Travelers Property Casualty Co. of America v. ArcelorMittal USA Inc. , 2019 IL App (1st) 180129 ( 2019 )

Digitally signed by
Reporter of
Decisions
Reason: I attest to
Illinois Official Reports the accuracy and
integrity of this
document
Appellate Court Date: 2019.06.13
08:45:00 -05'00'
Travelers Property Casualty Co. of America v. ArcelorMittal USA Inc.,
2019 IL App (1st) 180129
Appellate Court TRAVELERS PROPERTY CASUALTY COMPANY OF
Caption AMERICA, as Subrogee of Gallo Equipment Co., Plaintiff-Appellee,
v. ARCELORMITTAL USA INC., Defendant and Third-Party
Plaintiff-Appellant (Gallo Equipment Co., Third-Party Defendant-
Appellee).
District & No. First District, First Division
Docket No. 1-18-0129
Filed March 11, 2019
Decision Under Appeal from the Circuit Court of Cook County, No. 15-L-6441; the
Review Hon. Raymond W. Mitchell, Judge, presiding.
Judgment Affirmed.
Counsel on David E. Kawala, Catherine Basque Weiler, and T. Allon Renfro, of
Appeal Swanson, Martin & Bell, LLP, of Chicago, for appellant.
W. Gregory Aimonette, Joseph J. Ferrini, and Kenneth R. Wysocki, of
Clausen Miller P.C., of Chicago, for appellees.
Panel JUSTICE PIERCE delivered the judgment of the court, with opinion.
Presiding Justice Mikva and Justice Walker concurred in the judgment
and opinion.
OPINION
¶1 Plaintiff, Travelers Property Casualty Company of America (Travelers), as subrogee of
Gallo Equipment Co. (Gallo), filed this breach of contract action against ArcelorMittal USA
Inc. (ArcelorMittal). ArcelorMittal then filed a third-party breach of contract complaint against
Gallo. The circuit court of Cook County ultimately entered summary judgment in favor of
Travelers, awarded Travelers damages, and dismissed ArcelorMittal’s third-party claim
against Gallo. ArcelorMittal appeals from the circuit court’s entry of summary judgment in
favor of Travelers, and from the dismissal of its third-party breach of contract claim against
Gallo. We affirm.
¶2 I. BACKGROUND
¶3 ArcelorMittal leased lift truck tractors (which are essentially forklifts with detachable
masts) from Gallo pursuant to a written equipment supply contract (supply contract) dated
January 1, 2011. ArcelorMittal used the tractors to move steel coils at its steel fabrication mill
in East Chicago, Indiana. In September 2012, one of the leased tractors caught fire at the East
Chicago mill. The tractor, which Gallo purchased in 2005, was maintained by ArcelorMittal
mechanics under the direction and supervision of a Gallo employee. The fire reportedly started
as a result of a fuel hose being improperly routed across the engine during an earlier repair.
Although it was not established when that repair was done or who made that repair, there is no
dispute that ArcelorMittal was responsible for the loss. ArcelorMittal offered to compensate
Gallo for the tractor, but Gallo rejected the offer as too low. Gallo then submitted a claim to its
insurer, Travelers, under an inland marine policy. Travelers settled Gallo’s claim for $305,625.
¶4 In June 2015, Travelers, as subrogee of Gallo, filed a two-count complaint against
ArcelorMittal for negligence and breach of contract. Travelers voluntarily dismissed its
negligence claim, and therefore Travelers’ only claim before us is its breach of contract claim.
Travelers alleged that under the terms of the supply contract, ArcelorMittal was responsible for
any damage to the tractor that occurred while ArcelorMittal was using it and that ArcelorMittal
was liable for the cost to replace or repair the tractor. Travelers paid Gallo’s claim filed under
an inland marine policy issued by Travelers and sought recovery from ArcelorMittal of the
amount paid to Gallo. ArcelorMittal answered the complaint, and the parties engaged in
discovery.
