Find Legal Information

First Division
June 21, 2004

Plaintiff-appellant Chatham Corporation (Chatham) appeals from orders of the circuitcourt of Cook County granting summary judgment to defendant-appellee Zurich AmericanInsurance Company (Zurich) as to Chatham's claims of breach of an insurance contract, waiver,and estoppel, and dismissing with prejudice Chatham's claim seeking a declaratory judgment ofbreach of contract.

Chatham, a company based in Chicago Heights, Illinois, was in the business of sterilizingmedical products in Richmond, Virginia, through a subsidiary corporation known as SterilizationServices of Virginia, Inc. (SSV). SSV was an additional insured on a commercial propertyinsurance package Chatham obtained from Zurich in 1996 with the assistance of Chatham'sinsurance broker defendant Dann Insurance (Dann). Zurich and Dann were also located inIllinois. The Zurich policy covered loss of or damage to the SSV sterilization facility in Virginiaand provided additional coverage for "Extra Expense," which was defined in the written contractas "necessary expenses you incur during the 'period of restoration' that you would not haveincurred if there had been no direct physical loss or damage to [covered] property." The policyindicated "you" was a reference to the named insured, Chatham, and its subsidiaries, includingSSV, as additional insureds. The policy did not include definitions of the words "incur" or"necessary."

An equipment explosion on June 13, 1997, shut down the SSV facility for seven months. Zurich was immediately notified of the explosion and paid for the facility's reconstruction andabout $1 million in "extra expenses" claimed by the insured, but it rejected about $1 million inadditional "extra expenses." More specifically, during the restoration period, SSV could notsterilize the products of its main customer, a corporation now known as Maxxim Medical, Inc.(Maxxim). SSV's contract with Maxxim required SSV to find alternate sterilization facilities andto pay the cost of shipping Maxxim's unsterilized goods from SSV to the alternate facilities(Maxxim's "inbound freight"). SSV performed these contractual obligations, and Zurichreimbursed SSV for the resulting extra expenses. However, SSV was not contractually obligatedto pay and never paid the costs of shipping Maxxim's sterilized products from the alternatefacilities (Maxxim's "outbound freight") to Maxxim's customers. Zurich concluded that becauseSSV was not contractually required to pay Maxxim's outbound freight costs, those costs were not"necessary," and, therefore, not covered extra expenses. In addition, when SSV and Maxximsued each other in federal district court in Richmond, Virginia, regarding their obligations undertheir product sterilization contract, the judge presiding over their dispute also concluded that SSVwas not contractually obligated to pay Maxxim's outbound freight expenses and rejectedMaxxim's claim for those expenses. Sterilization Services of Virginia v. Maxxim Medical, Inc.,No. 3:01CV787, slip order at 18 (E.D Va. June 24, 2002). The federal judge reasoned that thesterilization contract specified "that SSV's obligation [was] to pay the 'difference between thecost of shipping to [SSV's] Virginia Facility and the cost of shipping to any alternate facility,' "and that it would be improper to "read into that clause the phrase 'and from' because that is notthe language the parties chose and that is not the obligation imposed on SSV by this contract." Sterilization Services of Virginia, No. 3:01CV787, slip order at 15 (E.D Va. June 24, 2002). Further, a court "cannot make a new contract for the parties, but must construe the language aswritten." Sterilization Services of Virginia, No. 3:01CV787, slip order at 15 (E.D Va. June 24,2002). The federal judge pointed out that if SSV was actually required to reimburse Maxxim forall expenses incurred when SSV could not process product at its own facility, there would havebeen no reason to detail the specific expenses that SSV was obligated to pay under thosecircumstances. Sterilization Services of Virginia, No. 3:01CV787, slip order at 17 (E.D Va. June24, 2002). The judge also considered whether SSV was equitably estopped from raising itscontractual defenses to Maxxim's suit, and determined there was "no evidence of anyrepresentation or misrepresentations made to Maxxim. Maxxim was merely advised to keep trackof its costs." Sterilization Services of Virginia, No. 3:01CV787, slip order at 19 (E.D Va. June24, 2002).

