United States District Court, N.D. Illinois, Eastern Division
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
MEMORANDUM AND ORDER
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
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
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.
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 1998, 1999, 2000, and 2001, without any requests to change the
name of the insured. Accordingly, Hartford asserts that it
correctly named Block as the only insured in the Policy.
In response to the above facts, which are contained in
Hartford's Local Rule 56.1 Statement of Additional Facts, Block
states that it has "[i]nsufficient information to admit or deny
[the Underwriter's] `understanding' of which entity was to be
provided coverage or as to the content of any communication she
may have had with [the Broker]." Generally, stating that one does
not have sufficient information to admit or deny a Local Rule
56.1 statement of fact constitutes an admission of that fact.
See Unterreiner v. Volkswagen of America, Inc., 8 F.3d 1206,
1211 (7th Cir. 1993) (a party can not create a genuine issue of
fact by simply disclaiming knowledge of undisputed testimony);
Malec, 191 F.R.D. at 584 ("general denial" to the movant's
statement will not suffice: the nonmovant "must cite specific
evidentiary materials justifying the denial"). Therefore, this
Court finds that it is undisputed that Hartford rightfully
believed that it properly named Block as the "named insured" in
the Policy. The Court, however, finds that at this time it is not clear if
Hartford actually believed that Block was the stevedore and
Wholesale the sales entity. Because the Broker was not deposed
and has not made an affidavit in this case nor have any written
records from him been submitted, it is uncertain what the Broker
was told by Block/Wholesale or what he stated to
Indeed, Block contends that it never told the Broker that it
was the stevedore at the Terminal. As explained above, at this
time the Court cannot say for certain what the actual
responsibilities of Block and Wholesale were at the Terminal. If
it turns out that Block only sells the cargo and Wholesale only
unloads the cargo, then it would be much less likely that the
Broker would have told Hartford otherwise.
In addition, a review of the Underwriter's deposition casts
some doubt on whether Hartford actually believed that Block alone
was responsible for stevedore operations.*fn5
A "loss control report" prepared by Hartford prior
to issuing the Policy listed "A. Block Marketing
D.B.A. Wholesale Mulch Products, Inc." (Carney Dep.
at 45-48, Ex. E to Block's Local Rule 56.1
Statement.)*fn6 In the "quote" offering insurance after the initial
denial, Hartford wrote "A. Block Marketing, Inc. et
al." and under a section titled "nature of business"
wrote "Whole Sale Distributor [sic]." (Id. at
67-8.) When asked why this name was in the quote, the
Underwriter testified that at that time both names
(Block and Wholesale) were in "the system." (Id.)
In a "revised quote," however, this information again
appeared, in spite of the fact that the Underwriter
testified that she had the ability to revise this
information and that Hartford was only insuring Block
for stevedore operations, not Wholesale. (Id. at
In a letter from the Broker to the Underwriter
regarding the "effective date of coverage," the
Broker referred to coverage for both "A. Block
Marketing, Inc. and Wholesale Mulch Products, Inc."
(Id. at 75.)
The Underwriter testified that she never received
anything in writing from the Broker "that would
indicate that Wholesale was not a stevedore
operation." (Id. at 78.) Instead, her belief that
only Block was a stevedore was "based on telephone
conversations" she had with the Broker. (Id. at
In submitting the necessary information to obtain
coverage, the Broker gave Hartford a copy of a "Salt
Handling and Storage Agreement," dated April 16,
1997, between Barge Terminal Trucking, Inc. and
Wholesale. (Id. at 86-7 and Ex. F to Block's Local
Rule 56.1 Statement.) This agreement states that
Wholesale "shall receive, store and load out at the
Terminal the salt which shall be subject to this
Agreement." (Id.) To do this, Wholesale "shall have
personnel at the Terminal to receive barges [and]
make themselves available for unloading" and "shall
provide and maintain equipment for the loading."
The Underwriter testified that some of the policies
she wrote for other insureds had to be reformed
because of a misunderstanding between the parties
and/or typographical errors in the policies. (Id.
at 104-09, 117.)
Based on the above facts, this Court cannot find as an undisputed
fact that Hartford believed that Block, and not Wholesale,
performed the stevedore operations at the Terminal.