¶5 ArcelorMittal moved for summary judgment on Travelers’ breach of contract claim,
arguing that Travelers was barred from asserting a subrogation claim because the supply
contract required Gallo to obtain subrogation waivers from its insurers for claims arising out of
the supply contract. Travelers filed a cross-motion for summary judgment on its breach of
contract claim, arguing that ArcelorMittal was responsible for damage to the tractor under the
supply contract, that ArcelorMittal failed to resolve Gallo’s claim under ArcelorMittal’s
self-insurance program, and that the correct measure of damages was $318,000, based on the
testimony of Michael Gallo and supported by a repair quote that Gallo received. After the
-2-
cross-motions for summary judgment were briefed, the circuit court, in a written order, granted
Travelers’ motion for summary judgment and awarded Travelers $305,625. The circuit court
denied ArcelorMittal’s motion for summary judgment.
¶6 While the motions for summary judgment were being briefed, ArcelorMittal was granted
leave to file a third-party complaint against Gallo and ultimately filed a third amended
third-party complaint. The only third-party claim relevant to this appeal is ArcelorMittal’s
claim that Gallo breached the supply contract by failing to obtain a subrogation waiver in the
Travelers inland marine policy that provided coverage for the damaged tractor. The circuit
court ultimately granted Gallo’s motion to dismiss ArcelorMittal’s third-party breach of
contract claim pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615
(West 2016)), finding that Gallo did not breach the supply agreement by obtaining the inland
marine coverage without securing a subrogation waiver.
¶7 ArcelorMittal filed a timely notice of appeal from the circuit court’s orders entering
summary judgment in favor of Travelers, denying ArcelorMittal’s motion for summary
judgment, and dismissing ArcelorMittal’s third-party breach of contract claim against Gallo.
¶8 II. ANALYSIS
¶9 On appeal, ArcelorMittal argues that summary judgment in favor of Travelers on
Travelers’ breach of contract claim was in error because, under the supply contract, Gallo was
required to obtain insurance policies that contained subrogation waivers. Alternatively,
ArcelorMittal argues that there were questions of fact on the issue of damages that preclude
summary judgment. Finally, ArcelorMittal argues that, in the event that we reverse the entry of
summary judgment in favor of Travelers, we should reinstate ArcelorMittal’s third-party
breach of contract claim against Gallo. We address these arguments in turn.
¶ 10 As an initial matter, the supply contract provides that any dispute would be governed by the
law of the state in which the job site was located, which in this case was Indiana. No party
raises any challenge on appeal to the application of Indiana law. Therefore, we apply the
procedural law of Illinois and apply the substantive law of Indiana. Belleville Toyota, Inc. v.
Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 351 (2002).
¶ 11 Summary judgment is appropriate if the pleadings, depositions, affidavits, and other
admissions on file establish that there is no genuine issue of material fact and that the moving
party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2016); Cohen v.
Chicago Park District, 2017 IL 121800, ¶ 17. The purpose of summary judgment is not to try a
question of fact but rather to determine whether one exists. Robidoux v. Oliphant, 201 Ill. 2d
324, 335 (2002). When the parties file cross-motions for summary judgment on the same issue,
they typically agree that only a question of law is involved and invite the circuit court to decide
the case based on the record before it. Pielet v. Pielet, 2012 IL 112064, ¶¶ 28, 30. Summary
judgment may be granted on cross-motions for summary judgment where it is clear that all
material facts are before the court, the issues are defined, and the parties agree that only a
question of law is involved. Haberer v. Village of Sauget, 158 Ill. App. 3d 313, 317 (1987)
(citing Allen v. Meyer, 14 Ill. 2d 284, 292 (1958)). The mere filing of cross-motions for
summary judgment, however, does not obligate the circuit court to grant one of the motions
(Pielet, 2012 IL 112064, ¶ 28), and if reasonable people could draw different inferences from
the undisputed facts, summary judgment is inappropriate (Danada Square, LLC v. KFC
National Management Co., 392 Ill. App. 3d 598, 607 (2009) (citing Mountbatten Surety Co. v.
-3-
Szabo Contracting, Inc., 349 Ill. App. 3d 857, 867 (2004))). “In determining whether a genuine
issue of material fact exists, the court must construe the pleadings, depositions, admissions,
and affidavits strictly against the movant and liberally in favor of the nonmovant.” West Bend
Mutual Insurance Co. v. DJW-Ridgeway Building Consultants, Inc., 2015 IL App (2d)
140441, ¶ 20. A party moving for summary judgment bears the initial burden of production
and may satisfy it by either showing that some element of the case must be resolved in its favor
or that there is an absence of evidence to support the nonmoving party’s case. Nedzvekas v.
