Manish S. Shah, United States District Judge

Christina M. Phillips, Edward Eshoo, Jr., Merlin Law Group, Chicago, IL, for Plaintiff.

Craig A. Jacobson, Christina Maria Flores, John Matthew Buscemi, Gordon Rees Scully Mansukhani, LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Manish S. Shah, United States District Judge

Plaintiff Icarus Holdings 2, LLC owned an apartment building, and insured it under a policy with defendant AmGUARD Insurance Company. The building's tenants moved out, and Icarus renovated the property. After renovations were complete, a pipe separated in one of the apartments causing water damage. Icarus filed a claim with AmGUARD, but the company denied coverage, citing the policy's vacancy condition and frozen plumbing exclusion. Icarus then filed this lawsuit, alleging that AmGUARD breached the parties’ contract in bad faith. Both parties move for summary judgment. For the reasons that follow, the motions are granted in part and denied in part.

I. Legal Standards

A party moving for summary judgment must show there is no genuine dispute about any material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. The moving party must demonstrate that, after construing all facts and drawing all reasonable inferences in favor of the nonmovant, a reasonable jury could not return a verdict for the nonmoving party. Birch Rea Partners, Inc. v. Regent Bank , 27 F.4th 1245, 1249 (7th Cir. 2022) ; Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Or the moving party must show that the nonmoving party has failed to establish an essential element of their case and could not carry their burden of proof at trial. Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). I need only consider the cited materials, but I may consider "other materials in the record." Fed. R. Civ. P. 56(c)(3). These standards apply equally to cross-motions for summary judgment, Blow v. Bijora, Inc. , 855 F.3d 793, 797 (7th Cir. 2017), and I consider evidence from both motions to ensure that there is no material dispute. Torry v. City of Chicago , 932 F.3d 579, 584 (7th Cir. 2019).

II. Facts

Icarus bought an apartment building on the south side of Chicago. See [44] ¶¶ 2–3, 5; [42] ¶ 12. According to Icarus's managing member, [42] ¶ 3, Icarus intended to either hold the building as an income-generating rental property or renovate and sell. Id. ¶ 13. Icarus's property manager, id. ¶ 6, said that Icarus generally purchased, held, and sold real estate, and that renovating buildings was part of the company's usual operations. Id. ¶ 14. An insurance broker said that Icarus told him that the building was "fully occupied" and directed him to purchase landlord's insurance. See [44] ¶ 6; [39-2] at 9, 81–82; [39-3]. Later, Icarus and the insurance broker discussed the possibility that the building could become vacant in the future. See [44] ¶ 7; [39-2] at 50–51, 82.

AmGUARD issued a "Businessowner's Policy" to Icarus, providing property coverage for Icarus's building from October 2019 to October 2020. [44] ¶¶ 1–3; [42] ¶ 15; [1-1]. The policy declarations classified the building as "Apartment Buildings – 4 families or fewer – NO office occupancy" and characterized Icarus as "Lessors of Residential Buildings and Dwellings[.]" [44] ¶¶ 3–4; [1-1] at 3–5. The AmGUARD policy covered "physical loss" and "damage" to Icarus's building, and was limited to $520,000 in replacement costs. [42] ¶¶ 17–18, 21; [44] ¶ 2.

The policy contained an exclusion for "loss or damage caused directly or indirectly by" "Frozen Plumbing" meaning "water ... that leaks or flows from plumbing ... caused by or resulting from freezing unless" certain exceptions applied. [1-1] at 26, 29; [44] ¶ 56. The policy also included a vacancy condition:

8. Vacancy

a. Description Of Terms

(1) As used in this Vacancy Condition, the term building and the term vacant have the meanings set forth in Paragraphs (a) and (b) below:

(a) When this policy is issued to a tenant, and with respect to that tenant's interest in Covered Property, building means the unit or suite rented or leased to the tenant. Such building is vacant when it does not contain enough business personal property to conduct customary operations.

(b) When this policy is issued to the owner or general lessee of a building, building means the entire building. Such building is vacant unless at least 31% of its total square footage is:

(i) Rented to a lessee or sublessee and used by the lessee or sub-lessee to conduct its customary operations; and/or

(ii) Used by the building owner to conduct customary operations.

(2) Buildings under construction or renovation are not considered vacant.

b. Vacancy Provisions

If the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs:

(1) We will not pay for any loss or damage caused by any of the following

even if they are Covered Causes of Loss:

...

