October 2014 Case Notes & Comments

“On Halloween, parents sent their kids out looking like me.” ~ Rodney Dangerfield

MONTHLY QUIZ: Insured leases and operates a water park, which is usually open to the public during the summer months. The park’s property policy covers “vandalism” damages, but includes a limitation that applies to “where loss or damage occurs” on premises that have been “vacant” for more than 60 consecutive days prior to the occurrence. For two consecutive summers, due to inclement spring weather, Insured opts to perform maintenance activities instead of opening for business. During the second summer closure, vandals break into and damage park property. Insurer declines coverage on grounds that since the park was not open to the public during the summer season, the property is vacant as defined by the policy. Insured argues that even though it was not open, its customary operations included not opening if inclement weather prohibited the necessary preparation and maintenance for the summer season. Is the vandalism covered or does the vacancy exclusion apply? You be the judge. (Answer below)


POTHOLE IN MALL PARKING LOT WAS NOT A “PUBLIC NUISANCE”:  After shopping, Plaintiff tripped and fell in a mall parking lot in a pothole near the rear of her parked car. Plaintiff sued Property Owner #1, who had sold its interest in the mall and parking lot to Property Owner #2 more than 3 year prior to Plaintiff’s fall. Though Owner#1 had no property interest at the time of the incident, Plaintiff contended that Owner #1 allowed the mall parking lot to fall into disrepair due to lack of maintenance. Plaintiff further alleged, among other things, that when Owner #1 sold the property, Owner #1 knew or should have known that Owner #2 had borrowed heavily and did not have the capital to renovate the parking lot (Owner #2 went into receivership the same year as Plaintiff’s fall). Therefore, Plaintiff alleged, Owner #1 had created a “public nuisance.” Plaintiff also claimed a public right to have “a reasonably safe means of ingress and egress to the mall stores over the parking lot.” In IL, a public nuisance is defined as the “doing of or the failure to do something that injuriously affects the safety, health or morals of the public, or works some substantial annoyance, inconvenience or injury to the public.” A nuisance is considered a “public nuisance” if it affects “a place where the public has a legal right to go, such as a park, street, or alley” but not if it “occurs in a place of business to which an invitee has no public right to go.” In affirming the dismissal of the case, the Court reasoned that Plaintiff was not exercising a right common to the public at the time that she entered the parking lot for the purpose of shopping, that the deterioration of the parking lot did not affect the “community at large” and that the claimed right to have “a reasonably safe means of ingress and egress to the mall stores over the parking lot” was actually a private right and not actionable as a public nuisance. Burns v. Simon Properties Group, LLP, 2013 IL App (5th) 120325 (Oct. 2, 2013)


INSURER ALLOWED TO DEDUCT SALES TAX FOR  PROPERTY NOT REPLACED - Policy obliged Insurer to pay Insured “the cost to repair or replace less depreciation” for lost property (i.e. replacement cost). However, even though the policy did not define the term “depreciation,” Insurer was allowed to deduct sales tax from the items Insured did not replace. The Court reasoned that since Insured elected not to replace certain property, Insured was made whole by a reduced amount that did not include sales tax - which Insured would not have to pay for such items. Gee v. State Farm Fire & Cas. Co, N. Dist. Ill., Case No. 11-cv-250 (Sept. 23, 2013)


DUTY TO DEFEND - WRONGFUL EVICTION: Insured-Owners leased work and rental space to Tenant. During the lease term, Owners sold the leased premises and in the process, removed Tenant’s personal items. Tenant filed a federal lawsuit against Owners, claiming federal statutory violations, conversion and wrongful eviction. Insurer denied having an obligation to provide Owners a defense and indemnity to Tenant’s lawsuit. In the ensuing declaratory action between Owner-Insured and Insurer, the Court found that Insurer had a duty to defend Owners because the insurance policy defined personal and advertising injury as including “wrongful eviction[s]” and Tenant’s federal lawsuit included allegations that Owners wrongfully evicted Tenant. John T. Doyle Trust v. Country Mut. Ins. Co., 2013 IL App (2d) 121238-U (Sept. 25, 2013)


ANSWER TO QUIZ:  Insured-Water Park loses. Court found that the losses did not occur during the park’s “usual and customary” winter closure period for normal maintenance and repair operations, but instead just after it was supposed to be open for the summer season. Therefore, Insured was not engaged in its customary operations at the time of the loss, or for the sixty days prior to the loss. Coverage denied. Travelers Casualty Ins. Co. of America v. Wild Waters, LLC, Dist. ID, Case No. 2:12-cv-00481-CWD (Aug. 30, 2013)