Fung, 374 Ill. App. 3d 618, 624 (2007). Once the moving party satisfies that initial burden, the
burden shifts to the nonmoving party to come forward with some factual basis that would
entitle it to a favorable judgment. Id. “Evidence not admissible at trial cannot be used to
support or oppose a motion for summary judgment.” Rodriguez v. Frankie’s Beef/Pasta &
Catering, 2012 IL App (1st) 113155, ¶ 14. We review a circuit court’s ruling on summary
judgment de novo. Standard Mutual Insurance Co. v. Lay, 2013 IL 114617, ¶ 15.
¶ 12 Indiana courts “ascertain the intent of the parties at the time the contract was made, as
disclosed by the language used to express the parties’ rights and duties.” Ryan v. TCI
Architects/Engineers/Contractors, Inc., 72 N.E.3d 908, 914 (Ind. 2017). “A contract’s clear
and unambiguous language is given its ordinary meaning.” Id. A contract should be construed
so as to not render any words, phrases, or terms ineffective or meaningless. Id. If the language
of a contract is found to be ambiguous, “the contract terms must be construed to determine and
give effect to the intent of the parties when they entered into the contract.” Celadon Trucking
Services, Inc. v. Wilmoth, 70 N.E.3d 833, 839 (Ind. Ct. App. 2017). “An ambiguous contract
should be construed against the party who furnished and drafted the agreement.” Id.
¶ 13 First, ArcelorMittal argues that, “under the plain, clear language of that contract, the parties
intended that Gallo’s insurance policies would provide that all rights of subrogation against
ArcelorMittal were waived, unless the damage resulted from ArcelorMittal’s gross negligence
or willful misconduct.” Several provisions of the supply contract are relevant to our analysis.
Section 1(j) defines “Equipment.” Section 1(j)(1) defines “Bare Equipment” as “Equipment
which shall be operated solely by [AcelorMittal’s] employees and/or agents.” Section 1(j)(2)
defines “Operated Equipment” as “Equipment which shall be operated solely by [Gallo’s]
employees and/or agents.” The parties agree that the damaged lift truck was “Bare
Equipment.”
¶ 14 Section 4(a) apportions the risk of loss and provides
“[Gallo] shall be responsible for all loss and damage to the Equipment: (i) prior to
[Gallo’s] delivery of the Equipment to the Facility, subject to the provisions of Section
5 below; (ii) at all times when the Equipment is in [Gallo’s] sole possession, including
but not limited to when the applicable Purchase Order provides that the Equipment
shall be used or operated solely as Operated Equipment, for the duration of the Work;
and (iii) upon [ArcelorMittal’s] notification of return of the Equipment or [Gallo] or
[Gallo’s] agent at the Facility. At all other times risk of loss or damage shall be the
responsibility of [ArcelorMittal].”
¶ 15 Section 5(e) provides, in relevant part, “For Bare Equipment, [ArcelorMittal] agrees to
maintain the Equipment on a daily and other periodic basis as prescribed in the manufacturer’s
instruction manual and as required by good industry practice ***. [ArcelorMittal]
acknowledges that [Gallo] has no responsibility to inspect the Equipment while it is in
[ArcelorMittal’s] possession.” Section 6(b) provides that ArcelorMittal “shall be responsible
-4-
for the cost to repair or replace Equipment rendered inoperable by misuse, abuse or neglect, or
any event for which [ArcelorMittal] has the risk of loss in accordance with Section 4(a)
hereof.”
¶ 16 Section 11 relates to insurance, and provides,
“(a) Each party is obligated to and shall provide and pay for the following insurance:
(i) Workers’ compensation ***.
(ii) Employer’s liability insurance ***.
(iii) Commercial general liability insurance coverage (including
Products/Completed Operations Liability, coverage [sic] and contractual liability
coverage’s [sic]) in an amount not less than $5,000,000 per occurrence combined
single limit on all operations for bodily injury and property damage liability arising
out of said operations.