(d) Water damage[.]

[44] ¶ 8; [1-1] at 36–37. Elsewhere in the policy, the word "operations" was defined as "your business activities occurring at the described premises," and "water damage" as "accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of any part of a system or appliance." [1-1] at 41–42; see id. at 13 (these definitions apply to "words and phrases that appear in quotation marks" in the policy, which have "special meaning").

In August 2019, Icarus decided to renovate and sell its building. [42] ¶ 25; see [44] ¶ 17. From August 24 to October 1, twenty-six percent of the building's total square footage was rented, and on October 1 the building's remaining tenant moved out, meaning that none of the building's square footage was rented. See [44] ¶¶ 18–23. Icarus's property management company hired a general contractor to renovate the basement, common hallway, first floor, and third floor. See [42] ¶¶ 4, 11, 27. The general contractor didn't complete the work itself, relying instead on subcontractors. [44] ¶ 37.

Bryan Heuer, co-owner of the general contractor, was at the building "about four times" in August and September of 2019, supervising and overseeing subcontractors. [42] ¶¶ 11, 29; [44] ¶ 39; [38-7] at 96. The general contractor received a deposit for renovation work on the hallway and upstairs units on August 20, and Heuer said that he thought the job took about a month to complete. See [44] ¶¶ 44–45; [42] ¶ 30; [38-7] at 45–47; [38-8] at 6. The general contractor received a deposit for renovations on the building's garden unit on September 4, and issued a related payment to a subcontractor on September 27. See [44] ¶ 46; [38-7] at 35; [38-8] at 3. Heuer said he thought the basement renovation work took about four weeks. See [44] ¶ 47; [42] ¶ 31; [38-7] at 108–09. Heuer said that the subcontractors might have a better idea of the days they worked, [44] ¶ 40; [38-7] at 109, but the subcontractor who worked on the garden unit couldn't recall when they were at Icarus's building and had no records of the work. [44] ¶¶ 41–42. The renovations were completed no later than October 1. See id. ¶ 29; [42] ¶¶ 32, 34.

Icarus put its building up for sale in October 2019. [42] ¶ 34. In November, Icarus called an insurance adjuster, asking him to visit the building and investigate a water issue. Id. ¶¶ 9, 36. The adjuster said he received the call on November 22 or a few days before, and a mitigation specialist first visited the building on November 22. See id. ¶¶ 9, 36; [38-5] at 27–29, 32. Inspections revealed that a copper plumbing pipe in the building's third-floor ceiling separated at a joint, resulting in a leak that caused damage. [42] ¶¶ 39–44, [44] ¶¶ 10, 52–53. The plumber who repaired the pipe said that frozen pipes usually crack or break, not separate. See [42] ¶¶ 10, 46–49.

On November 25, Icarus reported the loss to its insurance broker. [42] ¶ 54; [39-4] at 2. AmGUARD assigned the claim to an independent claim adjustment company, which investigated the loss. [44] ¶¶ 48–54; [42] ¶¶ 55–60. AmGUARD's adjuster reviewed temperature records, inspected the building, and prepared a report, which he sent to AmGUARD and Icarus. [44] ¶¶ 49–54; [42] ¶¶ 58, 63. AmGUARD's adjuster also prepared four additional reports between March and June 2020, which were largely identical to the initial report. [42] ¶ 67; [38-4] at 100.

Based on temperature records, the lack of tenants in the building, and a lack of evidence showing that heat had been maintained, AmGUARD's adjuster concluded that the water loss was caused by pressure from frozen water within the pipe system. [44] ¶ 54. The adjuster wrote that "[f]urther investigation into the date of loss and cause of loss may be required by an expert." [42] ¶ 63. AmGUARD's adjuster didn't have a background in plumbing and said he wasn't an expert. Id. ¶ 68. The adjuster also said that AmGUARD never retained an expert to determine the cause and date of the loss. Id. ¶ 72; [38-4] at 71–72.

AmGUARD denied Icarus's claim on July 10, 2020. [42] ¶ 69. In its coverage denial letter, AmGUARD explained that it didn't have to pay for the loss because the building was vacant for more than sixty days prior to the loss and because the policy excluded damages caused by frozen plumbing. See [44] ¶¶ 55–56; [39-19] at 6. About two weeks after AmGUARD denied the claim, Icarus filed this lawsuit. [1].

