Court Opinion

ID: 3147147
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:26:53.863541+00
Date Added: 2024-06-11T15:07:46.317805
License: Public Domain

FIRST DIVISION
                                              February 11, 2008

No. 1-05-0783

INDUSTRIAL ENCLOSURE            )   Appeal from the
CORPORATION,                    )   Circuit Court of
an Illinois Corporation,        )   Cook County.
                                )
          Plaintiff-Appellant, )
                                )
     v.                         )   No. 98 L 6459
                                )
GLENVIEW INSURANCE AGENCY, INC.,)
an Illinois Corporation,        )   The Honorable
                                )   Stuart A. Nudelman,
          Defendant-Appellee.   )   Judge Presiding.

     JUSTICE GARCIA delivered the opinion of the court.

     The plaintiff, Industrial Enclosure Corporation (IEC), was

awarded $567,172 in damages after a jury trial.     The defendant,

Glenview Insurance Agency, Inc. (Glenview), filed a motion for

judgment notwithstanding the verdict contending that the court

erred in denying its motion for a directed verdict based on the

absence of any evidence that (1) Glenview proximately caused the

damages suffered by IEC under its negligence claim, and (2)

Glenview breached its duty to IEC in the procurement of the

property insurance under its breach of contract claim.

     The court granted the motion for judgment notwithstanding

the verdict as to each ground.   The court also explained that the
No. 1-05-0783

jury was improperly instructed as to the duty owed by Glenview to

IEC.

       The plaintiff appeals that order, contending sufficient

evidence was presented at trial to support its claims of breach

of contract and negligence.    For the reasons that follow, we

affirm.

                              BACKGROUND

       The plaintiff, IEC, based in Aurora, Illinois, manufactures

industrial boxes.    The defendant, Glenview, is an insurance

agency located in Glenview, Illinois.      Glenview employee Marcus

Toral managed IEC’s account.    John Palmer, IEC’s president, was

responsible for purchasing IEC’s property insurance.

       IEC and Glenview first did business in 1992, with Glenview

procuring a property insurance policy from Chubb Insurance

Company for IEC.    During these meetings, Palmer and Toral also

discussed the possible purchase of flood insurance.     Palmer chose

not to purchase flood insurance because IEC’s headquarters had

never been flooded, though sewer backup and runoff were concerns.

The Chubb policy was renewed through 1996.     While a flood

coverage rider was discussed several times, it was never added to

the policy.

       In 1996, Palmer and Toral began to shop around for

competitively priced coverage.    Palmer’s brother found an

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attractive quote from Amerisure that Chubb Insurance was not

willing to meet.   At the same time, Toral obtained a quote from

The Maryland Insurance Group/Northern Insurance Company

(Maryland).   Maryland was willing to lower its premium price to

win IEC’s business.

     Palmer accepted the Maryland quote and the policy became

effective on June 1, 1996.   Palmer testified that based on his

conversations with Toral, he expected the coverage limits on the

Maryland policy to be comparable to or better than those of the

Chubb policy.   The policy papers were delivered at the end of

July.

     On July 17 and 18, the Aurora area experienced rainfall

measuring more than 17 inches.   Palmer testified that after the

storm there was damage to IEC’s building and equipment, including

several feet of standing water inside the building.    An adjuster

from Maryland examined the site and determined the occurrence to

be outside the coverage of the policy because the damage to the

building was caused by floodwater and surface water.   In its

August 4, 1996, letter, Maryland informed IEC that the areas

around the building showed "physical evidence characteristic of

general flooding."    The letter characterized the water inside the

building as "caused directly or indirectly by flood waters from a

nearby creek and surface run off that accumulated from

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surrounding property on higher ground."    As the policy excluded

"[f]lood, surface water, waves, tides, tidal waves, overflow of

any body of water, or their spray," Maryland declined coverage of

the storm damage as flood related.    IEC believed that the damage

inside the building was caused by sewer backup and hired its own

experts to prove that.

     On November 25, 1996, IEC submitted a proof of loss

statement to Maryland totaling $2,294,704.51 for the loss of July

18, 1996, contending the loss was caused by water backup and

overflow from a sewer, drain and/or sump pump, coverage it had

under the policy.

     Maryland advised IEC by letter dated January 15, 1997, that

it was denying coverage because it believed that the policy did

not provide coverage for IEC’s flood-related loss.    The letter

stated, "Although the flooding throughout the area no doubt

overcharged the sewer system in and around [the IEC] building,

significant surface storm water runoff caused the damage at [the

IEC] facility."   IEC sued.   After a trial in federal court, a

jury returned a verdict against Maryland and awarded IEC

approximately $1.1 million in damages, with $167,000 of that

amount designated as lost profits.    No appeal was taken.

     IEC then filed this action to recover attorney fees and

costs in the federal litigation, as well as lost profits and

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other expenses that IEC did not recover in the federal action.

IEC alleged that Glenview breached its duty to procure an

insurance contract consistent with its wishes and that Glenview

was negligent as to the Maryland policy it did procure.

     After a trial, the jury found for IEC and awarded damages in

the amount of $567,162.   Glenview filed a motion for a judgment

notwithstanding the verdict, arguing that the court erred in

denying its motion for a directed verdict because Glenview was

not the proximate cause of the damages claimed by IEC and that

Glenview owed no duty to IEC to interpret the Maryland insurance

policy as to the term "surface water."    The trial court granted

Glenview’s motion, holding that the proximate cause of the

damages claimed by IEC was Maryland's wrongful denial of IEC151 Ill. 2d 445, 453, 603 N.E.2d 508 (1992), citing

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Pedrick v. Peoria & Eastern R.R. Co., 37 Ill. 2d 494, 510, 229

N.E.2d 504 (1967).    This court applies a de novo standard to our

review of decisions on motions for judgment notwithstanding the

verdict.   McClure v. Owens Corning Fiberglas Corp., 188 Ill. 2d

102, 132, 720 N.E.2d 242 (1999).

