Bituminous Cas. Corp. v. Plano Molding Co.

• Decision Date: 26 March 2015
• Docket Number: No. 2–14–0292.,2–14–0292.
• Citation: 33 N.E.3d 658
• Parties: BITUMINOUS CASUALTY CORPORATION, Plaintiff–Appellant, v. PLANO MOLDING COMPANY, Defendant–Appellee.
• Court: United States Appellate Court of Illinois

33 N.E.3d 658

BITUMINOUS CASUALTY CORPORATION, Plaintiff–Appellant

v.PLANO MOLDING COMPANY, Defendant–Appellee.

No. 2–14–0292.

Appellate Court of Illinois, Second District.

March 26, 2015.

Thomas B. Orlando, Matthew S. Ponzi, and Robert T. Boylan, all of Foran, Glennon, Palandech, Ponzi & Rudloff, P.C., of Chicago, for appellant.

Christopher T. Sheean, of Swanson, Martin & Bell, LLP, of Chicago, for appellee.

OPINION

Justice ZENOFF

delivered the judgment of the court, with opinion.

¶ 1 Plaintiff, Bituminous Casualty Corporation, appeals from an order granting the cross-motion of defendant, Plano Molding Company, for summary judgment and denying plaintiff's motion for summary judgment. We reverse.

¶ 2 I. BACKGROUND

¶ 3 Plaintiff is an Illinois insurance company. Defendant is an Illinois corporation with its principal place of business in Plano, Illinois. Defendant designs, manufactures, and sells storage boxes, which are produced from steel injection molds. In 2004, defendant ordered two steel injection molds, which were manufactured in China. World Commerce Services, LLC (World), arranged for shipment of the molds from China to Illinois. World issued a bill of lading identifying defendant as the “consignee.” Paragraph 2.3 of the bill of lading defined “merchant” as including the “Shipper, the Receiver, the Consignor, the Consignee, the Holder of the Bill of Lading and any person having a present or future interest in the Goods or any person acting on behalf of any of the above-mentioned parties.” Paragraph 10(2) of the bill of lading provided as follows:

“Merchant warrants that the stowage and seals of the containers are safe and proper and suitable for handling and carriage and indemnifies Carrier for any injury, loss or damage caused by breach of this warranty.”

¶ 4 The molds were loaded into a shipping container and transported by sea to California by Kawasaki Kisen Kaisha, Ltd., and “K” Line America, Inc. (collectively K–Line). Union Pacific Railroad Company (Union Pacific) then transported the molds overland by rail. On April 21, 2005, the train derailed in Oklahoma. The derailment was allegedly caused by the molds breaking through the floor of the container and falling onto the tracks below. As a result of the derailment, various cargo owners whose goods were damaged, or their insurers, sued K–Line and Union Pacific for damages. K–Line and Union Pacific then sued defendant in federal district court in Illinois, seeking reimbursement for the claims they settled as well as compensation for damage to K–Line's own shipping containers and damage to Union Pacific's own equipment. Defendant tendered defense of the suit to plaintiff.

¶ 5 Plaintiff insured defendant under a commercial general liability (CGL) policy. Plaintiff defended defendant pursuant to a reservation of rights until the Seventh Circuit Court of Appeals determined that K–Line's and Union Pacific's only causes of action against defendant stemmed from its contractual obligations under the bill of lading. Kawasaki Kisen Kaisha, Ltd. v. Plano Molding Co., 696 F.3d 647, 660 (7th Cir.2012)

(affirming district court's grant of summary judgment as to the plaintiffs' negligence claims but reversing grant of summary judgment as to the plaintiffs' contract claims based on the bill of lading, remanding for disposition of the contract claims). Following that ruling, plaintiff filed the instant declaratory judgment action in the circuit court of Kendall County based upon a policy exclusion that provided that the insurance does not apply to property damage “for which the insured is obligated to pay damages by reason of the assumption of liability in a contract agreement.” Plaintiff filed a motion for summary judgment. Defendant filed a counterclaim for declaratory relief and a cross-motion for summary judgment based upon an exception to the exclusion in the policy for an “insured contract.” The policy defines an “insured contract” as:

“That part of any other contract or agreement pertaining to your business * * * under which you assume the tort liability of another party to pay for bodily injury or property damage to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.”

The trial court granted defendant's cross-motion for summary judgment and denied plaintiff's motion for summary judgment. Plaintiff filed a timely appeal.

¶ 6 II. ANALYSIS

¶ 7 When parties file cross-motions for summary judgment, they agree that only a question of law is involved and invite the trial court to decide the issues based on the record. Pielet v. Pielet, 2012 IL 112064, ¶ 28, 365 Ill.Dec. 497, 978 N.E.2d 1000

. However, the mere filing of cross-motions for summary judgment does not establish that there is no issue of material fact, nor does it obligate the court to render summary judgment. Pielet, 2012 IL 112064, ¶ 28, 365 Ill.Dec. 497, 978 N.E.2d 1000. Summary judgment should be granted only where the pleadings, depositions, admissions, and affidavits on file, when viewed in the light most favorable to the nonmoving party, show that there is no genuine issue of material fact and that the moving party is clearly entitled to judgment as a matter of law. Pielet, 2012 IL 112064, ¶ 29, 365 Ill.Dec. 497, 978 N.E.2d 1000. We review the grant or denial of summary judgment de novo.