III. Analysis

Both parties move for summary judgment on Icarus's breach of contract claim. [37] at 4; [35] at 2, 9–16. AmGUARD also moves for summary judgment on count two—Icarus's request for damages under § 155. [35] at 16. Icarus moves for summary judgment on twelve of AmGUARD's thirteen affirmative defenses. [37] at 4–14.

Under Illinois law, a court interpreting an insurance policy must determine and give effect to the parties’ intent, and begins with the language of the agreement. See Pekin Ins. Co. v. Wilson , 237 Ill.2d 446, 503, 341 Ill.Dec. 497, 930 N.E.2d 1011 (2010) (quoting American States Ins. Co. v. Koloms , 177 Ill.2d 473, 479, 227 Ill.Dec. 149, 687 N.E.2d 72 (1997) ); Am. Bankers Ins. Co. of Fla. v. Shockley , 3 F.4th 322, 327 (7th Cir. 2021) (citation omitted). Clear and unambiguous terms are given their "plain, ordinary and popular meaning." Founders Ins. Co. v. Munoz , 237 Ill.2d 424, 436, 341 Ill.Dec. 485, 930 N.E.2d 999 (2010) (citation omitted); Sproull v. State Farm Fire & Cas. Co. , 451 Ill.Dec. 616, 622, 184 N.E.3d 203 (Ill. 2021) (citation omitted). Ambiguous terms (those susceptible to more than one meaning) are construed strictly against the insurer who drafted the agreement. Pekin , 237 Ill.2d at 456, 341 Ill.Dec. 497, 930 N.E.2d 1011 (quoting Koloms , 177 Ill.2d at 479, 227 Ill.Dec. 149, 687 N.E.2d 72 ). Provisions that limit or exclude coverage are read liberally in favor of the insured and "applied only where [the] terms are clear, definite, and specific." Berg v. New York Life Ins. Co. , 831 F.3d 426, 429 (7th Cir. 2016) (quoting Gillen v. State Farm Mut. Auto. Ins. Co. , 215 Ill.2d 381, 393, 294 Ill.Dec. 163, 830 N.E.2d 575 (2005) ). The interpretation of an insurance policy is a question of law. Sproull , 451 Ill.Dec. at 623, 184 N.E.3d 203 (quoting Addison Ins. Co. v. Fay , 232 Ill.2d 446, 451, 328 Ill.Dec. 858, 905 N.E.2d 747 (2009) ).

The parties agree that in November 2019 Icarus's apartment building was covered under AmGUARD's insurance policy, and that the water damage to the property was a "loss." See [44] ¶¶ 1–2, 9–10, 53; [42] ¶¶ 15, 17, 22, 38, 65–66. AmGUARD promised to pay for "direct physical loss of or damage to" Icarus's apartment building "caused by or resulting from any Covered Cause of Loss." [1-1] at 13; [42] ¶ 17. There's no dispute that—unless an exclusion or limitation applies and an exception does not apply—AmGUARD must pay Icarus for the water damage. See [37] at 4; [41] at 4–15.

A. The Vacancy Condition

AmGUARD bears the burden of proving that the vacancy condition limits coverage for Icarus's claim. See Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co. , 611 F.3d 339, 347 (7th Cir. 2010) (citing Ins. Corp. of Hanover v. Shelborne Assocs. , 389 Ill.App.3d 795, 329 Ill.Dec. 138, 905 N.E.2d 976 (1st Dist. 2009) and 17A Couch on Insurance § 254:13 (3d ed. Dec. 2021 update) ); see also Gillen , 215 Ill.2d at 393–94, 294 Ill.Dec. 163, 830 N.E.2d 575. If AmGUARD shows that coverage is limited by the condition, Icarus bears the burden of showing that an exception (if any exists) preserves coverage. See Santa's Best , 611 F.3d at 347 ; Wells v. State Farm Fire & Cas. Ins. Co. , 447 Ill.Dec. 259, 267, 173 N.E.3d 613 (Ill.App. 5th Dist. 2021). It's undisputed that the policy was issued "to the owner or general lessee" of the building in question (and not to a tenant). [1-1] at 36; see [43] at 3; [35] at 9–10. The parties also agree that less than 31% of the building's total square footage was rented for the sixty-day period prior to the loss. See [44] ¶¶ 22–23. Whether the vacancy condition limits coverage over Icarus's claim turns on three issues: (1) whether Icarus used at least 31% of the building's square footage "to conduct its customary operations," (2) whether the building was "under construction or renovation," and (3) whether the loss constituted "water damage." [1-1] at 36–37; see [37] at 8–12; [35] at 9–16.

