Court Opinion

ID: 3140996
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:52:50.291061+00
Date Added: 2024-06-11T11:46:28.632084
License: Public Domain

NOTICE                          NO. 5-04-0525
 Decision filed 05/31/06. The text of
 this decision may be changed or                     IN THE
 corrected prior to the filing of a
 Petition   for    Rehearing   or   the   APPELLATE COURT OF ILLINOIS
 disposition of the same.
                             FIFTH DISTRICT
________________________________________________________________________
MICHAEL SIMS and TIFFANY SIMS,         ) Appeal from the
on Behalf of Themselves and All Others ) Circuit Court of
Similarly Situated,                    ) St. Clair County.
                                       )
   Plaintiffs-Appellants,              )
                                       )
v.                                     ) No. 99-L-393A
                                       )
ALLSTATE INSURANCE COMPANY,            ) Honorable
                                       ) Lloyd A. Cueto,
   Defendant-Appellee.                 ) Judge, presiding.
________________________________________________________________________

            JUSTICE HOPKINS delivered the opinion of the court:
            The plaintiffs, Michael and Tiffany Sims, on behalf of themselves and all others

similarly situated, filed a class action for a breach of contract against the defendant, Allstate

Insurance Company (Allstate). The circuit court certified the class, determined that Allstate's

insurance policy was ambiguous, and submitted the case to a jury. The jury returned a

verdict in favor of Allstate.

            On appeal, the plaintiffs argue that the circuit court erred in allowing the jury to
construe the insurance policy; that the circuit court abused its discretion in allowing Allstate

to present evidence regarding its unilateral subjective intent; that the circuit court erred in
instructing the jury regarding ambiguity, the burden of proof, and the principle of contra
proferentem; that, as a matter of law, the insurance policy's limit-of-liability provision was

ambiguous and therefore covered the plaintiffs' claims for a loss of value; and that Allstate
improperly attacked the ethics and integrity of the plaintiffs' counsel. We affirm on other

grounds.

                                                       1
                                           FACTS
       The plaintiffs' automobiles were damaged while insured by Allstate. Allstate paid the

cost to repair each vehicle but did not compensate the plaintiffs for its diminished value (a
repaired vehicle's loss in market value resulting from the fact that it suffered property
damage). The plaintiffs initiated this class action, alleging that by failing to compensate

them for their damaged but repaired vehicle's diminished value, Allstate breached its
contract.
       Allstate's collision and comprehensive coverages for an insured's automobile are

governed by section six of its insurance policy. Section six is entitled "Protection Against

Loss To The Auto," is substantially the same in each class state, and states as follows:
              "COVERAGE DD

              Auto Collision Insurance

              ALLSTATE will pay for direct and accidental loss to YOUR insured AUTO

       *** (including insured loss to an attached trailer) from a collision with another object
       or by upset of that AUTO or trailer. ***

                                            ***

              COVERAGE HH
              Auto Comprehensive Insurance

              ALLSTATE will pay for direct and accidental loss to YOUR insured AUTO
       *** not caused by collision. ***
                                            ***

              Payment Of Loss By Allstate
              ALLSTATE may pay for the loss in money, or may repair or replace the
       damaged or stolen property. ***

                                              2
                Limits of Liability
                ALLSTATE'S limit of liability is the actual cash value of the property or

         damaged part of the property at the time of loss. The actual cash value will be
         reduced by the deductible for each coverage as shown on the declarations page.
         However, OUR liability will not exceed what it would cost to repair or replace the

         property or part with other of like kind and quality."
         Prior to the trial, Allstate moved to dismiss the plaintiffs' action on the basis that the
"Payment of Loss" and "Limits of Liability" provisions of the policy did not require Allstate

to pay for diminished value. The circuit court determined that the insurance policy was

ambiguous, and the court denied Allstate's motion to dismiss. The case was tried before a
jury, and the jury rendered a general verdict in favor of Allstate. The circuit court denied the

plaintiffs' posttrial motion, and the plaintiffs filed a timely appeal.

