Elson v. State Farm Fire & Casualty Co.

FIRST DIVISION
FEBRUARY 17, 1998




No. 96-4354

IN THE APPELLATE COURT
OF ILLINOIS
FIRST JUDICIAL DISTRICT

B. JOHN ELSON, CHRISTINE E. ELSON,
KATHLEEN STRAND, THOMAS STRAND, and all
others similarly situated,

Plaintiffs-Appellants,

v.

STATE FARM FIRE AND CASUALTY COMPANY, an
Illinois corporation,

Defendant-Appellee.)
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)Appeal from the
Circuit Court of
Cook County

No. 93 CH 9816

Honorable
Stephen A. Schiller,
Judge Presiding.


JUSTICE O'MARA FROSSARD delivered the opinion of the court:
Plaintiffs appeal from the dismissal of their fifth amended
complaint, which alleged claims for breach of contract, statutory
and common law fraud, reformation of contract, violation of the
Illinois Insurance Code (215 ILCS 5/1 et seq. (West 1994)), and
estoppel. The action is based on defendant State Farm Fire and
Casualty Company's denial of plaintiffs' claims under their 1993
homeowners insurance policies.
On August 2, 1996, the trial court granted defendant's
motion to dismiss the fifth amended complaint for failure to
state a cause of action under section 2-615 of the Code of Civil
Procedure (735 ILCS 5/2-615 (West 1994). The court denied
plaintiffs' motions for reconsideration and for leave to file a
sixth amended complaint on November 19, 1996. It is from these
orders that plaintiffs appeal.

I. FACTS
Plaintiffs filed this action in September of 1993. Each
claim was based on the contention that defendant State Farm
wrongfully denied plaintiffs' claims in 1993 for flood-related
water damage under plaintiffs' homeowners insurance policies.
Plaintiffs purchased standard homeowners insurance policies from
State Farm in 1990, which excluded coverage for water damage
caused by sewer or drain backup. In 1990, plaintiffs purchased
additional insurance offered via an amendatory endorsement, which
included coverage for such water damage. Also in 1990,
plaintiffs' homes were flooded and they made claims based on the
drain backup coverage in the endorsement, which were paid by
defendant.
In 1991, plaintiffs received renewal notices from defendant
which offered to renew their homeowners policies. Along with the
renewal notices, plaintiffs received policy booklets setting
forth the terms of coverage. The notice, termed a "renewal
certificate," listed the number of the renewal policy on the face
of the document and contained language which provided that $5,000
worth of drain backup coverage could be added to the policy upon
payment of an additional $60.
In 1992 and 1993, plaintiffs continued to receive such
renewal notices for their State Farm insurance policies and paid
the required premiums, although they did not pay the additional
$60 to receive coverage for drain backup damages. The amount of
the premium did not reflect elimination of coverage for sewer and
drain backup. In 1993, after flooding caused more water damage
to their properties, plaintiffs again filed claims under their
homeowners policies. Defendant denied these claims, asserting
that the 1990 amendatory endorsement was not renewed in 1991
along with the original policies and plaintiffs were not covered
for such damage.

II. ANALYSIS
In reviewing an order on a section 2-615 motion to dismiss,
the court shall apply a de novo standard of review. Board of
Library Trustees v. Cinco Construction, Inc., 276 Ill. App. 3d
417, 658 N.E.2d 473 (1995). The standard of review for a section
2-615 motion to dismiss is whether the complaint sufficiently
states a cause of action, and the merits of the case are not
considered. Jesperson v. Minnesota Mining & Manufacturing Co.,
288 Ill. App. 3d 889, 681 N.E.2d 67 (1997). Upon review, all
well-pleaded facts are taken as true and considered in the light
most favorable to the plaintiffs. Rodgers v. Whitley, 282 Ill.
App. 3d 741, 668 N.E.2d 1023 (1996). The complaint is to be
construed liberally and should only be dismissed when it appears
that plaintiff could not recover under any set of facts.
Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 639 N.E.2d 1282
(1994).
A section 2-615 motion attacks only defects apparent on the
face of the complaint and is based on the pleadings rather than
the underlying facts. Urbatis v. Commonwealth Edison, 143 Ill. 2d 458, 475, 575 N.E.2d 548 (1991). The court, in ruling on a
section 2-615 motion, may not consider affidavits, the products
of discovery, documentary evidence not incorporated into the
pleadings as exhibits, testimonial evidence or other evidentiary
materials. Barber-Colman Co. v. A&K Midwest Insulation Co., 236
Ill. App. 3d 1065, 603 N.E.2d 1215 (1992). In the present case,
plaintiffs have incorporated several exhibits into their fifth
amended complaint, primarily insurance documents, which must be
considered when analyzing the sufficiency of the pleading.
In determining whether plaintiffs have met the section 2-615
pleading hurdle, we will address the sufficiency of each cause of
action, or count, on an individual basis.

