United States District Court, D. New Jersey
MILK INDUSTRY MANAGEMENT CORPORATION, trading as BALFORD FARMS, Plaintiff,
TRAVELERS INDEMNITY COMPANY OF AMERICA, Defendant.
C. KISTLER ROBYN LEIGH MICHAELSON STEPHEN M. ORLOFSKY BLANK
ROME LLP, HENRY M. KULLER (admitted pro hac vice) BLANK ROME
LLP, JOHN A. GIBBONS (admitted pro hac vice) BLANK ROME LLP
On behalf of Plaintiff.
GLAZER LAZARE POTTER & GIACOVAS LLP On behalf of
L. HILLMAN, U.S.D.J.
before the court are Plaintiff's and Defendant's
cross-motions for partial summary judgment regarding
Plaintiff's claim for business income insurance and
extended business income insurance. The parties' dispute
arises out of the termination of Plaintiff's dairy
distribution contract caused by a catastrophic fire at the
storage facility used by Plaintiff. For the reasons expressed
below, Plaintiff's motion will be denied, and
Defendant's motion will be granted.
Industry Management Corporation (“MIMCO”),
trading as Balford Farms, is a distributor of butter, cheese,
fluid milk, and associated dairy and other food products for
its own account and the accounts of third parties. On July
30, 2012, MIMCO and Dairy Farmers of America
(“DFA”) entered into a Warehousing and
Distribution Services Agreement (the “DFA Services
Agreement”) and an Asset Purchase Agreement
(collectively, the “DFA Agreements”). Under these
agreements, MIMCO acquired the right to receive, store,
warehouse, load out, and distribute seventy million pounds
annually of DFA's products to DFA's customers for a
term of five years, automatically renewing for subsequent
August 20, 2012, MIMCO entered into a Warehouse Services
Agreement with Black Bear Distribution LLC (“Black
Bear”) for the purpose of subcontracting the receipt,
storage, and load out of DFA's product to MIMCO trucks at
Black Bear's frozen and refrigerated warehouse storage
facilities located in Delanco, New Jersey. MIMCO commenced
distributing product to DFA's customers in September
approximately 1:30 p.m. on September 1, 2013, a fire broke
out on the roof of the Black Bear Facility. Firefighters were
unable to contain the fire for over twenty-four hours. The
Black Bear Facility collapsed and was completely destroyed.
On September 13, 2013, MIMCO terminated its contract with
Black Bear under the Force Majeure provisions of the contract
because Black Bear no longer had the ability to perform the
contract due to the fire and the complete destruction of its
claims that in an effort to mitigate its losses and continue
operations under the DFA Agreements, MIMCO attempted to
procure alternate warehouse space and services capabilities.
MIMCO claims that it was unable to find any warehouses that
had the capacity to warehouse all of DFA's product and to
provide the logistical, technological, and other services
required by DFA that Black Bear had provided prior to the
fire. MIMCO eventually located an alternate warehouse with
space and capabilities sufficient to maintain only a portion
of the DFA-required storage, capabilities, and deliveries,
but this alternate location did not provide MIMCO with the
ability to fully provide the services it rendered to DFA
prior to the fire, and it imposed extra costs, such as for
warehousing, transportation, and labor.
2014, Black Bear's affiliate announced it would not
re-build in the same geographical area or on the same scale
as the Black Bear Facility. MIMCO claims that effective
January 31, 2015, MIMCO and DFA mutually agreed to terminate
the DFA Agreements as a result of the fire because MIMCO was
unable to find a suitable replacement facility to enable
MIMCO to efficiently and fully perform the services to be
provided to DFA under the DFA Services Agreement. As a
result, MIMCO claims that it incurred significant financial
losses, including business income loss and other expenses,
totaling in excess of $9.7 million.
MIMCO purchased a package insurance policy, No.
