arrange alternate--and more expensive--transportation by rail. Mills Decl., Doc. No. 35, Attach. at A340, P 15. ADM argues that the plain language of Section 13(Q) supports its assertion that its costs for alternate transportation are recoverable under the policies.
Because the Court finds Section 13(Q) unambiguous, the Court must determine the contract's meaning as a matter of law affording the contract language its plain, ordinary, and popular meaning. Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90, 607 N.E.2d 1204, 1212, 180 Ill. Dec. 691 (1992). The key phrase for present purposes is "any supplier of goods or services." The word "any" is defined as "one or another without restriction or exception." Webster's II New Riverside University Dictionary 114 (1984). The term "supply" means "to furnish with what is needed or desired." Funk and Wagnalls New Standard Dictionary of the English Language 2427 (1940). A "supplier" is "one who or that which supplies." Id. Thus, the phrase "any supplier of goods or services" denotes an unrestricted group of those who furnish what is needed or desired. Because the parties do not dispute the meaning of the term "any," they focus most of their attention on the issue of whether the Corps or the Coast Guard is a supplier of services to ADM.
The United States Coast Guard administers the U.S. Aids to Navigation System, see 14 U.S.C. § 81; 33 C.F.R. §§ 62.1-62.65, under which the Coast Guard "maintains systems of marine aids to navigation consisting of visual, audible, and electronic signals which are designed to assist the prudent mariner in the process of navigation." 33 C.F.R. § 62.1(c). Under the Flood Control Act of 1936, 33 U.S.C. §§ 701-709a, the U.S. Army Corps of Engineers is charged with developing a flood control system on the Nation's rivers. 33 U.S.C. § 701a. One of the reasons for implementing the system was to prevent "the erosion of lands, and impairing and obstruction navigation, highways, railroads, and other channels of commerce between the states." Id.
Defendants contend that the function of the Coast Guard and the Corps is "to promote and facilitate transportation through the construction of physical improvements and the regulation of use--traffic control." Doc. No. 45 at 15. Defendants argue that these government entities do not provide services to any individual user, but rather, design and develop systems "for the overall improvement of what might otherwise be a less than desirable condition." Id. In support of this argument, the defendants assert that the Mississippi River was navigable prior to the installation of locks and dams, and the Corp's improvements merely made it "a more desirable and efficient means of transportation." Id.
Regardless of the navigability of the Mississippi River prior to the installation of locks and dams, the "construction of physical improvements" that result in "the overall improvement of what might otherwise be a less than desirable condition" is nonetheless a service. It cannot fairly be argued that one who paves a homeowner's dirt driveway does not provide a service merely because the driveway was usable in its unpaved condition. By constructing improvements on the Mississippi River, the Corps is undoubtedly providing a service. As a result, the Corps and the Coast Guard are "suppliers" of "services" for purposes of Section 13(Q) unless they are exempted from such a designation by virtue of the fact that they are government entities.
Defendants argue that the Corps and the Coast Guard primarily serve a regulatory function similar to that of the Federal Aviation Administration ("FAA") and the United States Department of Transportation ("DOT"). The Court agrees with plaintiffs' argument that defendants' analogy to the FAA fails because the FAA did not make the airspace in which planes travel a commercially viable means of transportation--it merely regulates the use of the air space and the safety of aircraft. In contrast, the Corps and the Coast Guard made significant physical improvements in the Mississippi River system. Thus, the role of those agencies is distinguishable from that of the FAA in that they do not serve an exclusively regulatory function.
ADM also argues that the Corps and the Coast Guard provide a service because ADM pays a "user charge" for its use of the Mississippi River through the excise tax it pays on fuel. Doc. No. 35 at 21-22. In response, defendants contend that Corps and the Coast Guard are similar to the DOT in that they do not provide goods or services to individual users. Doc. No. 45 at 15. Defendants note that ADM does not pay a fee to use the locks on the Mississippi River and the excise tax is collected whether or not ADM uses the locks or not just as automobile drivers pays fuel taxes regardless of whether they use the interstate highway system.
However, defendants fail to address the authority cited by ADM to support its claim that it pays taxes in exchange for services.