(iv) Commercial automobile (including all motor vehicles) liability insurance
coverage (including coverage for owned, hired and non-owned motor vehicles)
***.
(v) Umbrella or excess liability policy excess of coverage’s provided in
paragraphs (ii) and (iii) ***.
[ArcelorMittal] reserves the right to self-insure the aforementioned insurance
requirements as set forth in subsection 11(g) below.”
¶ 17 Section 11(b) provides,
“For the coverage described above, [ArcelorMittal] shall be added as an additional
insured for all claims including, but not limited to, claims by [Gallo’s] employees or
their personal representatives, heirs and beneficiaries. [Gallo’s] insurance policies
described above shall provide that all rights of subrogation against [ArcelorMittal] and
its affiliates are waived, except in the case of [ArcelorMittal’s] gross negligence or
willful misconduct. [ArcelorMittal’s] insurance requirements shall be primary to any
[Gallo] insurance or self-retention.” (Emphases added.)
¶ 18 Section 11(g) provides
“For Bare Equipment, [ArcelorMittal] maintains a self-insurance program ***
designed to cover exposure for losses or damages to equipment and/or other personal
property, including leased and rented equipment of the type provided under this
Agreement. [ArcelorMittal] shall provide [Gallo] with a written statement of such
Program signed by an authorized representative of [ArcelorMittal] and in a form and
content reasonably acceptable to [Gallo]. Any and all claims for loss or damage to the
Equipment shall be adjusted by [ArcelorMittal] in the same manner and to the same
extent as if a separate all-risk property insurance policy was in place to cover such
Equipment. Notwithstanding the above, [Gallo] shall be responsible for any losses or
events arising out of reasonable wear and tear.”
¶ 19 ArcelorMittal’s argument that, under the terms of section 11(b), the parties intended for
Gallo to obtain subrogation waivers for all of its insurance policies is not supported by the
plain language of the agreement. Section 11(b) clearly provides that it applies to “the coverage
described above.” Section 11(a) sets forth five specific types of insurance that Gallo was
required to maintain. A common sense reading of section 11(b) shows that the only “coverage
described above” are the specific coverages identified in section 11(a), and that for those five
-5-
specific types of insurance, Gallo was required to add ArcelorMittal as an additional insured
and waive subrogation under those five types of policies. There is no catch-all provision in
section 11 that extends the requirements of section 11(b) to other insurance policies that Gallo
maintained—such as the inland marine policy issued by Travelers—that were not specifically
identified in section 11(a). In other words, the plain language of the agreement does not reflect
an intent to capture and subjugate every insurance policy issued to Gallo to the section 11(b)
subrogation waiver. Instead, the plain language of the supply contract requires both
ArcelorMittal and Gallo to have or to obtain five specific types of insurance coverage and, in
Gallo’s case, Gallo was required to obtain a subrogation waiver for each of those specific
coverages. The inland marine policy under which Gallo submitted its a claim was not one of
the policies enumerated in section 11(a) of the supply contract, and nothing in the plain
language of the agreement suggests that the parties intended for Gallo to obtain a waiver of
subrogation under any other unspecified insurance policy that it had. Therefore, we reject
ArcelorMittal’s argument that Travelers’ subrogation claim is barred by the terms of the
supply contract.
¶ 20 Because the supply contract did not require Gallo to obtain a waiver of subrogation rights
in its inland marine policy issued by Travelers, Travelers, as subrogee, is entitled to recover the
amount it paid to Gallo for the damage sustained to the tractor under section 4(a) of the supply
contract. Therefore, because ArcelorMittal does not challenge its liability for the damages
Gallo sustained, the circuit court’s entry of summary judgment on the issue of liability in favor
of Travelers as Gallo’s subrogee is affirmed.
¶ 21 In affirming the entry of summary judgment in favor of Travelers on the issue of liability,
we do not consider ArcelorMittal’s argument that the nonassignment provisions in section 10
of the supply contract evidences the intent of the parties regarding the waiver of subrogation
issue discussed above. ArcelorMittal’s argument is forfeited because it was raised for the first
time at oral argument. Ill. S. Ct. R. 341(h)(7) (eff. May 25, 2018) (“Points not argued are
forfeited and shall not be raised in the reply brief, in oral argument, or on petition for
rehearing.”). Although ArcelorMittal’s appellate brief referenced section 10 in its statement of
facts, the argument section of its appellate brief contains no discussion of section 10.
