlation between the zero designation and debris removal provision. The debris removal provision offers no insight or explanation as to why a “0” was assigned to the south building. More importantly, it in no way suggests that the zero designation was the result of some flawed interpretation on Indiana’s part. The parties clearly agreed to how the south building of the junior high school was to be treated under the policy. There was no provision accidently omitted from the policy. Further, Indiana never learned that PANA had changed its position with regard to the south building. Indiana never intended to provide coverage for a building valued at “0.” Indiana did not include the south building in its determination of whether to provide coverage or its final bid amount, nor did Indiana ever charge PANA for premiums related to the south building. If any mistake occurred, it was a unilateral mistake by PANA. For these reasons, 1 While Indiana may have erred in its inclusion of the debris removal coverage, PANA does not assert, nor could it successfully, that this alleged mistake warrants reformation. The $50,000.00 of debris removal was never disputed by either party and was promptly paid by Indiana. PANA broaches the issue merely in connection with its argument that Indiana erroneously interpreted the zero designation on the statement of values. Nos. 02-1500 & 02-1501 15 we find the district court was correct in its determination that there was not a mutual mistake. Accordingly, we AFFIRM the decision of the district court. A true Copy: Teste: ________________________________ Clerk of the United States Court of Appeals for the Seventh Circuit USCA-02-C-0072—12-31-02