ADM primarily relies on Augusta Towing Co., Inc. v. United States, 5 Cl. Ct. 160 (Ct. Cl. 1984), in which commercial barge operators challenged the constitutionality of the Inland Waterways Revenue Act, which imposes the tax on fuel used by vessels engaged in commercial waterway transportation on twenty-six waterways. The court rejected the argument that the tax violated the Tax Uniformity Clause--which requires that a tax operate with the same force and effect wherever the subject of the tax is found--on the grounds that the Supreme Court has "consistently recognized that the interests protected by these Clauses are not offended by revenue measures that operate only to compensate a government for benefits supplied." Id. at 166 (quoting Massachusetts v. United States, 435 U.S. 444, 462, 55 L. Ed. 2d 403, 98 S. Ct. 1153 (1978)) (internal quotation marks omitted) (emphasis added). The court noted that a "user charge is one type of revenue measure designed to compensate the Government for supplying a benefit to the user. . . ." Id. at 167 (emphasis added).
Thus, the Augusta Towing court explicitly recognized that the excise tax paid by commercial users of the inland waterway system was "designed to compensate the Government for supplying a benefit to the user. . . ." Id. Although the question before the Augusta Towing court did not involve the interpretation of an insurance policy, the reasoning employed by the court is persuasive for the issue at hand. Funding the construction and maintenance of the physical infrastructure of the Mississippi River system through the fuel taxes imposed on the users of that system easily brings the Corps and the Coast Guard within the plain meaning of the term "any supplier of goods and services."
ADM observes that the Supreme Court has long recognized the importance of the government's services to the users of the inland waterway system. In Monongahela Navigation Co. v. United States, 148 U.S. 312, 334, 37 L. Ed. 463, 13 S. Ct. 622 (1893), the Court stated:
A river, to be sure, is a natural channel; but, if it is not a navigable one, it can no more be used for the purposes of commerce than the land, and therefore to convert it from the mere natural channel into a public highway, for commercial purposes, and to levy a toll to reimburse the expense [is within Congress's power under the Commerce Clause].
Similarly, in Huse v. Glover, 119 U.S. 543, 548, 30 L. Ed. 487, 7 S. Ct. 313 (1886), the Court noted that the "exaction of tolls for passage through the locks is as compensation for the use of artificial facilities constructed, not as an impost upon the navigation of the stream" and in return for "outlays caused by such works the state may exact reasonable tolls. They are like charges for the use of wharves and docks constructed to facilitate the landing of persons and freight, and the taking them on board, or for the repair of vessels."
Government entities have been recognized as playing a dual role in commerce, that of "regulator" and that of "market participant." See, e.g., Reeves, Inc. v. Stake, 447 U.S. 429, 65 L. Ed. 2d 244, 100 S. Ct. 2271 (1980); Hughes v Alexandria Scrap Corp., 426 U.S. 794, 49 L. Ed. 2d 220, 96 S. Ct. 2488 (1976); J.F. Shea Co., Inc. v. City of Chicago, 992 F.2d 745 (7th Cir. 1993). Defendants offer no authority to support their claim that the Coast Guard and the Corps serve a solely "regulatory" function by facilitating commerce on the Mississippi River. The authority cited by ADM supports the proposition that these agencies are not precluded from being considered "suppliers of goods and services" by virtue of the fact that they are government entities.
Defendants further argue that the government entities cannot be a supplier of services because ADM does not have a contract with the Corps or the Coast Guard for such services. Id. In addition, the defendants note that the principal entity that supplies ADM's insured locations is ADM's subsidiary, American River Transportation Co. ADM persuasively argues in its reply that the policies do not state that coverage is limited to principal suppliers or suppliers with whom ADM has a written contract, rather, they apply to "any" supplier. Doc. No.63 at 13. Thus, defendants' argument is rejected.
Defendants next argue that "to hold that the Federal Government is a supplier of services to ADM and other users of the river would make the Federal Government responsible for any breach of these 'services.' Has ADM sued the U.S. Government for its failure to provide transportation services? Could it?" The answer to the first question is "no." The answer to the second is "maybe." ADM has not sued the U.S. Government, presumably because ADM did not believe that the government had breached any duty owed to ADM. There was little the government could do to make river transportation possible in the face of one of the worst floods on the Mississippi River in recorded history. In fact, the government could have subjected itself to substantial liability if it had permitted commercial traffic on the river under such circumstances. Had the Corps or the Coast Guard been negligent in its operation of the river system they may have been subject to liability. See, e.g., Berkovitz v. United States, 486 U.S. 531, 100 L. Ed. 2d 531, 108 S. Ct. 1954 (1988) (holding that discretionary function exception to the Federal Tort Claims Act did not bar claim that government agencies permitted licensing and distribution of unsafe polio vaccine); Indian Towing Co., Inc. v. United States, 350 U.S. 61, 100 L. Ed. 48, 76 S. Ct. 122 (1955) (holding that Coast Guard's failure to maintain a lighthouse subjected the government to liability under the FTCA). Therefore, the Court finds defendants' argument unpersuasive.
