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August 2, 2005.

HARTFORD FIRE INSURANCE CO., Plaintiff/Counter-Defendant,
A. BLOCK MARKETING, INC., Defendant/Counter-Plaintiff.

The opinion of the court was delivered by: BLANCHE MANNING, District Judge


Plaintiff/Counter-Defendant Hartford Fire Insurance Co. ("Hartford") brought the instant action seeking a declaration of its rights and obligations under a terminal liability insurance Policy ("the Policy") which named Defendant/Counter-Plaintiff A. Block Marketing, Inc. ("Block") as the insured. The present matter comes before this Court on the parties' Cross Motions for Summary Judgment.*fn1 For the reasons set forth herein, the Court GRANTS Hartford's motion and DENIES Block's motion. BACKGROUND*fn2

This action stems from two events: (1) the issuance of a Policy listing Block as the "named insured" (with no other additional insureds); and (2) a separate action by Cargo Carriers ("CC"), brought prior to the instant case, alleging that Wholesale Mulch Products, Inc. ("Wholesale") and Barge Terminal Trucking, Inc. ("BTT") damaged several barges owned by CC ("the CC Action") while unloading road salt at a shipping terminal in Lemont, Illinois ("the Terminal").

  Block and Wholesale

  After allegedly first learning of the CC Action, Block sought coverage on the grounds that during the time the Policy was in effect Wholesale, which "share[s] a common ownership" with Block, was actually the party for whom Hartford assumed the risk because it, not Block, loaded and unloaded barges at the Terminal. Therefore, according to Block and Wholesale, because the Policy provided coverage "for damage to barges and cargo in the care and custody of the insured while at the Terminal," Wholesale, not Block, should be the name insured.

  According to Block, although both it and Wholesale conduct business out of the Terminal, they operate "separate and distinct" lines of business. According to Janice Rose, the co-president of Block and Wholesale, "Wholesale runs the stevedore operation at the Terminal," which includes loading and unloading cargo from barges. The "primary function" of Block, on the other hand, "is to market and sell" the cargo, mostly road salt and tree bark, to third parties.

  Hartford contests the above characterization of the operations of Wholesale and Block. After reviewing the pertinent portions of the parties' Rule 56.1 statements, this Court finds that the exact function of Wholesale and Block at the Terminal, during the time the Policy was written and in effect, is not clear from the record. Block's contention that Wholesale is a stevedore and that Block sells the cargo is based upon the affidavit of its co-president. At her deposition, however, the co-president testified that Block employed the dock manager and several stevedores at the Terminal and owned heavy equipment used in the loading and unloading of cargo at the Terminal.*fn3 Needless to say, if Block does not take part in the stevedore operations at the Terminal, it is unclear why it would employ dock workers and own stevedore equipment.

  Additionally, as explained below, the broker for Block and Wholesale ("the Broker") allegedly told Hartford that Block, not Wholesale, unloaded all cargo at the Terminal, and that Wholesale was the owner of the cargo. Indeed, the initial application for insurance, completed by the Broker, sought stevedore coverage for both Block and Wholesale. These facts beg the question of why Block would need stevedore coverage if it was not a stevedore.

  The Instant Action

  After denying coverage, Hartford brought the instant action seeking a ruling that it does not have an obligation to insure Block or Wholesale for the damage to CC because: (1) Wholesale, the plaintiff in the CC Action, is not a "named insured" under the Policy; and (2) even if the Policy is reformed to include Wholesale, neither Block nor Wholesale gave notice of "the occurrence" "as soon as practicable" as required by the Policy. In its counterclaim, Block seeks reformation of the Policy to make Wholesale the named insured. Accordingly, in ruling on the parties' cross-motions for summary judgment, this Court will address the facts surrounding: (1) how the Policy came to be written; and (2) when Block/Wholesale received notice of the alleged damage to CC's barges.

  The Policy

  According to the co-president of Block and Wholesale, in 1997, Wholesale, through the Broker, sought to transfer its insurance coverage for stevedore operations at the Terminal to Hartford. Although Block and Wholesale claim that Wholesale was solely responsible for stevedoring at the Terminal, the initial application for coverage, placed in February of 1997 by the Broker, sought stevedore insurance for both Block and Wholesale.

  Hartford denied this application in a letter dated May 6, 1997. Emma Carney, Hartford's "senior marine underwriter" at that time ("the Underwriter"), testified that this denial was based on two factors. One, the cargo unloaded at the Terminal included "bark mulch," which presents a risk of "spontaneous combustion." Second, because Wholesale owned the bark mulch being unloaded, Hartford was not willing to issue a stevedore policy covering cargo owned by the stevedore — thereby presenting "liability unto themselves."

  After the initial denial, the Broker allegedly informed the Underwriter that Block alone ran the stevedore operations at the Terminal. In light of the reasons for the previous denial — the risks associated with Wholesale and bark mulch — the Underwriter allegedly told the Broker that Hartford would "revisit insuring the terminal liability of Block only." The Underwriter testified that based on her conversations with the Broker, she understood that the coverage now sought was for Block, not Block and Wholesale or Wholesale alone. After reviewing the risks for Block alone, Hartford issued the Policy in May of 1997 with Block listed as the only named insured. The Broker renewed the Policy in ...

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