                                           ANALYSIS

         The plaintiffs argue that the diminished value of an adequately repaired vehicle is a
"direct and accidental loss" that Allstate is required to compensate under the policy's insuring

provision. Allstate does not dispute that the term "loss" could encompass a vehicle's

diminished value, but it contends that the insuring language must be construed in light of the
"Limits of Liability" and "Payment of Loss" sections. Allstate argues that these provisions

are clear and unambiguous and preclude an insured's recovery for a vehicle's diminished
value.
         The plaintiffs counter that the phrase "repair or replace *** with other of like kind and

quality" in the "Limits of Liability" section encompasses an inherent concept of value, is at
the least ambiguous, and therefore requires Allstate to compensate the plaintiffs for their
vehicles' diminution in value. The plaintiffs argue that because the policy requires that a

repair or replacement be of "like kind and quality," the vehicle must be repaired so that there

                                                 3
is no remaining physical damage and no loss in value and that, otherwise, Allstate must pay
to compensate its insured for the vehicle's diminished value.

       While a vehicle's diminished value may be a "loss" under the policy's insuring
provision, we agree with Allstate that its obligation to compensate the insured for that loss is
circumscribed by the plain language of the policy's "Limits of Liability" and "Payment of

Loss" sections.
       "The construction of an insurance policy is a question of law." Pekin Insurance Co. v.
Estate of Goben, 303 Ill. App. 3d 639, 642 (1999). "When construing the language of an

insurance policy, the court's primary objective is to ascertain and give effect to the intentions

of the parties as expressed in their agreement." Pekin Insurance Co., 303 Ill. App. 3d at 642.
When determining the parties' intentions as expressed in the contract, the court must

construe the policy as a whole, giving effect to every part. Hartford Accident & Indemnity

Co. v. Case Foundation Co., 10 Ill. App. 3d 115, 121 (1973); Miller v. Madison County

Mutual Automobile Insurance Co., 46 Ill. App. 2d 413, 417 (1964). An insurance policy
must be construed according to the sense and the meaning of the terms, and if the language is

clear and unambiguous, it must be given its plain, ordinary, and popular sense. Pekin

Insurance Co., 303 Ill. App. 3d at 642.
       "Although it is true that limitations on an insurer's liability must be construed liberally

in favor of the policyholder [citation], the rule comes into play only where there is an
ambiguity." Menke v. Country Mutual Insurance Co., 78 Ill. 2d 420, 424 (1980). "A
provision in an insurance policy is deemed ambiguous if it is subject to more than one

reasonable interpretation." Economy Fire & Casualty Co. v. Bassett, 170 Ill. App. 3d 765,
769 (1988). A contract provision is not rendered ambiguous simply because the parties do
not agree on its meaning. Johnstowne Centre Partnership v. Chin, 99 Ill. 2d 284, 288 (1983).

"While it is highly important that ambiguous clauses should not be permitted to serve as

                                                4
traps for policy[]holders, it is equally important to the policy[]holders, as well as to the
insurer, that definite and clear provisions, upon which the calculations of the company are

based, should be maintained unimpaired by loose or ill-considered interpretation." Coons v.
Home Life Insurance Co. of New York, 368 Ill. 231, 238 (1938). The touchstone in
determining whether an ambiguity exists is whether the relevant portion of the policy is

subject to more than one reasonable interpretation, not whether creative possibilities can be
suggested. Bruder v. Country Mutual Insurance Co., 156 Ill. 2d 179, 193 (1993). "[T]he
rule construing ambiguous provisions strictly against the insurer will not permit perversions

of plain language to create an ambiguity where none in facts exists." Miller, 46 Ill. App. 2d

at 418; see also Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11, 17 (2005).
       The "Limits of Liability" section of the policy states that Allstate's liability "will not

exceed what it would cost to repair or replace the property or part with other of like kind and

quality." Allstate has promised "to repair or replace the property or part with other of like

kind and quality," but there is no promise to restore the value of the vehicle. See Allgood v.
Meridian Security Insurance Co., 836 N.E.2d 243, 247 (Ind. 2005). The plain and ordinary

meanings of "repair" and "replace" connote the remedying of tangible, physical damage. See

