Archer-Daniels-Midland Co. v. Phoenix Assur. Co., 95-CV-4001-JLF.

• Decision Date: 17 July 1996
• Docket Number: No. 95-CV-4001-JLF.,95-CV-4001-JLF.
• Citation: 936 F. Supp. 534
• Parties: ARCHER-DANIELS-MIDLAND COMPANY, Reidy Terminal, Inc., ADM/Growmark River System, Inc., American River Transportation Co., ADM Milling Co., Collingwood Grain, Inc., Tabor Grain Co., Plaintiffs, v. PHOENIX ASSURANCE COMPANY OF NEW YORK, Commonwealth Insurance Company, Navigators Insurance Company, Albany Insurance Company, Hartford Fire Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of Illinois

936 F. Supp. 534

ARCHER-DANIELS-MIDLAND COMPANY, Reidy Terminal, Inc., ADM/Growmark River System, Inc., American River Transportation Co., ADM Milling Co., Collingwood Grain, Inc., Tabor Grain Co., Plaintiffs, v. PHOENIX ASSURANCE COMPANY OF NEW YORK, Commonwealth Insurance Company, Navigators Insurance Company, Albany Insurance Company, Hartford Fire Insurance Company, Defendants.

No. 95-CV-4001-JLF.

United States District Court, S.D. Illinois.

July 17, 1996.

A. James Shafter, Deanne F. Jones, Kehart, Shafter, Hughes & Webber, P.C., Decatur, IL, James E. Peckert, Decatur, IL, Aubrey M. Daniel, III, James W. Shannon, Jr., J. Alan Galbraith, and J. Gordon Seymour, Williams & Connolly, Washington, DC, for plaintiffs.

Carl L. Favreau, Campbell, Black, Carmine & Hedin, Mt. Vernon, IL, Maynerd I. Steinberg, Lord, Bissell & Brook, Chicago, IL, Eric C. Young, Dunham, Boman & Leskera, East St. Louis, IL, Harry P. Cohen, Richard M. Appel, Franklin F. Bass, Andrew L. Klauber, Michael Verde, Steven E. Goldman, Rosenman & Colin, New York City, Donald V. Ferrell, Jelliffe, Ferrell & Morris, Harrisburg, IL and Charles M. Fraenkel, Leahy, Eisenberg & Fraenkel, Chicago, IL, for defendants.

MEMORANDUM AND ORDER

FOREMAN, District Judge:

Before the Court is plaintiffs' Motion for Partial Summary Judgment against defendants Phoenix Assurance Company of New York, Commonwealth Insurance Company, Navigators Insurance Company, and Albany Insurance Company pursuant to Federal Rule of Civil Procedure 56.¹ Doc. No. 34. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332.

I. Introduction

In the Summer of 1993 the Mississippi River and its tributaries experienced unprecedented flooding that affected nine Midwestern states. Twenty million acres of farmland were damaged, resulting in $6.5 billion in crop damage. The Great Flood of 1993 Post-Flood Report (U.S. Army Corps of Engineers September 1994), Doc. No 35, Tab 28 at A172. Total damage from the flood is estimated to be between $15 and $20 billion. Id. River, road, and rail transportation systems were disrupted on a large scale. Id.

Archer Daniels Midland Company and its subsidiaries (collectively, "ADM") process farm products for domestic and international consumption. As a result of the Great Flood of 1993, ADM incurred substantial extra expenses and losses of income because of increases in both transportation costs and the cost of raw materials. ADM submitted claims to its insurance providers, who paid ADM approximately $11 million for losses sustained from the flooding. See Compl., Doc. No. 1, Exs. The defendant insurance companies denied approximately $44 million in additional claims submitted by ADM, which precipitated this breach of contract action. Id.

II. Background

Defendants sold ADM first-party property insurance and Difference-in-Conditions ("DIC") coverage to protect against perils not covered in the underlying property policy. At issue is the meaning of the "Extra Expense Coverage" ("EEC") and the "Contingent Business Interruption and Extra Expense Coverage" ("CBI") in the DIC policies.

ADM claims it is entitled to coverage under both provisions for the increased costs of transportation and raw materials it incurred as a result of the flood. The Court will address the applicability of both types of coverage after considering the propriety of plaintiffs' motion.

III. The Propriety of the Motion for Partial Summary Judgment

Defendants argue that plaintiffs' motion pursuant to Rule 56 is improper because "it cannot result in `judgment ... upon the whole case or for all the relief asked.....'" Doc. No. 45 at 5 (quoting Fed.R.Civ.P. 56(d)). Defendants further assert that "ADM's strategy is to file repeated motions, each addressing an additional element necessary to establish coverage." Id. However, ADM's attempt to resolve the specific issues addressed in its motion are not as sinister as defendants contend. "Summary judgment motions can help define, narrow, and resolve issues" prior to trial. Manual for Complex Litigation (Third) § 21.34 (1995) (supplement to James W. Moore, et al., Moores Federal Practice (2d ed. 1995)). As the Seventh Circuit has noted, the label "`partial summary judgment' is, of course, consistent with section (d) of Rule 56, which allows a court to establish facts prior to trial over which there is no `substantial controversy.'" ODC Communications Corp. v. Wenruth Invs., 826 F.2d 509, 515 (7th Cir.1987). The court also observed that it had previously addressed "the inherent ambiguity of the term partial summary judgment" in Minority Police Officers Ass'n of South Bend v. City of South Bend, 721 F.2d 197, 200 (7th Cir.1983), where it stated:

We can get no help from the caption of the judge's order. The word "judgment" in the term "partial summary judgment" is a misnomer. A partial summary judgment is merely an order deciding one or more issues in advance of trial; it may not be a judgment at all, let alone a final judgment on a separate claim.