1. "Used to conduct customary operations"

If Icarus used at least 31% of the building's total square footage to "conduct its customary operations" in the sixty days prior to the loss, the building wasn't vacant, and the condition won't limit coverage. See [1-1] at 36. Icarus argues that it used the building for its customary operations between August and November 2019 by renovating the building, holding it, and listing it for sale. See [37] at 10–11; [43] at 8–11. Plaintiff contends that the word "customary" is undefined in the policy, but that the word "operations" is defined as "your business activities occurring at the described premises." [43] at 8 (quoting [1-1] at 41); [37] at 10. Alternatively, Icarus argues that the words "customary operations" are ambiguous and should be construed against the insurer. [43] at 9–10.

The vacancy condition appears in § 1, paragraph E of the policy, titled "Property Loss Conditions." See [1-1] at 33, 36–37. In § 1, paragraph H ("Property Definitions"), the word "operations" is defined as "your business activities occurring at the described premises." Id. at 41. The word "operations" in paragraph H appears in quotation marks, and a note at the start of the policy explains that "[W]ords and phrases that appear in quotation marks have special meaning. Refer to Paragraph H." Id. at 13.

The vacancy provision must be read in context. Newman v. Metro. Life Ins. Co. , 885 F.3d 992, 998 (7th Cir. 2018) (citation omitted). Considering the whole of the policy, the paragraph H definition of "operations" isn't relevant to that word when used in paragraph E. The policy limits the application of paragraph H's definitions to those situations where the defined term appears in quotation marks. See [1-1] at 13, 17 (the word operations is in quotation marks in paragraph A, subsection f ("Business Income"); see also Ten Pas v. The Lincoln Nat'l Life Ins. Co. , 31 F.4th 541, 545–47(7th Cir. 2022) (rejecting a reading of an insurance policy that sought to apply a definition of a term ("active work") in one section of a policy to another term ("last day worked") in a different section). The word "operations" doesn't appear in quotation marks in the vacancy condition, see [1-1] at 36–37, and the explicit limitation on applying paragraph H's definitions shows that the parties didn't intend to extend that special definition to every use of the word in the policy. See [1-1] at 13.

Context also shows that "customary operations" can't mean making renovations. Interpreting "customary operations" to include making renovations would make the vacancy condition's clause on that subject ("Buildings under construction or renovation are not considered vacant") superfluous, which makes that reading unreasonable. See [1-1] at 36–37; Berg v. New York Life Ins. Co. , 831 F.3d 426, 430 (7th Cir. 2016) (quoting Pekin Ins. Co. v. Wilson , 391 Ill.App.3d 505, 330 Ill.Dec. 666, 909 N.E.2d 379 (5th Dist. 2009) ) ("We will not interpret an insurance policy in such a way that any of its terms are rendered meaningless or superfluous").

Neither "customary" nor "operations" is defined in the vacancy condition, see [1-1] at 36–37, but that's not enough to make the term ambiguous. See State Farm Mut. Auto. Ins. Co. v. Elmore , 450 Ill.Dec. 513, 519, 181 N.E.3d 865 (Ill. 2020) (citation omitted). Undefined terms in an insurance policy "are construed as an ‘average, ordinary, normal, and reasonable person’ would understand them." Newman , 885 F.3d at 998 (quoting Gillen v. State Farm Mut. Auto Ins. Co. , 215 Ill.2d 381, 393, 294 Ill.Dec. 163, 830 N.E.2d 575 (2005) ); Founders Ins. Co. v. Munoz , 237 Ill.2d 424, 436, 341 Ill.Dec. 485, 930 N.E.2d 999 (2010) (citation omitted) (courts should look to dictionary definitions of undefined terms). The class and character of the property at issue—here an apartment building—is relevant to understanding what the parties meant. See Pekin , 237 Ill.2d at 503, 341 Ill.Dec. 497, 930 N.E.2d 1011 (quoting American States Ins. Co. v. Koloms , 177 Ill.2d 473, 479, 227 Ill.Dec. 149, 687 N.E.2d 72 (1997) ) ("A court must ... take into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract."); see also Est. of Luster v. Allstate Ins. Co. , 598 F.3d 903, 908 (7th Cir. 2010) (applying Indiana law).