A. Breach of Contract (Count I)
In order to properly plead a breach of contract, a plaintiff
must allege the following elements: (1) the existence of a valid
and enforceable contract; (2) performance by the plaintiff; (3)
breach of contract by the defendant; and (4) resultant injury to
the plaintiff. Nielsen v. United Services Automobile Ass'n, 244
Ill. App. 3d 658, 662, 612 N.E.2d 526 (1993). Additionally, in
alleging a breach of contract, a plaintiff's pleadings must
allege facts sufficient to indicate the terms of the contract
claimed to have been breached. Nielsen, 244 Ill. App. 3d at 662.
The general principles governing the interpretation of insurance
contracts do not differ from those controlling in other
contracts. Rivota v. Kaplan, 49 Ill. App. 3d 910, 364 N.E.2d 337
(1977).
In construing insurance contracts, the court's primary
purpose is to give effect to the intention of the parties as
expressed therein. Rivota, 49 Ill. App. 3d at 915. Where the
terms of a policy are clear and unambiguous, their plain meaning
will be given effect. Economy Fire & Casualty Co. v. Kubik, 142
Ill. App. 3d 906, 909, 492 N.E.2d 504 (1986). Where, however, a
provision in an insurance policy is subject to more than one
reasonable interpretation, it is ambiguous and must be construed
against the insurer and in favor of the insured. Kubik, 142 Ill.
App. 3d at 909. See also Jones v. State Farm Mutual Automobile
Insurance Co., 289 Ill. App. 3d 903, 682 N.E.2d 238 (1997); Wahls
v. Aetna Life Insurance Co., 122 Ill. App. 3d 309, 461 N.E.2d 466 (1983).
In the present case, plaintiffs allege defendant breached
its contract by failing to provide "plain, clear and conspicuous
notice" of nonrenewal as required by their insurance policies and
denying the claims of plaintiffs for losses due to water damage
from sewer or drain backup. Defendant contends that the 1990
amendatory endorsement which provided for such coverage was not
part of the 1991 renewal policies and subsequent renewals of
plaintiffs' homeowners insurance policies. Defendant argues that
sufficient notice of nonrenewal of the endorsement was
established in two ways; first, the form number of the 1990
amendatory endorsement was not listed on the renewal notices
under the section labeled "Forms, options and endorsements," and
second, the renewal notices contained a statement which
purportedly alerted insureds that in order to purchase sewer or
drain backup coverage, an additional payment of $60 was required.
The renewal of an insurance policy is, in effect, a new
contract of assurance and, unless otherwise expressed, is on the
same terms and conditions as were contained in the original
policy. Dungey v. Haines & Britton, Ltd., 155 Ill. 2d 329, 614 N.E.2d 1205 (1993). The general rule is that when a policy
renewal is made, unless provided otherwise, the terms of the
original policy become part of the renewal contract of insurance.
Dungey, 155 Ill. 2d at 334; Economy Fire & Casualty Co. v.
Pearce, 79 Ill. App. 3d 559, 399 N.E.2d 151 (1979). Defendant
claims it has "provided otherwise" by giving sufficient notice of
nonrenewal of the endorsement and thus plaintiffs were not
covered for water damage under the version of the policies in
effect.
The key inquiry in construing policy coverage is not what
the drafters actually intended, but whether that alleged intent
was expressed in the language of the policy itself so that it was
understandable to the person purchasing the insurance policy.
Kubik, 142 Ill. App. 3d at 911. The rule that insurers should
gain no advantage from their own drafting ambiguities is most
rigorously applied to exclusionary provisions. Dungey, 155 Ill. 2d at 340-41 (Bilandic, J., dissenting). Our courts have held
that exclusions from the general coverage provided by an
insurance policy must be stated in such clear, definite and
explicit language as to warrant the conclusion that the insured
understood and accepted them. Protective Insurance Co. v.
Coleman, 144 Ill. App. 3d 682, 494 N.E.2d 1241 (1986).
Applying these principles here, it is evident that an
ambiguity exists as to whether the amendatory endorsement was
part of the insurance contracts during subsequent renewal
periods. Despite defendant's claims, it is not clear from the
language of the renewal notices that the subject endorsement was
not being renewed. First, defendant contends that the primary
insurance policies clearly exclude drain backup coverage. While
it is true that language excluding such coverage appears in the
policies, such language also appeared in the policies when the
1990 amendatory endorsement providing for such coverage was in
effect and when plaintiffs' claims for water damage were paid.
Defendant further asserts that because the renewal certificates
did not list the form number of the 1990 amendatory endorsement,
plaintiffs were notified that it was no longer in effect and the
exclusions from drain backup coverage in the original policies
must now apply.
In support of this contention, defendant cites two cases
that address the relevance of an endorsement number on a policy
renewal document.
In Pearce, the central issue was whether a "youthful
drivers" exclusion endorsement was in effect at the time of an
automobile accident. Pearce, 79 Ill. App. 3d 559. The exclusion
was signed and attached to the original policy, and upon renewal,
a certificate was sent to the insured. The renewal certificate
contained the notation "CE-90," the form number of the
endorsement attached to the original policy. The defendant
argued that the exclusion was not in effect at the time of the
accident, as the original endorsement expired by its own terms
and was not reexecuted upon renewal. The court rejected this
argument, holding that because the renewal certificate listed the
form numbers of endorsements and because there was no indication
the original endorsement was not intended to be part of the
renewal contract, the terms of the original endorsement became
part of the renewal contract of insurance. Pearce, 79 Ill. App.
3d at 563.
The listing of an endorsement number on a renewal
certificate was also discussed in Dungey. In Dungey, the
plaintiff was asked to sign a "named drivers" exclusion
endorsement excluding her husband from coverage. Dungey, 155 Ill. 2d at 332. Upon renewal, the plaintiff was again asked to
sign an endorsement, labeled "CE-303." The plaintiff renewed
this policy several times, and although she was not asked to sign
any additional endorsement forms, the notation "CE-303" appeared
after the word "Endorsement(s)" on each renewal declaration
statement. The plaintiff subsequently obtained a second,
separate policy which did not contain the exclusion and, at the
same time, added a third vehicle to the original policy, which
contained the exclusion. The defendant insurance company refused
to pay damages when the plaintiff's husband was injured while
driving the third vehicle under the original policy, as it
contained the "named drivers" exclusion endorsement.
The plaintiff sued, claiming the notation of "CE-303" on the
renewal certificate was ambiguous and the fact the insurance
company issued a second policy which did not exclude the
plaintiff's husband could lead a reasonable person to infer he
was covered to drive the third vehicle under the initial policy.
The court rejected these arguments and held, consistent with
Pearce, that the policy was subject to only one reasonable
construction - that the "named drivers" exclusion endorsement
listed on each renewal certificate clearly indicated the
plaintiff's husband was excluded from coverage. The court said
that each renewal was a new contract that incorporated the terms
of the original insurance contract. One of these terms,
indicated on the declaration as "CE-303," was the "named drivers"
exclusion endorsement. Dungey, 155 Ill. 2d at 332.
The present case can be factually distinguished from Dungey
and Pearce. A renewal is, by definition, a policy having the
same terms and conditions as the original policy. 215 ILCS
5/143.14(d) (West 1994). Both Dungey and Pearce involved
renewals and held that the subject endorsements were renewed
along with the policy and remained in effect after the renewal.
The listing of the endorsement numbers on the renewal
certificates reinforced the renewal of the endorsements in
question.
However, in the case at bar, the provision providing drain
backup coverage was removed despite the fact plaintiffs "renewed"
their policies. Though the number of the endorsement was absent
from the renewal certificates, under the totality of the
circumstances, this did not clearly convey an intent not to renew
that particular coverage. Based on both the legal definition of
"renewal" and the plain meaning of the word, there was no reason
for plaintiffs to believe that the policies differed in any
material way from the 1990 policies. If the amendatory
endorsement was part of the policy in 1990, it is reasonable to
believe that, upon renewal, the coverage it contained was renewed
as well. At best, the policies are ambiguous as to whether the
coverage within the endorsement was renewed, and the absence of a
