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Bituminous Casualty Corp. v. Plano Molding Co.

Court of Appeals of Illinois, Second District

March 26, 2015

BITUMINOUS CASUALTY CORPORATION, Plaintiff-Appellant,
v.
PLANO MOLDING COMPANY, Defendant-Appellee

Appeal from the Circuit Court of Kendall County. No. 12-MR-175. Honorable Robert P. Pilmer, Judge, Presiding.

Thomas B. Orlando, Matthew S. Ponzi, and Robert T. Boylan, all of Foran, Glennon, Palandech, Ponzi & Rudloff, P.C., of Chicago, for appellant.

Christopher T. Sheean, of Swanson, Martin & Bell, LLP, of Chicago, for appellee.

JUSTICE ZENOFF delivered the judgment of the court, with opinion. Justices Jorgensen and Birkett concurred in the judgment and opinion.

OPINION

Page 659

ZENOFF, JUSTICE.

[¶1] Plaintiff, Bituminous Casualty Corporation, appeals from an order granting the cross-motion of defendant, Plano Molding Company, for summary judgment and denying plaintiff's motion for summary judgment. We reverse.

[¶2] I. BACKGROUND

[¶3] Plaintiff is an Illinois insurance company. Defendant is an Illinois corporation with its principal place of business in Plano, Illinois. Defendant designs, manufactures, and sells storage boxes, which are produced from steel injection molds. In 2004, defendant ordered two steel injection molds, which were manufactured in China. World Commerce Services, LLC (World), arranged for shipment of the molds from China to Illinois. World issued a bill of lading identifying defendant as the " consignee." Paragraph 2.3 of the bill of lading defined " merchant" as including the " Shipper, the Receiver, the Consignor, the Consignee, the Holder of the Bill of Lading and any person having a present or future interest in the Goods or any person acting on behalf of any of the above-mentioned parties." Paragraph 10(2) of the bill of lading provided as follows:

" Merchant warrants that the stowage and seals of the containers are safe and proper and suitable for handling and carriage and indemnifies Carrier for any injury, loss or damage caused by breach of this warranty."

[¶4] The molds were loaded into a shipping container and transported by sea to California by Kawasaki Kisen Kaisha, Ltd., and " K" Line America, Inc. (collectively K-Line). Union Pacific Railroad Company (Union Pacific) then transported the molds overland by rail. On April 21, 2005, the train derailed in Oklahoma. The derailment was allegedly caused by the molds breaking through the floor of the container and falling onto the tracks below. As a result of the derailment, various cargo owners whose goods were damaged, or their insurers, sued K-Line and Union Pacific for damages. K-Line and Union Pacific then sued defendant in federal district court in Illinois, seeking reimbursement for the claims they settled as well as compensation for damage to K-Line's own shipping containers and damage to Union Pacific's own equipment. Defendant tendered defense of the suit to plaintiff.

[¶5] Plaintiff insured defendant under a commercial general liability (CGL) policy. Plaintiff defended defendant pursuant to a reservation of rights until the Seventh Circuit Court of Appeals determined that K-Line's and Union Pacific's only causes of action against defendant stemmed from its contractual obligations under the bill of lading. Kawasaki Kisen Kaisha, Ltd. v. Plano Molding Co., 696 F.3d 647, 660 (7th Cir. 2012) (affirming district court's grant of summary judgment as to the plaintiffs' negligence claims but reversing grant of summary judgment as to the plaintiffs' contract claims based on the bill of lading, remanding for disposition of the contract claims). Following that ruling, plaintiff filed the instant declaratory judgment action in the circuit court of Kendall County based upon a policy exclusion that provided that the insurance does not apply to property damage " for which the insured is obligated to pay damages by reason of the assumption of liability in a contract agreement." Plaintiff filed a motion for summary judgment. Defendant filed a counterclaim for declaratory relief and a cross-motion for summary judgment based upon

Page 660

an exception to the exclusion in the policy for an " insured contract." The policy defines an " insured ...


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