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Chicago double LODD 12-22-10 (more)
From excerpts on Claims Journal.com:
In a recent decision by the 7th Circuit Court of Appeals, an insurer could potentially be held accountable for $14 million of a settlement reached between a mortgage company and the families of two Chicago firefighters who tragically lost their lives while tackling a fire at an abandoned laundry building. This overturns the earlier ruling by a district court judge, who had determined that no coverage was applicable under the excess liability policy issued by a Chubb subsidiary due to an exclusion clause related to properties held by a "mortgagor in possession." However, a panel of judges within the 7th Circuit appellate court argued that there remains uncertainty regarding whether Apex Mortgage Corporation, the policyholder, was truly in control of the property located at 1738-1744 East 75th Street at the time of the incident.
"The district court concluded that Apex indisputably had control of the property, but we believe this conclusion was premature," stated the court in its opinion.
This case is titled "Apex Mortgage Corp. v. Great Northern Insurance Co." The City of Chicago had previously cited the former owners of Sing Way Commercial Shirt Service, Chuck and Richard Dai, for 14 different code violations. According to the court records, the building was described as being in severe disrepair, exposed to the elements, vandalized, and accessible to vagrants.
When the Dais defaulted on their mortgage, Apex Mortgage initiated foreclosure proceedings. In response, the Dais offered to transfer the deed of the property to Apex. Apex accepted this offer but only conditionally, pending an inspection to confirm the property's marketability. After conducting an inspection, Apex replaced the locks on the building and placed a tarp over the damaged roof. Despite these efforts, Apex decided against proceeding with foreclosure and returned the deed to the Dais in April 2009. They sent a letter to the Dais reminding them of their ownership and encouraging them to secure the premises. The Dais claim they never received this communication.
On December 22, 2010, the Chicago Fire Department responded to a fire alarm at the property. Approximately 20 minutes later, the roof collapsed, resulting in the tragic deaths of firefighters Corey Ankum and Edward Stringer, who had been inside searching for homeless individuals. Two additional firefighters were trapped beneath the debris but managed to survive. The estates of the deceased firefighters filed wrongful death lawsuits against Apex, leading to a settlement totaling $15 million.
Apex's primary liability insurer, Great Northern Insurance Co., fulfilled its obligation by paying out the $1 million policy limit following Apex's legal action. Apex then sought reimbursement for the remaining $14 million from its excess policy with Federal Insurance Co., but Federal contended that no coverage was owed due to the exclusion clause. District Court Judge Virginia M. Kendall sided with Federal, agreeing that Apex was considered a mortgagor in possession at the time of the fire and granted summary judgment in favor of Federal. However, the 7th Circuit panel disagreed, stating that the current evidence leaves room for alternative interpretations.
The panel noted that Chuck Dai had instructed a handyman to board up the property after receiving citations from the city for code violations. Despite these measures, he failed to address other necessary repairs and eventually faced a 180-day jail sentence for neglecting his responsibilities. During subsequent criminal proceedings, Chuck Dai did not dispute the city's claims of his control over the property.
Federal Insurance also argued that Apex effectively admitted to possessing the property when they chose to settle with the firefighters' estates. The panel dismissed this reasoning, stating, "Settlement agreements do not establish legal rulings or validate theories of liability. Parties can agree to settlements for various reasons, and the obligation to pay stems directly from the settlement agreement itself, independent of any party's assumed liability."
Consequently, the court sent the case back to the district court for further consideration and potential litigation. This development underscores the complexities involved in determining legal responsibility in cases involving multiple parties and overlapping jurisdictions.