form number for the endorsement does not clarify this issue
without further explanation to the insured.
Defendant argues that it provided such explanation to the
insured regarding the nonrenewal of the endorsement by including
language to that effect in the upper corner of the renewal
notices. However, rather than indicating to plaintiffs that
their coverage for drain backup was not being renewed, we find
the wording of the explanation compounds the ambiguity
surrounding this coverage.
The explanation was worded differently in the Elsons' and
Strands' renewal notices. The Elsons' renewal notice contained
the following version:
"You may add $5000 worth of sewer or drain coverage to your
policy for $60.00. To add this coverage, return this notice
with your payment of $60.00." (Emphasis added.)
The Strands' renewal notice contained the following language:
"You may add $5000 worth of sewer or drain coverage to your
policy for $60.00. To add this increased protection, return
this notice with your payment of $60.00." (Emphasis added.)
Defendant argues this language substantiates its notice to
insured plaintiffs that the coverage in question was no longer in
effect and that additional payment would be necessary to be
covered for water damage. The fact that defendant chose to
provide this additional language indicates it recognized the need
to "communicate" with plaintiffs about the reduction of coverage.
However, defendant did not use unambiguous language to
communicate the nonrenewal in the present case.
In interpreting insurance policies, policy provisions are
deemed ambiguous if they are subject to more than one
interpretation. Dungey, 155 Ill. 2d at 336. We agree with
plaintiffs that the language in question is ambiguous and can be
interpreted in various ways. The language can be read to mean
either that the insured has no coverage for this particular item
and must pay an additional $60 premium to be covered, as
defendant contends, or it can be read to mean that a payment of
$60 will provide an additional $5,000 worth of coverage for water
damage above and beyond the existing coverage, as interpreted by
plaintiffs. This creates an ambiguity as to coverage.
In determining whether an ambiguity exists in an insurance
contract, this court has held that a court should consider the
totality of the circumstances, including the subject matter of
the contract, the facts surrounding its execution, the situation
of the parties and the predominate purpose of the contract, which
is to indemnify the insured. Dungey, 155 Ill. 2d at 336. See also
Dora Township v. Indiana Insurance Co., 78 Ill. 2d 376, 400 N.E.2d 921 (1980).
In the present case, there are several circumstances which
contribute to the ambiguity of the insurance contracts at issue.
First, the document which defendant purports gives notice to
plaintiffs of nonrenewal of the endorsement is called a "renewal
certificate." The term "nonrenewal" does not appear in this
document. Again, the general rule is that, unless otherwise
provided, when a policy renewal is made, the terms of the
original policy become part of the renewal contract. Dungey, 155 Ill. 2d 329; Pearce, 79 Ill. App. 3d 559. Here, the renewal
certificates give plaintiffs every reason to believe that the
original terms were incorporated into the renewal contracts and
no clear indication defendant "provided otherwise."
Significantly, though one type of coverage was eliminated,
the renewal policies provided no corresponding reduction in
premium. The lack of a reduced premium further magnifies the
ambiguity of the language on the renewal certificates, which
referred to "add[ing] coverage" or "add[ing] increased
protection" for $60. It is reasonable to infer that the payment
of an additional $60 would provide the insured with a higher
amount of drain backup coverage - in addition to the coverage
plaintiffs believed was already provided by the policies. If the
premium had been reduced by $60, and the message had appeared,
such an inference would be less likely.
Additionally, plaintiffs had previously made claims for
water damage under their homeowners policies. Plaintiffs had
invested in and utilized water damage protection prior to 1991,
and it is reasonable to believe that a renewal of the same
policies would again offer this coverage, especially in the
absence of unambiguous notice to the contrary.
Where there is an ambiguity in an insurance policy, all
exclusions, conditions or provisions which tend to limit or
defeat liability should be construed most favorably to the
insured. Economy Fire & Casualty Co. v. Bassett, 170 Ill. App.
3d 765, 525 N.E.2d 539 (1988). The reason for this rule is
twofold: (1) the intent of an insured in purchasing an insurance
policy is to obtain coverage, and therefore any ambiguity
jeopardizing such coverage should be construed consistent with
the insured's intent; and (2) the insurer is the drafter of the
policy and could have drafted the ambiguous provision clearly and
specifically. State Farm Mutual Automobile Insurance Co. v.
Schmitt, 94 Ill. App. 3d 1062, 419 N.E.2d 601 (1981).
The intent of the insureds in the present case is evident in
that they had previously purchased an endorsement which
specifically provided for coverage for water damage caused by
sewer or drain backup. As noted above, claims were made and paid
under this endorsement for flood damages. It is therefore not
unreasonable to believe plaintiffs intended to retain the same
coverage, and thus the ambiguity should be construed consistent
with plaintiffs' intent.
Regarding the second prong, defendant could have provided
sufficient notice to plaintiffs regarding the significant
reduction in coverage. As plaintiffs point out, a document
clearly detailing the elimination of water damage coverage
entitled "About your new homeowners policy" (exhibit E, fifth
amended complaint) was prepared and issued by defendant as the
cover page of the renewal policy. This document states that
enclosed is "your new State Farm Homeowners policy which replaces
your current policy." It further states that the new policy
contains some changes which broaden or add coverage and some that
reduce or eliminate coverage. The document encourages insureds
to review the changes and includes a section that covers
reductions or eliminations of coverage. Included under this
heading is the following language:
"Back-up of sewer or drain coverage is not being renewed as
part of your basic Homeowners coverage. You may be eligible
to add this coverage by endorsement for an additional
premium charge."
The above language clearly and unambiguously notifies insureds
that backup of sewer or drain coverage was not renewed. However,
plaintiffs allege they never received this part of their
policies, a well-pleaded fact accepted as true for purposes of a
section 2-615 analysis.
The issue of what constitutes proper notice of nonrenewal
has been previously addressed by this court. In First National
Bank v. Country Mutual Insurance Co., 175 Ill. App. 3d 860, 530 N.E.2d 521 (1988), the issue presented was whether defendant's
notice of nonrenewal of an insurance policy was sufficient. The
insureds were required to renew their Farm Bureau membership
before their Farm Bureau insurance policy could be renewed.
Plaintiff argued the insureds were confused by the subject line
of the letter, which read "Farm Bureau Membership." However, the
notice was entitled "Notice of Intent Not to Renew" and contained
the phrase "unless you reinstate your farm bureau membership ***
non-renewal will be necessary." First National Bank, 175 Ill.
App. 3d at 863. The document also stated the dates when the
policy was to expire. The court found the notice of intent not
to renew was not ambiguous and complied with the Illinois statute
requiring such notice. First National Bank, 175 Ill. App. 3d at
867. The court further held that a reasonable person reading the
notice would understand that to take no action would result in
the policy's expiration on the date stated. First National Bank,
175 Ill. App. 3d at 867. The same is simply not true in the
present case, as presented in the plaintiffs' complaint. There
is no explicit reference to a "nonrenewal" or an "intent not to
renew," and the language appearing on the renewal certificates
regarding the purchase of water damage coverage for an additional
$60 does not convey the information that this coverage was not
renewed.
To find notice of nonrenewal as defendant claims, an insured
must disregard the term "renewal," discover the absence of an
endorsement form number, and infer from this absence that certain
coverage was not renewed. Further, the insured must interpret
the ambiguous and confusing language regarding additional
coverage or protection in exactly the way the insurer intended
it. Lastly, the insured must understand that the payment of a
similar premium amount as the prior year provided plaintiffs with
not the same coverage, but a reduction in coverage for water
damage.
Based on the totality of the circumstances, we find the
complaint has sufficiently stated a cause of action for breach of
contract.

