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1-00-2581 

First Division
May 21, 2001

JUSTICE COHEN delivered the opinion of the court:

Appellant Bashar Zubi owned a grocery store known as American Food & Liquor, locatedat 1511-1515 West Roosevelt Road in Chicago. In December 1993, Zubi placed an application forinsurance on the store premises with an insurance broker, Intermodal Insurance Agency. Intermodalplaced Zubi's application with appellee Hull & Company (Midwest), Inc., for purposes of contractingwith an insurance carrier. Hull was the managing general agent for appellee Acceptance IndemnityInsurance Company, an insurance carrier located in Nebraska, and had full authority to bind coverageand cancel policies on Acceptance's behalf. In December 1993, John Szczesny, an account executiveat Hull, secured a policy of insurance on Zubi's behalf through Acceptance. In December 1994, Zubirenewed his policy with Acceptance through its agent, Hull. During the renewal period (inDecember 1994, and July 1995, respectively), Zubi's property sustained two minor arson fires. Acceptance paid both of these losses. Following notification of the July 1995 fire to Acceptance,Paula Flemming-Irons, an underwriter for Acceptance, contacted Szczesny and advised him to cancelZubi's policy. On July 17, 1995, Acceptance, through Szczesny at Hull, mailed to Zubi a notice ofAcceptance's election to cancel the policy. The notice of cancellation stated an effective cancellationdate of August 19, 1995, at 12:01 a.m. The notice was sent to Zubi at his last known mailing addressof 1000 South Loomis, Chicago, Illinois 60609, the address reflected on the relevant policydeclarations. Acceptance obtained a receipt of mailing from the United States Postal Service. Acceptance also returned the remaining amount of his premium to Zubi. On September 5, 1995,Zubi's store premises suffered a fire loss in excess of the $225,000 policy limit. Acceptance deniedcoverage for the September 5 loss predicated on the August 19 policy cancellation.

Zubi filed a four-count complaint in the circuit court of Cook County against Acceptance,Hull and Intermodal. Count I alleged breach of contract against Acceptance for failure to pay Zubi'sclaim. Count II alleged unreasonable and vexatious delay in settling Zubi's claim against Acceptanceunder section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1998)). Count III allegednegligent misrepresentation against Intermodal.⁽¹⁾ Count IV alleged negligent misrepresentationagainst Hull.

Zubi moved for summary judgment against Acceptance on count I. Acceptance filed itsresponse to Zubi's summary judgment motion and a cross-motion for summary judgment on countI, asserting as an affirmative defense that the contract had already been canceled at the time Zubisought payment of his claim. The trial court denied Zubi's motion and entered summary judgmentin favor of Acceptance on count I.

Zubi then moved for leave to amend his complaint by adding a proposed count V. CountV further alleged breach of contract against Acceptance in the manner and method by which hispolicy was cancelled as opposed to alleging the lack of a contractual basis for cancellation as allegedin count I. Following briefing and argument, the court denied Zubi's motion to amend. Zubi thenfiled a second motion, seeking leave to file an amended count V, which the court subsequentlydenied. Acceptance then moved for summary judgment on count II of the complaint, which wasgranted. Hull moved for summary judgment on count IV, which was also granted.

On appeal, Zubi argues that the trial court erred: (1) in granting summary judgment toAcceptance on counts I and II of the complaint; (2) in granting summary judgment to Hull on countIV of the complaint; and (3) in denying Zubi leave to file an amended count V. We affirm.