In May 2000, Chatham filed a multicount complaint against Zurich in the circuit court ofCook County based on Zurich's refusal to pay SSV for the outbound freight costs incurred byMaxxim. One of the counts in this initial pleading sought a declaration that Zurich's refusal was abreach of the insurance contract. Judge Richard A. Siebel sua sponte dismissed the declaratoryjudgment claim with prejudice, stating that it was actually a breach of contract claim, and gaveChatham leave to amend. Chatham's second amended complaint included two breach of contractcounts (counts I and VI), waiver (count II) and estoppel allegations (count III), and thepreviously dismissed declaratory judgment count (count IV). The parties filed cross-motions forsummary judgment as to one of the breach of contract counts and the waiver and estoppel counts(counts I, II, and III), and after briefing and oral argument, Judge Paddy H. McNamara resolvedthe cross-motions in Zurich's favor, indicating that she agreed with the federal district court'sanalysis and conclusion that SSV was not contractually obligated to pay Maxxim's outboundfreight costs. At a later date, Judge McNamara dismissed the declaratory judgment count aspreviously dismissed by Judge Siebel (count IV) and granted Zurich's oral motion for summaryjudgment as to the additional breach of contract count (count VI). Chatham then voluntarilywithdrew the remaining counts of its second amended complaint (counts V and VII). We alsonote that Chatham filed suit against Dann in the circuit court of Cook County, asserting insurancebroker malpractice and negligence, and that the action was consolidated with the Zurich suit, butis still pending.

In this appeal from the disposition of its action against Zurich, Chatham first argues thesterilization contract is not relevant to the question of extra expense coverage, and that if Zurichwanted to incorporate the terms of the sterilization contract into the insurance contract, Zurichshould have done so at drafting. In contradiction to Chatham's prior contention that there wereno material facts in dispute and that cross-motions for summary judgment could be resolved inChatham's favor, Chatham now contends "necessary" is an ambiguous term in the insurancecontract which should be construed against Zurich, as the drafting party. Chatham asserts it mayrecover Maxxim's outbound freight costs as expenses "necessary" to facilitate ongoing customerservice to Maxxim, even though Maxxim alone bore the expenses. Chatham concludes thatZurich breached its contractual obligation to pay the extra expenses and that the trial judge erredin granting summary judgment to Zurich on the breach of contract claim asserted as count I ofChatham's second amended complaint. Zurich responds that the facts surrounding Chatham'sinsurance claim are pertinent to the question of coverage and that the insurance contract'sunambiguous requirements that extra expenses be both "necessary" and "incur[red]" by theinsured were never met.

We note that count VI of the second amended complaint, entitled "breach of contract,"was a variation on count I, and that it is undisputed the trial judge granted Zurich's oral motionfor summary judgment as to count VI "for the same reasons" the trial judge granted Zurich'swritten motion for summary judgment as to count I. Further, Chatham acknowledges it is relyingon the "same reasons" and "same authorities" in defense of both counts. Accordingly, we willresolve the counts together, rather than engaging in subsequent, repetitive discussion of count VI. The standard of review of an order granting summary judgment is de novo. Levitt v.Hammonds, 256 Ill. App. 3d 62, 64, 628 N.E.2d 280, 282 (1993). A reviewing court will reversethe entry of summary judgment if it determines that the prevailing party was not entitled tojudgment as a matter of law or that a material question of fact exists. Levitt, 256 Ill. App. 3d at64, 628 N.E.2d at 282. While the opposing party need not prove its case, it must present afactual basis that would arguably entitle it to a judgment. Lyon Metal Products, L.L.C. v.Protection Mutual Insurance Co., 321 Ill. App. 3d 330, 338, 747 N.E.2d 495, 502 (2001). Iffrom the pleadings, depositions, affidavits, and admissions on file, the plaintiff fails to establish anelement of his cause of action, summary judgment for the defendant is proper. Lyon MetalProducts, 321 Ill. App. 3d at 338, 747 N.E.2d at 502.