Webster's Third New International Dictionary 1923 (1993) ("repair" means "to restore by
replacing a part or putting together what is torn or broken"); Black's Law Dictionary 1298

(6th ed. 1990) ("repair" means "[t]o mend, remedy, restore, renovate" or "[t]o restore to a
sound or good state after decay, injury, dilapidation, or partial destruction"); Webster's Third
New International Dictionary 1925 (1993) ("replace" means to "restore to a former place,

position, or condition"); Black's Law Dictionary 1299 (6th ed. 1990) ("replace" means "to
restore to a former condition"). By their definitions and the common understanding of the
terms, "repair" and "replace" mean to restore something to its former condition, not to its

former value.     See Allgood, 836 N.E.2d at 247-48 ("[d]iminution in value can be

                                               5
compensated, but it cannot be 'repaired' or 'replaced' "); Culhane v. Western National Mutual
Insurance Co., 2005 SD 97, &24, 704 N.W.2d 287, 295 (2005) ("the ordinary meaning of the

words 'repair' and 'replace' indicate something physical and tangible"); Given v. Commerce
Insurance Co., 440 Mass. 207, 212-13, 796 N.E.2d 1275, 1280 (2003) (the plain meaning of
the terms "repair" and "replace" do not encompass "repair" or "replace[ment]" of damage

caused by stigma, a form of damage that, by definition, defies a remedy by way of "repair" or
"replace[ment]"); American Manufacturers Mutual Insurance Co. v. Schaefer, 124 S.W.3d
154, 158 (Tex. 2003) (the term "repair" with regard to a vehicle connotes something tangible,

like removing dents or fixing parts, not value); Hall v. Acadia Insurance Co., 2002 ME 110,

&7, 801 A.2d 993, 995 (2002) ("[t]he act of repairing an object typically focuses upon
restoring the object's function and purpose, and not upon returning the object to its earlier

worth or value"); see also Townsend v. State Farm Mutual Automobile Insurance Co.,

34,901, p. 9 (La. App. 2 Cir. 8/22/01); 793 So. 2d 473, 478 (general prevailing meaning of

"repair" is to fix, restore, or mend physical damage and does not encompass the restoration of
value, an item of damage that cannot be physically repaired); Carlton v. Trinity Universal

Insurance Co., 32 S.W.3d 454, 464 (Tex. App. 2000) (there is no concept of value in the

ordinary meanings of "repair" and "replace"). "Ascribing to the words 'repair or replace' an
obligation to compensate the insured for things [i.e., diminished market value] which, by

their very nature, cannot be 'repaired' or 'replaced' would violate the most fundamental rules
of contract construction." Carlton, 32 S.W.3d at 464; see also O'Brien v. Progressive
Northern Insurance Co., 785 A.2d 281, 290-91 (Del. 2001).

       To expand the ordinary meaning of "repair or replace *** with other of like kind and
quality" to include an intangible, diminished-value element would be ignoring the policy's
language or giving the policy's text a meaning never intended. Siegle v. Progressive

Consumers Insurance Co., 819 So. 2d 732, 738 (Fla. 2002); see also Schaefer, 124 S.W.3d at

                                              6
160 (to require the insurer, who elects to repair, to additionally pay cash for the market's
diminished perception incorporates an intangible-value element into the repair provision that

simply does not exist in the policy's language). The Indiana Supreme Court has explained:
               " '[L]ike kind and quality' refers to 'replace,' not 'repair[,]' which encompasses
       the notion of restoring property to its former condition. Only to the extent parts are

       replaced does a 'repair' entail 'property of like kind or quality.' To say one would
       repair an item with goods of like kind or quality is simply not correct English. An
       item of property (or a part of that item) is 'replaced' with other property, but it is

       'repaired' with tools and labor. *** '[L]ike kind and quality' unambiguously refers

       only to replacement, not to repairs, and the verb 'restore' appears nowhere in the
       policy." Allgood, 836 N.E.2d at 247-48.