1. Summary Judgment

"Where the matter or issue may be decided as a question of law, such as where the only issueconcerns the construction of an insurance policy, including its exclusionary provisions, summaryjudgment is a proper remedy." University of Illinois v. Continental Casualty Co., 234 Ill. App. 3d340, 343 (1992). Our review of an order granting summary judgment is de novo. North AmericanInsurance Co. v. Kemper National Insurance Co., No. 1-98-2673, slip op. at 6 (March 16, 2001). "Summary judgment is proper 'where the pleadings, affidavits, depositions, admissions and exhibitson file, when viewed in the light most favorable to the nonmovant, reveal that there is no genuineissue of material fact and that the movant is entitled to judgment as a matter of law.' " Natale v.Gottlieb Memorial Hospital, 314 Ill. App. 3d 885, 888 (2000), quoting Busch v. Graphic ColorCorp., 169 Ill. 2d 325, 333 (1996). The function of a reviewing court on appeal from a grant ofsummary judgment is limited to determining whether the trial court correctly concluded that nogenuine issue of material fact was raised and, if none was raised, whether judgment as a matter oflaw was correctly entered. Malanowski v. Jabamoni, 293 Ill. App. 3d 720, 724 (1997). "A court ofreview's determination as to whether the record supports a grant of summary judgment is one of law*** and may be based on any grounds called for by the record." In re Marriage of Palacios, 275 Ill.App. 3d 561, 568 (1995). "Summary judgment is a drastic means of disposing of litigation andtherefore should be allowed only when the right of the moving party is free from doubt." NorthAmerican Insurance Co., slip op. at 6. "Reversal of [an order granting] summary judgment *** iswarranted where, on review, a material issue of fact or an inaccurate interpretation of the law exists." North American Insurance Co., slip op. at 6.

A. Counts I and II

"When a contract is the subject of a summary judgment motion, 'the appropriateness ofsummary judgment will turn on the clarity of the contract terms under scrutiny.' " Old RepublicInsurance Co. v. Federal Crop Insurance Co., 947 F.2d 269, 274 (7th Cir. 1991), quotingInternational Surplus Lines Insurance Co. v. Fireman's Fund Insurance Co., No. 88-C320 (N.D. Ill. May 4, 1991). Before addressing the contract terms at issue, we first consider general principlesinvolved in the construction of contracts of insurance:

"An agreement reduced to writing must be presumed to reflectthe intention of the parties who signed it. [Citations.] To ascertain themeaning of [a] policy's words and the intent of the parties, the courtmust construe the policy as a whole with due regard to the riskundertaken, the subject matter that is insured, and the purposes of thecontract in its entirety. [Citations.] Illinois law governing theconstruction of insurance contracts dictates that, if a policy term issubject to more than one reasonable interpretation, any ambiguitymust be construed in favor of the policyholder. [Citation.] Where theterms of an agreement are plain and unambiguous, a court must affordthem their plain, ordinary and popular meaning. [Citations.] Inaddition, the absence of a definition does not render a policy termambiguous, nor is it ambiguous simply because the parties cansuggest creative possibilities for its meaning. [Citations.] Thealternate interpretation must also be reasonable. [Citation.] Althoughambiguities in an insurance policy will be construed against theinsurer, courts will not distort the language of a policy to create anambiguity where none exists. [Citation.] Whether an ambiguity existsis a question of law for the trial court to determine." (Emphasis inoriginal.) Smith v. Neumann, 289 Ill. App. 3d 1056, 1064 (1997).

See Board of Education of Maine Township High School District 207 v. International Insurance Co.,292 Ill. App. 3d 14, 17 (1997); International Surplus Lines Insurance Co. v. Pioneer Life InsuranceCo., 209 Ill. App. 3d 144, 148 (1990).

Count I of Zubi's complaint alleged breach of contract against Acceptance for failure to payZubi's claim.⁽²⁾ Acceptance asserted as an affirmative defense that the contract had already beencanceled prior to the occurrence of the fire damage for which Zubi sought payment. In ruling onZubi's and Acceptance's cross-motions for summary judgment on count I, the trial court stated in itsorder:

"Counsel *** agree[] that they have pointed the court to no decisiondirectly on point and what is here called for is a determination as amatter of law as to the terms of the subject contract. The court findsthat there is no ambiguity in the contract terms and that any ambiguityabout possible surplusages [sic] in the written notice of cancellationdoes not affect the substantive right of the defendant, Acceptance***, to cancel the surplus lines insurance policy as here that policywas cancelled. In short, on this record there are no genuine issues ofmaterial fact in dispute and plaintiff is not, and defendant, Acceptance *** , is entitled to the judgment sought as a matter of law."