Further, the construction of an insurance contract is a question of law. Lapham-HickeySteel Corp. v. Protection Mutual Insurance Co., 166 Ill. 2d 520, 529, 655 N.E.2d 842, 846(1995). A court must determine the intent of the parties when construing their contract. Lapham-Hickey Steel, 166 Ill. 2d at 529, 655 N.E.2d at 846. In order to determine the meaningof the policy and the intent of the parties, " 'the court must construe the policy as a whole[citations], with due regard of the risk undertaken, the subject matter that is insured and thepurposes of the entire contract.' " Lapham-Hickey Steel, 166 Ill. 2d at 529, 655 N.E.2d at 846,quoting Outboard Marine Corp. v. Liberty Mutual Insurance Corp., 154 Ill. 2d 90, 108, 607N.E.2d 1204 (1992). "A policy term is not ambiguous because the term is not defined within thepolicy or because the parties can suggest creative possibilities for its meaning." Lapham-HickeySteel, 166 Ill. 2d at 529, 655 N.E.2d at 846. In addition, a court may not read an ambiguity into apolicy just to find in favor of the insured. Lapham-Hickey Steel, 166 Ill. 2d at 530, 655 N.E.2d at846. A policy provision is considered ambiguous if it is subject to more than one reasonableinterpretation. Outboard Marine, 154 Ill. 2d at 108, 607 N.E.2d at 1212. "If the words in thepolicy are unambiguous, a court must afford them their plain, ordinary, and popular meaning." Outboard Marine, 154 Ill. 2d at 108, 607 N.E.2d at 1212. "If the words of a policy canreasonably be given their plain, ordinary, and popular meaning, the provisions should be appliedas written and the parties should be bound to the agreement they made." Western Casualty &Surety Co. v. Brochu, 105 Ill. 2d 486, 495, 475 N.E.2d 872, 876 (1985).

We are unable to find any ambiguity in the contract language regarding extra expenses. The coverage was limited to "necessary expenses you incur during the 'period of restoration.' "According to the policy, "you" is a reference to Chatham as named insured, and its subsidiaries asadditional insureds, including SSV. Although the policy does not specifically define the word"necessary," that word is not ambiguous and has a plain, ordinary, and popular meaning of "beingessential, indispensable, or requisite." Random House Webster's Unabridged Dictionary 1883-84(1998). This commonly understood meaning encompasses expenses that the named andadditional insureds to the policy, Chatham and SSV, were required to incur during thereconstruction of the sterilization facilities. It does not encompass expenses that the insureds mayhave wanted to incur on a gratuitous or voluntary basis, which would have been the opposite of"necessary." It also does not encompass expenses that other, nonparties to the contract wererequired to incur during the facility reconstruction period. The only party required to pay for thecost of shipping Maxxim's sterilized products away from the alternate sterilization facilities wasMaxxim itself, not Chatham or SSV. In addition, Chatham has failed to address the unambiguousrequirement that Chatham or SSV actually "incur" the expenses Chatham now seeks to "recover." "Incur" is another term that was not defined in the contract, but it has a plain, ordinary, andpopular meaning of "to become liable or subject to through one's own action; [to] bring or takeupon oneself." Random House Webster's Unabridged Dictionary 969 (1998). Chatham neverbecame liable or subject to the expense of Maxxim's outbound freight. Maxxim did.

There is a general and well-established rule that a court "will not add terms to the contractof insurance which the parties have not included in the language of the policy." Walsh v. StateFarm Mutual Automobile Insurance Co., 91 Ill. App. 2d 156, 164, 234 N.E.2d 394, 399 (1968). Accordingly, we cannot read a provision into Chatham's insurance contract with Zurich thatrequires Zurich to pay expenses incurred by a third party. We cannot conclude from the languageof the contract that at the time of contracting Chatham intended to obtain coverage for thirdparties it did business with, or to undertake the expense of their coverage, or that Zurich intendedto undertake the risk of extending coverage to unknown third parties. Even though Maxxim'soutbound freight expenses were a consequence of the explosion at the Virginia sterilizationfacilities, they were not covered by the insurance contract at issue.