Dictionaries show that "customary" means "[i]n accordance with the usual practice or behaviour of a person or thing; habitual, typical, usual," Customary , Oxford English Dictionary Online, https://www.oed.com (last visited April 28, 2022), or "commonly practiced, used, or observed." Customary , Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/customary (last visited April 28, 2022). "Operation" means "the action of operating a ... business," Operation , Oxford English Dictionary Online, https://www.oed.com (last visited April 28, 2022), or "a business transaction." Operation , Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/operation (last visited April 28, 2022); see also Keren Habinyon Hachudosh D'Rabeinu Yoel of Satmar BP v. Philadelphia Indem. Ins. Co. , 462 Fed. App'x 70, 73 (2d Cir. 2012) (interpreting a similar vacancy provision, defining "customary" through a dictionary definition and "operations" with reference to the building in question). The policy declarations described Icarus's property as "Apartment Buildings – 4 families or fewer – NO office occupancy." [44] ¶ 3. The policy also said that Icarus was a lessor of residential buildings. See id. ¶ 4.

In the context of the parties’ agreement, "conduct customary operations" meant conducting ordinary business at an apartment building associated with leasing units to tenants. The business pursuit identified in the policy was the renting of apartments, not the sale of the building. See [44] ¶¶ 3–4. Customary operations, then, included work in support of renting the building like maintenance or cleaning, but not holding the property without tenants and listing it for sale. See Oakdale Mall Assocs. v. Cincinnati Ins. Co. , 702 F.3d 1119, 1124 (8th Cir. 2013) (a building owner trying to rent space wasn't using that space to conduct customary operations); Keren , 462 Fed. App'x at 72–73 (customary operations at a school were the instruction of students and didn't include a one-day meeting of teachers or the storage of school supplies); Saiz v. Charter Oak Fire Ins. Co. , Civil Action No. 06-cv-01144-EWN-BNB, 2007 WL 2701398, at *5 (D. Colo. Sept. 12, 2007), aff'd , 299 Fed. App'x 836 (10th Cir. 2008) (a restaurant owner didn't conduct customary operations when he used a portion of a building as an office to sell the building and work on other projects but not to run a restaurant).

Even if selling the property was a "customary operation," plaintiff hasn't offered evidence that it "used" any of the square footage of the building to conduct that operation. [1-1] at 36; see [42] ¶¶ 32, 34 (there's no evidence that Icarus's representatives were at the building to list it for sale or to show it, for example); see also Saiz , 2007 WL 2701398, at *5 (a building owner didn't conduct customary operations where the owner used an office but that space didn't occupy the required portion of the building's square footage); cf. Cincinnati Ins. Co. v. KDL, Inc. , CIVIL ACTION No. 12-4093-KHV, 2017 WL 2555952, at *2–4 (D. Kan. June 13, 2017) (a building owner who used almost all of a space for storage conducted customary operations); Camelback Properties v. Phoenix Ins. Co. , No. 10 C 01467, 2012 WL 32965, at *6 (N.D. Ill. Jan. 6, 2012) (a building owner who used office space to lease the property's units conducted customary business operations in that office space). Renovating, holding, and listing the building for sale weren't "customary operations."

2. "Under construction or renovation"

The policy says that "[b]uildings under construction or renovation are not considered vacant." [1-1] at 36. The parties dispute whether this provision limits coverage or is an exception to the vacancy condition that would restore coverage. See [37] at 3; [35] at 13. If the "under construction or renovation" provision is part of the vacancy condition, AmGUARD has the burden of showing that the building wasn't under construction or renovation. See Varlen Corp. v. Liberty Mut. Ins. Co. , 924 F.3d 456, 460 n.2 (7th Cir. 2019) ; Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co. , 611 F.3d 339, 347 (7th Cir. 2010) (citations omitted). If the provision is an exception, Icarus must prove the opposite. See Santa's Best , 611 F.3d at 347.

