                           ILLINOIS OFFICIAL REPORTS
                                         Appellate Court




            Stendera v. State Farm Fire & Casualty Co., 2012 IL App (1st) 111462




Appellate Court            AGNIESZKA STENDERA and MATT DAJEWSKI, Plaintiffs and
Caption                    Counterdefendants-Appellants, v. STATE FARM FIRE AND
                           CASUALTY COMPANY, Defendant and Counterplaintiff-Appellee.



District & No.             First District, Sixth Division
                           Docket No. 1-11-1462


Filed                      June 15, 2012


Held                       In an action arising from a dispute over plaintiffs’ claims under their
(Note: This syllabus       homeowners’ policy for the fire damage to their house, the trial court
constitutes no part of     properly determined that defendant insurer was entitled to set off against
the opinion of the court   plaintiffs’ personal property claim defendant’s advance payment under
but has been prepared      the personal property coverage, the payment of the security deposit for a
by the Reporter of         temporary dwelling under the dwelling coverage and the amount paid
Decisions for the          pursuant to the mortgagee’s proof of loss for damages to the dwelling less
convenience of the         the amount of the receipts plaintiffs submitted for the repair of the
reader.)
                           dwelling, but summary judgment was improperly entered for defendant,
                           since a genuine issue of material fact existed as to the cost of the repairs.


Decision Under             Appeal from the Circuit Court of Cook County, No. 09-L-4284; the Hon.
Review                     Bill Taylor, Judge, presiding.


Judgment                   Reversed and remanded with directions.
Counsel on                  Peter C. Morse, Matthew J. Kowals, and Daniel J. James, all of Morse
Appeal                      Bolduc & Dinos, of Chicago, for appellants.

                            Daniel J. Nolan, Elizabeth M. Dillon, Luke P. Sheridan, and Kevin C.
                            Rasp, all of O’Hagan Spencer, LLC, of Chicago, for appellee.


Panel                       JUSTICE PALMER delivered the judgment of the court, with opinion.
                            Presiding Justice R. Gordon and Justice Garcia concurred in the judgment
                            and opinion.



                                              OPINION

¶1          Plaintiffs Agnieszka Stendera and Matt Dajewski appeal the trial court’s entry of
        summary judgment in favor of defendant State Farm Fire and Casualty Company. The trial
        court’s ruling was based on its finding that plaintiffs suffered no loss following a fire that
        damaged their home because defendant had overpaid under its policy and was entitled to a
        setoff in the amount it had paid to plaintiffs’ mortgagee less the amount actually expended
        to repair the home. We reverse and remand.

¶2                                          BACKGROUND
¶3          Defendant issued plaintiffs a homeowner’s insurance policy (Policy) containing three
        coverages of relevance to this case: “Coverage A–Dwelling” (Dwelling coverage), with a
        separate limit of $390,000; “Coverage B–Personal Property” (Personal Property coverage),
        with a separate limit of $292,500; and “Coverage C–Loss of Use,” with the amount being the
        actual loss sustained. “Coverage A–Dwelling” provides:
            “1. A1–Replacement Cost Loss Settlement–Similar Construction.
                a. We will pay the cost to repair or replace with similar construction and for the same
            use on the premises shown in the Declarations, the damaged part of the property covered
            under SECTION 1–COVERAGES, COVERAGE A–DWELLING, except for wood
            fences, subject to the following:
                    (1) until actual repair or replacement is completed, we will pay only the actual
                cash value at the time of the loss of the damaged part of the property up to the
                applicable limit of liability shown in the Declarations, not to exceed the cost to repair
                or replace the damaged part of the property;
                    (2) when the repair or replacement is actually completed, we will pay the covered
                additional amount you actually and necessarily spend to repair or replace the
                damaged part of the property, or an amount up to the applicable limit of liability
                shown in the Declarations, whichever is less[.]”