                     I.   Breach of Contract Claim

     IEC first contends that Glenview’s sale of the Maryland

policy to IEC without an explanation of the differences between

the coverages offered by Maryland and Chubb Insurance violated

the parties’ contract to procure insurance.     IEC contends that

Glenview breached their contract to procure insurance with

coverage for sewer and drain backup not "impaired by flooding

caused by surface water or general flooding."

     An insurance broker, in general, must exercise reasonable

skill and diligence when the agent negotiates and procures an

insurance policy according to the wishes of the client.        Pittway

Corp. v. American Motorists Insurance Co., 56 Ill. App. 3d 338,

346-47, 370 N.E.2d 1271 (1977).     The broker must act with

competence and skill when procuring the policy.      Pittway, 56 Ill.

App. 3d at 347.   IEC alleges that by not specifically procuring a

policy that included a sewer and drain backup rider, Glenview did

not procure a suitable policy and thus breached the contract.

     However, in a May 29, 1996, fax from Toral to Palmer

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comparing price and coverage between Chubb, Amerisure and

Maryland, the attachment highlighting Maryland127 Cal. App. 4th 1311, 26 Cal. Rptr. 3d 452

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No. 1-05-0783

(2005) as support.   We find Third Eye Blind inapposite.    Third

Eye Blind is, as IEC's counsel noted at oral argument, a "gap in

coverage" case.

     In Third Eye Blind, a music band contracted with its

business manager and an insurance broker to obtain a commercial

general liability insurance policy for the group.     Third Eye

Blind, 127 Cal. App. 4th at 1314, 26 Cal Rptr. 3d at 454-55.      The

problem with the policy obtained on the group's behalf was that

it "excluded coverage for some liability under a Field of

Entertainment Limitation Endorsement (FELE)."   Third Eye Blind,

127 Cal. App. 4th at 1315, 26 Cal. Rptr. 3d at 455.     The FELE

exclusion pertained to the very risk the band's professional

entertainment work exposed them to.   The court noted that the

appellants "alleged they would have obtained an errors and

omission policy if they had been so advised."   Third Eye Blind,

127 Cal. App. 4th at 1316, 26 Cal. Rptr. 3d at 456.    As we have

already determined that the Glenview complied with the wishes of

IEC in procuring the Maryland policy, Third Eye Blind, as a "gap

in insurance" coverage case, provides no guidance here.

                     II. Breach of Duty Claim

     In an action for negligence, the plaintiff must establish

that the defendant owed the plaintiff a duty of care, which was

breached, proximately causing an injury.   See Marshall v. City of

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No. 1-05-0783

Centralia, 143 Ill. 2d 1, 6, 570 N.E.2d 315 (1991).    Whether a

defendant owes a duty of care to a plaintiff is a question of

law.    Marshall, 143 Ill. 2d at 6.   In the context of an insurance

broker procuring insurance on behalf of the plaintiff, "the

primary function of an insurance broker as it relates to an

insured is to faithfully negotiate and procure an insurance

policy according to the wishes and requirements of his client."

Pittway Corp. v. American Motorists Insurance Co., 56 Ill. App.

3d 338, 346-47, 370 N.E.2d 1271 (1977).

       As the trial court made clear in its consideration of

Glenview's motion for a directed verdict, IEC's theory of

recovery against Glenview turned on the application of the term

"surface water" as part of the "flood" exclusion in the Maryland

policy.    While IEC argues that Glenview should have anticipated

Maryland's denial of coverage based on the "surface water"

exception in the policy, there is nothing in the record to

support IEC's underlying contention that Glenview had a duty to

advise IEC that such an exception would nullify coverage under

the sewer backup provision.    Nor was any evidence presented that

such a nullification would have been known to an insurance broker

exercising the requisite "competence and skill" the law places on

an insurance broker.    Pittway, 56 Ill. App. 3d at 347.   In fact,

the record makes clear that to the extent Maryland denied

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No. 1-05-0783

coverage based on the "surface water" term contained in the flood

exclusion, coverage for the damages suffered by IEC was provided

under the additional coverage endorsement for water backup from

sewer, drain and/or sump pump of the Maryland policy procured by

Glenview.

       As in Pittway, IEC "essentially seeks to impose upon

insurance brokers the duty to advise their customers of the

import and meaning of the provisions of the insurance policies

which have previously been faithfully procured according to the

customer's requirements."    Pittway, 56 Ill. App. 3d at 347.    No

such duty exists under Illinois law.      "[T]he burden was on

plaintiff to know the import and meaning of the insurance

contract *** which it accepted."      Pittway, 56 Ill. App. 3d at

347.    No evidence of negligence based on the breach of any duty

owed by Glenview to IEC as to the Maryland policy was presented.

The trial court properly entered judgment for Glenview

notwithstanding the jury's verdict as to duty claim as well.

                             CONCLUSION

       The circuit court properly entered judgment notwithstanding

the verdict because there was no evidence that Glenview

proximately caused the damages suffered by IEC; nor was there any

evidence that Glenview breached its duty to IEC in the

procurement of the property insurance.

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No. 1-05-0783

     Affirmed.

     CAHILL, P.J., and WOLFSON, J., concur.

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