It's reasonable to interpret the construction or renovation provision as part of the vacancy condition (limiting coverage), not an exception. The vacancy condition is divided into two sections. See [1-1] at 36–37. The first part defines the term "vacant," and includes the renovation or construction provision. Id. ("Buildings under construction or renovation are not considered vacant."). The second part of the condition uses the term "vacant" to limit coverage for certain causes of loss. Id. ("If the building ... has been vacant for more than 60 consecutive days ... We will not pay for any loss or damage caused by any of the following"). That the renovation or construction provision appears in the policy before any limitation of coverage related to vacancy, and isn't set off by any word showing a contrast (like "but" or "unless"), distinguishes this case from those involving an exception. See Varlen Corp. v. Liberty Mut. Ins. Co. , Case No. 13-cv-05463, 2017 WL 4278787, at *2 (N.D. Ill. Sept. 25, 2017), aff'd , 924 F.3d 456 (7th Cir. 2019) (policy announced an exclusion and then an exception: "but this exclusion does not apply" given certain conditions); Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co. , No. 04 C 1342, 2008 WL 4328192, at *2 (N.D. Ill. Sept. 16, 2008), aff'd in part, rev'd in part , 611 F.3d 339 (7th Cir. 2010) (policy announced an exclusion and then an exception: "Nor will we apply this exclusion to" certain injuries); Wells v. State Farm Fire and Cas. Ins. Co. , 447 Ill.Dec. 259, 262, 266, 173 N.E.3d 613 (Ill.App. 5th Dist. 2021) (policy announced an exclusion and then an exception: "unless: (1) you do your best to maintain heat in the building or structure"); Myers v. Merrimack Mut. Fire Ins. Co. , 788 F.2d 468, 470 (7th Cir. 1986) (policy announced an exclusion and then an exception: "but a building in process of construction shall not be deemed vacant"). Similarly, although the policy in Liberty Mut. Ins. Co. v. Blandford , Civil Action No. 3:98CV-6-S, 1999 WL 33756670, at *2–4 (W.D. Ky. Sept. 1, 1999), used similar language ("Buildings under construction are not considered vacant"), it placed that term after announcing a complete exclusion. Here, the policy placed the construction-or-renovation term before completing the definition of vacancy. That makes the entire provision a single condition.

The vacancy condition limits coverage, and it's at least ambiguous as to whether the renovation or construction provision is part of the condition or an exception to it. See Berg v. New York Life Ins. Co. , 831 F.3d 426, 430 (7th Cir. 2016) (quoting Gillen v. State Farm Mut. Auto. Ins. Co. , 215 Ill.2d 381, 393, 294 Ill.Dec. 163, 830 N.E.2d 575 (2005) ) (provisions that limit or exclude coverage are read liberally in favor of the insured and "applied only where [the] terms are clear, definite, and specific"); Sproull v. State Farm Fire and Cas. Co. , 451 Ill.Dec. 616, 622, 184 N.E.3d 203 (Ill. 2021) (citation omitted) (ambiguities are construed against the insurer). The burden is on the insurance company to demonstrate the application of the vacancy condition, including the renovation term. Because the building was not occupied with tenants and Icarus was not otherwise using the building for its customary business operations, AmGUARD must show that the building wasn't under construction or renovation for the sixty days prior to the loss. See [1-1] at 36–37; Varlen Corp. , 924 F.3d at 460 n.2.

It's undisputed that the loss occurred on November 22 or a few days earlier. See [42] ¶ 36; [44] ¶ 13; [38-5] at 27–29, 32. That sets the sixty-day window to September 23 or a few days earlier. The parties agree that the renovations other than in the garden unit were completed no later than September 20. See [42] ¶ 30. Icarus's representative said all of the renovation work was completed by October 1. [44] ¶ 29. The subcontractor who completed the work on the building's garden unit couldn't remember the dates they worked or when they completed the work. [44] ¶ 41. Icarus's contractor received a deposit for the garden-unit work on September 4, issued a related payment to a subcontractor on September 27, and said that the job took about four weeks. See [44] ¶¶ 46–47; [42] ¶ 31; [38-7] at 35, 108–09; [38-8] at 3. Taken together, this evidence shows that there's a genuine material dispute as to whether the building was under renovation or construction (and therefore not vacant) in the sixty days prior to the loss.

3. "Water damage"

Icarus argues that the loss in question doesn't fall under the vacancy condition because it wasn't "water damage." See [37] at 11–12; [43] at 11–12. Relying again on a definition in another section of the policy, Icarus argues that "water damage" in the vacancy condition means "accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of any part of a system or appliance ... containing water or steam." See [43] at 11 (citing [1-1] at 42). Because the pipe at its building separated, see [44] ¶ 52; [42] ¶ 49, Icarus reasons that the damage it suffered wasn't "water damage," and so coverage wasn't limited by the vacancy condition. See [37] at 11–12; [43] at 11–12. Alternatively, Icarus argues that the term "water damage" in the vacancy condition is ambiguous. See [43] at 12.