                                                  -2-
¶4         The Policy also contains a “Mortgage Clause” (Mortgage clause), which states: “If a
       mortgagee is named in this policy, any loss payable under Coverage A shall be paid to the
       mortgagee and you, as interests appear.” The Mortgage clause further provides that if the
       insured’s claim is denied, “that denial shall not apply to a valid claim of the mortgagee.”
¶5         A fire subsequently damaged plaintiff’s residence located at 1205 Wilmot Road in
       Deerfield, Illinois (Property). Plaintiffs informed defendant, which issued plaintiffs a check
       for $5,000 as an advance on their personal property claim. Defendant also issued plaintiffs
       a check for $3,395 to use as a security deposit for temporary housing. Plaintiffs claimed
       $123,765.68 in damages to their personal property under the Personal Property coverage of
       the Policy. Defendant refused to provide plaintiffs with further payments, alleging that
       plaintiffs had intentionally caused the fire.
¶6         On April 9, 2009, plaintiffs filed suit alleging defendants breached the terms of the Policy
       by denying coverage for their claims.
¶7         On or about May 6, 2009, Wells Fargo submitted a sworn proof of loss to defendant,
       making a claim as the mortgagee. Defendant paid $174,191.24 to Wells Fargo under the
       Mortgage clause section of the Policy on August 7, 2009. In their briefs the parties contest
       whether this amount was the “actual cash value” of the damage to plaintiffs’ home
       (plaintiffs’ argument) or an “estimate of the actual cash value of the repairs to the property
       necessitated by the fire” (defendant’s argument). In its brief defendant states that the
       “estimate of the actual cash value of the repairs was based on plaintiffs’ misrepresentations
       relating to the remodeling of their residence prior to the fire.” At oral argument counsel for
       defendant also argued that the $174,191.24 payment defendant made to Wells Fargo was
       based on plaintiffs’ misrepresentations that they remodeled their home prior to the fire. We
       note that the issue regarding the allegation of misrepresentations concerning the cost of
       remodeling was not briefed below and we will not address it here.1
¶8         On December 17, 2009, plaintiffs submitted to Wells Fargo a “Certificate of Completion
       of Repairs” wherein plaintiffs certified that all necessary repairs resulting from damage
       sustained at the Property had been completed and the house was “restored to the condition
       existing prior to the date of damage.”
¶9         On January 4, 2010, Wells Fargo transferred the $174,191.24 it received under the
       Mortgage clause to plaintiffs.
¶ 10       During written discovery defendant requested “[a]ll records and documents relating to
       the repair of any portion of the [Property] damages as a result of the August 1, 2008 fire.”
       Plaintiffs objected to the request on relevance grounds, stating: “[Defendant] has already
       disbursed payment for the structural damages to Wells Fargo in the amount of $174,191.24,
       and as such the structural damages are no longer in issue.”
¶ 11       Plaintiffs eventually provided defendant with copies of receipts totaling 30,837.61
       regarding the repair of the Property. In a June 25, 2010 letter, counsel for plaintiffs informed


               1
                See Forest Preserve District v. First National Bank of Franklin Park, 2011 IL 110759, ¶ 67
       (issues not presented to the trial court are forfeited and will not be considered by the appellate court).

                                                     -3-
       defendant that plaintiffs would not appear for further depositions on the issue of the repair
       costs of the Property because that information was irrelevant to plaintiffs’ claim for damage
       to their personal property. Defendant subsequently filed a motion to bar additional evidence
       of the expenses plaintiffs incurred for repairs above the $30,837.61 in receipts plaintiffs
       provided defendant. The court did not rule on the motion.
¶ 12       On August 4, 2010, defendant filed a counterclaim for setoff, alleging it was entitled to
       set off any judgment entered in favor of plaintiffs by the amount defendant paid to Wells
       Fargo as well as the $5,000 payment defendant made to plaintiffs as an advance toward their
       personal property claim.
¶ 13       On September 23, 2010, defendant moved for summary judgment on the setoff claim.
       Defendant contended that plaintiffs had received $182,586.24: $5,000 advance payment from
       defendant under the Personal Property coverage; $3,395 from defendant for the security
       deposit on plaintiffs’ temporary home under the Dwelling coverage; and $174,191.24 from
       Wells Fargo for the damage to plaintiffs’ home. Defendant argued that it was entitled to set
       off the amount it had paid to Wells Fargo, less the $30,837.61 expended for repairs, against
       plaintiffs’ $123,765.68 personal property claim. The court denied defendant’s motion for
       summary judgment, and defendant moved to reconsider. Plaintiffs filed a cross-motion for
       summary judgment on defendant’s claim for setoff.
¶ 14       On April 14, 2011, the court issued a written order granting defendant’s motion to
       reconsider and entered summary judgment in its favor. The court found defendant was
       entitled to a setoff and, as a result, had overpaid in the amount of $27,982.95, which is the
       difference between the $182,586.24 plaintiffs received for damages caused by the fire
       ($174,191.24 paid to Wells Fargo plus $8,395 defendant issued directly to plaintiffs) and the
       $154,603.29 in damages plaintiffs actually claimed ($123,765.68 in personal property
       damages plus $30,837.61 plaintiffs had provided in receipts for repairs to their home). The
       court concluded that pursuant to the Policy, and as the undisputed damages did not exceed
       the amount of the setoff, summary judgment in favor of defendant was proper. The court also
       denied plaintiffs’ cross-motion for summary judgment.