B. Violation of Illinois Insurance Code (Count V)
Under section 143.17 of the Illinois Insurance Code (Code),
an insurance company is required to send by mail to the named
insured at least 30 days' advance notice of its intention not to
renew an insurance policy. 215 ILCS 5/143.17 (West 1994).
Plaintiffs allege that defendant violated this section of
the Code on the same basis the breach of contract was alleged.
Defendant argues that under section 143.13(d) of the Code, "any
successive polic[y] issued by the same insurer to the same
insured, for the same or similar coverage, shall be considered a
renewal policy." 215 ILCS 5/143.13(d) (West 1994). Defendant
asserts that the only change in coverage between the 1990 and
successive policies is the elimination of coverage for sewer or
drain backup, and this constitutes "the same or similar
coverage." Thus, defendant argues, a renewal took place and no
notice of nonrenewal is required under the Code. We disagree.
Without the provisions contained in the 1990 endorsement, the
policy contains no coverage for water damage from sewer or drain
backup, which was clearly coverage plaintiffs had sought,
purchased and made claims on in the past. With regard to water
damage, obviously an important component of the policy to
plaintiffs, the 1990 policy and the 1991 and subsequent policies
were, in fact, quite dissimilar. Therefore, the provision in the
Code requiring notice of nonrenewal must apply. We find
plaintiffs have sufficiently alleged facts to support their claim
of insufficient notice under the Code and that a valid cause of
action has been stated.