Therefore, ArcelorMittal forfeited any argument regarding section 10.
¶ 22 Next, ArcelorMittal argues that questions of fact remain with respect to damages and,
consequently, that the summary judgment damage award of $305,625 in Travelers favor
should be reversed. It argues that the tractor was purchased in 2005 for $113,000, and that
Gallo invested another $90,000 in parts and labor. Also, a detachable mast was attached to the
tractor that was worth $50,000, which was repaired after the fire, and Gallo was able to
continue using it. ArcelorMittal further argues that during negotiations with Gallo, Gallo made
varying claims as to the value of the tractor and that ArcelorMittal made its own offer based on
its fair market valuation of the tractor. ArcelorMittal contends that the circuit court ignored
questions of fact about the tractor’s fair market value and instead simply awarded Travelers
what it asked for.
¶ 23 Fatal to ArcelorMittal’s argument, however, is the fact that ArcelorMittal failed to actually
contest Travelers’ motion for summary judgment on the amount of damages in the circuit
court. Travelers’ motion for summary judgment asserted that there were no genuine issues of
material fact as to damages. In support of its motion, Travelers attached numerous exhibits
including Michael Gallo’s deposition transcript wherein he testified as to his knowledge and
-6-
experience within the equipment industry, as well as to the damage to the tractor. Mr. Gallo
further testified that he received a $318,000 repair quote from the tractor’s manufacturer. A
copy of the quote—identified as an exhibit to Mr. Gallo’s deposition—was attached to
Travelers’ motion for summary judgment. The repair quote reflects that several components,
including the chassis and engine, needed to be rebuilt. Mr. Gallo testified that Travelers
deducted a “salvage value” and Gallo’s deductible from the service quote and issued Gallo a
check for $305,625. Section 6(b) of the supply contract provides that ArcelorMittal “shall be
responsible for the cost to repair or replace Equipment rendered inoperable by misuse, abuse
or neglect, or any event for which [ArcelorMittal] has the risk of loss in accordance with
Section 4(a) hereof.” (Emphasis added.) Therefore, the cost of repair—$318,000—was an
appropriate measure of damages for Travelers’ subrogation claim.
¶ 24 Travelers’ motion for summary judgment on the issue of damages therefore argued that
ArcelorMittal was liable under the supply contract for $318,000. ArcelorMittal’s response did
not raise any objection to Mr. Gallo’s deposition testimony or the repair quote. ArcelorMittal’s
only response to Travelers’ motion for summary judgment on the issue of damages consisted
of a single footnote:
“Travelers also argues that it has established damages in this case; however,
damages, to the extent Travelers is entitled to any, is an extremely contested issue.
[Mr.] Gallo previously represented in a letter to ArcelorMittal that the value of the
tractor, without its mast (which was the condition Travelers [sic] bought the tractor)
was worth $235,000, not the $318,000 claimed in Travelers’[s] brief. (See December
20, 2012, letter, attached *** as Exhibit 5). Further, Gallo itself claims to have bought
the tractor for $113,000 and spent $90,907 in refurbishing it in 2006. Therefore, Gallo
paid $203,907 for the refurbished tractor, the tractor depreciated due to use at a steel
mill for 6 years, and now Travelers claiming [sic] that the tractor increased in value by
over a [sic] $100,000. ArcelorMittal disputes this unsupported contention by
Travelers.” (Emphases in original.)
¶ 25 Asserting in a footnote that damages are contested is not the same as contesting damages
with admissible evidence, and a footnote not supported by evidence submitted to the circuit
court does not raise a question of fact that will defeat a motion for summary judgment.