Y-630-5076A285-TIA-13, from Defendant, Travelers Indemnity
Company of America (“Travelers”), for the policy
period July 1, 2013, to July 1, 2014. The Policy covers
Business Income and Extra Expense loss up to $16, 167, 000,
and MIMCO claims that it purchased coverage specifically to
account for the DFA business and paid a premium to extend the
Policy coverage to include losses resulting from damage to
the Black Bear warehouse. MIMCO also purchased enhanced
coverage that provided for 365 days of Extended Business
Income Coverage instead of the standard 180 days.
days of the fire at the Black Bear facility, MIMCO tendered
notice of an insurance claim for Business Income and Extra
Expense due to the fire. Ultimately, Travelers paid MIMCO
$11.6 million under the Policy for Business Personal Property
(“BBP”), Business Income (“BI”)
(approximately $3 million), and Extra Expense
(“EE”). MIMCO claims, however, that Travelers
still owes it $7 million in BI coverage and for Extended
Business Income (“Extended BI”). For
Travelers' refusal to fully compensate MIMCO under the
Policy, MIMCO seeks a declaratory judgment that MIMCO is
entitled to the additional $7 million under the Policy, and
it has asserted a claim for breach of contract.
parties have moved for partial summary
judgment. The heart of the instant dispute is the
import of Black Bear not rebuilding its facility and MIMCO
ultimately ceasing operations under the DFA contract. In
order to calculate the amount of the insured loss under the
BI provision, Travelers determined the Period of Restoration
(“POR”) under the policy, which Travelers based
on the reasonable time it would have taken Black Bear to
rebuild its facility - 23 months. In contrast, MIMCO contends
that the proper method to determine the POR is based on its
unfulfilled contract term with DFA - 48 months plus an
additional 24 months - because Travelers' use of a
hypothetical restoration over which MIMCO had no control is
contrary to the law and the Policy language. MIMCO further
contends that because the Black Bear facility was never
rebuilt and MIMCO never resumed its operations, a
hypothetical POR when there is no restoration is not the
appropriate guidepost for BI coverage.
“no restoration” and “no resumption of
business” issues also affect MIMCO's claim for
Extended BI, should it not be awarded full compensation under
the BI provision. Travelers argues that MIMCO is not entitled
to Extended BI because that provision only provides coverage
when an insured suffers certain BI losses after actually
repairing, replacing, or rebuilding the damaged property, and
then resuming operations, and MIMCO never did any of those
things. MIMCO argues the that the Extended BI provision is
ambiguous, and therefore should be construed in its favor to
provide Extended BI to MIMCO.
has moved for summary judgment in its favor on the POR issue.
Travelers has moved for summary judgment in its favor on the
Extended BI issue. Each party has opposed the other's
Subject matter jurisdiction
Court has jurisdiction over the subject matter of this action
under the Declaratory Judgment Act, 28 U.S.C. § 2201,
and pursuant to 28 U.S.C. § 1332(a) because there is
complete diversity of citizenship between Plaintiff and
Defendant, and the amount in controversy exceeds $75, 000.00,
exclusive of interest, attorneys' fees, and costs.
Plaintiff is a citizen of Pennsylvania and New Jersey, and
Defendant is a citizen of Connecticut.
Standard for Summary Judgment
judgment is appropriate where the Court is satisfied that the
materials in the record, including depositions, documents,
electronically stored information, affidavits or
declarations, stipulations, admissions, or interrogatory
answers, demonstrate that there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law. Celotex Corp. v.
Catrett, 477 U.S. 317, 330 (1986); Fed.R.Civ.P. 56(a).
issue is “genuine” if it is supported by evidence
such that a reasonable jury could return a verdict in the
nonmoving party's favor. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A fact is
“material” if, under the governing substantive
law, a dispute about the fact might affect the outcome of the
suit. Id. In considering a motion for summary
judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence;
instead, the non-moving party's evidence “is to be
believed and all justifiable inferences are to be drawn in
his favor.” Marino v. Industrial Crating Co.,
358 F.3d 241, 247 (3d Cir. 2004)(quoting Anderson,
477 U.S. at 255).
the moving party has the burden of demonstrating the absence
of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Once the moving party
has met this burden, the nonmoving party must identify, by
affidavits or otherwise, specific facts showing that there is
a genuine issue for trial. Id. Thus, to withstand a
properly supported motion for summary judgment, the nonmoving
party must identify specific facts and affirmative evidence
that contradict those offered by the moving party.
Anderson, 477 U.S. at 256-57. A party opposing
summary judgment must do more than just rest upon mere
allegations, general denials, or vague statements.
Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir.
MIMCO's motion for summary judgment
any insurance coverage dispute, the starting point of the
analysis is the language of the Policy. The provisions
relevant to MIMCO's motion provide:
We will pay ...