Novogroder Companies, Inc. v. Hartford Fire Insurance

Citation: 528 F. App'x 644Docket: No. 12-3163

Court: Court of Appeals for the Seventh Circuit; July 15, 2013; Federal Appellate Court

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Novogroder Companies owned a vandalized building in Danville, Illinois, and sought insurance compensation for the damage from Hartford Fire Insurance Co. Hartford paid Novogroder the Actual Cash Value of $1,116,082.16 for the damages and indicated it would also cover up to $384,293.00 for repair costs exceeding this value, contingent upon Novogroder filing a supplemental claim within 180 days post-loss. Novogroder, however, did not make any repairs, arguing it was still entitled to the repair funds. The district court granted summary judgment against Novogroder, affirming that without repairs, the basis for claiming additional funds was not met. The insurance policy stipulated that Hartford would only pay for the Depreciation Holdback once repairs were completed or if the building was rebuilt or replaced within two years of the loss. Novogroder chose to delay repairs until the property was occupied, a decision communicated to and accepted by Hartford.

Novogroder attempted to donate a building to a local school, but after this effort failed, he decided to donate it to a local church instead. In July 2009, Novogroder contacted Hartford to inquire about donating the building while also receiving the Depreciation Holdback. Hartford denied the request, stating that the Depreciation Holdback could not be issued because no repairs exceeding the building's cash value of $1,116,082.16 had been made, and emphasized that the insurance policy required repairs within two years of the vandalism, a deadline that had passed. Novogroder argued that Hartford had previously agreed to provide the Depreciation Holdback upon completion of repairs, regardless of a time limit, and Hartford acknowledged waiving a 180-day limit but maintained that the two-year limit was still in effect. Consequently, Novogroder donated the building to the church on August 23, 2010, without repairs, and claimed a tax deduction.

On March 9, 2010, Novogroder filed a complaint against Hartford in Indiana state court, which Hartford subsequently moved to federal court citing diversity jurisdiction. The amended complaint alleged breach of contract for not paying the Depreciation Holdback of $384,293.00, asserting that Hartford waived the two-year limit and should be estopped from enforcing it. The complaint also sought punitive damages and attorney fees. Hartford's motion for summary judgment was granted by the district court on August 21, 2012, which found that Novogroder could not prove waiver of the two-year limit, and had not made any repairs to warrant the Depreciation Holdback. Novogroder appealed, contending the district court erred in its ruling. The case is governed by Illinois law, which treats insurance policies as contracts, requiring courts to consider the intent expressed in the policy language. The insurance policy explicitly stated that the Depreciation Holdback would only be paid once the property was repaired, a provision upheld by Illinois courts.

Novogroder is required to repair damage before receiving the Depreciation Holdback because it only reimburses for expenses incurred. Hartford has already disbursed $1,116,082.16 to Novogroder for the Actual Cash Value of damage to the Danville building. Novogroder seeks the Depreciation Holdback but has not repaired the building, which it can no longer do as it donated it to a local church. Property insurance covers the insured's interest, not the property itself, and does not transfer with property ownership. Without repair costs, Novogroder cannot claim reimbursement from the Depreciation Holdback. Novogroder argues that Hartford waived the two-year limit for repair but this waiver does not impact the case's outcome since repairs were never made. Consequently, Novogroder's suit is unsuccessful. The insurance contract explicitly requires repairs before claiming the Depreciation Holdback, and since Novogroder neither repaired the building nor could do so after the donation, the district court's ruling is affirmed. Additionally, the insurance policy specifies that reimbursement is based on actual repair costs incurred, with no payments exceeding the insured's financial interest in the property. Records indicate Hartford attempted to cancel the policy in September 2007, but this does not alter the case's resolution. While there were indications of a third incident of damage, both parties agree it occurred in June, prior to Hartford's cancellation attempt. Unclear records suggest Novogroder may have spent $35,000 to $40,000 for inspections, but these costs do not exceed the Actual Cash Value payment received and do not justify a claim for the Depreciation Holdback.