Our conclusion is not swayed by Chatham's citation to Kay County Excise Board v.Atchison, T. & S.F. Ry. Co., 185 Okla. 327, 328, 91 P.2d 1087, 1088 (1939), for the propositionthat the word " 'necessary' must be considered in the connection in which it is used, as it is a wordsusceptible of various meanings. It may import absolute physical necessity or inevitability, or itmay import that which is only convenient, useful, appropriate, suitable, proper, or conducive tothe end sought." The issue in that tax protest case was whether a board of education, which wasgiven broad powers and discretion to maintain a suitable school system and "to incur all expenses,within the limitations provided by law, necessary to carry out and fulfull all powers [statutorily]granted," was authorized to buy band uniforms. Kay County, 185 Okla. at 327, 91 P.2d at 1087. We consider the Oklahoma court's determination that band uniforms were "convenient, useful,appropriate, suitable, proper, or conducive to the end" sought in the teaching of band music, andtherefore "necessary" for instruction in band music (Kay County, 185 Okla. at 328, 91 P.2d at1088), to be a rather strained interpretation of the word "necessary." In addition, a four-judgedissent indicated the majority's interpretation was contrary to prior decisions of Oklahoma andother states' courts. Kay County, 185 Okla. at 330, 91 P.2d at 1090 (Gibson, J., dissenting). Furthermore, it cannot be seriously contended that expenses Chatham has never been willing toincur itself were "convenient, useful, appropriate, suitable, proper, or conducive to" maintainingChatham's relationship with its customer.

In addition, another court interpreting insurance policy language nearly identical to thelanguage at issue also determined that "necessary" is not an ambiguous term and that it limitedcoverage to extra expenses that were incurred by the insured as " '[a]bsolutely essential ***needed to achieve a certain result or effect; requisite,' " due to the suspension of the insured'soperations. Butwin Sportswear Co. v. St. Paul Fire & Marine Insurance Co., 534 N.W.2d 565,567 (Minn. App. 1995). In that case, the insured manufacturer proved $521,103 in losses after anequipment fire, and then sought $72,797 in fees charged by a service it had hired to assist withpresenting the claim to the insurer. Butwin Sportswear, 534 N.W.2d at 567. The insurer rejectedthe third party fees, and the court agreed the service's fees were not an essential expense. ButwinSportswear, 534 N.W.2d at 567. The court reasoned that the insurer might well have paid all thecovered losses without the service's involvement in the claim, and that the insured "engaged [theservice] primarily in anticipation of conflict and to assure itself a maximum recovery, not out ofnecessity." Butwin Sportswear, 534 N.W.2d at 567. This additional analysis further supports ourinterpretation of the language involved here. Chatham contends this case stands for theproposition that expenses which necessarily result from a suspension of the insured's operationsare covered, and Maxxim's outbound freight expenses are covered because they "would not havebeen incurred but for the explosion on June 13, 1997." Chatham's argument is ineffective becauseit fails to address the policy language requiring that the expenses were necessarily incurred by theinsured, not by some third party.

We conclude that Chatham failed to establish any material facts which would arguablyentitle it to judgment on its claims that Zurich breached the insurance contract by refusing to paySSV or Chatham for Maxxim's outbound freight expenses under the extra expense portion of thepolicy. Zurich was entitled to judgment as a matter of law on those claims (counts I and VI). Accordingly, the cross-motions for summary judgment were properly resolved in Zurich's favor.