Furthermore, attaching a settlement proposal from an opposing party does not correct this
deficiency. ArcelorMittal attached to its summary judgment response a letter dated December
20, 2012, from Mr. Gallo, wherein Gallo asserted that the market value of the tractor was
$285,000 and the value of the detachable mast was $50,000, and he offered to settle for
$235,000. Even if an argument contained in a footnote in a circuit court filing were deemed
sufficient to establish a contested issue of fact, ArcelorMittal makes no argument on appeal
that the December 20, 2012, letter would have been admissible at trial. Illinois Rule of
Evidence 408(a)(2) (eff. Jan. 1, 2011) provides that “conduct or statements made in
compromise negotiations regarding [a] claim” are inadmissible to prove the amount of a
disputed claim. Because no argument was made or advanced below that Gallo’s letter was
admissible evidence, ArcelorMittal could not rely on the letter to create a genuine issue of
material fact. Rodriguez, 2012 IL App (1st) 113155, ¶ 14. Therefore, in the face of a motion for
summary judgment on the issue of damages, ArcelorMittal offered no admissible evidence to
create any genuine issue of material fact as to the damages claimed by Travelers. Instead, it
appears ArcelorMittal attempted to reserve the issue of damages until the circuit court
-7-
determined the issue of liability. ArcelorMittal cites no authority to support the notion that a
party responding to a motion for summary judgment on both liability and damages may avoid
summary judgment on damages by simply asserting in a footnote that “damages [are] an
extremely contested issue.” To establish a contested material issue of fact, ArcelorMittal was
required to submit relevant, admissible evidence on the issue of damages in the circuit court. In
the absence of any such evidence, the circuit court correctly entered judgment in the amount of
the adjusted repair cost that Travelers paid Gallo, or $305,625.
¶ 26 ArcelorMittal’s argument that the circuit court erred in its damage award because the fair
market value of the equipment was not established also fails. Section 6(b) of the supply
contract provides that ArcelorMittal “shall be responsible for the cost to repair or replace
Equipment rendered inoperable by misuse, abuse or neglect, or any event for which
[ArcelorMittal] has the risk of loss in accordance with Section 4(a) hereof.” (Emphasis added.)
As stated, Mr. Gallo’s testimony and the repair estimate showed that the cost of repair was
$318,000 because several components, including the chassis and engine, needed to be rebuilt.
Mr. Gallo testified that Travelers deducted a “salvage value” and Gallo’s deductible from the
service quote, and issued Gallo a check for $305,625. Therefore, the adjusted cost of repair
paid by Travelers to Gallo was an appropriate measure of damages on Travelers’ subrogation
claim. ArcelorMittal failed to identify any factual or contractual basis that would preclude the
entry of summary judgment in favor of Travelers on the issue of damages based on the cost of
repair, rather than the market value of the damaged equipment. Therefore, the circuit court’s
$305,625 damage award in favor of Travelers is affirmed.
¶ 27 In sum, the circuit court properly entered summary judgment in favor of Travelers on its
subrogation claim that ArcelorMittal breached its contract with Gallo.
¶ 28 Finally, because we have affirmed the entry of summary judgment in favor of Travelers
based on our finding that the supply contract did not require Gallo to obtain subrogation
waivers under all of its insurance policies, we affirm the circuit court’s dismissal of
ArcelorMittal’s claim that Gallo breached the supply contract by failing to obtain a
subrogation waiver for its inland marine policy issued by Travelers. ArcelorMittal has
forfeited its argument, raised for the first time during oral argument, that its third-party breach
of contract claim against Gallo was based in part on Gallo’s failure to name ArcelorMittal as an
additional insured pursuant to section 11 of the supply contract. This argument is forfeited
because it was raised for the first time at oral argument. Ill. S. Ct. R. 341(h)(7) (eff. May 25,
2018). ArcelorMittal’s appellate brief focused solely on the issue of whether Gallo was
required to obtain subrogation waivers and made no mention of whether Gallo failed to add
ArcelorMittal as an additional insured. By not advancing any argument in its appellate brief
that Gallo breached the supply contract by failing to have ArcelorMittal named as an additional
insured, ArcelorMittal forfeited any argument in support of reinstating ArcelorMittal’s breach
of contract claim on that basis.
¶ 29 III. CONCLUSION
¶ 30 For the foregoing reasons, the judgment of the circuit court is affirmed.
¶ 31 Affirmed.
-8-