Investigator Had No Duty to Report Mold
May 19, 2009
The 2d District Appellate Court recently held that an insurance investigator searching for evidence of first party water property damage had no duty to report to the insureds mold damage that was not covered by the applicable policy. Fichtel v. Board of Directors of the River Shore of Naperville Condominium Association, 2009 WL 1099910 (2d Dist. April 21).
The insureds, the Gattos, owners of a condominium covered by a homeowner's policy, were represented by Boyd & Kummer, Chicago. State Farm, issuer of the homeowner's policy, was represented by Momkus & McClusky, Lisle.
The Gattos suffered water damage within their condominium unit, which was investigated by State Farm in September of 2000. While investigating the claim, the State Farm investigator viewed the attic space over the unit. Patricia Gatto was present at the time and held the ladder, but she did not look into the attic herself.
When the investigator came down, he told Patricia Gatto that the roof was leaking. Although he also observed and photographed mold in the attic, he did not tell her about the mold. He did ask for the name of the condominium management company, and then told her that he "would take care of it." He subsequently reported the leak and mold to the manager, and State Farm paid the Gattos' claim for water damage.
Under the declaration of condominium ownership, the roof and attic were common areas, to which the State Farm coverage for the Gattos' individual unit did not apply. The insurance contract with the Gattos provided that State Farm could conduct investigations relating to insurability and premiums to be charged, but that it would not make general safety inspections.
The Gattos and other condominium owners subsequently brought suit against the condominium board, the management company, State Farm and others based on water, sewage and mold damage stemming from a failure to maintain the condominium premises. The current appeal involved the Gattos' claims against State Farm for fraudulent concealment, breach of fiduciary duty and negligence, based on State Farm's failure to disclose the mold damage to the Gattos.
State Farm moved to dismiss these tort counts against it, which the circuit court denied. After discovery, however, State Farm moved for summary judgment, which the circuit court allowed. The Gattos then brought this appeal.
In an opinion by Justice Kathryn E. Zenoff, the 2d District affirmed. She first addressed the Gattos' argument that the trial court was inconsistent in denying State Farm's motion to dismiss but then granting its motion for summary judgment. She found there was no inconsistency and that the rulings simply reflected the differences inherent in the two types of motions.
She then turned to the Gattos' argument that the trial court erred in granting summary judgment because it limited State Farm's duty to the terms of the insurance contract. Specifically, they contended that the trial court erroneously held that the mere existence of the insurance contract precluded State Farm from being liable for torts separate and distinct from the contract. They relied on Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513 (1996), which held that an insurer's conduct in a first-party insurance context could give rise to both a breach of contract and a separate tort action.
Here, however, according to Zenoff, the trial court did not find that State Farm's duties were limited because a contract existed. Rather it found that the Gattos failed to present a genuine issue of material fact regarding duties State Farm may have owed the Gattos outside the contract. She therefore rejected the argument.
With respect to the alleged extracontractual duties themselves, the Gattos relied on four arguments as a basis for their claim of trial court error. One was the contention that, by making the "partial" disclosure that the roof leaked, the State Farm investigator had the duty to disclose "the whole truth" relating to the nature of the defects. In support they cited cases suggesting that that a partial disclosure gives rise to a duty to make full disclosure.
Zenoff found, however, that State Farm did accurately disclose all material facts related to the Gattos' request to investigate water damage within their condominium unit and material to the insurance claim in issue. She therefore rejected the partial disclosure theory.
The Gattos second argument was based on the standards articulated in State Farm's operating guide, which suggested that State Farm investigators must discuss evidence of mold with the insured and should, in general, advise insureds of the results of their findings.
Zenoff cited case law, however, which indicated that a defendant's internal guidelines would not generally impose a duty on a defendant to make disclosure. This was particularly true where the plaintiff could not be said to have relied on the internal guidelines, and the Gattos here did not contend that they were aware of the existence of the operating guide prior to discovery in the case. The internal directives, moreover, were not relevant to the kind of injury — water damage — that the Gattos suffered to their unit and that was covered by the State Farm insurance.
The Gattos third argument was the voluntary undertaking theory of the Restatement (Second) of Torts, as adopted by Illinois courts, which imposes liability on one who voluntarily undertakes an obligation which is performed negligently. Zenoff said that the investigation here was not a voluntary undertaking because State Farm was required by contract to resolve the Gattos' claim, and the purpose of the investigation was to determine the amount of damage payable under the insurance contract.
Finally, the Gattos claimed that State Farm owed a fiduciary duty to disclose the mold damage to the Gattos. Zenoff noted that no fiduciary relationship typically exists between an insurer and insured as a matter of law, although such a relationship may be created where one places another in a position of influence and superiority over the former.
Here, however, said Zenoff, the Gattos failed to provide a factual basis for State Farm's significant dominance and superiority sufficient to create a genuine issue of material fact regarding a fiduciary duty. Rather, they made only a conclusory allegation that the investigator had knowledge and expertise in investigating mold.
Accordingly, summary judgment in favor of State Farm was appropriate, and the 2d District affirmed.
