Court Opinion

ID: 2723502
Source: CourtListenerOpinion
Date Created: 2014-09-03 22:03:11.953081+00
Date Added: 2024-06-11T10:14:14.145116
License: Public Domain

2014 IL App (2d) 131311
                                  No. 2-13-1311
                          Opinion filed September 2, 2014
______________________________________________________________________________

                                              IN THE

                              APPELLATE COURT OF ILLINOIS

                              SECOND DISTRICT
______________________________________________________________________________

ROYAL GLEN CONDOMINIUM                 ) Appeal from the Circuit Court
ASSOCIATION,                           ) of Du Page County.
                                       )
       Plaintiff-Appellee,             )
                                       )
v.                                     ) No. 11-L-818
                                       )
S.T. NESWOLD AND ASSOCIATES, INC., ) Honorable
                                       ) Patrick J. Leston,
       Defendant-Appellant.            ) Judge, Presiding.
______________________________________________________________________________

       PRESIDING JUSTICE BURKE delivered the judgment of the court, with opinion.
       Justices Zenoff and Schostok concurred in the judgment and opinion.

                                            OPINION

¶1     This interlocutory appeal presents three certified questions regarding a suit by plaintiff, the

Royal Glen Condominium Association, against defendant, S.T. Neswold & Associates, Inc.,

pursuant to section 12 of the Condominium Property Act (Condo Act) (765 ILCS 605/12 (West

2010)). We answer the first certified question in the negative. Specifically, we find that section

12 does not impose on an insurance producer a duty giving rise to a statutory cause of action

against that insurance producer. Our answer to the first certified question is dispositive of the

remaining two certified questions.

¶2                                      I. BACKGROUND
2014 IL App (2d) 131311

¶3      The following facts are alleged in the pleadings.       The Royal Glen Condominiums are

comprised of two separate buildings located in the Village of Glen Ellyn, Illinois (Village).

The buildings were constructed around 1978 and did not include sprinkler systems, as they were

not required by the Village at the time.        Effective as of March 1, 2004, the Village code

required installation of NFPA-approved sprinkler systems to remodeled areas only.

¶4      Defendant has served as the insurance broker for plaintiff since approximately 1999.

On June 11, 2009, based on defendant’s recommendation, plaintiff purchased from Travelers a

“Condominium Pac Plus” insurance policy, which includes coverage for the complete

replacement cost of the insured buildings.        Plaintiff also purchased an “Ordinance or Law

Coverage” endorsement, with a $1 million limit. Defendant served as the insurance producer

for this policy. 1

¶5      On October 20, 2009, a fire destroyed substantial portions of one of the condominium

buildings.     The Village determined that its restoration must include installation of a sprinkler

system, as required by the code.

¶6      Plaintiff undertook a bidding process for the renovation, including the sprinkler system,

the total cost of which was estimated to be $1.3 million.      Plaintiff advised defendant of the fire

and sought coverage under the insurance policy for the cost of the renovation.

¶7      Travelers accepted coverage of the renovation cost but only for a total of $1 million,

citing the $1 million limit in the endorsement as the basis for denying full coverage.

        1
            An “insurance producer” is defined in the Illinois Insurance Code as “a person required to

be licensed under the laws of this State to sell, solicit, or negotiate insurance.” 215 ILCS

5/500-10 (West 2010).

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¶8     Based on the $1.3 million estimated cost of the renovation, plaintiff alleges that it was

left $300,000 short of the necessary funds.   Plaintiff alleges that, at the time of purchase, it did

not know that the policy, when coupled with the endorsement, would not serve to provide the

“full insurable replacement cost of the insured property, less deductibles, but including coverage

for the increased costs of construction due to building code requirements, at the time the

insurance [was] purchased and at each renewal date,” as required by section 12(a)(1) of the

Condo Act. 765 ILCS 605/12(a)(1) (West 2010).

¶9     Plaintiff alleges that, even though the Village code required installation of sprinkler

systems to remodeled areas as of March 1, 2004, well before it purchased the insurance policy,

the full insurable replacement cost of the insured property, including the increased costs of

construction based on the code as it existed when plaintiff purchased the policy, exceeded the

coverage by $300,000.

