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ARCHER-DANIELS-MIDLAND CO. v. PHOENIX ASSUR. CO.

August 4, 1997

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.



The opinion of the court was delivered by: FOREMAN

 FOREMAN, District Judge:

 I. Introduction.

 For a discussion of the facts leading to this litigation see Archer-Daniels-Midland Co. v. Phoenix Assur. Co. of New York, 936 F. Supp. 534, 536 (S.D.Ill. 1996).

 II. Background.

 Phoenix Assurance Company of New York sold ADM a Marine Policy to insure its watercraft and marine operations against certain hazards or risks for the period July 1, 1992 to July 1, 1993. Phoenix seeks a ruling on the following two issues:

 
A. Does the Marine Policy cover losses, damages or expenses incurred after July 1, 1993?
 
B. Does the Marine Policy cover losses, damages or expenses caused by delay in shipment?

 Phoenix's motion does not seek a determination or ruling as to coverage for particular claims submitted by ADM, rather, Phoenix merely seeks an interpretation or ruling as to the contract language.

 III. Interpretation of the Policy.

 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, 607 N.E.2d 1204, 1212, 180 Ill. Dec. 691 (Ill. 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, 582 N.E.2d 1257, 1260, 164 Ill. Dec. 313 (Ill. App. 1st Dist. 1991.), appeal denied, 587 N.E.2d 1013 (Ill. 1992).

 Neither party has argued that the Policy language at issue is ambiguous. Instead, the parties argue for different interpretations based on the plain and ordinary meaning of the Policy language. 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, 655 N.E.2d 842, 846, 211 Ill. Dec. 459 (Ill. 1995) (citing United States Fidelity & Guar. Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 578 N.E.2d 926, 161 Ill. Dec. 280 (1991)). A policy term is not ambiguous merely because the parties can suggest creative possibilities for its meaning. Id. (citations omitted).

 A. Does the Marine Policy Cover Losses, Damages or Expenses Incurred after July 1, 1993?

 Phoenix seeks a ruling that the Marine Policy does not cover any losses, damages or expenses that were incurred after July 1, 1993. Phoenix argues that by its terms, the Marine Policy expired on July 1, 1993, and that no losses that occurred after July 1, 1993 are covered.

 ADM argues that certain losses and expenses that occurred after July 1, 1993 are covered if the underlying shipment began loading prior to July 1, 1993. In other words, ADM argues that as long as the cargo was loaded prior to July 1, 1993, any related losses (and related sue and labor expenses) are covered even though the Policy itself expired on July 1, 1993.

 In reply, Phoenix reiterates that the Policy expired on July 1, 1993, and that the Policy clearly provides that if ADM wanted to extend coverage beyond this date, ADM could have done so by providing notice to Phoenix and by paying an additional pro rata monthly premium. Phoenix argues that the Marine Policy is divided into six different sections. Section I is entitled "General Conditions." This General Conditions Section has an Attachment clause which states that the Policy shall attach for a certain time period as follows:

 
Section I
 
General Conditions
 
Attachment :
 
At or from the 1st Day of July, 1992, Noon Central Standard Time to the 1st day of July, 1993, Noon, Central Standard Time.

 (Doc. 120, Exh. 9, Sec. I, p.1).

 The General Conditions Section also contains a Duration of Risk clause which provides:

 
Duration of Risk :
 
1. Should the vessel at the expiration of this policy be at sea, or in distress, or at a port of refuge or of call, she shall, provided previous notice be given to this Company, be held covered at a pro rata monthly premium to her port of destination.

 (Doc. 120, Exh. 9, Sec. I, p.2).

 Based on these provisions, Phoenix argues that the Policy expired on July 1, 1993 and that to extend coverage beyond that date, ADM had to give notice to Phoenix and had to pay an additional pro rata monthly premium.

 ADM argues, however, that the Policy contains language which suggests that as long as a shipment was loaded before July 1, 1993, the losses and expenses related to that shipment are covered, even if those losses and expenses were incurred after July 1, 1993. Specifically, ADM looks to Section VI of the Policy which is entitled "Cargo Insurance." Section VI insures:

 
Section VI
 
Cargo Insurance
 
Goods Insured :
 
. . . goods and/or merchandise of every description but consisting principally of grain, soybeans, flour and their products . . . ...

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