Chatham is also arguing that waiver and estoppel occurred (1) about two weeks after theequipment explosion when Bill Lee of Zurich agreed with Chatham's insurance brokers, CharlesDann and Anna Lively of Dann, that all the freight charges were extra expenses and that it wasallowable if Maxxim rather than SSV kept track of them, and (2) when Zurich issued three checksto Chatham between December 4, 1997, and August 20, 1998, in partial payment of the extraexpenses, without specifying which particular expenses it was paying. Chatham contends thecircuit court erred in granting summary judgment to Zurich on Chatham's waiver and estoppelclaims, and that we should reverse and remand with instructions to grant Chatham's cross-motionfor summary judgment. Zurich responds that Chatham has mischaracterized an initialconversation between Zurich and Dann regarding nothing more than how the claim would bepresented, that the three partial payments were made after Zurich issued a reservation of rightsletter on November 5, 1997, and that the record shows Zurich continually questioned its coverageof Maxxim's outbound freight expenses for at least two years before Chatham filed suit in CookCounty.

The following additional facts are pertinent to the waiver and estoppel arguments.

We disregard Chatham's assertion of "fact" that Zurich conceded that it would havecovered all inbound and outbound freight charges as SSV's "extra expenses" if Maxxim haddelivered its unsterilized products to SSV's facility for SSV's shipment to and from the alternatesterilization facilities. Chatham supported this assertion only by citing paragraph 13 of its secondamended complaint, yet in its answer to the pleading, Zurich denied that particular allegation. The assertion is actually an argument, and therefore it should not have been included in thestatement of facts section of Chatham's brief. See 188 Ill. 2d R. 341 (e)(6).

When Anna Lively of Dann was deposed on December 18, 2001, she indicated she hadbeen working in the insurance industry since 1973, and had been a Dann account executiveresponsible for Chatham's account since 1985. Dann and Zurich were immediately notified of theequipment explosion on Friday, June 13, 1997, and the following week, she and Chatham'srepresentative Thomas Morthorst discussed the fact that SSV was contractually required tocontinue processing for some customers, including Maxxim. The next day, Lively and CharlesDann of Dann spoke with Bill Lee at Zurich and informed him that it was extremely importantthat SSV continue to process product for its biggest customer, Maxxim. Lively did not have acopy of SSV's contract with Maxxim, and neither did Lee, and she was relying on what Morthorsthad said. According to Lively, "[O]ur question to [Lee] was, did we have to actually put all ofthe bills and process everything through [SSV] or could we let Maxxim keep track of all the extraexpenses and then present the claim." In response, "[Lee] told us that we -- he agreed that he feltthat that was an extra expense, but that we really needed to talk to Jack Healy, that Jack was theadjustor and that everything needed to be run through Jack, and he gave us Jack's phone number." When asked whether the focus of the June 25th conversation with Bill Lee was "how SSV shouldprocess the paperwork that was going to be coming because of Maxxim's claim," Livelyresponded: "The focus was whether SSV should handle it or if we could let Maxxim keep trackof their own expenses and then just give us an accounting of the extra expense over and abovetheir normal operating expenses." Further:

"Q. So rather than have them bill SSV and SSV pays it andthen submits it to Zurich, could Maxxim just go ahead and keeptrack of it and submit it to Zuric[h] themselves?

A. Well, that's correct.

Q. Okay. At that point did you believe that everything thatMaxxim submitted with regard to their claim would be coveredunder the Zurich policy?

A. I had no way of knowing, since I didn't know what theywould submit.

***

Q. So [Zurich] couldn't have made any determinations withregard to what was and what wasn't covered at that point?

A. That's correct.

* * *

Q. Okay. So you still had an expectation that Zurich wouldadjust this loss, whether it's put through Maxxim or SSV, accordingto its policies, terms and conditions, correct?

A. That's correct."

Lively and Dann called Jack Healy at Zurich that same day:

"We explained that we had talked to Bill Lee, who had toldus to contact Jack, because he was the main clearing person for theclaim. And that Bill -- we explained the situation with [SSV]. Wetold him that Bill felt that it was extra expenses and that he didn'thave any objection to us having Maxxim keep track of the expensesas long as Jack agreed.