¶ 10   Plaintiff sued defendant. Count I of the complaint alleged failure to procure sufficient

insurance coverage for the “full insurable replacement cost of the insured property *** including

coverage for the increased costs of construction due to building code requirements,” as mandated

by section 12(a)(1). Count II alleged that, pursuant to section 2-2201(a) of the Insurance

Placement Liability Act (Insurance Placement Act) (735 ILCS 5/2-2201(a) (West 2010)),

defendant failed to exercise ordinary care and skill in procuring a Condo Act-compliant

insurance policy and in assessing the sufficiency of the policy it provided, which, when coupled

with the endorsement, failed to satisfy the requirements of section 12(a)(1) of the Condo Act.

¶ 11   Defendant filed a combined motion to dismiss both counts of the complaint, pursuant to

section 2-619.1 of the Code of Civil Procedure (735 ILCS 5/2-619.1 (West 2010)), contending that

section 12 does not create a statutory cause of action against an insurance producer or a duty of

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care pursuant to the Insurance Placement Act. Defendant’s motion, and its subsequent motion to

reconsider, were denied.

¶ 12    Defendant brought a second motion to dismiss on an independent basis—that, even if

there is a valid cause of action pursuant to section 12, Travelers, which issued the policy, and the

Director of Insurance, who in his official capacity approved the endorsement, were necessary

parties to the action.   The trial court denied this motion as well.

¶ 13    Defendant ultimately brought this interlocutory appeal, pursuant to Illinois Supreme Court

Rule 308 (eff. Feb. 26, 2010), after the trial court certified the following three questions: (1) Does

section 12 of the Condo Act “create a duty on the part of an insurance producer giving rise to a

statutory cause of action against such an insurance producer?” (2) Does section 12 “create a legal

duty for an insurance producer to procure a policy of insurance that includes coverage for the

increased costs of construction due to building code requirements at the time the insurance is

purchased and at each renewal date?” and (3) If a cause of action exists under section 12 against an

insurance producer, are the insurer and the Director of Insurance necessary parties?

¶ 14                                       II. ANALYSIS

¶ 15    Plaintiff asserts that its right to sue defendant is created by section 12(a)(1) of the Condo

Act, which provides:

                “§ 12. Insurance

                 (a) Required coverage. No policy of insurance shall be issued or delivered to a

        condominium association, and no policy of insurance issued to a condominium

        association shall be renewed, unless the insurance coverage under the policy includes the

        following:

                         (1) Property insurance. Property insurance (i) on the common elements

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               and the units, including the limited common elements and except as otherwise

               determined by the board of managers, the bare walls, floors, and ceilings of the

               unit, (ii) providing coverage for special form causes of loss, and (iii) in a total

               amount of not less than the full insurable replacement cost of the insured property,

               less deductibles, but including coverage for the increased costs of construction

               due to building code requirements, at the time the insurance is purchased and at

               each renewal date.” (Emphases added.) 765 ILCS 605/12(a)(1) (West 2010).

¶ 16   Plaintiff does not dispute that section 12 places a duty upon a board of managers to

acquire insurance.   It maintains that the phrase, “[n]o policy of insurance shall be issued or

delivered to a condominium association, and no policy of insurance issued to a condominium

association shall be renewed, unless the insurance coverage under the policy includes *** a total

amount of not less than the full insurable replacement cost of the insured property,” is not limited

to the board of managers, because, although a board can renew an insurance policy, the board

cannot issue or deliver a policy, as an insurance producer can.       Plaintiff thus concludes that

section 12(a)(1) imposes a duty on an insurance producer to procure a policy that includes the

increased costs of construction due to building code requirements existing when the policy is

purchased and at each renewal date, while a board of managers has the duty to renew the policy.

¶ 17   Defendant contends that section 12(a) does not impose such a duty upon an insurance

producer.   Defendant argues that the phrase “[n]o policy of insurance shall be issued or

delivered” does not explicitly provide that it applies to insurance producers; rather, the statute as

a whole speaks directly to the duties of boards of managers, not insurance producers, and any

expansion of the duties contained within section 12 would run contrary to the principles of

statutory construction.

