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MGN Logistics, Inc v. Travelers Property Casualty Co.

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

August 31, 2017

MGN LOGISTICS, INC. D/B/A LASER TRANSPORTATION SYSTEMS, INC., Plaintiff
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, and TRANS LOGISTICS, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          REBECCA R. PALLMEYER United States District Judge.

         Plaintiff MGN Logistics, Inc. (“MGN”) arranged for Defendant Trans Logistics (“Trans”), a freight carrier, to deliver a shipment of copper coils worth more than $132, 000, but the cargo was lost. Trans had an insurance policy with a general limit of $250, 000, but the policy limit was reduced for loss of certain kinds of valuable cargo, including copper, if the insured did not take adequate steps to protect that cargo: specifically, if the vehicle transporting valuable cargo was not protected by a driver, an alarm system, or a locked fence, then the coverage limit for loss of that cargo was reduced to $5, 000.

         In this case, the cargo was stolen after the driver left the vehicle unattended in a parking lot overnight. MGN paid the owner of the cargo, and then, presumably as Trans's subrogee, made a claim on Trans's insurance policy. Invoking the reduced limit for copper cargo not properly secured, Trans's insurer, Essex, offered just $5, 000 on MGN's claim. MGN rejected this offer and turned to its own carrier-Defendant Travelers Property Casualty Company of America (“Travelers”). Travelers had issued a policy of “contingent” insurance to MGN, but Travelers, too, declined to pay the loss. Travelers noted that the contingent insurance policy it issued to MGN provides coverage only when the primary insurance carrier declines to or is unable to cover a loss; the policy also provides that Travelers will not pay more than the “actual limits” of the primary policy. Because Essex has offered the “actual limits” of its coverage- $5, 000-Travelers contends it is liable in that amount at most.

         MGN has sued Trans and Travelers for the value of the cargo. Trans is in default, and MGN and Travelers have filed cross-motions for summary judgment on Travelers's liability for the full $132, 000 loss. For the reasons stated below, Travelers's motion is granted. MGN's motion is granted in part and denied in part. The court concludes that Travelers's liability, if any, is limited to $5, 000.

         BACKGROUND

         I. Local Rule 56.1

         In its response to Travelers's Local Rule 56.1 Statement of Facts, MGN purported to admit many of Travelers's proposed facts, but added a qualifier to several of these admissions: “Admitted; however, the First Amended Complaint cited to by Travelers is a document which speaks for itself and any characterization that does not comport with the plain language of those documents is denied." (See, e.g., MGN's Resp. to Travelers's Local Rule 56.1 Statement of Material Facts [32] ¶ 1.) MGN did not identify any specific discrepancies, however. The court issued a minute entry noting that without such information, it would “assume that Defendant's statements and characterizations are accurate.” (Minute Entry [33].)

         MGN submitted an amended response, altering the qualifier only slightly; it now responded to Travelers's statements of fact with language like this: “Admitted; however, the First Amended Complaint cited to by Travelers is a document which speaks for itself and any characterization or construction that does not comport with the plain language of those documents is denied.” (See, e.g., MGN's Am. Resp. to Travelers's Local Rule 56.1 Statement of Material Facts [34] ¶ 1 (emphasis added).) This addition hardly solves the problem; it does not explain how Travelers's citation is an improper “characterization” or “construction” of the cited document. At worst, this qualifier suggests that Travelers has cited to a source that does not accurately support the claimed fact, a serious accusation.

         But as far as the court can tell, Travelers has not misrepresented any sources. For example, MGN has hedged on admitting the first paragraph of Travelers's Statement of Facts: “Plaintiff, MGN Logistics Inc., is a freight broker in the business of connecting shippers and their cargo with interstate motor carriers.” (Travelers's Statement of Facts (“DSOF”) [22] ¶ 1.) To support this assertion, Travelers cites a paragraph of MGN's own complaint, which squarely supports Travelers's statement: “As a federally licensed freight broker, MGN is in the business of connecting shippers and cargo, with interstate motor carriers who haul the cargo/freight. MGN is merely an intermediary and does not transport goods. MGN is not authorized to transport anything and owns no transportation equipment.” (First Am. Compl. [16] ¶ 7.)

         MGN cannot in good faith dispute Travelers's statement, nor does MGN identify any other specific misrepresentations in its qualified admissions. Because MGN has not provided any reason for the court to question Travelers's citations, and has failed to clarify after the court's request, the court assumes those citations are accurate. See Poole v. U.S. Gen. Accounting Office, 1 Fed.Appx. 508, 510 (7th Cir. 2001) (“Any facts in the movant's statement that are not specifically denied will be deemed admitted in considering the motion for summary judgment.”).

         II. MGN Arranges for Trans to Ship Copper Coils

         As reflected above, MGN, a freight broker, connects shippers and cargo with interstate motor carriers. (DSOF ¶ 1.) On January 6, 2014, MGN acquired substantially all of the assets of Laser Transportation Systems, Inc. (“Laser”), which appears to have conducted the same type of business. (Ex. J to MGN's Mot. for Summ. J. [24-10].) The asset purchase agreement provided that all insurance policies would “be maintained until the [c]losing.” (Id. at 7.) MGN apparently continued to operate as “Laser Transportation Systems.”