Jack said that he needed to contact Shore & Asimov [a firmthat would help Zurich process the claim] and talk to KeithStrohecker, and as long as he had no objections, it would be fine. And we left it that he would get back to us if Keith had objections,otherwise that would be the way that the claim would be run, andthat that would be communicated to Tom [Morthorst.]"

Neither Strohecker nor Healy subsequently contacted Dann to indicate there was anobjection to how the claim would be handled. Lively thought Zurich "actually liked handling itthis way better, because they could independently audit the numbers." When asked whetherHealy had given any indication that there would be extra expense coverage, Lively responded:

"He didn't really say that there was coverage, he just saidthat -- I'm trying to remember. That it would be handled as anextra expense, and that we could put it through and that Maxximcould keep track of the expenses."

Lively also indicated that as an experienced insurance broker, she knew when she spokewith Healy that Zurich would "do an adjustment of any claim that was submitted by eitherMaxxim or SSV with regard to the business interruption and extra expense claim." She also knewthat Zurich "would have to wait to receive the actual claim before they would be able to makethese determinations." When Lively was asked, "[W]ould any expense that the insured covers tokeep [a] customer happy in the event of a loss be an extra expense," she responded, "I think that itwould be subject to adjustment just as the client's claim would be adjusted."

Lively relayed her conversation with Healy to Morthorst. When she "informed[Morthorst] that Zurich had agreed to let Maxxim keep track of the expenses," she did not"provide any other direction or instruction" to him. She worked for Chatham, not Zurich, and shehad no authority to make coverage decisions for Zurich. She had experience with many businessinterruption extra expense claims, although she had never been involved in a claim of this size. Dann or SSV had numerous conversations with Healy with regard to the outbound freightcharges "and about whether it was going to be covered or not or what portions of it they weregoing to cover. It was [Dann's] contention that as long as it was necessary, that it should becovered. But we all [a]greed not to dwell too much on the coverage issues until the numberscould be finalized."

During the claims process, Zurich did not take a "hard line position" that there was nocoverage for outbound freight, but Healy did bring it up in several conversations and indicatedcoverage might be denied because SSV was not contractually obligated to Maxxim for thosecharges. Morthorst gave Lively a copy of a Maxxim letter indicating that Zurich met withMaxxim on August 11, 1998, and that Maxxim was displeased with Zurich's interpretation of theoutbound freight coverage. Further, Healy wanted Maxxim to make a claim with its owninsurance company and then let that insurer subgrogate against Zurich. During a meeting withHealy, Lively called Maxxim's insurance broker, who indicated that he did not want to make aclaim on Maxxim's insurance coverage because Maxxim was not responsible for the explosion. Atthat point, Healy "backed down." Lively thought the issue may have come up again later and thatMaxxim had again refused to file a claim with its own insurer. Healy also wanted to arbitrate theoutbound freight question, but Lively thought Maxxim was unwilling to participate.

Thomas Morthorst, the chief financial officer and a vice president of a Chatham subsidiaryresponsible for handling the insurance claim, indicated during his deposition on December 20,2001, that "[t]he outbound freight has been a point of contention for years." No one ever toldMorthorst that if SSV rather than Maxxim shipped and paid for Maxxim's freight and submittedthe records to Zurich that Zurich would pay the charges. The issue was not about who wouldkeep the records, but whether there was coverage for outbound freight. He had known as earlyas the summer of 1998 that Zurich had not determined whether the outbound freight was covered. He knew that Shore & Asimov had been "backing out" the outbound freight numbers from theschedules they submitted to Zurich for payment under the policy, although he did not realize thiswhen Chatham received the first partial payments from Zurich.