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¶ 18    The first certified question requires this court to interpret the phrase, “[n]o policy of

insurance shall be issued or delivered to a condominium board,” to determine whether it imposes

on an insurance producer a duty giving rise to a statutory cause of action against that insurance

producer.      Resolution of this issue is a matter of statutory interpretation.

¶ 19    In construing a statute, the primary rule is to determine and give effect to the intent of the

legislature.    Robidoux v. Oliphant, 201 Ill. 2d 324, 332 (2002).         The intent of the legislature

can be ascertained by examining the terminology of the statute, its goals and purposes, the

natural import of the words in common and accepted usage, the setting in which they are

employed, and the general structure of the statute as a whole.          Costello v. Governing Board of

Lee County Special Education Ass’n, 252 Ill. App. 3d 547, 557 (1993).              If the language of a

statute is certain and unambiguous, the court must enforce the law as enacted without resorting to

other aids of construction. Id.       If the language is capable of being understood by reasonably

well-informed persons in two or more different senses, an ambiguity exists, and it is proper to

examine sources other than the statute’s language to ascertain the legislative intent.        Id.   One

such source is the legislative history.    Kunkel v. Walton, 179 Ill. 2d 519, 533-34 (1997).

¶ 20    Defendant maintains that the first sentence of section 12(a) is ambiguous as it does not

provide who is directed to issue or deliver a policy.       We agree.    Section 12(a) is written in the

passive voice, the subject of which is “policy.”         There is no explicit reference to who or what

shall issue or deliver the policy.    In fact, there is also no reference to who has the duty to renew

the policy.

¶ 21    Thus, we must delve into other principles of statutory construction to determine the

legislature’s intent.    It is presumed that statutes that relate to the same subject are governed by

one spirit and a single policy. Picerno v. 1400 Museum Park Condominium Ass’n, 2011 IL

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2014 IL App (2d) 131311

App (1st) 103505, ¶ 13.      A conflict in the interpretation of a single provision can be resolved by

referring to the purposes and goals of the statute as a whole.     Costello, 252 Ill. App. 3d at 557.

Therefore, in determining legislative intent, courts should consider the entire statutory scheme in

pari materia in a manner that renders the statute consistent, useful, and logical.      LaSalle Bank

National Ass’n v. Village of Bull Valley, 355 Ill. App. 3d 629, 641 (2005).        We may consider

the consequences that would result from construing the statute one way or another, and, in doing

so, we presume that the legislature did not intend to create absurd, inconvenient, or unjust

results.     Village of Lake in Hills v. Niklaus, 2014 IL App (2d) 130654, ¶ 15.

¶ 22       The purpose of the Condo Act is to govern the affairs of Illinois condominium

associations.     Poulet v. H.F.O., L.L.C., 353 Ill. App. 3d 82, 90 (2004).         The Condo Act

establishes procedures for the creation, sale, and operation of condominiums.         It regulates the

duties of boards of managers, as well as condominium associations and unit owners.

¶ 23       Section 18.4(f) of the Condo Act sets forth the powers and duties of a board of managers,

which include “obtain[ing] adequate and appropriate kinds of insurance.” (Emphasis added.)

765 ILCS 605/18.4(f) (West 2010).             Section 12 regulates the types of insurance that

condominium associations must obtain, including property insurance on the common elements

and other areas of the property (765 ILCS 605/12(a)(1) (West 2010)), general liability insurance

against claims and liabilities arising in connection with the ownership, existence, use, and

management of the property (765 ILCS 605/12(a)(2) (West 2010)), and directors’ and officers’

liability coverage (765 ILCS 605/12(a)(3)(D) (West 2010)).         When these subsections are read

with section 18.4(f), it is clear that the legislature intended that the board of managers has the

duty to obtain adequate and appropriate insurance coverage as set forth in section 12.