         In May 2014, MGN arranged for Trans, an interstate motor cargo carrier, to transport a shipment of copper coils from Weiland Metals in Wheeling, Illinois, to Laars Heating Systems in Rochester, New Hampshire. (MGN's Local Rule 56.1 Statement of Material Facts (“PSOF”) [23] ¶ 17; DSOF ¶ 2.)[1] The contract between MGN[2] and Trans required Trans to insure the cargo in the amount of $150, 000. (Ex. A to First Am. Compl. [16-1] ¶ 3.) Trans also agreed to indemnify MGN “for any liability resulting from loss or damage” to the cargo. (Id. at ¶ 8.) Sometime between May 16 and May 17, 2014, a Trans driver picked up the cargo from Weiland. (DSOF ¶ 3.) The driver for Trans drove the trailer containing the coils to Addison, Illinois, and left the trailer unattended in a parking lot overnight. (DSOF ¶ 3; Ex. B to MGN's Resp. to Travelers' Local Rule 56.1 Statement of Material Facts [31-2] at AE037.) Upon returning, the driver discovered the trailer was missing and reported the trailer and coils stolen. (DSOF ¶ 4.)

         When Trans failed to deliver the cargo, Laars made a claim to MGN.[3] (Ex. N to MGN's Mot. for Summ. J. [24-14].) On November 4, 2014, MGN paid Laars $132, 426 to satisfy Laars's claim. (DSOF ¶ 5; PSOF ¶ 21.) MGN then submitted a claim to Trans's insurer, Essex Insurance Company (“Essex”), and to its own insurer, Travelers. (PSOF ¶ 22; see DSOF ¶ 8.) Both insurance policies are at issue in this case.

         III. The Essex Policy

         Essex issued an insurance policy to Trans for a policy period from January 17, 2014 to January 17, 2015. (Ex. H to MGN's Mot. for Summ. J. [24-8] at AE085.) The “limit of loss” was $100, 000. (Id. at AE086.) On March 4, 2014, an endorsement to the policy increased that limit to $250, 000. (Id. at AE084.) The Essex Policy also included a “Special Theft Warranty Endorsement.” (Id. at AE083.) That endorsement limits Essex's liability for the loss of certain types of goods left unattended in a vehicle. Specifically, the endorsement states:

As respects shipments consisting of:
Furs, Garments Trimmed with Fur, Silks, Rayons, Wearing Apparel, Cellular Telephones, Liquors, Cigarettes, Drugs, Pharmaceuticals, Automobile Parts & Tires, Computer Parts & Accessories, Radio & TV Sets, Stereo Equipment, Copper & Copper Products, Precious Metals & Alloys

         Theft coverage is limited to $5, 000 in any one loss or disaster unless the vehicle:

1. Is protected by a driver in attendance (a driver is considered not in attendance while temporarily absent having a meal, making a delivery, etc.) or[;]
2. Is protected by an operating U.L. approved alarm system, or;
3. Is located in a fenced area with locked gates and either an operating U.L. approved alarm system or a watchman.

(Id. (emphasis added).)[4]

         Trans provided MGN with a certificate of insurance as evidence of its cargo insurance coverage.[5] (DSOF ¶ 6.) The certificate states:

THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE [ESSEX POLICY]. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. . . . .
THIS IS TO CERTIFY THAT THE [ESSEX POLICY HAS] BEEN ISSED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.

(Ex. G to MGN's Mot. for Summ. J. [24-7] (capitalization in original).) The certificate of insurance lists the $250, 000 limit of liability for cargo, and does not mention the Special Theft Warranty Endorsement. (Id.) There is no evidence that anyone at MGN saw (or requested to see) any Essex Policy documents other than the insurance certificate.

         IV. The Travelers Policy

         At issue in this case is the scope of the coverage furnished to MGN by its own insurer, Travelers. Travelers issued a policy to Laser Transportation Systems with effective dates from June 15, 2013 to June 15, 2014. (Ex. D to MGN's Mot. for Summ. J. [24-4] at 2.) The following year, Travelers issued a renewal policy, also to Laser Transportation Systems, effective from June 15, 2014 (after MGN had acquired Laser's assets) to June 15, 2015. (Ex. C to MGN's Mot. for Summ. J. [24-3] at 2.[6]) All of the relevant provisions in the renewal policy are identical to the provisions in the initial policy. (See Id. at 2, 6, 10-17.) On January 2, 2015, Travelers amended the policy to change the named insured to MGN Logistics, Inc. DBA Laser Transportation Systems.[7] (Id. at 38.)

         The Travelers Policy included “Contingent Cargo Coverage, ” which covers a cargo loss when a freight carrier or its insurance company cannot or will not pay. (Ex. D to MGN's Mot. for Summ. J. at 11; DSOF ¶ 17.) In the “Contingent Cargo Coverage Special Form, ” Travelers agrees to “cover ‘loss' to Covered Property from any of the Covered Causes of ‘Loss.'” (Ex. D to MGN's Mot. for Summ. J. at 16.) “Covered Causes of ‘Loss'” are defined as the trucking carrier's liability for direct physical loss, with certain exceptions not applicable here. (Id. at 16- 17.) Neither party disputes that the copper coils are Covered Property, that the theft constitutes a loss, or that Trans is the relevant cargo carrier. (See Travelers's Resp. to PSOF [29] ¶ 7-8.)

         The Declarations in the Contingent Cargo Policy set forth the following Limits of Insurance:

Type of Carrier

Limit of Insurance

Railroad Company

$100, 000

Motor Transportation Carrier

$100, 000

Air Freight Company

NO COVERAGE

All Covered Property In Any One Occurrence

$200, 000

         (Ex. D to MGN's Mot. for Summ. J. at 11.) Section C of the Contingent Cargo Coverage policy warns that “[t]he most we will pay in any one occurrence is the applicable Limit of Insurance shown in the Declarations.” (Id. at 17.) Section E.2 (titled “Additional ...


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