Thus, the trial court found as a matter of law that Acceptance's cancellation of Zubi's coverage wasproper under the terms of the contract.

The question before the trial court in construing the terms of the policy (which is now beforeus de novo) was whether Acceptance had a contractual right to cancel Zubi's coverage. The contractprovisions at issue in this case are as follows:

"COMMON POLICY CONDITIONS

All Coverage Parts included in this policy are subject to the following conditions.

1. The first Named Insured shown in the Declarations may cancel this policy bymailing or delivering to us advance written notice of cancellation.

2. We may cancel this policy by mailing or delivering to the first Named Insured written notice of cancellation at least:

a. 10 days before the effective date of cancellation if we cancel for nonpayment of premium; or

3. We will mail or deliver our notice to the first Named Insured's last mailingaddress known to us.

4. Notice of cancellation will state the effective date of cancellation. The policy period will end on that date.

5.  If this policy is cancelled, we will send the first Named Insured any premiumrefund due. If we cancel, the refund will be pro rata. If the first NamedInsured cancels, the refund may be less than pro rata. The cancellation willbe effective even if we have not made or offered a refund.

6. If notice is mailed, proof of mailing will be sufficient proof of notice."

"THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT CAREFULLY.

CANCELLATION CHANGES

This endorsement modifies insurance provided under the following:

The following is added to the CANCELLATION Common Policy Condition:

If any one of the following conditions exists at any building that is Covered Property in this policy, we may cancel this Coverage Part by mailing or delivering to the first Named Insured written notice of cancellation at least five days before the effective date of cancellation.

1. Seasonal unoccupancy;

2. Buildings in the course of construction, renovation or addition, or

3. Buildings to which the Vacancy Permit endorsement applies.

Buildings with 65% or more of the rental units or floor area vacant or unoccupied are considered unoccupied under this provision.

B. After damage by a covered cause of loss, permanent repairs to the building;

1. Have not started, and

2. Have not been contracted for, within 30 days of initial payment of loss.

C. The building has:

1. An outstanding order to vacate;

2. An outstanding demolition order;

3. Been declared unsafe by governmental authority.

D. Fixed and salvageable items have been or are being removed from the building and are not being replaced. This does not apply to such removal that is necessary or incidental to any renovation or remodeling.

E. Failure to:

2. Pay property taxes that are owing and have been outstanding for more thanone year following the date due, except that this provision will not applywhere you are in a bona fide dispute with the taxing authority regardingpayment of such taxes."

Acceptance urges us to adopt the trial court's interpretation of these provisions, i.e., thatAcceptance had the right to cancel Zubi's coverage upon either 5 or 10 days' notice, if the contractwas cancelled for one of the reasons set forth in the policy, or upon 30 days' notice if the contractwas cancelled for "any other reason." Pointing to the notice of cancellation received from Hull, Zubiargues that "INCREASE IN HAZARD" was not a valid reason for cancellation of the policy, and thatthe trial court erred in granting summary judgment on that basis.

