Cincinnati Ins. Co. v. Berkshire Refrigerated Warehousing, LLC

The CINCINNATI INSURANCE COMPANY, Plaintiffs, v. BERKSHIRE REFRIGERATED WAREHOUSING, LLC, & CHARTER OAKFIRE INSURANCE COMPANY a/s/o GOLD STANDARD BAKING, INC. Defendants.

No. 15 C 686

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

August 24, 2017

Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Cincinnati Insurance Company filed a Complaint for Declaratory Relief against Berkshire Refrigerated Warehousing, LLC pursuant to 28 U.S.C. §§ 2201 and 1332 to determine whether Cincinnati has an obligation to defend or indemnify Berkshire in an underlying action brought against it by Charter Oak Fire Insurance Company as subrogee of Gold Standard Baking, Inc. Charter Oak intervened as a defendant. Cincinnati filed an Amended Complaint, and the parties filed cross-motions for summary judgment. For the following reasons, the Court grants Cincinnati Insurance Company's Motion for Summary Judgment [94] and denies Berkshire Refrigerated Warehousing, LLC's Motion for Summary Judgment [97].

BACKGROUND

The parties do not dispute the following facts unless otherwise noted.

Defendant Berkshire Refrigerated Warehousing, LLC ("Berkshire") is a warehousing, logistics, and refrigerated storage business. (Dkt. 99-14, Grzywacz Dep., 9:18-20; Dkt. 101, ¶ 24.) About ninety percent of Berkshire's storage business consists of storing frozen food products. Berkshire also stores its customers' non-refrigerated and non-frozen products.¹ (Dkt. 99-14, 9:21-10:1, 10:19-21, 11:1-8.)

I. The Storage and Loss of Gold's Baking Equipment

Berkshire has worked with its customer Gold Standard Baking, Inc. ("Gold") since 2005, typically storing and shipping Gold's frozen croissants and sometimes refrigerating their flour. (Id., 12:23-13:17, 13:24-14:3.) Gold gives Berkshire about $4 to 5 million worth of business each year, making them Berkshire's second largest customer.² (Id., 14:4-13.)

In late summer of 2010, Eberhard Oberlander of Gold, called Ted Gryzwacz, President and CEO of Berkshire. Oberlander told Gryzwacz that he had some baking equipment that he needed to put onto trailers because he was preparing for an outside audit, and he wanted to rent the trailers from Berkshire. (Id., 14:16-15:4; 28:13-22.) Gryzwacz told Oberlander that he did not have available any such trailers, known as "dry trailers" because they do not have refrigeration capacity. However, Gryzwacz said that he could rent dry trailers and send them to Gold's facilities, and he quoted Oberlander a price and Oberlander agreed. (Id., 16:2-15, 17:12:20.) It was not the first time that Berkshire had rented dry trailers for a customer to move product that did not need to be frozen or refrigerated. (Id., 17:18-18:5.) Berkshire began renting the trailers to Gold on November 28, 2010. (Dkt. 99-12, at 2.)

In early 2011, Oberlander again called Gryzwacz, this time to ask whether Berkshire had a place to put the trailers. Gryzwacz said he could move them to Berkshire's Packers Avenue facilities. (Dkt. 99-14, 19:11-20.) Gold filled the trailers in late spring 2011, and Berkshire picked up the trailers and moved them to its facilities at 4550 S. Packers Avenue in Chicago.(Dkt. 103, ¶ 10.) Berkshire did not charge Gold for moving and storing the trailers. Gryzwacz considered this an "accommodation" for Gold. (Dkt. 99-14, 19:24-20:3.)

Berkshire stored the trailers in the vacant lot at 4550 S. Packers Avenue. The land itself is not fenced in, but the lot sits in an industrial park which has a fence. (Id., 20:11-23.) The lot did not have a security gate or security guards but it had cameras that surveilled the site where Berkshire stored the trailers. (Id., 21:3-16.) The trailers had locks and Berkshire did not have any key or combination to open the locks. (Id., 21:21-22:10.)

In May or June of 2011, Gryzwacz called Oberlander to tell him that Berkshire had started a construction project on the Packers Avenue facility and that Berkshire would need the space where Cincinnati's trailers stood but could store them at a space down the street that Berkshire had rented from the company Fresh Start. Oberlander agreed that Berkshire could move the trailers to this new location. (Id., 22:10-23:18.) Berkshire moved the four trailers holding Gold's baking equipment, along with about 10 to 12 other Berkshire trailers, to the new location at 1250 W. 42nd Street in Chicago. (Dkt. 103, ¶ 11; Dkt. 99-14, 25:13-18.) The 42nd Street space also had cameras surveilling the lot and a gate that was locked at night. (Dkt. 99-14, 25:19-26:4.) Fresh Start employees granted access to the lot through the gate between 4 or 5 AM and 10 PM. (Dkt. 103, ¶ 13.) A driver conducted inventory of the Berkshire and Fresh Start lots each morning. (Dkt. 99-14, 29:6-9.)