¶ 15                                        ANALYSIS
¶ 16       On appeal, plaintiffs contend that nothing in the Policy allows defendant to set off the
       amount it owes under the Personal Property coverage by the amount it had paid under the
       Dwelling coverage. Specifically, plaintiffs argue that their $123,765.68 personal property
       claim must be evaluated independently of the $174,191.24 defendant paid to Wells Fargo
       under the Dwelling coverage, and that defendant had no independent cause of action to
       recover any overpayment on the Dwelling coverage. Plaintiffs also argue in the alternative
       that if defendant was entitled to bring a cause of action against them for setoff, summary
       judgment was inappropriate because there is at least a question of fact regarding the amount
       plaintiffs spent on repairs and the value of their labor.
¶ 17       Summary judgment is only appropriate where the “pleadings, depositions, and
       admissions on file, together with the affidavits, if any, show that there is no genuine issue as
       to any material fact and that the moving party is entitled to a judgment as a matter of law.”

                                                 -4-
       735 ILCS 5/2-1005(c) (West 2010); Williams v. Manchester, 228 Ill. 2d 404, 417 (2008).
       Summary judgment is a drastic measure and should only be allowed where the right of the
       moving party is clear and free from doubt. Williams, 228 Ill. 2d at 417. We review the trial
       court’s grant of summary judgment de novo. Merca v. Rhodes, 2011 IL App (1st) 102234,
       ¶ 40 (citing Williams, 228 Ill. 2d at 417).
¶ 18        An insurance contract is a contract of indemnity. West American Insurance Co. v.
       Yorkville National Bank, 238 Ill. 2d 177, 200 (2010) (citing Imperial Fire Insurance Co. of
       London v. Coos County, 151 U.S. 452, 462 (1894)). The purpose of damages stemming from
       a contract breach is to place the nonbreaching party in the position he would have been in
       had the contract been performed, but not to place him in a better position or provide him with
       a windfall recovery. Feldstein v. Guinan, 148 Ill. App. 3d 610, 613 (1986). The law does not
       allow for an insurance loss to turn into a profit because doing so would encourage arson or
       neglect. See, e.g., Farmers Automobile Insurance Ass’n v. St. Paul Mercury Insurance Co.,
       482 F.3d 976, 978-79 (7th Cir. 2007) (“[n]o insurance company would knowingly write a
       policy that would enable the insured to trigger coverage any time it wanted a windfall”).
¶ 19        As a preliminary matter, we address plaintiffs’ argument that defendant is not entitled to
       set off the amount it had paid to Wells Fargo, less the $30,837.61 expended for repairs,
       against plaintiffs’ $123,765.68 personal property claim. Because this is a contract action, a
       setoff ordinarily would be allowed if a plaintiff was paid more than his damages. See Walker
       v. Ridgeview Construction Co., 316 Ill. App. 3d 592, 596 (2000) (compensation awarded in
       a breach of contract action should not provide a plaintiff with a windfall). The term “setoff
       “ has two distinct meanings. First, a “setoff” may refer to a situation when a defendant has
       a distinct cause of action against the same plaintiff who filed suit against him, which is
       subsumed procedurally under the concept of counterclaim. See Thornton v. Garcini, 237 Ill.
       2d 100, 113 (2009). Under this meaning, a setoff may refer to a situation where the defendant
       claims that the plaintiff has done something that results in a reduction in the defendant’s
       damages. Thornton, 237 Ill. 2d at 113. “When a defendant pursues this type of setoff, the
       claim must be raised in the pleadings.” Thornton, 237 Ill. 2d at 113.
¶ 20        Under its second meaning, a “setoff” may refer to a defendant’s request for a reduction
       of the damage award because a third party has already compensated the plaintiff for the same
       loss. Thornton, 237 Ill. 2d at 113. For example, this may occur when a codefendant who
       would be liable for contribution settles with the plaintiff. Thornton, 237 Ill. 2d at 113. A
       defendant may raise this type of setoff at any time. Thornton, 237 Ill. 2d at 113.
¶ 21        Plaintiffs argue that the trial court erred in crediting defendant with a setoff in the amount
       defendant paid to Wells Fargo under the Policy less the amount actually expended for repairs.
       In setting forth this argument, plaintiffs rely on Fittje v. Calhoun County Mutual County Fire
       Insurance Co., 195 Ill. App. 3d 340 (1990).
¶ 22        In Fittje, a married couple entered into a contract for deed to purchase a home. Fittje, 195
       Ill. App. 3d at 342. The couple procured an insurance policy that named both themselves and
       the sellers. Fittje, 195 Ill. App. 3d at 342-43. Less than a year later, the home was destroyed
       by a fire. Fittje, 195 Ill. App. 3d at 343. The insurer paid $56,930 to the sellers under the
       policy but denied coverage to the couple because the insurer’s investigation suggested that