We begin with the plain language of the policy itself. We must give the words of the policytheir "plain, ordinary and popular meaning." Smith v. Neumann, 289 Ill. App. 3d 1056, 1064 (1997). Only if we find an ambiguity in the language of the policy may we fall back upon the rule ofconstruction requiring the interpretation of such an ambiguity in favor of the insured. Smith, 289 Ill.App. 3d at 1064. After a careful review of the entire policy, we find ourselves in agreement with thetrial court. There is no ambiguity in the cancellation provisions of the policy. The plain languageof those provisions -- "We may cancel this policy by mailing or delivering to the first Named Insuredwritten notice of cancellation at least *** " -- grants Acceptance the right to cancel upon propernotice to Zubi. Any cancellation by Acceptance is subject to certain time-based limitations: writtennotice must be provided to the insured 5 days before the effective date of cancellation if coverageis cancelled for any of the reasons set forth in the amendatory endorsement, 10 days before theeffective date of cancellation if coverage is cancelled for nonpayment of premium, and 30 daysbefore the effective date of cancellation if coverage is cancelled for "any other reason." Zubi urgesus to take the position that the phrase "any other reason" limits Acceptance's right to cancel to thosereasons set forth in the policy, i.e., either nonpayment of premium or one of the several reasonsstated in the amendatory endorsement. However, such limiting language (although it might easilyhave been added) is simply not present. Indeed, such a limitation would render the 30-day noticeprovision superfluous, as the reasons set forth in the policy and the amendatory endorsement arealready subject to 5- and 10-day notice requirements, respectively. The phrase "any other reason"(emphasis added) means exactly that -- a reason "that is selected without restriction or limitation ofchoice" (Webster's Third New International Dictionary 97 (1986)) -- and refers to the applicable timeframe for notice of cancellation if Acceptance cancels the policy for a reason other than those towhich the policy specifies that a 5- or 10-day period of notice applies.

We further agree with the trial court with respect to the "INCREASE IN HAZARD" notationin the notice of cancellation. In light of our reading of the policy terms, the reason for cancellationstated in the notice was surplusage and did not affect the substantive right of Acceptance to cancelthe policy.

Acknowledging the distress our reading of the policy most probably bestows upon theappellant, once again this court reiterates its never-changing mandate -- follow the law. The plainlanguage of the policy is unambiguous, and we may " 'neither distort the meaning of words so as toreach a desired result, nor search for or invent ambiguities where none exist.' " University of Illinoisv. Continental Casualty Co., 234 Ill. App. 3d 340, 350 (1992), quoting International Surplus LinesInsurance Co. v. Pioneer Life Insurance Co., 209 Ill. App. 3d 144, 148-50 (1990). "[A] court cannotread an ambiguity into a policy just to find in favor of the insured." Lapham-Hickey Steel Corp. v.Protection Mutual Insurance Co., 166 Ill. 2d 520, 530 (1995). "A policy term is not ambiguous[merely] because the term is not defined within the policy or because the parties can suggest creativepossibilities for its meaning." Lapham-Hickey Steel Corp., 166 Ill. 2d at 529.

Our reading of the policy also takes into account "the risk undertaken, the subject matter thatis insured, and the purposes of the contract in its entirety." Smith v. Neumann, 289 Ill. App. 3d 1056,1064 (1997). Surplus lines coverage is only available to a proposed insured in Illinois if "theinsurance producer representing the [proposed] insured [(in this case, Intermodal)] *** is unable,after diligent effort, to procure said insurance from companies which are authorized to transactbusiness in this State." 215 ILCS 5/445(1) (West 1998). Zubi was forced to turn for coverage to anout-of-state surplus lines carrier because no authorized Illinois carrier was willing to insure such ahigh-risk business. Although we recognize that insurance contracts are typically contracts ofadhesion (Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513, 533 (1996) (Freeman, J., speciallyconcurring):

"the mere fact that one party to a contract enjoyed little relativebargaining strength *** cannot alone render a contractual provisionunenforceable. [Citation.] Neither will the mere fact that aquestioned clause is contained in a form agreement support a findingof unconscionability. [Citation.] An unconscionable bargain is onewhich no reasonable person would make and which no honest personwould accept. [Citations.] The term 'unconscionable' encompasses theabsence of meaningful choice by one of the parties as well as contractterms which are unreasonably favorable to the other party." Larnedv. First Chicago Corp., 264 Ill. App. 3d 697, 700 (1994).

Although the cancellation provision of the policy was certainly more favorable to Acceptance, as theparty bearing the risk, we cannot say, based on the level of risk inherent in Zubi's business and itsattendant low degree of insurability, that this was a bargain that "no reasonable person would makeand which no honest person would accept." Larned, 264 Ill. App. 3d at 700.