C. Common law and Statutory Fraud Claims (Counts II, III)
Plaintiffs allege defendant made certain representations
regarding the reduction in coverage of plaintiffs' homeowners
insurance policies and assert claims based on common law fraud
and the Illinois Consumer Fraud and Deceptive Business Practices
Act (815 ILCS 505/1 et seq. (West 1994)).
In order to state a cause of action for common law fraud,
the essential elements of fraud must be pleaded with specificity.
Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513, 675 N.E.2d 897 (1996). The elements include: (1) a false statement of
material fact; (2) the party making the statement knew or
believed it to be untrue; (3) the party to whom the statement was
made had a right to rely on the statement; (4) the party to whom
the statement was made did rely on the statement; (5) the
statement was made for the purpose of inducing the other party to
act; and (6) the reliance by the person to whom the statement was
made led to that person's injury. Cramer, 174 Ill. 2d at 529.
Plaintiffs have failed to adequately plead this cause of action
in their complaint. The communications made by defendant are not
false statements of material fact that defendant knew or believed
to be false.
Plaintiffs also assert defendant has violated the Illinois
Consumer Fraud and Deceptive Business Practices Act (Act),
section 2, which reads:
"Unfair methods of competition and unfair or deceptive acts
or practices, including but not limited to the use or
employment of any deception, fraud, false pretense, false
promise, misrepresentation or the concealment, suppression
or omission of any material fact *** are hearby declared
unlawful." 815 ILCS 505/2 (West 1994).
The Act was intended to protect consumers against fraud,
unfair methods of competition, and unfair or deceptive acts or
practices in the conduct of trade or commerce. Washington Courte
Condominium Assoc'n-Four v. Washington-Golf Corp., 267 Ill. App.
3d 790, 643 N.E.2d 199 (1994). The Act was designed to provide
broader protection for consumers than the common law action of
fraud and thus a plaintiff is not required to prove every element
of common law fraud in order to recover. Washington Courte, 267
Ill. App. 3d at 838-39.
In order to state a claim for a violation of the Act, a
plaintiff must allege the following: (1) a deceptive act or
practice; (2) an intent by defendant that plaintiff rely on the
deception; and (3) the deception occurred in the course of
conduct involving trade or commerce. Hoke v. Beck, 224 Ill. App.
3d 674, 587 N.E.2d 4 (1992). Plaintiffs allege defendant engaged
in unfair or deceptive practices by purporting to sell renewal
policies while failing to provide clear notice that the policies
had been substantially changed and accepting payment for such
renewal when in fact, the policies were not renewed.
A complaint alleging a violation of consumer fraud must be
pled with the same specificity as that required under common law
fraud. Connick v. Suzuki Motor Co., Ltd., 174 Ill. 2d 482, 675 N.E.2d 584 (1996). Plaintiffs' complaint fails to sufficiently
plead the "deceptive act" of defendant that constitutes the
alleged consumer fraud. Merely characterizing the action as
unlawful or wrongful is insufficient to allege a violation of the
Act. Kennedy v. First National Bank, 194 Ill. App. 3d 1004, 551 N.E.2d 1002 (1990). Additionally, not all misrepresentations or
omissions are actionable; only those for which culpability can be
shown. A misrepresentation may have been made "innocently" in
that there is no intent to deceive. In claiming a violation of
the Act, the perpetrator must have knowledge of the
misrepresentation or omission and the misrepresentation or
omission must be deceptive or unfair. Washington Courte, 267
Ill. App. 3d at 838.
We do not find that plaintiffs pled with specificity the
elements for a cause of action for statutory fraud under the
Illinois Consumer Fraud and Deceptive Business Practices Act.