In sum, with regard to the Policy, this Court finds that there
are material disputes of fact as to:(1) what the functions of
Block and Wholesale are at the Terminal; and (2) whether Hartford
actually believed that Block performed stevedore operations at
the Terminal. The Alleged Damage to CC's Barge
In the CC Action, which was filed on February 6, 2004, CC seeks
damages from Wholesale and BTT for several barges that Wholesale
allegedly damaged while unloading road salt at the Terminal on
December 5 and 6, 2000. Block/Wholesale contend that they did not
learn of the alleged damages to CC's barges until BTT's counsel
sent a copy of CC's complaint to them in February 2004. After
receiving a copy of the complaint, Block/Wholesale "immediately"
tendered the claim to its broker, who then forwarded it to
Hartford contends that Block/Wholesale had notice of CC's claim
well before receiving a copy of the complaint in February 2004.
In support of this assertion, Hartford cites to: (1) letters
regarding the alleged damage to CC's barge which were mailed to
and/or faxed to Terry Peterson, Block/Wholesale's dock manager at
the Terminal ("the Dock Manager") in 2000-01; and (2)
conversations which the Dock Manager had with Jack Edmier, the
president of BTT.
According to the deposition testimony of BTT's
president, shortly after the barges were damaged,
both he and the Dock Manager "personally viewed the
barges" which were allegedly damaged. They, however,
did not see any damage.
After viewing the barges, on December 20, 2000, CC
sent a letter to the Dock Manager at Block's
corporate offices in Arlington Heights, Illinois,
stating that CC's barges were damaged at the Terminal
"as a result of [Block's] recent unloading" and that
it "will look to A. Block Marketing, Inc. for
recovery of all costs incurred."
On January 18, 2001, CC sent a letter to the Dock
Manager and BTT which stated that "[y]ou have both
been previously placed on notice for damages
connected with the unloading of barges. . . . We are
now advising each of you the we do intend to have
these barges bid out for repair and we do intend to
recover all costs associated with this matter from
your firms." (Emphasis Added.) The letter further
stated that the barges were available for inspection
and that "[w]e encourage both you and your insurance
providers to take advantage of inspecting these
barges prior to repair."
Also, on January 18, 2001, CC faxed a "two-page
Notice of Damage" to the Dock Manager at the correct
fax number at Block's corporate offices. After the CC employee (Michael Donze) sent this fax, he sent an
internal e-mail to other CC employees stating that he
had "faxed and called both parties connected to the
damages of these barges and advised both of them that
they have until 1800 9-19 to complete inspections and
we do intend to come after them for repairs."
On May 2, 2001, CC mailed another letter to the
Dock Manager, at the correct address of Block's
corporate offices, stating that CC "holds A. Block
Marketing, Inc., responsible for all . . . damages to
barges" that Block damaged while unloading at the
Terminal. CC further stated again that the barges
were available for inspection.
The president of BTT testified that "[e]ach time
BTT received a letter from [CC], [he] faxed a copy of
the letter to [the Dock Manager] at the fax machine
number at the [Terminal]." Among the letters faxed to
the Dock Manager was a February 27, 2002, letter from
CC giving BTT notice that CC was seeking a "claim" of
$114,889.92 for damages to its barges.
The president of BTT also testified that he
discussed the contents of some of the above
correspondences with the Dock Manager and the
co-president of Block/Wholesale, Janice Rose.
In response to the above evidence, Block/Wholesale states that
they will "neither admit nor deny" its accuracy. Instead, as
explained below, Block/Wholesale contend that they never received
these letters and that Hartford has not shown that they were
properly sent. Accordingly, this Court will accept the contents
of the above documents as uncontested facts. See
Unterreiner., 8 F.3d at 1211; Malec, 191 F.R.D. at 584.
STANDARD OF REVIEW
Summary judgment is appropriate "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to
judgment as a matter of law." Fed.R.Civ.P. 56(c). See also
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Cheek
v. Western & Southern Life Ins. Co., 31 F.3d 497, 500 (7th Cir.