Because we agree with the trial court that Zubi failed to establish a genuine issue of materialfact at trial with respect to count I, we turn to the question of whether summary judgment wasproperly granted as a matter of law. Natale v. Gottlieb Memorial Hospital, 314 Ill. App. 3d 885, 888(2000). The notice of cancellation was mailed on July 17, 1995, stating an effective date ofcancellation of August 19, 1995 at 12:01 a.m. Thus, the notice was mailed more than "thirty daysbefore the effective date of cancellation," as required under the terms of the policy. Despite the errorin the zip code listed on the policy declarations (the correct code for the 1000 S. Loomis addressshould have been 60607 rather than 60609), the notice was sent to the "last mailing address knownto [Acceptance]," as reflected in the policy declarations. Zubi did not contest that the notice ofcancellation had been mailed. Indeed, Zubi admitted during his deposition that he had received andreviewed the policy declarations. The cancellation provision of the policy states that "[i]f notice ismailed, proof of mailing will be sufficient proof of notice." The record contains a certificate of proofof mailing from the United States Postal Service, signed by the receiving employee. Thus,Acceptance fulfilled all of its obligations under the policy with respect to cancellation. The policyhad been properly cancelled as of August 19, 1995, and was no longer in force at the time of theSeptember 5, 1995, fire for which Zubi was denied coverage. Therefore, Acceptance could not havebeen in breach of the policy at that time. Acceptance was entitled to summary judgment as to countI, and the judgment of the trial court in that regard is affirmed.

Similarly, an action for unreasonable and vexatious delay in settling a claim cannot lie where,as we have determined, there is no policy of insurance in effect upon which such a claim may bepredicated. 215 ILCS 5/155 (1) (West 1998). The trial court's grant of summary judgment in favorof Acceptance on count II is affirmed.

B. Count IV

Zubi further claims that the trial court erred in granting summary judgment to Hull on countIV of the complaint. Count IV alleged negligent misrepresentation against Hull for failing to:

"A. Disclose to [Zubi] that Acceptance Indemnity intended to cancel his policy for an increase in hazard;

C. Verify [Zubi's] mailing address for purposes of notice;

D. Communicate to Acceptance Indemnity that [Zubi's] mailing address had changed;

E. Otherwise apprise Acceptance Indemnity regarding material matters pertinent to[Zubi's] insurance policy."

"An action for the tort of negligent misrepresentation may be maintained if the complaint alleges thatthe defendant is in the business of supplying information for the guidance of others in their businesstransactions and, therefore, owes a duty to plaintiff, a breach of that duty, and injury proximatelycaused by the breach." Lang v. Consumers Insurance Service, Inc., 222 Ill. App. 3d 226, 233 (1991).

There was no dispute in the trial court over Hull's status with respect to Acceptance: Hull wasAcceptance's managing general agent, with authority to bind and cancel policies on Acceptance'sbehalf. "In its capacity as [Acceptance's] agent, [Hull] was acting on behalf of [Acceptance] andunder [Acceptance's] authority." Lang, 222 Ill. App. 3d at 234. "[N]egligent misrepresentationactions are almost universally limited to situations involving one who, in the course of his businessor profession, supplies information for the guidance of others in their business relations with thirdparties." (Emphasis added.) Lang, 222 Ill. App. 3d at 235. However, Hull had its own pecuniaryinterest in Zubi's purchase of insurance from Acceptance. As Acceptance's agent, Hull received acommission from Acceptance on the sale of the policy. Zubi also financed the payment of hispremium through Hull. "Any information that was given to [Zubi] by [Hull] was not supplied to[Zubi] to aid him in his business with others, but was merely incidental to [Zubi's] insurancetransaction with [Hull] and its principal, [Acceptance]." Lang, 222 Ill. App. 3d at 236. Therefore,under these facts, we do not reach the question of whether Hull had a duty to independently verifythe zip code recorded in the policy declarations, as used on the notice of cancellation -- no cause ofaction for negligent misrepresentation may lie unless information is supplied "for the guidance ofothers in their business relations with third parties." Lang, 222 Ill. App. 3d at 235. We affirm thetrial court's determinations that no genuine issue of material fact was raised with respect to count IV,and that Hull was entitled to summary judgment as a matter of law. 2. Motions to Amend Zubi's final argument on appeal is that the trial court erred in denying both his motion toamend his complaint by adding a proposed count V as well as his subsequent motion to add anamended count V. The first proposed count V alleged that Acceptance breached its contract withZubi in the manner and method of its cancellation of the contract in that Acceptance had addressedthe notice of cancellation with the wrong zip code. The proposed amended count V was differentfrom the version previously rejected by the trial court in that it cited a specific section of the policythat Zubi claimed Acceptance had violated.

