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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 Relating to Post-October 1, 1993 Raw Material Losses filed by defendants Phoenix and Commonwealth (Doc. No. 91). Defendants Navigators and Albany have joined in this motion. Plaintiffs have filed a response (Doc. No. 120) and defendants have filed a Reply (Doc. No. 125). This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332.

 I. Introduction.

 In the Summer of 1993 the Mississippi River and its tributaries experienced unprecedented flooding that affected nine Midwestern states. Twenty million acres of farmland were damaged, resulting in $ 6.5 billion in crop damage (See Doc. 35, Tab 28 at A172) - (The Great Flood of 1993 Post-Flood Report (U.S. Army Corps of Engineers September 1994). Total damage from the flood is estimated to be between $ 15 and $ 20 billion. Id. River, road, and rail transportation systems were disrupted on a large scale. Id.

 Archer Daniels Midland Company and its subsidiaries (collectively, "ADM") process farm products for domestic and international consumption. As a result of the Great Flood of 1993, ADM incurred substantial extra expenses and losses of income because of increases in both transportation costs and the cost of raw materials. ADM submitted claims to its insurance providers, who paid ADM approximately $ 11 million for losses sustained from the flooding. (See Compl., Doc. 1, Exhs). The defendant insurance companies denied approximately $ 44 million in additional claims submitted by ADM, which precipitated this breach of contract action. Id.

 II. Background.

 Phoenix, Commonwealth, Navigators, and Albany sold ADM Difference In Conditions ("DIC") policies for the period October 1, 1992 to October 1, 1993. ADM claims that Paragraph 13Q of these policies provides coverage for ADM's "Raw Material Claims." ADM's "Raw Material Claims" relate to the expenses incurred by ADM to obtain raw materials, (i.e., crops), to keep its processing plants running. Because the 1993 Flood damaged numerous Midwestern farms, the cost of crops increased and ADM was forced to pay a higher price to get raw materials to keep its plants running.

 ADM seeks coverage under Paragraph 13Q for these increased raw material costs that it incurred from approximately June 1993 through June 1994. The insurers claim, however, that the subject policies expired at 12:01 a.m. on October 1, 1993 and that by its terms, Paragraph 13Q does not provide CBI&EE coverage beyond October 1, 1993.

 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.1

 Phoenix, Navigators, Commonwealth and Albany have moved for partial summary judgment requesting a ruling that there is no coverage under Paragraph 13Q for any Raw Material losses sustained on or after October 1, 1993. The insurers argue that the DIC policies expired at 12:01 a.m. on October 1, 1993 and that nothing in Paragraph 13Q extends coverage beyond October 1, 1993. They further argue that two other provisions of the Policies, Paragraphs 9 and 10, contain language that extends coverage for certain losses for a period of time after the Policies' expiration date. Because ...


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