Pielet, 2012 IL 112064, ¶ 30, 365 Ill.Dec. 497, 978 N.E.2d 1000.

¶ 8 At issue is the proper construction of paragraph 10(2) of the bill of lading. The primary objective in construing a contract is to give effect to the intent of the parties. Dearborn Maple Venture, LLC v. SCI Illinois Services, Inc., 2012 IL App (1st) 103513, ¶ 31, 360 Ill.Dec. 469, 968 N.E.2d 1222

. The plain and ordinary meaning of the language used in the contract is the best indication of the parties' intent. Dearborn, 2012 IL App (1st) 103513, ¶ 31, 360 Ill.Dec. 469, 968 N.E.2d 1222. An indemnity agreement is a contract subject to contract interpretation rules. Buenz v. Frontline Transportation Co., 227 Ill.2d 302, 308, 317 Ill.Dec. 645, 882 N.E.2d 525 (2008). It is well settled that indemnity contracts are strictly construed and will not be construed as indemnifying against a party's own negligence unless such a construction is required by the clear and explicit language of the contract. McNiff v. Millard Maintenance Service Co., 303 Ill.App.3d 1074, 1077, 239 Ill.Dec. 802, 715 N.E.2d 247 (1999). We also review the interpretation of a contract de novo.

Asset Recovery Contracting, LLC v. Walsh Construction Co. of Illinois, 2012 IL App (1st) 101226, ¶ 57, 366 Ill.Dec. 615, 980 N.E.2d 708.

¶ 9 The parties agree on a number of things. They agree that the bill of lading is a contract. See Kawasaki, 696 F.3d at 652

(a bill of lading can serve as evidence of a contract of carriage). Defendant agrees that “any liability that [it] [owes] to K–Line or Union Pacific * * * emanates from the warranties set forth in the World Bill of Lading.” The parties, therefore, agree that the CGL policy's contractual liability exclusion applies. That provision excludes coverage for property damage “for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.”

¶ 10 However, the parties disagree whether the CGL policy's exception to the exclusion for insured contracts applies. Defendant contends that the bill of lading is an insured contract because K–Line and Union Pacific are seeking indemnification for tort losses they sustained. In other words, defendant focuses on K–Line's and Union Pacific's liability to the other parties in the underlying lawsuits. To the contrary, plaintiff contends that the bill of lading is not an insured contract, because defendant is liable only for its own breach of warranty; it has not assumed liability for K–Line's and Union Pacific's negligence.

¶ 11 Virginia Surety Co. v. Northern Insurance Co. of New York, 224 Ill.2d 550, 310 Ill.Dec. 338, 866 N.E.2d 149 (2007)

, is dispositive. However, before we reach our discussion of Virginia Surety, we must look at two divergent lines of appellate court cases that it resolved. In Hankins v. Pekin Insurance Co., 305 Ill.App.3d 1088, 239 Ill.Dec. 394, 713 N.E.2d 1244 (1999), the Fifth District of the Appellate Court examined an agreement between Hankins, who agreed to provide a shipping and receiving terminal, and Rudolf Express Company, which was permitted to use the terminal to deliver and pick up loads of materials. Hankins, 305 Ill.App.3d at 1089, 239 Ill.Dec. 394, 713 N.E.2d 1244. The parties' agreement included a hold-harmless clause in which Hankins agreed to indemnify and hold harmless Rudolf for all claims “ ‘caused in whole or in part’ ” by Hankins' negligence. Hankins, 305 Ill.App.3d at 1089–90, 239 Ill.Dec. 394, 713 N.E.2d 1244. While this agreement was in effect, one of Hankins' employees was injured unloading Rudolf's truck and sued Rudolf. Hankins, 305 Ill.App.3d at 1089, 239 Ill.Dec. 394, 713 N.E.2d 1244. Rudolf filed a third-party complaint against Hankins, seeking indemnification and damages based in part on the agreement. Hankins, 305 Ill.App.3d at 1089, 239 Ill.Dec. 394, 713 N.E.2d 1244. Hankins tendered the defense to Pekin under Hankins' CGL policy, which contained a contractual liability exclusion and an exception for an insured contract identical to the policy language in our case. Hankins, 305 Ill.App.3d at 1089–90, 239 Ill.Dec. 394, 713 N.E.2d 1244. Pekin refused the tender as to the counts related to the indemnity and hold-harmless agreement, and argued that the contractual liability exclusion applied. Hankins, 305 Ill.App.3d at 1091, 239 Ill.Dec. 394, 713 N.E.2d 1244. The trial court granted judgment on the pleadings in favor of Hankins, ruling that the agreement was an insured contract under the Pekin policy, even though the agreement did not explicitly say that Hankins would be responsible for Rudolf's negligence. Hankins, 305 Ill.App.3d...