                                                  -5-
       the fire had been intentionally started by the wife. Fittje, 195 Ill. App. 3d at 343. The couple
       filed suit, seeking enforcement of the coverage under the policy. Fittje, 195 Ill. App. 3d at
       343. The insurer filed a counterclaim against the couple in the amount of $56,930, the sum
       it had paid to the sellers. Fittje, 195 Ill. App. 3d at 343. The trial court found that the husband
       was an innocent insured who was not responsible for the fire and, under the innocent-insured
       doctrine, awarded him half of the coverage due under the policy ($50,992), then set off the
       amount paid to the sellers ($56,930). Fittje, 195 Ill. App. 3d at 345. The couple appealed.
¶ 23        The Fourth District Appellate Court affirmed the trial court’s decision but held that the
       setoff could not be applied to the sum awarded to the husband for the loss of his personal
       property and living expenses. Fittje, 195 Ill. App. 3d at 346. In doing so, the court noted that
       the insurer would avoid liability for the innocent insured’s personal property and living
       expense coverage if the insurer were permitted to set off the entire amount it paid to the
       sellers. Fittje, 195 Ill. App. 3d at 346. The court in Fittje also noted that such a result would
       “abrogate[ ] the innocent-insured doctrine and permit[ ] the insurer to escape a portion of its
       contractual obligation.” Fittje, 195 Ill. App. 3d at 346. The court refused to “permit such a
       result to stand” and applied the setoff only to the innocent husband’s recovery for damage
       to the home. Fittje, 195 Ill. App. 3d at 346. In reaching this conclusion, the Fittje court
       reiterated that a “setoff is not to indemnify the insurer for sums paid on behalf of the
       plaintiffs, but to prevent a multiple recovery by different parties for a single loss.” Fittje, 195
       Ill. App. 3d at 347.
¶ 24        Here, unlike Fittje, the innocent-insured doctrine is not implicated and we are not
       confronted with the task of reaching an equitable result for an innocent spouse. Rather, this
       case concerns a basic indemnity analysis under the Policy. Notably, the Policy here does not
       preclude a common law setoff, regardless of whether it is across coverage lines. However,
       even assuming that a setoff would not be allowed under the second definition found in
       Thornton because defendant’s coverage for the third party (Wells Fargo) was not for the
       “same loss,” a setoff would still be allowable under the first definition set forth in Thornton
       because it is a separate action brought by way of counterclaim. We note that defendant here
       pursued this type of setoff by raising it in a counterclaim against plaintiffs. As a result, the
       trial court did not err in finding that defendant would be entitled to a setoff in the event that
       the amount it paid exceeded the cost of repair. That said, we next consider whether the trial
       court could resolve this question based on the pending cross-motions for summary judgment.
¶ 25        After carefully reviewing the record, we find that the trial court improperly entered
       summary judgment as we believe there remains a genuine issue of material fact as to the
       amount actually expended for repairs to the home. The court essentially ruled that plaintiffs
       suffered no loss and would receive a windfall in the absence of a setoff. In coming to this
       conclusion the court relied on a supposed stipulation that only $30,837.61 was expended to
       restore the property. The court stated, “[f]or the purposes of summary judgment, the parties
       stipulated the following: (1) the actual cash value of Plaintiffs’ personal property claim is
       $123,765.68; (2) Plaintiffs spent $30,837.61 to repair the property; (3) Plaintiffs’ damages
       total $154,603.29; and (4) Plaintiffs received $182,586.24 for damages caused by the fire.”
       However, the parties agreed at oral argument that no such stipulation existed and there is no
       written stipulation in the record. In fact, plaintiffs refused to comply with discovery requests

                                                  -6-
       with regard to repairs, claiming that it was irrelevant as they were no longer pursuing a
       structural loss claim. Defendant filed a motion to bar evidence of such repairs but that motion
       was not ruled upon. Plaintiffs contest the $30,837.61 figure and claim much higher costs,
       including labor.
¶ 26       Whether or not plaintiffs actually spent more than the $30,837.61 claimed by defendant
       is a genuine issue of material fact precluding summary judgment, as that figure must be
       determined to conclude whether or not plaintiffs have received a windfall. That figure needs
       to be determined in the trial court unless the court agrees that plaintiffs’ refusal to cooperate
       in discovery barred them from asserting a higher number. As a result, we direct the trial court
       upon remand to first decide defendant’s motion to bar and, if denied, to decide the amount
       actually expended for repairs without referring to a stipulation that does not appear to be in
       the record or agreed to by the parties.

¶ 27                                     CONCLUSION
¶ 28       We conclude that the trial court properly found that defendant was allowed to set off the
       amount it paid to Wells Fargo less the amount expended for repairs but erred in granting
       summary judgment to defendant because there remains a genuine issue of material fact as to
       the amount actually expended for repairs. We remand for further proceedings consistent with
       this opinion.

¶ 29       Reversed and remanded with directions.




                                                 -7-
