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Champion Transportation Services, Inc. v. Lexington Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

April 22, 2014

CHAMPION TRANSPORTATION SERVICES, INC., D/B/A CHAMPION LOGISTICS GROUP, Plaintiff,
v.
LEXINGTON INSURANCE COMPANY, Defendant.

MEMORANDUM OPINION AND ORDER

THOMAS M. DURKIN, District Judge.

Champion Transportation Services, Inc., alleges that Lexington Insurance Company improperly denied a claim under the policy Champion has with Lexington after certain cargo that Champion was transporting was stolen en route. R. 1. The parties have both moved for summary judgment. R. 21; R. 22. For the following reasons Champion's motion is granted in part and denied in part, and Lexington's motion is denied.

Background

Champion is a licensed motor carrier and freight forwarder, R. 26 ¶¶ 2-3, meaning that it is in the business of providing cargo transportation services to its customers. Id. ¶ 4. Lexington issued an insurance policy to Champion that covered loss of cargo from June 30, 2010 to June 30, 2011 (the "Policy"). Id. ¶¶ 7-8. The Policy was in effect when the loss at issue in this case occurred. Id. ¶ 10.

In or around March 2011, Champion entered into an agreement to arrange to ship cargo for Lithographix. Id. ¶¶ 11-13.[1] The cargo consisted of 69, 120 Annual Reports for the Exelon Corporation for the year 2010. Id. ¶ 16. Champion also shipped toys and apparel for two other clients in the same shipment with the annual reports. Id. ¶¶ 11, 14-15. The cargo was stolen while in transit. Id. ¶ 22. The theft was reported on March 18, 2011. Id. ¶ 23. Lithographix submitted a "Damage Claim Form" to Champion dated April 28, 2011 that claimed the cost of the annual reports was $178, 986. Id. ¶ 29-30. Champion paid $178, 986 to Lithographix, id. ¶ 42, based on an invoice from Lithographix that itemized the cost of replacing the annual reports as follows: $39, 434.50 for paper; $53, 277.85 for printing; $33, 858.75 for bindery; $17, 884.30 for materials; $6, 150 for alterations; and $28, 380.60 for "travel expenses/client fees." See R. 26-2 at 8-9. Kurt Novak, a sales representative for Lithographix who is familiar with the annual reports at issue here, testified that the cost described as "alterations" was incurred because a different kind of paper had to be used for the replacement reports, see R. 26-2 at 20:20-22:7, 25:7-26:5, and the cost described as "travel expenses/client fees" was incurred to pay the design firm that worked on the project. See R. 26-2 at 26:20-29:4. Champion then submitted the Lithographix claim to Lexington, along with claims from the other two companies whose cargo was also stolen. R. 26 ¶¶ 26, 28, 31.

Lexington paid the claims of the two companies not at issue here, id. ¶¶ 26, 28, but denied the Lithographix claim. Id. ¶ 32. Lexington denied the claim based on the Policy's "Freight Forwarder Form, " section 3(C), which provides:

3. PROPERTY EXCLUDED THIS POLICY DOES NOT COVER.
....
(C) ACCOUNTS, BILLS, DEEDS, EVIDENCES OF DEBT, CURRENCY, MONEY, SECURITIES, NOTES, LETTERS OF CREDIT, BULLION, PRECIOUS STONES, JEWELRY OR OTHER SIMILAR VALUABLES; PAINTING, STATUARY OR OTHER WORKS OF ART; PASSPORTS, TICKETS, DOCUMENTS, MANUSCRIPTS, RECORDS OR OTHER VALUABLE PAPERS;

R. 26-1 at 68.[2] Lexington contends that the annual reports are "documents, " and thus are excluded from the Policy's coverage. R. 26 ¶¶ 33-34.

The Policy also provides that the "value of covered property at the time of the loss' will be its Actual Cash Value (defined as replacement cost less depreciation and obsolescence)." R. 26-1 at 15. The Policy further provides that "[i]n the event of loss' [Lexington] will pay... [t]he shippers cost of repairing or replacing the Covered Property." Id.

In addition to denying the claim in its entirety, Lexington also asserted that the specific losses itemized by Lithographix would not be covered even if the annual reports were cargo covered by the Policy. Lexington denied the claim as it relates to charges for "paper, printing, bindery, materials, alterations, travel expenses and client fees, " R. 26 ¶¶ 38-39, based on the Policy's "Freight Forwarder Form, " section 8(A), which provides:

8. PERILS EXCLUDED
THIS POLICY DOES NOT INSURE ...

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