The defendants also argue that: 1) none of the locks or dams on the Mississippi River were "damaged" within the meaning of Section 13(Q); and 2) if there was such damage, there was no causal connection between the damage and the restriction of barge traffic because the Coast Guard restricted barge traffic while all locks were still operational. Whereas this issue must be resolved before ultimately deciding whether ADM's transportation claims are covered under the policies, this is a factual issue that is not before the Court for purposes of the present motion. The present inquiry is limited to whether the Corps and the Coast Guard are suppliers of goods and services.
For the foregoing reasons, ADM's Motion for Partial Summary Judgment (Doc. No. 34) is GRANTED to the extent that the Court concludes that the United States Coast Guard and the Army Corps of Engineers are suppliers of goods and services within the meaning of Section 13(Q) of the applicable insurance policies.
Raw Materials Claims
ADM argues that the Midwest farmers who grow the crops that ADM processes are also "suppliers of goods and services" within the meaning of Section 13(Q). In response, the defendants contend that the farmers are not suppliers because ADM does not contract for the purchase of grain from individual farmers. Rather, ADM purchases grain from licensed grain dealers. In support of this assertion, defendants rely on the deposition testimony of Brian West, a grain merchandiser at ADM's Cedar Rapids, Iowa, facility. Doc. No. 45, Tab 14. West testified that from his experience, ADM purchases approximately ninety percent of its wheat from resellers, who are licensed grain dealers that either purchased the grain directly from farmers or from other dealers. Id. at 42, 47. The other ten percent is purchased from farmer cooperatives and grain elevators. Id. at 47. ADM does not pay farmers directly for grain. Id. at 48.
In reply, ADM argues that the policy language does not limit coverage to "contractual suppliers," "direct suppliers," or "immediate suppliers." Doc. No. 43 at 15. Moreover, ADM notes that the policies do not require direct contractual privity between ADM and its suppliers. Id. 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." Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90, 607 N.E.2d 1204, 1212, 180 Ill. Dec. 691 (1992). (citations omitted). ADM purchased the CBI insurance "'to protect the insured from the increased cost of 'cover' arising out of a supplier's misfortune,' and such coverage insures the losses resulting from insured's suppliers have been damaged and, 'in order to avoid an interruption of business, [the insured must] obtain the necessary goods or services, 'cover,' from another source.'" Doc. No. 63 at 14 (quoting defendants' brief, Doc. No. 45 at 9) (original alteration).
ADM is correct in its assertion that the policy language does not limit coverage to those suppliers in direct contractual privity. Moreover, the problem of remote claims--such as a claim that ADM's business was interrupted because of damage to a supplier of the farmers--does not arise under Section 13(Q). The goods at issue is the grain grown by the Midwest farmers. The grain is produced by the farmers and sold to grain dealers, who then sell it to ADM. The farmers may be an "indirect" supplier of the grain, but they are a supplier nonetheless. Had either of the parties wanted to limit the coverage to "direct" suppliers, they could easily have added language to that effect.
Defendants also contend that "the clear intent of the policy is to increase the scope of coverage" to include business interruption losses under Section 10(A) and contingent business interruption losses incurred by non-insured parties under Section 13(Q) without changing the scope of the property insured or excluded or the perils insured or excluded. Defendants view ADM's interpretation of the policies as resulting in "duplicative coverages." Doc No. 45 at 18. However, ADM is not seeking a double recovery for its losses. In fact, the policy issued by Navigators Insurance Company provides that "if two or more of this policy's coverages apply to the same loss or damage, we will not pay more than the actual amount of the loss or damage." Doc. No. 35, Attach. at A108. The policies issued by the other defendants do not contain similar language. However, because ADM does not seek to recover under both Section 10(A) and 13(Q), any potential duplication in coverage is irrelevant.
For the foregoing reasons, ADM's Motion for Partial Summary Judgment (Doc. No. 34) is GRANTED to the extent that the Court concludes that the Midwest farmers who supply raw materials to ADM are suppliers of goods and services within the meaning of Section 13(Q) of the applicable insurance policies.
The Court finds that the language of Sections 10(A) and 13(Q) of the applicable insurance policies is unambiguous. Section 10(A) does not require that "direct physical damage" be to property insured under the property damage coverage of the policies or be to property at scheduled locations. The U.S. Army Corps of Engineers, the Coast Guard, and Midwestern farmers who supply raw materials to ADM are suppliers of goods and services within the meaning of Section 13(Q). Accordingly, ADM's Motion for Partial Summary Judgment (Doc. No. 34) is GRANTED in its entirety.
IT IS SO ORDERED.
DATED : 7-17-96
James L. Foreman