The record includes a letter from Healy to Morthorst dated November 5, 1997, and aletter from Healy to Maxxim dated November 19, 1997, regarding the claimed expenses. In bothletters, Zurich reserved its rights and defenses with respect to the ongoing expense claim. Duringhis deposition, Morthorst acknowledged that on or about November 6, 1997, he received thereservation of rights letter addressed to him. He asked Healy to withdraw it, but Healy refused. With Morthorst's agreement, Lively sent a written objection to Healy on or about November 7,1997. Healy's letter to Maxxim indicated that Zurich would be undertaking "a thoroughinvestigation of Maxxim's claim." Zurich offered to submit the outbound freight issue to bindingarbitration proceedings, at Zurich's expense, but Maxxim said no.

The record also includes a letter from Healy to Maxxim dated December 16, 1997,indicating that Zurich "must confirm that the extra expenses submitted meet the terms andconditions of the policy." Healy concluded the letter by indicating that Zurich was reserving all ofits rights and defenses with regard to Maxxim's ongoing expenses, and he sent a copy of the letterto Lively.

In a letter to Maxxim dated February 28, 1998, which Healy copied to Lively andMorthorst, Healy acknowledged Zurich's receipt of Maxxim's claim submission for the periodfrom June 13, 1997 to January 18, 1998, which was in excess of $3.3 million. Healy indicatedthat Zurich's analysis and review of the claim was "continuing," but "based on our preliminaryreview of the Submission, it appears that various items may not be covered under the ZurichInsurance policy with SSV. The amount of these items may be significant." Healy suggested"these non-covered items" might be covered under Maxxim's own business income and extraexpense coverage with the Indemnity Insurance Company of North America (IINA), and heoffered to meet with an IINA adjustor in order to expedite resolution of the issue. He concludedthe letter with reservation of rights language.

Morthorst also indicated during his deposition that he told Maxxim that Chatham wouldattempt to get Zurich to pay the outbound freight, but he never represented that if Zurich did notpay the charges, SSV or Chatham would pay them. There was no agreement between Chathamand Maxxim with regard to the outcome of Chatham's suit against Zurich.

Morthorst was again deposed on May 15, 2002, in conjunction with the SSV and Maxximcontract dispute in federal district court. Morthorst acknowledged that SSV had never paid anyof Maxxim's outbound freight charges, and then the following exchange occurred:

"Q. So you want your insurance company to pay youmoney for something you did not incur, right?

A. Yes, because that's covered under my policy.

Q. And then you don't want to give the money to thepeople who incurred the expense?

A. That is not covered under the contract.

Q. So in your analysis, you think it would be fair and ***permissible for SSV *** just to keep the money?

* * *

A. There's nothing in my policy that says what I must dowith the money that I'm entitled to under my insurance policy.

Q. Do you think that's fair?

A. Yes, I think that's fair."

Waiver consists of either an express or implied voluntary and intentional relinquishment ofa known right. Ames v. Crown Life Insurance Co. of Toronto, Canada, 85 Ill. App. 3d 203, 204,406 N.E.2d 222, 224 (1980). "It is essentially unilateral in character, focusing on an insurer'sconduct, and requiring no prejudice to, nor detrimental reliance by, an insured. [Citation.] Toconstitute a waiver, the words or conduct of an insurer must be inconsistent with the intention torely on the requirements of the policy." Ames, 85 Ill. App. 3d at 204-05, 406 N.E.2d at 224.

We reject Chatham's contention that waiver occurred during the conversation between BillLee of Zurich and Anna Lively and Charles Dann of Dann shortly after the equipment explosionshut down SSV's processing capabilities. Lively's deposition testimony makes clear that Leenever indicated that Zurich would cover Maxxim's outbound freight expenses. Lee indicated thathe would not be adjusting the claim and that the Dann representatives would have to contact theZurich representative charged with adjusting responsibility, Jack Healy. Lively, an insuranceprofessional with experience in processing business interruption claims, acknowledged at herdeposition that she "had no way of knowing" when she talked with Lee whether all of Maxxim'sclaimed expenses would be covered by Zurich. She knew that Zurich would have to have theactual claim before Zurich could determine what would or would not be covered. Healy alsonever indicated that Zurich would cover Maxxim's outbound freight expenses. At most, Lee andHealy's statements regarding extra expenses were indications that Maxxim's freight costs could becategorized as extra expenses in the eventual claim, and Zurich would not deny coverage simplybecause SSV was not directly involved in the shipments. Nothing that Lee or even Healy saidduring those initial conversations with Lee and Dann was "inconsistent with the intention to relyon the requirements of the policy," and so waiver did not occur.

