No Replacement Costs On Coverage Where Property Repairs Not Completed In Time

November 17, 2015 / Writing and Speaking

The 1st District Appellate Court recently held that a property owner was not entitled to recover more than the actual cash value for property damage because he had failed to complete the repairs within the time limit for recovering the higher-than-cash-value replacement cost, despite his claim that the delay was caused by the insurer’s refusal to meet with village officials regarding building code issues.

The insured in Lytle v. Country Mutual Insurance Co., 2015 IL App (1st) 142169 (Sept. 30, 2015), was represented by Lawrence A. Rosen. McKnight, Kitzinger & Pravdic LLC represented the insurer, Country Mutual.

Robert Lytle’s Elmhurst home was damaged during a severe storm in 2011. He made a claim with his property insurer, Country Mutual. He also hired an insurance adjuster to represent him in the claims process. Country Mutual ended up paying nearly $60,000 based on a computation of the actual cash value of the repairs.

The policy, however, contained a depreciation holdback provision under which Country Mutual would not pay more than the actual cash value — meaning it would not pay the higher replacement cost — until the actual repair or replacement was complete. If the insured accepted the actual cash value payment, as Lytle did, then, for the insured to be entitled to the amount necessary to bring the total payment up to the replacement cost, the repairs had to be completed within one year of the date of loss.

Lytle’s repairs bogged down apparently due to the fact that the city of Elmhurst required necessary upgrades under its building code, and the nature of the upgrade requirements was not forthcoming from the village. Lytle’s adjuster requested Country Mutual representatives meet with village officials, but Country Mutual apparently declined.

Lytle also made a request for an appraisal, and Country Mutual responded that the request was premature.

When the repairs were not completed within a year, Country Mutual denied Lytle’s request for payment of the depreciation holdback. At that point Lytle filed this lawsuit seeking damages for breach of contract. He also requested the payment of attorney fees and penalties under Section 155 of the Illinois Insurance Code, 215 ILCS 5/155, claiming that Country Mutual acted in bad faith.

Country Mutual moved for summary judgment, which the trial court allowed. Lytle filed this appeal.


In an opinion by Justice Bertina E. Lampkin, the 1st District affirmed. Her analysis began with a review of the loss payable provisions of the insurance contract and a finding that they were not ambiguous. She then applied those provisions to the facts of this case.

Lampkin found that Lytle had been paid the actual cash value of the damaged property and that the repairs had not been completed.

Therefore, she said, Lytle was not entitled to the depreciation holdback.

As to his argument that Country Mutual had a duty to meet with representatives from the city to learn about what ordinances the city might or might not enforce, Lampkin found no authority in support of such a proposition. Moreover, she said, Lytle’s own insurance adjuster had already met with city officials and knew about the necessary building code upgrades, which information was never passed on to Country Mutual.

Concerning the requested appraisal, Lampkin found that Lytle’s request went to whether certain costs associated with complying with building ordinances would be covered under his policy. The appraisal he requested thus involved a matter of insurance coverage or contract interpretation. It was not a proper subject for an appraisal.

Finally, Lampkin found that Lytle also was not entitled to damages under Section 155. His bad-faith claim depended on the success of his breach-of-contract action, and because he did not succeed in proving a breach, Section 155 remedies did not apply.

The court therefore affirmed summary judgment for Country Mutual.

Key Points

  • A property coverage requirement that repairs be completed by a specified deadline to entitle the policyholder to replacement costs and the payment of a depreciation holdback is enforceable.
  • Section 155 remedies for bad faith are available only where the insured is successful in establishing breach of the insurance contract.
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