Amendments to a complaint are permissible at any time prior to final judgment (735 ILCS5/2-616(a) (West 1998)), even after an award of summary judgment (735 ILCS 5/2-1005(g) (West1998)). "However, parties do not have an absolute right to amend their pleadings. [Citation.] Rather,the determination of whether pleadings may be amended is committed to the sound discretion of thetrial court." Kennedy v. King, 252 Ill. App. 3d 52, 55 (1993). The decision of the trial court will notbe disturbed on review absent an abuse of discretion. People ex rel. Ulrich v. Bossmann, 279 Ill.App. 3d 36, 46 (1996).

"[T]he factors which are to be considered in reviewing the propriety of the denial of a motionto amend the pleadings include (1) whether the proposed amendment would cure the defectivepleading; (2) whether the proposed amendment would cause prejudice or surprise to the defendant;(3) the timeliness of the proposed amendment; and (4) whether previous opportunities to amend thepleadings could be identified. [Citation.] The first factor is an important one and may bedeterminative of the question on review, where, as a matter of law, the proposed amended complaintwould be subject to immediate dismissal, due to some inherent defect." Kennedy, 252 Ill. App. 3dat 55.

In its order dismissing Zubi's original proposed count V, the trial court stated that "count 5as cast does not state a cause of action." The record indicates that the trial court found the originalproposed count V insufficient on the grounds that it failed to cite a specific provision of the policyupon which a breach might be predicated. Zubi then amended the proposed count V to allege thatAcceptance had breached sections A.2.b and A.3 of the "Common Policy Conditions" by mailingthe notice of cancellation to the wrong address (i.e., by addressing the notice with a "60609" zip coderather than the correct "60607" code).

In its order denying Zubi's motion to file an amended count V, the trial court stated that"[Zubi's] averments, viewed in the light most favorable to [Zubi] and taken as true, fail to aver factssufficient to state a claim for breach of contract." Section A.3 required Acceptance to "mail ordeliver [its] notice [of cancellation] to the first Named Insured's last mailing address known to [it]." (Emphasis added.) The "60609" zip code was appended to Zubi's last known mailing address, aslisted in the relevant policy declarations. Zubi admitted in his deposition to having received a copyof those declarations. There is nothing in the record to indicate that Zubi ever attempted to informAcceptance or its agent, Hull, of any change of address prior to the mailing of the notice ofcancellation. Therefore, Acceptance did mail the notice of cancellation to the last mailing address"known to [it]," as required under section A.3 of the "Common Policy Conditions." (Emphasisadded.) Under these circumstances, the trial court correctly determined that the averments in theproposed amended count V "failed to state a claim for breach of contract." After a careful reviewof the record, we conclude that the trial court acted well within its discretion in denying both Zubi'smotion to add a proposed count V, as well as his motion to add a proposed amended count V, andits rulings are affirmed. Kennedy, 252 Ill. App. 3d at 55.

For the foregoing reasons, we affirm the judgment of the trial court: (1) in granting summaryjudgment in favor of Acceptance on counts I and II; (2) in granting summary judgment to Hull oncount IV; and (3) in denying Zubi's motions to amend his complaint by adding a proposed andamended count V.

Affirmed.

O'MARA FROSSARD and TULLY, JJ., concur.

1. A jury verdict in favor of Intermodal was rendered on June 29, 2000. Intermodal is not a party to this appeal.

2. It was undisputed at trial that fire was a covered cause of loss under the subjectinsurance policy.