Icarus's argument for applying the definition of "water damage" from paragraph H to the vacancy condition in paragraph E fails for the reasons discussed above. See supra at 323. Water damage wasn't itself defined in paragraph H, but was instead part of the definition of "Specified causes of loss," a term with a "special meaning" used elsewhere in the policy. See [1-1] at 13, 42. Importing part of a definition of another term ("Specified causes of loss") into an unrelated section where the "special definition" from paragraph H isn't being used isn't a reasonable interpretation of the policy. See Founders Ins. Co. v. Munoz , 237 Ill.2d 424, 433, 341 Ill.Dec. 485, 930 N.E.2d 999 (2010).

The term "water damage" is undefined in the vacancy condition. See [1-1] at 36–37. Read in context, the term isn't ambiguous, and means damage caused by water. "Water damage" as it appears in the vacancy condition isn't limited to circumstances that only involve pipes that crack or break apart. See id. Even if the term were limited in that way, the term "break" includes separation. Break , Oxford English Dictionary Online, https://www.oed.com (last visited April 28, 2022) ("To sever into distinct parts by sudden application of force"); Break , Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/break (last visited April 28, 2022) ("to separate into parts with suddenness or violence"). A jury could conclude that the loss in question—buckled flooring, widespread damage, and water throughout the building caused by water that escaped from a separated pipe—was "water damage" under the policy's vacancy condition. See [42] ¶¶ 36, 38–40, 48–49; [44] ¶¶ 10, 52–54.

A jury could find that the vacancy condition applied to Icarus's claim, and therefore AmGUARD didn't owe Icarus for the loss. Plaintiff's motion for summary judgment on liability for the contract claim and on the vacancy condition affirmative defense is denied.

B. Other Affirmative Defenses

AmGUARD raised eleven other affirmative defenses to Icarus's contract claim. See [13] at 8–10, ¶¶ 1—10, 12. Icarus moves for summary judgment on all of them. See [37] at 4–14.

AmGUARD's seventh affirmative defense is that the loss wasn't covered because it fell under the policy's frozen plumbing exclusion. See [13] at 9, ¶ 7. The policy excluded loss or damage caused by "water ... that leaks or flows from plumbing ... caused by or resulting from freezing." [1-1] at 26, 29. Icarus's plumber said the loss was caused by poor soldering. See [42] ¶ 49. Defendant's adjuster concluded that the loss was caused by frozen plumbing. See [44] ¶ 54; [39-18] at 5 ("It is our opinion that [the loss] is a result of a separated solder joint as a result of freezing within the line."). This material dispute as to the cause of the loss means that summary judgment is inappropriate. See Driveline Sys., LLC v. Arctic Cat, Inc. , 936 F.3d 576, 579 (7th Cir. 2019) (quoting Aregood v. Givaudan Flavors Corp. , 904 F.3d 475, 482 (7th Cir. 2018) ).

Icarus challenges all of AmGUARD's other affirmative defenses. See [37] at 4–14. By failing to make any arguments in response, see [41], AmGUARD waived those defenses to the contract claim. See Betco Corp., Ltd. v. Peacock , 876 F.3d 306, 309 (7th Cir. 2017) (a party waives "underdeveloped" arguments at summary judgment); Henry v. Hulett , 969 F.3d 769, 786 (7th Cir. 2020) (quoting United States v. Olano , 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993) ) ("[W]aiver is the ‘intentional relinquishment or abandonment of a known right.’ ").