1994). A genuine issue of material fact is one that might affect
the outcome of the lawsuit, and factual disputes that are irrelevant will not be considered. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 249 (1986). In determining whether a genuine
issue of material fact exists, the court must construe the
alleged facts in a light most favorable to the party opposing the
motion. Dale v. Chicago Tribune Co., 797 F.2d 458, 460 (7th
The moving party carries the initial burden of establishing
that no genuine issue of material fact exists. Fed.R.Civ.P.
56(c); Celotex Corp., 477 U.S. at 323. Once the moving party
has met its burden, the nonmoving party must set forth specific
facts showing that there is a genuine issue for trial.
Fed.R.Civ.P. 56(e); Becker v. Tennenbaum Hill Assoc., Inc.,
914 F.2d 107, 110 (7th Cir. 1990). The nonmoving party must do more than
"show that there is some metaphysical doubt as to the material
facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986), and may not merely rest upon the
allegations or denials in its pleading, but instead must "set
forth specific facts showing that there is a genuine issue for
trial." Anderson, 477 U.S. at 248. If the evidence presented is
"merely colorable" or is not "significantly probative," summary
judgment may be granted. Id. at 250-51 (citations omitted). The
court considers the record as a whole, and draws all reasonable
inferences in the light most favorable to the nonmoving party.
Regner v. City of Chicago, 789 F.2d 534, 536 (7th Cir. 1986). ANALYSIS
The parties' cross-motions for summary judgment ask this Court
to rule on two issues. One, whether the Policy should be
reformed to include Wholesale as a named insured. Two, if
reformation is appropriate, whether Block and/or Wholesale gave
notice of CC's alleged damages "as soon as practicable" as
required by the Policy. The Court will address each of these
issues in turn.
I. Reformation of an Insurance Policy
Under Illinois law, an insurance policy may be reformed where
the parties intended to insure a particular risk but because of a
"mutual mistake" or "unilateral mistake by one party and fraud by
the other," the policy "does not properly reflect the intent of
the parties." Gschwendter v. John Hancock Mut. Life Ins. Co.,
1990 WL 186572, at *1 (N.D. Ill. Nov. 16, 1990). To reform a
policy, the movant "must prove by clear and convincing evidence,"
(1) the existence and substance of an agreement
between the parties . . .; (2) that the parties
agreed to reduce the agreement to writing; (3) the
substance of the written agreement; (4) that a
variance exists between the parties' original
agreement and the writing; and (5) mutual mistake or
some other basis for reformation.
Schons v. Monarch Ins. Co. of Ohio, 574 N.E.2d 83
Here, Block moves to reform the Policy on the grounds that: (1)
the parties intended to provide coverage for the entity
performing the stevedore operations at the Terminal; (2)
Wholesale, not Block, is the stevedore at the Terminal; and (3)
despite the parties' intention, through mutual mistake, Block
instead of Wholesale was named as the insured under the Policy.
Hartford contends that reformation is not proper in that: (1) it
never intended to provide coverage for Wholesale because it
believed that Wholesale owned the cargo and Block was the
stevedore; (2) the Broker, Block's agent, intended to place
coverage for Block only, and thus, there was not mutual mistake.*fn7
As detailed above, this Court finds that there are material
disputes of fact as to:(1) what the functions of Block and
Wholesale are at the Terminal;*fn8 and (2) whether Hartford
actually believed that Block performed stevedore operations at
the Terminal; and (3) what information the Broker actually
relayed to Hartford. Therefore, because these facts are necessary
to ruling on the legal issues for reformation, this Court DENIES
the parties' motions on this issue.
II. Notice Under the Policy
Hartford further contends that summary judgment is proper
because, even if reformation is appropriate, Block and/or
Wholesale failed to give notice of the CC's alleged damages "as
soon as practicable" as required by the Policy. According to
Hartford, Block/Wholesale did not give notice until February
2004, over three years after learning of the alleged damages. In
response, Block/Wholesale contend that they did not learn of CC's
claim until they received a copy of the complaint in February of
2004 and then immediately forwarded notice to Hartford.