       If an insurer elects to repair a vehicle and must replace parts in doing so, it must use

parts of "like kind and quality," and if an insurer elects to replace the vehicle, it must do so

with a vehicle of "like kind and quality." See Schaefer, 124 S.W.3d at 160. The limit-of-
liability provision includes no reference to diminished value or the restoration of value, and

the plain and ordinary meaning of the provision's language precludes an insured's recovery

for the diminished market value of a damaged but repaired vehicle.
       Additionally, the language of the "Limits of Liability" provision demonstrates that

Allstate knew how to say "value" when it meant "value." See Townsend, 34,901, p. 10; 793
So. 2d at 479. Allstate's limit of liability is "the actual cash value of the property or damaged
part of the property at the time of loss," but Allstate's liability "will not exceed what it would

cost to repair or replace the property or part with other of like kind and quality." Allstate
therefore has the option to pay the actual cash value of the property or part at the time of the
loss or to pay the cost to repair the property or to replace the property or part with one of like

kind and quality. If Allstate's policy provision was intended to guarantee the market value of

                                                7
the automobile after an election to repair, Allstate would have used the phrase "actual cash
value" instead of "like kind and quality." See Ray v. Farmers Insurance Exchange, 200 Cal.

App. 3d 1411, 246 Cal. Rptr. 593 (1988); see also Camden v. State Farm Mutual Automobile
Insurance Co., 66 S.W.3d 78, 82 (Mo. App. 2001) (the term "repair," particularly considering
that it is the option contrary to cash value, does not inherently include the concept of value).

The policy's language allows the insurer to choose to pay either the actual cash value of the
vehicle or the amount necessary to repair, not some combination of the two. If a combination
of the two were allowed, the insurer's obligation to compensate the loss would be

cumulativeBrepair or replace and pay diminished value, and the language does not so

provide. See Schaefer, 124 S.W.3d at 159.
       In addition to applying the plain meaning of the policy's language, we must also read

the policy as a whole, giving effect to the "Payment of Loss" provision. See Hartford

Accident & Indemnity Co., 10 Ill. App. 3d at 121. Pursuant to this section of the policy, the

insurer has an option to "pay for the loss in money, or may repair or replace the damaged or
stolen property." Including diminished value in the terms "repair or replace" would force an

insurer that chooses to compensate a loss by exercising the "repair or replace" option to also

pay money, ignoring the clause's disjunctive language and rendering the clause meaningless.
See Schaefer, 124 S.W.3d at 160. Although the plaintiffs argue that the trial testimony

demonstrated that Allstate generally declined to utilize its right to repair the vehicle, because
it would be assuming the duty of having the repairs made with due care, the policy as a whole
is facially unambiguous; therefore, we interpret the policy as a matter of law, without

resorting to extrinsic evidence. See Air Safety, Inc. v. Teachers Realty Corp., 185 Ill. 2d 457,
462 (1999). The policy does not contemplate the repair or replacement of property or parts
plus an additional payment of money for unrepairable diminished value. See Culhane, 2005

SD at &23, 704 N.W.2d at 295.

                                               8
       We find no ambiguity in the contractual terms of Allstate's automobile insurance
policy. The policy clearly does not allow an insured to recover for a diminution in value.

See Allgood, 836 N.E.2d 243 (the phrase "repair or replace the property with other property
of like kind and quality" is not ambiguous and does not allow the insured to recover for the
repaired vehicle's diminished value); Culhane, 2005 SD 97, 704 N.W.2d 287 (an

unambiguous policy requires the insurer to restore the vehicle to its preloss physical and
operating condition, not to compensate for its loss of value); Given, 440 Mass. 207, 796
N.E.2d 1275 (no objectively reasonable insured would conclude that "repair" or "replace"

includes compensation for a diminution in market value or for anything else beyond the

restoration of the vehicle's precollision physical condition); Schaefer, 124 S.W.3d 154 (the
phrase "repair or replace the property with other of like kind and quality" clearly requires the

insurer to restore the vehicle to its preloss physical and operating condition, not its preloss

value); Schulmeyer v. State Farm Fire & Casualty Co., 353 S.C. 491, 579 S.E.2d 132 (2003)