D. Reformation of Contract (Count IV)
We next turn to plaintiffs' assertion of reformation of
contract. The underlying basis for a reformation action is the
existence of a mutual understanding between the parties which the
parties agreed to reduce to a writing, but through either mutual
mistake or mistake on one side and fraud on the other, a material
provision was omitted. Briarcliffe Lakeside Townhouse Owners
Ass'n v. City of Wheaton, 170 Ill. App. 3d 244, 524 N.E.2d 230
(1988). Reformation of a contract should be allowed only when
clear and convincing evidence compels the conclusion that the
instrument as it stands does not properly reflect the true
intention of the parties and that there has been either a mutual
mistake or a mistake by one party and fraud by the other. 319
South La Salle Corp. v. Lopin, 19 Ill. App. 3d 285, 311 N.E.2d 288 (1974).
We find plaintiffs have failed to establish a cause of
action for reformation of contract. In the present case,
plaintiffs argue that reformation is proper as plaintiffs
mistakenly believed they were renewing insurance policies which
covered water damage by sewer or drain backup, and defendant
failed to provide plain, clear and conspicuous notice of the
nonrenewal of the water damage endorsement in violation of the
Illinois Consumer Fraud and Deceptive Business Practices Act and
under common law fraud principles. For the reasons discussed
previously, the fraud claim cannot stand and the reformation
claim based on the fraud claim must fail as well.