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2014 IL App (2d) 131311

¶ 24    Nowhere in the Condo Act is there an explicit statement requiring an insurance producer

to issue or deliver an insurance policy that strictly complies with section 12(a).    By contrast,

section 7-601 of the Illinois Vehicle Code (625 ILCS 5/7-601 (West 2010)) specifically sets forth

minimal requirements and expressly states that the insurance policy issued must be in accordance

with the requirements of sections 143a and 143a-2 of the Illinois Insurance Code (215 ILCS

5/143a, 143a-2 (West 2010)). We agree with defendant that subjecting an insurance producer

to a vague provision in the Condo Act, without reference to the Insurance Code, is unjust and

cannot be what the legislature intended in enacting section 12, particularly given the duties and

responsibilities specified in the other provisions of the Condo Act. 2       That the Condo Act

regulates only condominiums, and that it is aimed squarely at the duties of a board of managers

in obtaining adequate and appropriate kinds of insurance, imply that the objective of section 12 is

not to regulate the business of insurance, which is already heavily regulated, but to impose

certain insurance-related obligations on the association and its board, not on insurance producers.

See Citizens Property Insurance Corp. v. River Manor Condominium Ass’n, Inc., 125 So. 3d
846, 853 (Fla. Dist. Ct. App. 2013) (an insurance provision in the Florida Condominium Act was

not intended to impose a mandatory obligation on insurance carriers).

¶ 25    The legislative history of section 12 bolsters our conclusion.   Public Act 92-518, which

became effective June 1, 2002, rewrote section 12, which prior thereto read, in relevant part:

        2
            Public Act 98-762 (eff. June 1, 2015) amends section 12. It adds a provision that

specifies the required combined total of insurance coverage for demolition costs and increased

costs of construction as no less than 10% of each insured building’s value or $500,000, whichever

is less. As the amendment is not effective until June 1, 2015, it does not affect our determination

here.

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       “Insurance. (a)(1) The board of managers shall have the authority to and shall obtain

       *** insurance for the property against loss or damage by fire and such other

       hazards as are covered under standard extended coverage provisions for the full insurable

       replacement cost of the common elements and the units.      Every insurer issuing a policy

       against loss or damage by fire and such other hazards as are covered under standard

       extended coverage to a condominium association shall print on or attach to the premium

       notice the following statement:        ‘The Condominium Property Act requires every

       condominium association to obtain insurance for the property against loss or damage by

       fire and such other hazards as are covered under the standard extended coverage

       provisions for the full insurable replacement costs.   This policy may or may not satisfy

       this requirement.   Please examine your policy carefully to determine if it complies with

       these requirements.’ ”   765 ILCS 605/12(a)(1) (West 2000).

¶ 26   An amendment to section 12(a)(1), first introduced by the Senate in February 2001,

provided, in relevant part, that “[a] condominium association must maintain the following

insurance coverage.” 92d Ill. Gen. Assem., Senate Bill 1046, 2001 Sess.

¶ 27   On August 3, 2001, the Governor returned Senate Bill 1046 with specific

recommendations for change.     The Governor recommended the following, in relevant part:

              “Senate Bill 1046 involves the very detailed and complicated issue of insurance

       coverages required to be provided to condominium associations in the State of Illinois.

       The insurance industry requested an amendatory veto to correct what they believe to be

       minor technical errors in the bill.   They have worked with the Chicago Bar Association,

       the primary organization supporting this legislation, to secure their support for these

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      changes.     The *** specific recommendations for change that they have made are

      technical in nature and do not change the substance of this legislation.

             The first change makes it clear that the changes in coverages are to be made on

      each condominium association insurance policy during the calendar year 2002 at the time

      of renewal of that policy.   Without this clarification, it is possible that insurance carriers

      would have to non-renew or cancel their insurance coverages on condominium

      associations, which would be unnecessarily disruptive and clearly not the intent of the bill

      sponsors.

             The second change involves clarification of the new requirement that

      condominium association insurance coverage include ‘coverage for municipal building

      code requirements.’ This phrase is ambiguous and could result in insurance coverages

      being substantially different throughout the State of Illinois. The intent of this section is

      to make sure that in the event of a covered loss by a condominium association, the repairs

      are made consistent with the applicable building code.         Many times, these types of

      building code upgrades cost more than if the property was restored to its original

      condition.   With this change the insurance coverage will recognize the increased cost of

      construction due to building code requirements.