(there was no concept of value in the policy's "repair or replacement" terminology); Hall,
2002 ME 110, 801 A.2d 993 (the unambiguous "repair" language of the policy precludes a

recovery for a diminution in value, a loss that cannot be repaired); Siegle, 819 So. 2d 732 (the

phrase "repair or replace the property with other of the like kind and quality" clearly limited
the insurer's liability to a monetary amount necessary to repair the car's function and

appearance, not value); O'Brien, 785 A.2d 281 (under the unambiguous "repair or replace"
limitations in the policy, the insurer was obligated to repair or replace vehicle parts only to
the extent necessary to return the automobile to substantially the same physical, operating,

and mechanical condition, but not the value it had before the accident); see also Pritchett v.
State Farm Mutual Automobile Insurance Co., 834 So. 2d 785 (Ala. Civ. App. 2002) (the
words "repair" and "with like kind and quality" do not connote a return to market value);

Camden, 66 S.W.3d 78 (diminished value is not a covered loss pursuant to the unambiguous

                                               9
language of the policy); Townsend, 34,901, p. 13; 793 So. 2d at 480 (the insurer's liability
was limited to the cost of restoring the damaged automobile "to substantially the same

physical condition [not value] as before the accident"); Johnson v. State Farm Mutual
Automobile Insurance Co., 157 Ariz. 1, 754 P.2d 330 (App. 1988) (the phrase "pay to repair
or replace the property or part with like kind and quality" contemplates the restoration of

physical condition, rather than the restoration of value); Ray, 200 Cal. App. 3d 1411, 246
Cal. Rptr. 593 (the policy language unambiguously required the insurer to restore the
automobile to its precollision condition, but not to its precollision value).

       We recognize that some jurisdictions have reached the opposite conclusion regarding

similar policy provisions. State Farm Mutual Automobile Insurance Co. v. Mabry, 274 Ga.
498, 556 S.E.2d 114 (2001) (the provision affording the insurer the option to repair serves

only to abate, not eliminate, the insurer's liability for a diminution in value); Venable v.

Import Volkswagen, Inc., 214 Kan. 43, 519 P.2d 667 (1974) (when the insurer elects to repair

or rebuild, the insurer is obligated to put the vehicle in substantially the same condition as it
was prior to the collision, to render it as valuable and as serviceable as before); Potomac

Insurance Co. v. Wilkinson, 213 Miss. 520, 57 So. 2d 158 (1952) (if, despite repairs, there

remains a loss in actual market value, that deficiency is added to the cost of the repairs);
Dunmire Motor Co. v. Oregon Mutual Fire Insurance Co., 166 Or. 690, 114 P.2d 1005

(1941) (a replacement means the restoration of the property to its preinjury condition, and a
restoration is not complete unless there is no diminution of value after the repair of the
vehicle); see also Hyden v. Farmers Insurance Exchange, 20 P.3d 1222 (Colo. App. 2000)

(the phrase "of like kind and quality" is ambiguous so that when the insurer promises to
provide a vehicle "of like kind and quality," the insurer must provide the insured, through
repair, replacement, and/or compensation, the means of acquiring a vehicle substantially

similar in function and value to that which the insured had prior to the accident). We

                                               10
respectfully decline to join the opposing jurisdictions that have ignored the policy's clear and
unambiguous language to give the policy's text a meaning never intended.

       We conclude, as a matter of law, that the language of this policy, when read as a
whole, is clear and unambiguous, requires Allstate to restore the insured's vehicle to
preaccident mechanical function and condition, and does not require Allstate to compensate

its insured for a repaired vehicle's loss in market value due to the fact that it suffered damage.
Accordingly, the circuit court erred in finding that the policy language was ambiguous and
sending the case to a trial before a jury. We find in favor of Allstate, as a matter of law, and

we need not address the plaintiffs' remaining arguments on appeal.

