Tower Automotive v. American Protection Ins.
| Decision Date | 05 June 2003 |
| Docket Number | No. 1:02-CV-08.,1:02-CV-08. |
| Citation | 266 F.Supp.2d 664 |
| Parties | TOWER AUTOMOTIVE, INC., a Delaware corporation, Plaintiff, v. AMERICAN PROTECTION INSURANCE COMPANY, a foreign stock insurance company, Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Bryan R. Walters, Eric C. Fleetham, Mark S. Allard, Varnum, Riddering, Schmidt & Howlett LLP, Grand Rapids, MI, for Tower Automotive, Inc., a Delaware Corporation, plaintiff.
Edward W. Gleason, Keegan, Laterza, Lofgren & Gleason, P.C., Chicago, IL, Michael T. Small, Ralph M. Reisinger, Roberts, Betz & Bloss, P.C., Grand Rapids, MI, Patrick F. Geary, Smith Haughey Rice & Roegge, Grand Rapids, MI, for American Protection Ins. Co., defendant.
William S. Farr, Farr, Oosterhouse & Krissoff, Grand Rapids, MI, for Facilitative Mediator, defendant.
This insurance coverage dispute is before the Court on the parties' cross-motions for summary judgment. For the reasons that follow the Court concludes there is no coverage for the loss at issue.
The relevant facts are not in dispute. Plaintiff Tower Automotive, Inc. ("Tower") manufactures parts for the automotive industry. Defendant American Protection Insurance Company ("American Protection") insured Tower under an "all risks" property insurance policy that expired on September 30,1999.
Tower utilized Marsh USA, Inc. ("Marsh"), an independent insurance broker, as its agent for negotiating a renewal insurance policy for the period beginning October 1, 1999. On or about October 1, 1999, American Protection issued Tower a binder for property insurance for the period October 1, 1999 to October 1, 2000. The binder stated that with respect to the boiler and machinery coverage "a Contract Penalty Exclusion applies." An extension binder was issued on October 29, 1999, that was scheduled to expire on December 1, 1999. The extension binder also referenced the contract penalty exclusion.
On November 30, 1999, American Protection issued Policy No. 3ZG006752-02 ("the Policy"), effective October 1, 1999, and expiring October 1, 2000.1 The Policy was issued on Marsh's form with changes made by American Protection. Attached to the Policy were the Manuscript Property Form and Endorsement No. 1. The Policy issued on November 30, 1999, made no reference to a contract penalty exclusion.
On January 4, 2000, one of the presses at Tower's Greenville, Michigan, plant suffered a failure. As a result of the failure, Tower's delivery of truck parts to Ford Motor Company ("Ford") was delayed. Ford constituted over one-third of Tower's business in 1999 and 2000. Ford advised Tower that as a result of the delay it incurred idle labor and lost production costs in the amount of $907,763.86. Ford requested compensation from Tower for its loss.
Tower reported the press failure to American Protection and submitted a claim for its losses from the failed press in the amount of $1,198,802.55, of which $907,763.86 represented the amount claimed by Ford. Through negotiations Tower was able to negotiate the amount of the Ford claim down to $600,000. Tower ultimately authorized Ford to debit its account in the amount of $600,000.
American Protection reported Tower's loss to Hartford Steam Boiler Inspection and Insurance Company ("Hartford") which reinsured the boiler and machinery coverage issued by American Protection to Tower. After investigating, Hartford Steam Boiler determined that an accident as defined under the boiler machinery part of the Policy had occurred. Hartford Steam Boiler agreed to pay that part of Tower's claim that related to overtime for Tower employees and premium freight charges. (Wilson dep. at 50-51). Payment was denied as to the amount represented by the Ford debit because it fell within the contract penalty exclusion and because the $600,000 represented a loss sustained by Ford and not by Tower. (Pranulis letter 9/21/01).
