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Sonoco Buildings Inc. v. American Home Assurance Co.

decided: June 27, 1989.


Appeal from the United States District Court for the Eastern District of Wisconsin. No. 87-C-68 -- Terence T. Evans, Judge.

Bauer, Chief Judge, Wood, Jr., Circuit Judge, and Hubert L. Will, Senior District Judge.*fn*

Author: Wood

WOOD, JR., Circuit Judge

This appeal involves a cargo of building construction panels transported from Wisconsin to Missouri pursuant to a shipping contract in which time was of the essence. The panels never reached the Missouri construction site but turned up five months later in an Illinois truck depot. Sonoco Buildings, Inc. (Sonoco), the panels manufacturer, sued American Home Assurance Company (American), the carrier's insurer, for the loss. The district court granted summary judgment in favor of Sonoco. American appeals, claiming that the loss was excluded from coverage because it was caused by delay and that, even if the loss was not excluded, American did not receive timely notice of the loss. We affirm in part and reverse in part.


On May 1, 1984 Sonoco contracted with Western Transport Crane and Rigging (Western Transport) to deliver fourteen bundles of twenty-six gauge galvalume panels from Waukesha, Wisconsin to Noel, Missouri. A bill of lading, naming Western Transport co-brokered with Nationwide Transport, Inc. (Nationwide), who in turn contracted with Thunderbird Motor Freight Lines, Inc., (Thunderbird), to carry the panels to Missouri.

Thunderbird picked up the panels at Sonoco's premises on May 1, 1984. On July 11, 1984 the builder in Missouri notified Sonoco that the panels had not yet arrived. After Western Transport confirmed that the panels could not be located, Sonoco manufactured and shipped new panels to replace those that were missing. On approximately December 20, 1984 Sonoco discovered that the panels were unharmed and sitting in Thunderbird's truck yard in South Roxana, Illinois. Sonoco refused to accept the panels back, however, claiming that the panels were specifically designed for the Missouri job and were now useless.

On April 23, 1985 Sonoco sued Western Transport, Nationwide, Thunderbird, and United States Fidelity and Guaranty Company to recover $30,115.36, the replacement cost and penalties for late shipment. Eventually all defendants were dismissed except Thunderbird. The trial court granted Sonoco summary judgment against Thunderbird on October 26, 1986, even though Thunderbird had shut down business in October 1985.

During the course of litigation, however, on approximately April 30, 1986, attorneys stating that they represented Thunderbird's insurer contacted Sonoco's attorneys but did not identify the insurer. Thereafter, Sonoco sent copies of its motion for summary judgment and brief to the insurer's attorneys. Eventually the attorneys identified defendant American as the insurer by sending Sonoco a copy of American's insurance policy that covered the defunct Thunderbird.

On January 16, 1987 Sonoco sued American claiming that, as Thunderbird's insurer, American was responsible for the expenses incurred with regard to the lost panels. American moved to dismiss the complaint on the grounds that it had not received proper notice of the loss and that the policy did not cover the loss because the panels were eventually recovered. Sonoco, in response, filed a motion for summary judgment. The district judge granted Sonoco summary judgment on February 4, 1988 in the amount of $30,115.36. American appeals.


A. The Conflicts of Law Issue

Before we reach the merits of American's appeal, we first must determine which state's laws to apply in this diversity suit. Sonoco argues that the insurance contract entered into by Thunderbird and American expressly provides that we should apply the law of the state where the policy was issued, in this case -- Texas. American contends that Illinois law is applicable.

Sonoco chose Wisconsin as the forum for this lawsuit, therefore we apply Wisconsin's conflicts of law rules. Pittway Corp. v. Lockheed Aircraft Corp., 641 F.2d 524, 526 (7th Cir. 1981); see also SCA Services, Inc. v. Lucky Stores, 599 F.2d 178, 180 (7th Cir. 1979). Under Wisconsin law, the parties to a contract may expressly agree that the law of a particular jurisdiction will control the contractual relationship. First Wisconsin Nat'l Bank v. Nicolaou, 85 Wis. 2d 393, 397, 270 N.W.2d 582, 584 n. 1 (Ct. App. 1978), appeal dismissed, 87 Wis. 2d 360, 274 N.W.2d 704 (1979). Sonoco is correct that the insurance policy was issued in Texas, but the insurance policy provision cited by Sonoco does not indicate that the parties stipulated to Texas as the source of law for interpreting the terms of the policy. The ...

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