             ***

             For these reasons, I hereby return Senate Bill 1046 with the following

      recommendations for change:

             on page 1, by replacing lines 8 and 9 with the following:

             ‘(a) Required coverage.     No policy of insurance shall be issued or delivered to a

      condominium association, and no policy of insurance issued to a condominium

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       association shall be renewed, unless the insurance coverage under the policy includes the

       following:’; and

       on page 1 by replacing line 18 with the following:

               ‘the increased costs of construction due to building code requirements, at the time

       the’ ***[.]”    (Emphases in original.)    92d Ill. Gen. Assem., Senate Bill 1046, 2001

       Sess. (Governor’s Message).

¶ 28   Before the Senate accepted the changes proposed by the Governor’s amendatory veto,

Senator John J. Cullerton stated:

       “The insurance industry, after the bill passed, made some recommendations to the

       Governor, which are really minor and technical in nature.       They don’t have any effect

       on the substance of the bill, and I move to accept it.   They clarify that the new coverage

       requirements apply to existing policies at the time of renewal and to all new policies upon

       issuance or delivery.   It clarifies that property insurance coverage must include increases

       in construction costs due to municipal code—building code requirements.              ***    I

       would ask that we accept the Governor’s changes.”           92d Ill. Gen. Assem., Senate

       Proceedings, Nov. 14, 2001, at 20 (statements of Senator Cullerton).

Both houses subsequently accepted the Governor’s recommendations on November 27, 2002.

¶ 29   It is clear that, prior to the enactment of Public Act 92-518, only the board of managers

was explicitly identified as having the duty to obtain required insurance.    The original version

of Senate Bill 1046 placed the duty of acquiring adequate insurance on the condominium

association.   While the Governor’s recommendations removed the unambiguous reference to

the association’s duty, both the Governor and Senator Cullerton viewed the changes as having no

effect on the substance of the bill. And there is nothing in the legislative history to suggest that

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the changes were made with the intent to impose a duty on insurance producers or any entity

other than the board of managers. The changes concerned when the board of managers must

reassess its insurance needs and required it to obtain property insurance to cover increases in

construction costs due to municipal building code requirements.

¶ 30   We therefore hold that section 12(a)(1) is intended to regulate the insurance obligations

of boards of managers of condominium associations by specifying the types of insurance that

boards are required to procure and when they must reassess their insurance needs.       Interpreting

the statute as plaintiff urges would place on the insurance industry a burden not contemplated by

the legislature, to procure sufficient insurance to cover the full insurable replacement cost of the

insured property, including increased costs due to building code requirements.

¶ 31   We note also that section 754.30(c) of title 50 of the Illinois Administrative Code (50 Ill.

Adm. Code 754.30 (1991)) provides that an insurer is not required to extend coverage for risks

that cannot be assessed without inspecting improvements to insured property.          Subjecting an

insurance producer to a duty under section 12 of the Condo Act would directly conflict with

section 754.30(c) of title 50 of the Administrative Code, a result that the legislature certainly did

not intend.   Section 12 does not impose on an insurance producer a duty giving rise to a

statutory cause of action against that insurance producer.

¶ 32                                    III. CONCLUSION

¶ 33   Because we find that section 12 of the Condo Act does not impose on an insurance

producer a duty giving rise to a statutory cause of action against that insurance producer, our

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answer to the first certified question is in the negative and it is dispositive of the remaining two

certified questions. 3

¶ 34    Certified questions answered; cause remanded.

        3
            Plaintiff argues that section 2-2201 of the Insurance Placement Act provides a basis for

determining that defendant has a duty under section 12 of the Condo Act to procure an insurance

policy that complies with section 12.      However, we were not asked to address this issue, and

our opinion in no way makes any comment on whether and to what extent section 2-2201

provides such a duty.     This court’s examination in an appeal under Rule 308 is strictly limited

to the questions certified by the trial court. Thompson v. Gordon, 221 Ill. 2d 414, 426 (2006)

(citing In re M.M.D., 213 Ill. 2d 105, 113 (2004)).

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