                                        CONCLUSION
       For the foregoing reasons, we affirm the judgment of the circuit court of St. Clair

County in favor of Allstate, for reasons other than those relied on by the circuit court.

       Affirmed.

       SPOMER, P.J., concurs.

       JUSTICE WELCH, dissenting:

       I respectfully dissent. As set forth in the majority opinion, the insurance policy
provides that Allstate will "pay for direct and accidental loss to YOUR insured AUTO"
(collision coverage) and that Allstate will "pay for direct and accidental loss to YOUR

insured AUTO *** not caused by collision" (comprehensive coverage). Allstate does not
dispute that the term "loss" could include a vehicle's diminished value. In addition, there is
no dispute that the policy fails to explicitly exclude from coverage, after the vehicle's repair,

the loss sustained because of the vehicle's diminished value. Because the provisions in the

                                               11
policy do not exclude the loss sustained by a repaired vehicle's diminished value, I believe
there is an ambiguity in the policy that must be construed against Allstate as the drafter. If

Allstate, the drafter of the insurance policy, did not want its insureds to reasonably believe
that they would be compensated for the entire loss, including the diminished value of the
vehicle, Allstate should have specifically so stated in the policy. The policy could have

stated, "The term 'loss' in this policy does not include the diminished value of an insured
vehicle," to avoid any ambiguity regarding this coverage. Because I believe that a reasonable
person, after reviewing the policy, would believe that the coverage would return him or her to

the same financial position he or she was in immediately prior to the accident, I must

respectfully dissent.

                                             12
                                           NO. 5-04-0525
                                               IN THE

                                APPELLATE COURT OF ILLINOIS
                                  FIFTH DISTRICT
___________________________________________________________________________________
      MICHAEL SIMS and TIFFANY SIMS,        ) Appeal from the
      on Behalf of Themselves and All Others) Circuit Court of
      Similarly Situated,                   ) St. Clair County.
                                            )
         Plaintiffs-Appellants,             )
                                            )
      v.                                    ) No. 99-L-393A
                                            )
      ALLSTATE INSURANCE COMPANY,           ) Honorable
                                            ) Lloyd A. Cueto,
         Defendant-Appellee.                ) Judge, presiding.
___________________________________________________________________________________

Opinion Filed:   May 31, 2006
___________________________________________________________________________________
Justices:           Honorable Terrence J. Hopkins, J.
                 Honorable Stephen L. Spomer, P.J., concurs
                 Honorable Thomas M. Welch, J., dissents
___________________________________________________________________________________

Attorneys        Mark C. Goldenberg, Elizabeth V. Heller, Goldenberg, Miller, Heller & Antognoli,
for              P.C., 227 S. State Route 157, P.O. Box 959, Edwardsville, IL 62025; Michael B.
Appellants       Hyman, Melinda J. Morales, Much Shelist Freed Denenberg Ament
                 & Rubenstein, P.C., 191 North Wacker Drive, 18th Floor, Chicago, IL 60606;
                 Robert E. Becker, Kevin T. Hoerner, Becker Paulson Hoerner & Thompson, P.C.,
                 5111 West Main Street, Belleville, IL 62226; Elizabeth J. Cabraser, Scott P. Nealey,
                 Lieff, Cabraser, Heimann & Bernstein, LLP, 275 Battery Street, 30th Floor, San
                 Francisco, CA 94111-3339
___________________________________________________________________________________
Attorneys        Jeffrey P. Lennard, Richard L. Fenton, Margo Weinstein, Sonnenschein Nath &
for              Rosenthal LLP, 8000 Sears Tower, Chicago, IL 60606; Gordon R. Broom, Troy
Appellee         A. Bozarth, Burroughs Hepler Broom MacDonald Hebrank & True LLP, 103
                 West Vandalia Street, Suite 300, Edwardsville, IL 62025-0510; H. Sinclair Kerr,
                 Jr., Kerr & Wagstaffe LLP, 100 Spear Street, Suite 1800, San Francisco, CA 94105
___________________________________________________________________________________