Great Lakes Dredge & Dock v. Commercial Union, 94 C 2579.
| Decision Date | 26 March 1999 |
| Docket Number | No. 94 C 2579.,94 C 2579. |
| Citation | 57 F.Supp.2d 525 |
| Parties | GREAT LAKES DREDGE & DOCK COMPANY, Plaintiff-Counterdefendant, The City of Chicago, et al., Plaintiff-Intervenors, v. COMMERCIAL UNION ASSURANCE COMPANY, et al., Defendants-Counterplaintiffs. |
| Court | U.S. District Court — Northern District of Illinois |
Terry M. Grimm, Duane M. Kelley, Jack J. Crowe, Michael V. Hasten, James F. Hurst, Winston & Strawn, Chicago, IL, for Great Lakes Dredge & Dock Company, plaintiff.
Don W. Fowler, Richard Fred Johnson, Richard Edward Mueller, Frederic W. Weber, David M Agnew, Christine J. Siwik, Lord, Bissell & Brook, Chicago, IL, Michael Patrick Hannigan, Connelly & Schroeder, Chicago, IL, Phillip A. Bock, Stein, Ray & Conway, Chicago, IL, for Commercial Union Assurance Company, Ocean Marine Insurance Company, Limited, Sirius (UK) Insurance PLC, Prudential Assurance Company Limited, Pearl Assurance Public Limited Company, Indemnity Marine Assurance Company Limited, defendants.
Don W. Fowler, Richard Fred Johnson, Richard Edward Mueller, Frederic W. Weber, David M Agnew, Christine J. Siwik, Lord, Bissell & Brook, Chicago, IL, for London & Hull Maritime Insurance Company Limited, Sovereign Marine and General Ins. Co. Ltd., Tokio Marine & Fire Ins. Co. Ltd., (U.K.), Northern Assurance Co. Ltd., Scottish Lion Ins. Co. Ltd., Threadneedle Ins. Co. Ltd., Insurance Co. of north America (U.K.) Ltd., Minster Ins. Co., Ltd., Yorkshire Ins. Co., Ltd., Orion Ins. Co. P.L.C., Phoenix Assurance Public Ltd. Co., Norwich Union Fire Ins. Society Ltd., Bishipsgate Ins. Ltd., Sphere Drake Ins. PLC, DIA-Tokyo Ins. Co. (UK) Ltd., Lombard Continental Ins. PLC, Assicurazioni Generali S.P.A., La Reunion Francaise Soc. Anon D'Assurances at Des Reassurances, Hansa Marine Ins. Co. (U.K.) Ltd., Vesta (U.K.) Ins. Co. Ltd., Certain Lloyd's Syndicates Underwriting the Policy Evidenced by Cover Note 91E1979, defendants.
Richard Fred Johnson, Christine J. Siwik, Lord, Bissell & Brook, Chicago, IL, Neal R. Novak, Dan J. Hofmeister, Jr., Michael Lee Tischleder, Brand & Novak, Limited, Chicago, IL, for Yasuda Fire & Marine Insurance Company of Europe Ltd., The Limited, defendants.
Stephen Belgrade, John Andrew O'Donnell, James Kent Minnette, Belgrade and O'Donnell, P.C., Chicago, IL, for Continental Insurance Company, defendant.
William J. Harte, Stephen L. Garcia, William J. Harte, Ltd., Chicago, IL, for Commonwealth Edison Company, counter-defendant.
William J. Harte, Stephen L. Garcia, William J. Harte, Ltd., Chicago, IL, for Kantner & Mattenson, Ltd., Merit Insurance Company, Aera Crockett, MJ Miller & Co. Inc., Edwin J Mills, Richard Cook, Dr., Tiffany Wilson, Le Pecque Women's Apparel, Jac-Lin, Merced E Zuniga, Jolie Mome Inc., Norman C. Berliant, Fish Port, Inc., Hedlund corp., Oriental Electronics, Inc., R & L Fashions, Inc., Royal Redemption Center, Inc., Young Jong, intervenors.
Richard Charles Bollow, Russ M. Strobel, Theodore Robert Tetzlaff, Kenneth A. Kroot, Jenner & Block, Chicago, IL, William J. Harte, Stephen L. Garcia, William J. Hate, Ltd., Chicago, IL, Michael A. Forti, City of Chicago, Department of Law, Chicago, IL, for Donald L Hohman, intervenor.
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
Plaintiff, Great Lakes Dredge & Dock Company ("Great Lakes"), filed this action under the federal Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaratory judgment that various insurance policies purchased from a consortium of primarily London-based insurance companies led by the Commercial Union Assurance Company, P.L.C. (hereinafter collectively referred to as "London Insurers") and from Continental Insurance Company ("Continental") indemnify Great Lakes for liability it has incurred or may incur in litigation arising out of the Chicago flood of April 13, 1992. London Insurers subsequently filed a counterclaim seeking the opposite declaratory judgment. Other parties have joined the lawsuit, including the City of Chicago ("City"), which seeks coverage as an additional insured under the policies purchased by Great Lakes, and various businesses and individuals damaged by the flood ("the underlying claimants"). The court's diversity jurisdiction was originally invoked, but following the Seventh Circuit's opinion in Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314 (7th Cir.1998), the court revisited the issue of jurisdiction and determined that the case falls within its admiralty jurisdiction. Venue is proper in the Northern District of Illinois.