Hartford Steam Boiler did not review the Policy until after the failure of the press on January 4, 2000. Upon review, Hartford Steam Boiler learned for the first time that several of the agreed upon boiler and machinery insurance terms had been omitted from the Policy, including the definitions of "accident" and "object" and certain restrictive wording regarding the "Dies, Molds, Patterns Exclusion," the "Contract Penalties Exclusion" and the "Actual Cash Value" conditions. As soon as these omissions were discovered, American Protection and Hartford Steam Boiler prepared an endorsement to the Policy. Endorsement No. 2, which addresses all of these omissions, was delivered to Tower on January 27, 2000. Endorsement No. 2 states that it has an effective date of October 1, 1999. Under the heading "Contract Penalty Exclusion," Endorsement No. 2 states that
On December 6, 2001, Tower filed this action for breach of contract, penalty interest and waiver in the Kent County Circuit Court. Tower contends that the Ford debit was a covered loss and that the contract penalty exclusion did not apply because it was not a part of the Policy at the time of the covered incident. American Protection removed the action to federal court on the basis of diversity of citizenship. American Protection filed a counterclaim for reformation of the contract to include the contract penalty exclusion. This action is currently before the Court on the parties' cross-motions for summary judgment.
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In evaluating a motion for summary judgment the Court must look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). If the moving party carries its burden of showing there is an absence of evidence to support a claim then the non-moving party must demonstrate by affidavits, depositions, answers to interrogatories, and admissions on file, that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient to create a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The proper inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52,106 S.Ct. 2505.
The parties' cross-motions for summary judgment address the issue of whether the Ford debit is a covered loss under the Policy. Because there is a dispute between the parties over the inclusion of the contract penalties exclusion, the Court will first consider the Policy without this exclusion.
The insurance Policy at issue in this case is known as an "all risks" policy. (Answer, ¶5). Paragraph 8 of the Policy at issue in this case insures against "all risks of direct physical loss or damage to covered property described herein, except as hereafter excluded." "All-risk insurance is a special type of insurance policy that, as a rule, covers every loss that may occur, except as a result of fraudulent acts of the insured." Mull v. Equitable Life Assur. Soc. of U.S., 444 Mich. 508, 523, 510 N.W.2d 184, 190-91 (1994). Notwithstanding the breadth of this statement, courts are in general agreement that all-risk policies, are not "all loss" policies. Under an "all risk" policy, an insured is entitled to recover for damage to the insured property regardless of the peril that caused that damage, but the term "all risk" does not stand for the proposition that an "all risk" policy permits an insured to recover for all losses or damages resulting from the accident. Fireman's Fund Ins. Co. v. Tropical Shipping and Const. Co., Ltd., 254 F.3d 987, 1008 (11th Cir.2001). All risk policies often contain express written exclusions and implied exceptions that have been developed by the courts over the years. Yale University v. Cigna Ins. Co., 224 F.Supp.2d 402, 411 (D.Conn.2002) (quoting Costabile v. Metropolitan Property and Cos. Ins. Co., 193 F.Supp.2d 465, 477 (D.Conn.2002)).
Even with an all risk policy, the burden is on the policyholder to demonstrate that the loss falls within the terms of the policy. Yale University, 224 F.Supp.2d at 411 See also Port Authority of New York and New Jersey v. Affiliated FM Ins. Co., 245 F.Supp.2d 563, 579 (D.N.J.2001) (); Roundabout Theatre Co., Inc. v. Continental Cas. Co. 302 A.D.2d 1, 6, 751 N.Y.S.2d 4, 7 (N.Y.App.Div.2002) (); Witcher Const. Co. v. St Paul Fire and Marine Ins. Co., 550 N.W.2d 1, 4 (Minn.Ct.App.1996) (). The burden is on the insurer, however, to clearly state any exclusions. Fragner v. American Community Mut. Ins. Co. 199 Mich.App. 537, 540, 502 N.W.2d 350, 352 (1993) (citations omitted).
Tower contends that because this was an all risks policy, everything is covered unless it is excluded. According to Tower, the Ford...
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