E. Estoppel (Count VI)
Finally, plaintiffs allege defendant should be estopped from
denying coverage for the 1993 claims as defendant's conduct
induced them to believe and have confidence in the renewal of
their homeowners insurance from 1991 through 1993 under the same
terms and conditions as the 1990 policies.
In order to assert a claim of estoppel, a plaintiff must
plead the following: (1) words or conduct amounting to a
misrepresentation or concealment of material facts; (2) the party
against whom estoppel is alleged must have had knowledge at the
time the representations were made that they were untrue; (3) the
truth as to the representations must have been unknown to the
party asserting estoppel at the time they were relied upon; (4)
the party estopped must have intended or reasonably expected the
conduct or representations would be acted upon; (5) the party
asserting estoppel must have relied in good faith on the
misrepresentation to his or her detriment; and (6) the party
asserting estoppel must have so acted because of such
representations or conduct and must be prejudiced if the party to
be estopped is permitted to deny the truth thereof. Vaughn v.
Speaker, 126 Ill. 2d 150, 533 N.E.2d 885 (1988). Plaintiffs'
complaint alleges that defendant did not give plaintiffs plain,
clear and conspicuous notice of the reduction of water damage
coverage. However, plaintiffs' allegations of ambiguity do not
rise to the level of a misrepresentation or concealment of
material fact known to be untrue, as required to assert an
estoppel claim.

III. CONCLUSION
We hold that the trial court erred in dismissing plaintiffs'
complaint as to the counts asserting claims for breach of
contract and a violation of the Illinois Insurance Code provision
requiring notice of nonrenewal for an insurance policy, and
reverse on this basis. We agree with the trial court's
conclusion that plaintiffs did not sufficiently plead claims of
statutory and common law fraud, reformation of contract, and
estoppel.
Additionally, because of our holding that plaintiffs' fifth
amended complaint stated a cause of action, the question of class
certification must be determined by the trial court. Moreno v.
Joe Perillo Pontiac, Inc., 112 Ill. App. 3d 670, 445 N.E.2d 1184
(1983).
Finally, we find it unnecessary to address plaintiffs' claim
the trial court improperly denied leave to file a sixth amended
complaint, in light of our finding that the fifth amended
complaint stated a cause of action.
In view of the foregoing, the judgment of the trial court is
affirmed in part and reversed in part, and the cause is remanded
to the trial court for further action consistent with this
opinion.
Affirmed in part and reversed in part; cause remanded.
MCNULTY, P.J., and RAKOWSKI, J., concur.