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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:

 Before the Court is a "Motion for Partial Summary Judgment Under the DIC Policies For Losses Related to Watercraft" filed by defendant Phoenix Assurance Company of New York and Commonwealth Insurance Company" pursuant to Federal Rule of Civil Procedure 56 (Doc. 85). Defendants Navigators Insurance Company and Albany Insurance Company have joined in this motion. Archer Daniels Midland Company and its subsidiaries (collectively, "ADM") have filed a response (Doc. 120) and defendants have filed a Reply (Doc. 124). This Court has jurisdiction over this matter pursuant to 28 U.S.C. ยง 1332.

 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, Commonwealth, Navigators, and Albany sold ADM Difference In Conditions ("DIC") policies for the period October 1, 1992 to October 1, 1993. These Policies are "excess" insurance policies in that they provide coverage for losses that are in excess of certain amounts ranging from $ 10 million to $ 50 million. ADM's primary insurance is with General Accident Insurance Company of North America who is not a party to this lawsuit (Doc. 120, Exh. 2).

 ADM claims that the excess DIC policies provide coverage for ADM's "marine expenditures" and "grain degradation" losses. The "marine expenditures" and "grain degradation" claims arose out of ADM's efforts to maintain its transportation operations during the Flood of 1993. When the Mississippi River closed, some of ADM's grain-laden barges were stranded on the river. The "marine expenditures" are the expenses that were incurred to keep the grain cooled and aerated on these barges, as well as the expenses incurred to protect the loaded barges from breaking loose from their moorings (Doc. 120, p.12). These expenses are also called "sue and labor" expenses. The "grain degradation" claims relate to the actual deterioration of the grain itself. While the barges were stranded, the grain on the barges deteriorated and had to be sold at great discounts to the normal sales price. These discounts gave rise to the "grain degradation" claims. Id.

 Defendants request a ruling on the following two issues:

 A. That the DIC Policies do not cover the Marine Expenditures; and

 B. That the DIC Policies do not cover the Cargo, i.e., the Grain Degradation.

 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). 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 term is not defined within the policy or because the parties can suggest creative possibilities for its meaning. Id. (citations omitted).

 The parties have agreed that the questions before the Court are clearly questions of policy construction and must be determined by the Court as matters of law. Consequently, the Court must determine the Policies' 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).

 A. Do the DIC Policies Cover the Marine Expenditures?

 Defendants seek a ruling that the DIC Policies do not cover: 1) the sue and labor expenses related to protecting the barges; or 2) the sue and labor expenses related to protecting the grain that was on the barges. These two items are discussed separately below.

 1. Sue and Labor Expenses to Protect the Barges.

 Defendants seek a ruling that the DIC Policies do not cover the barges themselves or any sue and labor expenses that were incurred to protect the barges. ADM does not dispute that the DIC policies do not insure property damage to the barges. ADM readily concedes that the barges are "watercraft" and that the DIC Policies expressly exclude watercraft from coverage (Doc. 120, p.12). ADM also notes that the barges were insured by a separate marine insurance policy that was issued by Phoenix.

 ADM also does not dispute that the DIC Policies do not cover the sue and labor expenses incurred to protect the barges. What ADM does argue, however, is that the overall sue and labor expenses were incurred not to protect the barges but to protect the grain. As such, ADM argues, the sue and labor expenses are covered by the DIC Policy. Because the parties agree that the DIC Policies do not cover the sue and labor expenses incurred to protect the barges, the Court will not consider this issue further. *fn1"

 2. Sue and Labor Expenses to Protect the Grain.

 As noted, ADM argues that its sue and labor expenses were incurred primarily to protect the grain and are therefore covered under the DIC Policy. ADM argues that coverage for these expenses ...


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