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Chicago double LODD 12-22-10 (more)
In a recent decision, the 7th Circuit Court of Appeals overturned a previous ruling by a district court judge, stating that an insurer might indeed be responsible for $14 million of a settlement involving Apex Mortgage Corporation and the families of two Chicago firefighters who tragically lost their lives while fighting a fire at an abandoned laundry building. The initial decision by the district court, presided over by Judge Virginia M. Kendall, concluded that there was no coverage due under an excess liability policy issued by a Chubb subsidiary. This conclusion was based on an exclusion clause that applies to properties held by a "mortgagee in possession." However, the appeals court panel argued that there was sufficient ambiguity regarding whether Apex Mortgage Corporation was truly in control of the property located at 1738-1744 E. 75th Street at the time of the incident.
The court stated that the lower court had prematurely determined that Apex indisputably held possession of the property. "The district court rushed to a conclusion," the appeals panel noted. The case in question is Apex Mortgage Corp. v. Great Northern Insurance Co. The City of Chicago had previously cited the former owners of Sing Way Commercial Shirt Service for 14 code violations. According to the court documents, the property was described as being in severe disrepair, exposed to the elements, vandalized, and accessible to vagrants.
Chuck and Richard Dai, the owners of the building, had defaulted on their mortgage payments. In response, Apex Mortgage Corporation threatened foreclosure. The Dais then proposed transferring the deed to Apex Mortgage, subject to an inspection to confirm the property's marketability. Apex conducted the inspection, secured the building by installing new locks and a tarp over the damaged roof, but ultimately decided against proceeding with the foreclosure. Apex Mortgage returned the deed to the Dais in April 2009, along with a letter advising them of their ownership and urging them to properly secure the property. The Dais claim they never received this letter.
Tragically, on December 22, 2010, a fire broke out at the property. Approximately 20 minutes after the emergency call, the roof collapsed, resulting in the deaths of firefighters Corey Ankum and Edward Stringer, who had entered the building to search for homeless individuals. Two additional firefighters were trapped in the debris but managed to survive. The estates of the deceased firefighters filed wrongful death lawsuits against Apex Mortgage, which eventually settled for $15 million.
Apex's primary liability insurer, Great Northern Insurance Co., paid 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. However, Federal denied coverage citing the exclusion clause. District Court Judge Virginia M. Kendall concurred with Federal, granting summary judgment in their favor. Nevertheless, the appeals court maintained that the current evidence leaves room for debate.
The appeals panel also dismissed Federal's assertion that Apex implicitly admitted to possessing the property when they reached a settlement with the firefighters' families. "A settlement does not establish a legal ruling," the panel explained. "Nor does it validate the plaintiff's interpretation of liability. Parties can settle for various reasons, and the responsibility to pay arises directly from the settlement agreement itself, not from any party's acknowledgment of liability."
Consequently, the case has been sent back to the district court for further proceedings. Additionally, the court noted that Chuck Dai had arranged for a handyman to board up the property after receiving citations from the city for code violations. However, he failed to complete the necessary repairs and was later sentenced to 180 days in jail for neglecting his duties. Chuck Dai did not dispute the city's claims regarding his control over the property during these legal proceedings.
Federal Insurance also argued that Apex effectively confessed to being in possession of the property through their settlement agreement with the firefighters' families. However, the court refuted this claim, emphasizing that settlements do not constitute judicial rulings or affirmations of liability theories. Ultimately, the case will return to the district court for further examination and potential resolution.