Great Lakes is in the business of marine excavation with worldwide operations encompassing dredging waterways, renourishing beaches and marine construction. In May 1991, Great Lakes entered into a contract with the City of Chicago in which Great Lakes agreed to replace pilings at five bridges on the Chicago River, including the Kinzie Street Bridge. In the course of its work, Great Lakes removed deteriorating pilings from the riverbed near the Kinzie Street Bridge and installed new pilings by driving them into the riverbed.
During all relevant times, the City owned an underground tunnel system, including a tunnel underneath the Chicago River near the Kinzie Street Bridge. It is undisputed, for the purpose of this declaratory judgment action, that Great Lakes negligently damaged the tunnel while driving pilings during September 1991. It is also undisputed, for purposes of this declaratory judgment action, that the tunnel damage caused by Great Lakes in September 1991 "progressed,"1 that at some time the Chicago River began flowing into the underground tunnel, and that as a result of the initial tunnel damage, buildings in the Chicago loop were flooded on April 13, 1992.
The underlying claimants have sued Great Lakes and the City for losses suffered as a result of the flood. The total losses claimed by the underlying claimants exceed $300 million.
In July 1991, Great Lakes purchased primary comprehensive general liability ("CGL") insurance, with a limit of $1 million per occurrence, that provided coverage for the time period July 31, 1991 to July 31, 1992 (the "primary layer"). (Ex. 7102.) Also in July 1991, Itel Corporation ("Itel"), Great Lakes' parent company, purchased two layers of coverage in excess of the primary coverage for the period July 31, 1991 to July 31, 1992. The first layer of excess coverage provided a $40 million limit for excess liabilities arising out of the operations of Great Lakes, written on an occurrence basis, together with additional coverage for Itel and certain specified Great Lakes activities, not at issue here, written on a claims-made basis. (Ex. 7103.) The second layer of excess coverage provided a $60 million layer in excess of both the $40 million first excess layer and the $1 million primary layer. Great Lakes was a named insured, together with Itel, on both excess layers. Although the final policy wording of the $60 million second excess layer has never been agreed upon, all parties agree, for purposes of this litigation, that the wording of the $60 million second excess layer should be considered identical to the wording of the $40 million first excess layer.
When the excess layers were placed for the period July 31, 1991-July 31, 1992, it was anticipated that Great Lakes might be sold by Itel during the policy period. Accordingly, the parties reached an agreement that in the event Great Lakes were sold, London Insurers would "issue, if required, a separate policy with separate limits in respect of Great Lakes International, Inc., et al." See, e.g., Ex. 7103A at LI 00127, LI 006491.
On October 15, 1991, the Blackstone Dredging Partnership L.P. ("Blackstone") purchased Great Lakes from Itel. At that time, London Insurers canceled Great Lakes from the $40 million first layer excess policy, # 90H6337/41-FO33342 (Ex. 7103 at GLDD 13045), and issued a $40 million excess policy numbered # 90H6337/41(a)-FO33983 to Blackstone for the period October 15, 1991-July 31, 1992. (Ex. 7105.) Further, as of October 15, 1991, Itel canceled the $60 million second excess layer and received a refund of the unearned premium. Instead of replacing the $60 million excess policy, Blackstone purchased a substitute second excess layer for the October 15, 1991-July 31, 1992 period from Continental with a $10 million per occurrence limit for the operations of Great Lakes. The Continental policy was a "following form" policy, meaning that it adopted and used the policy wording of the underlying $40 million excess policy. For convenience, the court and the parties have referred to the July 31, 1991-October 15, 1991 period preceding the sale of Great Lakes as the "first period." The period October 15, 1991-July 31, 1992 is referred to as the "second period."
While the only policy that has actually been issued is the first period $40 million first excess layer, the parties agree that for purposes of this action, the relevant coverage wording for all the policies can be deemed to read as follows:
2. INSURING AGREEMENTS
2.1 Coverage
Underwriters hereby agree, subject to the limitations, terms and conditions hereinafter mentioned, to pay on behalf of the Assured all sums which the Assured shall be obligated to pay by reason of the liability:
(a) imposed upon the Assured by law,
or
(b) assumed under contract or agreement (verbal, written or implied) by the Named Assured and/or any officer, director, stockholder, partner or employee of the Named Assured, while acting in his capacity as such
for damages on account of:
caused by or arising out of each occurrence happening anywhere in the world.
(Ex. 7103 at GLDD 13002.)
The excess policies at issue define an "occurrence" as
an accident or a happening or event or a continuous or repeated exposure to conditions which unintentionally results in Personal...
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