Scarsdale Villas Associates, Ltd. v. Korman Associates Insurance Agency, Inc.

Citations: 533 N.E.2d 81; 178 Ill. App. 3d 261; 127 Ill. Dec. 463; 1988 Ill. App. LEXIS 1781Docket: 87-0180

Court: Appellate Court of Illinois; December 27, 1988; Illinois; State Appellate Court

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In the case of Scarsdale Villas Associates, Ltd. v. Korman Associates Insurance Agency, Inc., the Illinois Appellate Court affirmed the trial court's judgment awarding the plaintiff $160,000 for damages following a jury verdict. Scarsdale Villas, which purchased the Scarsdale Villas Apartments in Houston and retained Korman as its insurance broker, contended that it had specifically requested flood insurance, which was not included in the policies obtained. The defendants argued that flood insurance was never mentioned. After a major storm in 1979 resulted in flooding, the plaintiff's insurance claim was denied due to flood exclusions, leading the plaintiff to purchase flood insurance from the National Flood Insurance Program (NFIP) afterward. Scarsdale subsequently filed suit against the defendants for breach of contract and fiduciary duties, among other claims. The trial court dismissed claims related to intentional breach of fiduciary duty and intentional misrepresentation, while the jury found in favor of Scarsdale but reduced the award by one-third due to contributory negligence, ultimately awarding $160,000. The plaintiff sought a higher damages amount of $655,993 or a new trial on damages, but the court upheld the original judgment.

Plaintiff's motion for an additur or new trial regarding damages was denied, with the appeal focusing solely on the adequacy of damages awarded. An insurance broker is obligated to exercise reasonable skill and diligence and is liable for losses resulting from failure to procure insurance. Establishing a contract to procure insurance requires a mutual agreement, with necessary terms potentially implied from context or past interactions. The measure of damages for breach of such a contract is typically determined by the terms of the unprocured policy, with the presumption that the parties intended a policy with standard conditions. 

The plaintiff argued that the trial judge erred by rejecting its proposed jury instruction on measuring damages based on the fair market value of the property before and after the flood, citing the absence of a specific flood insurance policy agreement. In contrast, defendants contended damages should be limited to those recoverable under a standard flood insurance policy, excluding lost rent. The court rejected both arguments, affirming that specific policy terms are not necessary to establish damages. Evidence indicated that the plaintiff sought full repair or replacement coverage and lost rental income for the Scarsdale Villas Apartments. 

The court noted that an instruction based on fair market value could mislead the jury into awarding damages unrelated to the defendants' failure to procure insurance, and the defendants’ proposed instruction would inappropriately limit the plaintiff's claims regarding lost rent coverage. Ultimately, the jury instruction given was deemed appropriate for the case.

The proper measure of damages was defined as the amount the plaintiff would have received for damages to the Scarsdale Villas Apartments from the July 1979 flood, based on the insurance policy the plaintiff reasonably expected the defendants to procure. The jury was tasked with determining the type of policy contemplated and the corresponding damages. The plaintiff argued that the jury award was insufficient and did not account for all proven damages, asserting that the amount should be awarded directly due to the undisputed nature of the damages. However, upon review, it was determined that the claimed damages were not indisputable, and there was sufficient evidence to support the jury's verdict. The plaintiff's claim regarding the absence of an award for lost rental was also unsupported by the record. Given that the jury issued a general verdict without specific breakdowns, and due to the absence of special interrogatories requested by the parties, the verdict was upheld. Consequently, the trial court's judgment was affirmed.