Icarus's motion for summary judgment is granted as to affirmative defenses one through six and eight through ten. Plaintiff's motion is denied as to the seventh affirmative defense: the frozen plumbing exclusion. Because disputes remain as to whether either the vacancy condition or the frozen plumbing exclusion applies, AmGUARD's motion for summary judgment on the contract claim is denied. C. Section 155

Section 155 damages are appropriate if an insurer's actions with respect to a claim made under a policy are "vexatious and unreasonable." 215 ILCS 5/155. Section 155 does not create a cause of action but rather "provides an extra-contractual remedy for policyholders." Creation Supply, Inc. v. Selective Ins. Co. of the Southeast , 995 F.3d 576, 579 (7th Cir. 2021) (quoting Cramer v. Ins. Exch. Agency , 174 Ill.2d 513, 221 Ill.Dec. 473, 675 N.E.2d 897 (1996) ). "[A]n insurer's conduct is not vexatious and unreasonable if: (1) there is a bona fide dispute concerning the scope and application of insurance coverage, (2) the insurer asserts a legitimate policy defense, (3) the claim presents a genuine legal or factual issue regarding coverage, or (4) the insurer takes a reasonable legal position on an unsettled issue of law." Citizens First Nat. Bank of Princeton v. Cincinnati Ins. Co. , 200 F.3d 1102, 1110 (7th Cir. 2000) (citations omitted). Whether an insurer's conduct was unreasonable or vexatious under § 155 is a question of fact. Med. Prot. Co. v. Kim , 507 F.3d 1076, 1086 (7th Cir. 2007) (citations omitted).

AmGUARD hasn't shown that it didn't owe coverage under the policy, and therefore isn't entitled to summary judgment under § 155 on that basis. But AmGUARD also argues that its denial was grounded on a bona fide dispute about coverage. See [35] at 16. Icarus contends that defendant acted unreasonably and vexatiously by (1) failing to diligently investigate or reasonably evaluate the claim; (2) refusing to resolve the claim in a timely manner; and (3) failing to provide a reasonable explanation for the denial. See [43] at 14.

When AmGUARD denied coverage, the insurer took the position that coverage was excluded or limited. See [44] ¶ 55; [39-19]. AmGUARD reasoned that frozen plumbing caused the loss, and that the building had been vacant for more than sixty days prior to the loss. See [39-19] at 6. AmGUARD's adjuster inspected the building on November 27, prepared reports, reviewed temperature records, and determined that the loss was caused by frozen plumbing. See [44] ¶¶ 48–54. During his inspection, AmGUARD's adjuster noticed that some of the building appeared to be recently remodeled. See [42] ¶ 60. The adjuster wrote that "[f]urther investigation into the date of loss and cause of loss may be required by an expert," and didn't speak with Icarus's representative about the claim. Id. ¶¶ 61–63. AmGUARD's adjuster didn't have a background in plumbing, said that he wasn't an expert, and said that AmGUARD never retained an expert to determine the cause and date of the loss. Id. ¶¶ 68, 72.

Defendant reasonably relied on the analysis of its adjuster, and wasn't required to retain an expert even after the adjuster suggested that step. See [42] ¶ 63. That Icarus's plumber reached a different conclusion about the cause of the damage, see id. ¶ 47, didn't make it unreasonable for AmGUARD to rely on its adjuster's conclusions, even though its adjuster said he wasn't an expert. The adjuster explained the investigation to AmGUARD, and passed along the observation that the property appeared to be vacant at the time of the loss. See [39-18] at 5; [44] ¶ 50. AmGUARD's analysis, while not as thorough as it could have been, was reasonable under the circumstances, and defendant's denial letter provided an adequate explanation. See [39-19]. AmGUARD's interpretation of the vacancy condition as an exception was incorrect, as discussed, but that interpretation wasn't unreasonable.

There's a bona fide dispute concerning the scope and application of coverage. AmGUARD has asserted legitimate policy defenses in the form of the vacancy condition and frozen plumbing exclusion, both of which present genuine factual issues regarding coverage. AmGUARD's argument shows a disagreement that is "real, actual, genuine, and not feigned," Am. States Ins. Co. v. CFM Constr. Co. , 398 Ill.App.3d 994, 1003, 337 Ill.Dec. 740, 923 N.E.2d 299 (2nd Dist. 2010) (quoting Black's Law Dictionary 177 (6th ed. 1990)) (cleaned up), and Icarus hasn't shown evidence from which a jury could conclude otherwise. AmGUARD's motion for summary judgment on Icarus's bad faith claim under § 155 is granted.

IV. Conclusion

AmGUARD's motion for summary judgment, [34], is denied with respect to Icarus's breach of contract claim. The motion as to relief under § 155 is granted. Icarus's motion for partial summary judgment, [36], is denied as to its breach of contract claim, the frozen plumbing exclusion, and the vacancy condition affirmative defenses. Icarus's motion is granted as to the other affirmative defenses. Icarus's motion to strike, [45], is granted.