Id; see also Victory Container Corp. v. Sphere Ins. Co., 448 F.Supp. 1043 (S.D.N.Y. 1978) (granting partial summary judgment on issue of defendants' maximum liability under insurance policy). Thus, whereas a grant of partial summary judgment may not resolve a separate claim for purposes of Rule 54(b), it is an appropriate mechanism for resolving separate issues prior to trial. Therefore, there is nothing improper in attempting to resolve such issues by seeking partial summary judgment.

IV. Interpretation of the Policies

Contract interpretation is particularly suited to disposition by summary judgment. Metalex Corp. v. Uniden Corp. of America, 863 F.2d 1331 (7th Cir.1988). Summary judgment is appropriate where no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. Because neither party has raised the issue of choice of law in this diversity action, the Court will apply the substantive law of Illinois, the forum state. Travelers Ins. Cos. v. Penda Corp., 974 F.2d 823, 827 (7th Cir.1992) (citing Wood v. Mid-Valley, Inc., 942 F.2d 425, 426-27 (7th Cir. 1991)).

The construction of an insurance policy and its provisions is a question of law. Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill.2d 90, 180 Ill.Dec. 691, 698-99, 607 N.E.2d 1204, 1212 (1992). In construing an insurance policy, the Court's task is to ascertain the intent of the parties to the contract, "with due regard to the risk undertaken, the subject matter that is insured and the purposes of the entire contract." Id. (citations omitted). If the policy language is unambiguous, there is no issue of material fact, and the Court must determine the contract's meaning as a matter of law affording the contract language its plain, ordinary, and popular meaning. Id. But if the Court determines that the contract is ambiguous, the contract's meaning is a question of fact. Dash Messenger Serv., Inc. v. Hartford Ins. Co. of Ill., 221 Ill.App.3d 1007, 164 Ill.Dec. 313, 316, 582 N.E.2d 1257, 1260 (1st Dist. 1991), appeal denied, 143 Ill.2d 637, 167 Ill. Dec. 398, 587 N.E.2d 1013 (1992). A policy provision is ambiguous only if it is subject to more than one reasonable interpretation. Lapham-Hickey Steel Corp. v. Protection Mut. Ins. Co., 166 Ill.2d 520, 211 Ill.Dec. 459, 463, 655 N.E.2d 842, 846 (1995) (citing United States Fidelity & Guar. Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 161 Ill.Dec. 280, 578 N.E.2d 926 (1991)). A policy term is not ambiguous merely because the term is not defined within the policy or because the parties can suggest creative possibilities for its meaning. Id. (citations omitted).

A. Extra Expense Coverage

Section 10(A) of the policies, entitled "Extra Expense" provides, in part:

A. General Provisions

Interest Insured: This policy is hereby extended to cove-1Xr "Extra Expense" sustained by the insured as a result of direct physical damage caused by the perils insured against under this policy and not excluded elsewhere in this form....

ADM argues that Section 10(A) is unambiguous and the policies create only two preconditions for recovery of its claims for extra transportation and raw materials expenses: 1) the extra expense was incurred "as a result of direct physical damage" that was 2) "caused by the perils insured under this policy." Doc. No. 35 at 10-11. The defendants argue that the "extra expense" provision is limited to situations in which the insured's "described property" is damaged. Thus, under defendants' interpretation, damage to the property of suppliers of goods and services is not covered. Doc. No. 45 at 18.

In support of its argument that EEC provision is not limited to instances where direct physical damage occurs at scheduled locations, ADM observes that at least nine other sections of the policies specifically state that a provision's application depends on the property being insured under the property damage provision.² In response, the defendants contend that, looking at the policy as a whole, it is implicit that compensable claims must relate to damage to property at "scheduled" locations. However, "when attempting to limit liability, the insurer must show that the claim falls within the exclusion; exclusionary provisions, therefore, are applied only if their terms are clear, definite, and explicit." National Union Fire Ins. Co. v. Glenview Park Dist., 230 Ill. App.3d 578, 171 Ill.Dec. 780, 782, 594 N.E.2d 1300, 1302 (1st Dist.1992), aff'd in part and rev'd in part, 158 Ill.2d 116, 198 Ill.Dec. 428, 632 N.E.2d 1039 (1994) (emphasis added) (citing Maryland Casualty Co. v. Chicago & N.W. Transp. Co., 126 Ill.App.3d 150, 81 Ill.Dec. 289, 466 N.E.2d 1091 (1st Dist.1984); State Farm Fire & Casualty Co. v. Moore, 103 Ill.App.3d 250, 58 Ill.Dec. 609, 430 N.E.2d 641 (2d Dist.1981)). Thus, seeking to have a court find implicit terms in an insurance policy is a questionable strategy under Illinois law.

It is...