Court Opinion

ID: 770304
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:32:56+00
Date Added: 2024-06-11T17:55:49.465423
License: Public Domain

225 F.3d 868 (7th Cir. 2000)
JUPITER ALUMINUM CORPORATION,  an Illinois Corporation, Plaintiff-Appellant,v.HOME INSURANCE COMPANY and  HARTFORD STEAM BOILER INSPECTION  AND INSURANCE COMPANY, Defendants-Appellees.
No. 99-2935
In the  United States Court of Appeals  For the Seventh Circuit
Argued March 31, 2000Decided August 22, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 96 C 3060--Robert W. Gettleman, Judge.[Copyrighted Material Omitted]
Before POSNER, RIPPLE and ROVNER, Circuit Judges.
RIPPLE, Circuit Judge.

1
Jupiter Aluminum Corp.  ("Jupiter") operates an aluminum mill in Hammond,  Indiana. In March 1993, the drive motor for a  reducing stand at the aluminum mill failed, and  the motor was not returned to service until two  months later. At the time of the accident,  Jupiter held an insurance policy, issued by Home  Insurance Co. ("Home"), and reinsured by Hartford  Steam Boiler Inspection and Insurance Co. ("HSB")  (collectively, "the insurance companies"), that  covered the property damage and business  interruption loss resulting from the drive  motor's failure.

2
Although Jupiter and the insurance companies  reached an agreement as to the amount of property  damage suffered by Jupiter, the parties could not  agree on the amount of Jupiter's business  interruption loss. To resolve the dispute over  the amount of the business interruption loss,  Jupiter requested an appraisal in accordance with  the terms of the insurance policy. The insurance  companies agreed to the appraisal, which was  concluded in January 1996. The appraisal set the  total loss at $66,105.

3
Dissatisfied with the amount awarded in the  appraisal, however, Jupiter filed this action for  declaratory relief in April 1996, in an Illinois  circuit court to set aside the appraisal  award.1 The insurance companies removed the  action to federal district court. See 28 U.S.C.  sec. 1441(a).2 The insurance companies asserted  a counterclaim against Jupiter for unjust  enrichment in order to recover the difference  between the appraisal award and an advance the  companies had paid to Jupiter while the parties  were attempting to settle their dispute over  Jupiter's business interruption loss.

4
The insurance companies moved for summary  judgment on Jupiter's claim and on their  counterclaim. The district court granted the  motion and entered judgment in favor of the  insurance companies. Jupiter now appeals. For the  reasons set forth in the following opinion, we  affirm the judgment of the district court.

5
* BACKGROUND

A.

6
The facts as we describe them are largely not in  dispute, in part because Jupiter failed to  respond with an appropriate statement of material  facts to the summary judgment motion tendered by  the insurance companies.3 In response to the  summary judgment motion, Jupiter submitted a  document that simply identified, without  citations to the record, those paragraphs from  the insurance companies' statement of facts that  Jupiter found acceptable or not acceptable. In  addition, Jupiter submitted a list of portions  from individual depositions that it believed to  be material to the case; Jupiter failed to  provide page citations to accompany some of the  references to the depositions. Because the  district court concluded that Jupiter's  submission failed to comply with the requirements  of the local rule, the court accepted the facts  as set forth by the insurance companies.

7
Jupiter has not challenged the district court's  enforcement of the local rule, and having  reviewed Jupiter's submission ourselves, we agree  with the district court that Jupiter did not  comply with the requirements of the local rule.  "'An answer that does not deny the allegations in  the numbered paragraph with citations to  supporting evidence in the record constitutes an  admission.'" Michas v. Health Cost Controls of  Ill., Inc., 209 F.3d 687, 689 (7th Cir. 2000)  (quoting McGuire v. United Parcel Serv., 152 F.3d 673, 675 (7th Cir. 1998)). Therefore, we too have  accepted as true all material facts as submitted  by the insurance companies and not properly  contested by Jupiter.4

B.

8
Jupiter is incorporated in Illinois, but the  company's principal place of business is Hammond,  Indiana. In 1993, Jupiter held an insurance  policy, issued by Home and reinsured by HSB, for  its Hammond aluminum mill and one other Jupiter  property in that city. The policy provided first  party property, boiler, machine, and business  interruption coverage. Jupiter obtained the  policy through a Chicago insurance broker,  Alexander & Alexander.

9
In March 1993, the drive motor for one of the  reducing stands at the aluminum mill failed, and  it was not returned to service until May 6, 1993.  On May 6, Jupiter filed a claim with the  insurance companies stating that it had suffered  a loss of over $100,000, including its business  interruption loss, as a result of the drive  motor's failure. In response to this claim, the  insurance companies conducted an investigation,  and, after making an adjustment for Jupiter's  deductible under the policy, the parties agreed  that the property damage portion of Jupiter's  loss amounted to $12,270.

10
The parties could not reach an agreement as to  the amount of Jupiter's business interruption  loss. In November 1993, the insurance companies  paid Jupiter a $100,000 advance as partial  payment for the agreed property damage loss and  Jupiter's yet-unresolved claim for its business  interruption loss. Jupiter estimated that its  business interruption loss exceeded $500,000, and  in July 1994, it submitted a proof of claim to  the insurance companies in the amount of  $528,113. The insurance companies, however,  estimated the business interruption loss to be  closer to $100,000, after accounting for the  deductible.