Similarly, Zurich's partial payments during the claims processing period do not constitutewaiver of the outbound freight claim. Zurich's payments were consistent with its determinationthat Maxxim's inbound freight expenses were necessarily incurred by SSV or Chatham, andtherefore covered under the Zurich policy. Zurich's payment of covered expenses cannotconstitute waiver of payment of noncovered expenses. In addition, the record reflects thepayments were made after Zurich issued reservation of rights letters. The record also reflects thatZurich repeatedly indicated to the Chatham, Dann, and Maxxim representatives, through letters,meetings, and telephone conversations, throughout the claims processing period in 1997 and 1998that Zurich was questioning outbound freight coverage. The record also reflects that Zurichencouraged Maxxim to make a claim with its own insurer, where Zurich believed Maxxim wouldreceive a favorable response. In short, Zurich's conduct was not "inconsistent with the intentionto rely on the requirements of the policy," and did not amount to waiver.

"To establish estoppel in an insurance context, the insured must show: (1) that he wasmisled by the acts or statements of the insurer or its agent; (2) reliance by the insured on thoserepresentations; (3) that such reliance was reasonable; and (4) detriment or prejudice suffered bythe insured based on the reliance." Dumenric v. Union Oil Co. of California, 238 Ill. App. 3d208, 213, 606 N.E.2d 230, 233-34 (1992). It is not necessary that the insurer intended to misleadthe insured in order for estoppel to apply. Dumenric, 238 Ill. App. 3d at 213, 606 N.E.2d at 233-34. "The burden of establishing prejudice rests with the insured and must be proved by clear,concise, and unequivocal evidence." Laycock v. American Family Mutual Insurance Co., 289 Ill.App. 3d 264, 269, 682 N.E.2d 382, 386 (1997)

Our earlier analysis of Lee and Healy's conversation with Dann and Lively is applicable toChatham's estoppel argument. The record in this case raises no question of material fact thatChatham was mislead by any of Zurich's statements. Analysis of the remaining elements ofestoppel is not necessary, but we also point out that Chatham fails to indicate how SSV changedits position as a result of Zurich's agreement to allow Maxxim to keep track of its expenses for thepurposes of the eventual claim submission.

The record discloses that Chatham failed to raise any material facts which would arguablyentitle it to judgment on its claims of waiver and estoppel (counts II and III). Instead, Zurichwas entitled to judgment on those claims as a matter of law. For these reasons, we affirm thecircuit court's resolution of those claims.

Chatham's final contention is that the first trial judge erred in sua sponte dismissing withprejudice Chatham's original declaratory judgment count, and the second trial judge erred indismissing the repled count as previously dismissed. Chatham cites authority regardingdeclaratory judgment actions and their disposition. See, e.g., Aetna Insurance Co. v. Janson, 60Ill. App. 3d 957, 377 N.E.2d 296 (1978); Chicago & Eastern RR. Co. v. Reserve Insurance Co.,99 Ill. App. 3d 433, 425 N.E.2d 429 (1981). However, because the count sought a declarationthat Zurich was liable for Maxxim's outbound freight under the extra expense coverage yet hadrefused to pay the expenses as claimed, we conclude the count was essentially a breach ofcontract claim. Our earlier determination that the unambiguous contract did not require Zurich topay Maxxim's outbound freight expenses sufficiently resolves Chatham's final contention.

For these reasons, the orders appealed from are affirmed.

Affirmed.

O'MALLEY, P.J., and McNULTY, J., concur.