In August of 2011, when Oberlander next needed to access the baking equipment stored in the trailers, he called Gryzwacz so that he and another individual affiliated with Gold, Noel Rodriguez, could go over to Fresh Start to take a look in the trailers. Gryzwacz and his son accompanied Oberlander and Rodriguez over to Fresh Start, and when they got there, Oberlanderand Rodriguez opened up the trailers, crawled inside, looked around, and closed them up when finished. (Id., at 27:6-28:5.)

Berkshire next contacted Gold on January 18, 2012. (Id., 29:1-5; Dkt. 103, ¶ 16.) That morning, Berkshire's driver noticed that four trailers and their contents had gone missing from the 42nd Street facility. Indeed, they were the same four trailers that Berkshire was storing for Gold.³ (Dkt. 103, ¶ 16.) Berkshire notified Gold and the Chicago Police Department. The trailers would have needed a tractor to pull them away. When Gryzwacz viewed the security camera tapes, he found that the tape was blank for about six hours during the time when the trailers disappeared. To this day, the trailers have not been located. (Dkt. 99-14, 29:10-32:15.)

II. Berkshire's Insurance Policy from Cincinnati

Berkshire purchased Insurance Policy No. COP 233 01 82/COA 233 01 82 (the "Policy") from the Cincinnati Insurance Company ("Cincinnati") for a period covering December 15, 2011 to December 15, 2012. (Dkt. 13, ¶ 23; Dkt. 96-9.) The Policy included in pertinent part provisions on Property Coverage, Commercial General Liability ("CGL") Coverage, and Commercial Umbrella Liability Coverage. (Dkt. 96-9 at 35, 107, 250.)

Under the Property Coverage provision, Cincinnati insured Berkshire for property "at all covered locations" and replacement costs for business personal property. (Id. at 35.) "Covered locations" include "any location or premises where [the insured] has buildings, structures, or business personal property to which this Coverage Part applies," but caveats that if the Coverage Part includes a Scheduled Locations Endorsement, then a "covered location" means a "location that is described on that endorsement." (Id. at 40.) Berkshire's Policy indeed included a Scheduled Locations Endorsement listing two locations: 4550 S Packers, Chicago, IL, 60609 and 1211 S Prairie Ave, Unit 3402, Chicago, IL, 60605. (Id. at 8.) "Covered location" generallydoes not include vehicles containing covered property, unless those vehicles are "on or within 1,000 feet of the premises of any covered building or structure." (Id. at 40.) Regarding business personal property, the Policy defines "business" as "normal business activities occurring at covered locations," which includes the personal property of others that is in the insured's "care, custody, or control, or for which you are legally liable," even in a vehicle, as long as it is also "on or within 1,000 feet" of what the Policy deems "covered locations." (Id. at 40, 43.)

Further, in its CGL Coverage, Cincinnati agrees to pay sums that Berkshire "becomes legally obligated to pay as damages," including for property damage. (Id. at 108.) The Policy states that Cincinnati has the duty to defend the insured against any such suit, but also that Cincinnati has no duty to defend for suits seeking damages for "... 'property damage' to which this insurance does not apply." (Id.) The Policy goes on to exclude coverage for "[p]ersonal property in the care, custody of control of an insured." (Id. at 112.)

Finally, in its Umbrella Liability Coverage, Cincinnati agrees to pay on behalf of Berkshire the "ultimate net loss" that Berkshire is legally obligated to pay, including for property damage, when damages go beyond the coverage of other underlying insurance. (Id. at 250, 254.) However, an endorsement added to the Policy alters the definition of "personal property" included in the Umbrella Liability Coverage to exclude damage to personal property "not owned by an insured and in the care, custody or control of an insured..." (Id. at 283.)

III. Procedural History & Allegations in the Underlying Complaint

On July 9, 2014, Gold's insurance company Charter Oak Fire ("Charter Oak") filed suit, as subrogee of Gold, against Berkshire. (Dkt. 99-4, at 2.) In this original underlying complaint, Charter Oak alleged that Berkshire engaged "in the business of warehousing and refrigerated storage" and, sometime prior to the date of the loss, Gold had entered into an agreement withBerkshire "for the storage of equipment owned by GOLD in trailers provided by BERKSHIRE at a location provided by BERKSHIRE in exchange for a monthly fee." (Id. ¶¶ 12, 14.) The complaint goes on to allege that Berkshire initially stored these trailers at their Packers Avenue premises but "without the knowledge and consent of GOLD; [sic] the trailers were moved by BERKSHIRE and relocated to 1250 W. 42nd Street, Chicago, Illinois." (Id. ¶ 15.) The complaint then alleges that on January 18, 2012 the trailers and their contents were missing from the Packers Avenue premises and had been either released to an unauthorized party or otherwise stolen from the 42nd Street premises. (Id. ¶¶ 16, 21.) The complaint sought $250,000 relief to cover damages to cover the loss of the...