When interpreting "as soon as practicable" notice provisions in
insurance contracts, Illinois courts try to "weigh? the
desirability of compensation to the insured against the
importance of the notice provision to the insurance company as a
means of providing an opportunity to investigate the accident and
protect itself against unjustified claims." American Country Ins. Co. v. Efficient Constr. Corp., 587 N.E.2d 1073,
1075 (Ill.App.Ct. 1992). Based on this rationale, Illinois
courts require the insured to notify the insurer if it would
appear to "a reasonable person that a claim covered under the
policy may be brought." Id. (emphasis added). In so holding,
Illinois courts decline to hold that the insured need only give
notice if it appears that the insured "may be liable." Nat'l
Bank of Bloomington v. Winstead Excavating of Bloomington,
419 N.E.2d 522, 524-25 (Ill.App.Ct. 1981).
Here, as detailed above, Hartford has submitted numerous
letters and notices which were mailed and/or faxed to the Dock
Manager. These documents clearly show that Block/Wholesale were
given reasonable notice of CC's claim for damages as early as
December of 2000. As such, a reasonable person in
Hartford/Block's position would have known that there was a
likelihood that a claim under the Policy may have been
In an attempt to get around this seemingly insurmountable
hurdle, Block/Wholesale contend that they should not be credited
as having received the above notices of damages because: (1) they
deny having received them; (2) Hartford has not shown that they
were properly sent; and (3) even if they were properly
mailed/faxed, they were sent to the Dock Manager, so their
content should not be attributed to Block/Wholesale.*fn9
Illinois law presumes that an addressee received a letter when
it is shown that the letter was placed in a properly addressed
envelope, with the correct postage, and deposited in the mail.
Kent Meters, Inc. v. Emcol of Illinois, Inc., 768 F. Supp. 242,
244 (N.D. Ill. 1991). The person who actually mailed the letter need not provide direct testimony
"if corroborating circumstances, such as telephone confirmation
of the notice was received." Id.
Here, there was both direct evidence of the letters being
properly mailed and sufficient corroborating evidence for this
Court to find that Block/Wholesale had notice of CC's claim well
before receiving a copy of the complaint in February of 2004.
Michael Donze, the risk manager at CC, testified that with regard
to the December 20, 2000 and May 2, 2000, letters, he typed them,
prepared the envelopes with the proper address,*fn10 and
then placed them in CC's "in-house mail routing system." He also
testified that he prepared the January 18, 2001, fax cover sheet
and faxed it to the correct fax number for Block/Wholesale.
While the above assertions appear sufficient to show that CC
properly mailed the letters and sent the fax, Hartford points to
several pieces of corroborating evidence. For example, in an
e-mail to other CC employees, the risk manager wrote that he had
"faxed and called both parties connected to the damages of these
barges and advised both of them that they have until 9-19 to
complete inspections and we do intend to come after them for
repairs." Furthermore, the president of BTT testified that he
discussed the contents of some of the above correspondences with
the Dock Manager and the co-president of Block/Wholesale, Janice
This Court thus finds that Hartford has put forth sufficient
facts to warrant a presumption that Block/Wholesale received the
above letters and the fax, which detailed CC's claim for damages
and provided reasonable notice that CC may bring a claim. The
fact that these notices were sent to the Dock Manager does not
change these facts. Block/Wholesale cannot avoid the presumption
that they had knowledge of CC's claim by simply asserting,
without presenting any evidence, that the Dock Manager, who no longer works for them and
has not provided any direct evidence, did not forward these
notices to anyone else at Block/Wholesale.
Accordingly, given that Block/Wholesale had reasonable notice
that CC would likely bring a claim for the damages to its barges,
this Court holds that Block/Wholesale breached the "as soon as
practicable" notice provision of the Policy.*fn11 This Court
thus GRANTS Hartford's Motion for Summary Judgment and finds that
there is no coverage under the Policy for the damage to CC's
For the foregoing reasons, the Court GRANTS
Plaintiff/Counter-Defendant Hartford Fire Insurance Co.' Motion
for Summary Judgment [28-1] and DENIES
Defendant/Counter-Plaintiff A. Block Marketing, Inc.'s Cross
Motion for Summary Judgment [22-1]. It is so ordered.