11
With the parties at an impasse, Jupiter  requested a formal appraisal, in accordance with  the terms of the insurance policy, to determine  the amount of its loss. The policy's appraisal  provision reads as follows

12
If the Insured and the Company fail to agree as  to the amount of the loss, each shall, on the  written demand of either, made within sixty (60)  days after receipt of proof of loss by the  Company, select a competent and disinterested  appraiser and the appraisal shall be made at a  reasonable time and place. The appraisers shall  first select a competent and disinterested umpire  and, failing for fifteen (15) days to agree upon  such umpire, then on request of the Insured or  the Company, such umpire shall be selected by a  judge of a court of record in the county and  state in which such appraisal is pending. The  appraisers shall then appraise the loss in  accordance with the insurance conditions, stating  separately the amount of loss, and failing to  agree, shall submit their differences to the  umpire. An award in writing of any two (2) shall  determine the amount of loss. The Insured and the  Company shall each pay his or its chosen  appraiser and shall bear equally the other  expenses of the appraisal and the umpire. The  Company shall not be held to have waived its  rights by any act relating to appraisal.

13
R.89 (Policy TR 789281, sec. I, K). The insurance  companies agreed to the appraisal, and both  Jupiter and the insurance companies designated  their appraisers and selected the umpire in  accordance with the procedure set forth in the  policy. The parties agreed that the only matter  to be resolved by the appraisal would be the  total loss in production and sales that Jupiter  had suffered while the drive motor had not been  operational.

14
Both appraisers conducted an appraisal and then  submitted findings to the umpire. In January  1996, the appraisers met with the umpire, who  placed three of his own loss calculations on the  table. The umpire's calculations were lower than  those of the appraisers for both Jupiter and the  insurance companies. The umpire then asked the  appraiser for the insurance companies to choose  one of the umpire's three calculations on the  table. The insurance companies' appraiser picked  the highest of the three, and both the umpire and  the insurance companies' appraiser signed the  award in the amount of $66,105 for the total loss  ($53,835 of that amount represented the business  interruption loss). Jupiter's appraiser refused  to sign the award.

15
In April 1996, Jupiter filed suit in Illinois  state court seeking to vacate the appraisal  award. The insurance companies removed the action  to federal court, and they later added a  counterclaim for unjust enrichment in the amount  of $33,895, the difference between the $100,000  advance and the $66,105 awarded by the umpire.

C.

16
After the insurance companies moved for summary  judgment on both Jupiter's complaint and the  insurance companies' counterclaim, the district  court granted the motion and entered judgment in  favor of the insurance companies on both claims.

17
Because this is a diversity action, the district  court first had to determine which state's  substantive law would govern this dispute. The  insurance policy does not contain a choice of law  provision. The district court looked to the  choice of law rules for Illinois, the forum  state, to ascertain the appropriate choice of law  rule. The district court observed that, in West  Suburban Bank of Darien v. Badger Mutual  Insurance Co., 141 F.3d 720, 724 (7th Cir. 1998),  a case involving a fire insurance contract, this  circuit regarded the situs of the insured  property as the deciding factor under Illinois'  conflict-of-laws rules. Following our approach in  West Suburban, the district court held that  Indiana law governed this action because both of  the properties insured by Jupiter's policy were  located in Indiana.

18
Under Indiana law, the district court concluded,  the appraisal in this case was binding on the  parties. To reach this conclusion, the district  court relied on the decision of the Court of  Appeals of Indiana in Atlas Construction Co. v.  Indiana Insurance Co., 309 N.E.2d 810 (Ind. Ct.  App. 1974), in which the court held that an  appraisal is binding unless it can be  demonstrated that the appraisal was unfair or  unjust. The district court also looked to our  more recent application of Atlas in FDL, Inc. v.  Cincinnati Insurance Co., 135 F.3d 503 (7th Cir.  1998), in which we held that, under Atlas, the  parties were bound to their appraisal. In  Jupiter's case, the district court explained,  Jupiter had not come forth with any objective  evidence to establish that the umpire had been  biased or partial; therefore, the district court  concluded, the appraisal was binding on these  parties.5

II
DISCUSSION
A.

19
We review de novo the district court's grant of  summary judgment. See West Suburban, 141 F.3d at  724. Summary judgment is appropriate when "the  pleadings, depositions, answers to  interrogatories, and admissions on file, together  with the affidavits, if any, show 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." Fed. R. Civ. P. 56(c); see  Celotex Corp. v. Catrett, 477 U.S. 317, 322-23  (1986). The interpretation of an insurance policy  is a question of law that is an appropriate  subject for disposition by way of summary  judgment. See Hurst-Rosche Eng's, Inc. v.  Commercial Union Ins. Co., 51 F.3d 1336, 1342  (7th Cir. 1995). We also review de novo the  district court's choice of law determination. See  Gramercy Mills, Inc. v. Wolens, 63 F.3d 569, 572  (7th Cir. 1995).

B.

20
We begin our analysis by reviewing the choice of  law determination of the district court. Federal  courts sitting in diversity must look to the  conflict-of-laws rules of the forum state for the  applicable substantive law. See Klaxon Co. v.  Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941);  West Suburban, 141 F.3d at 724. The forum state  in this case is Illinois; therefore, we must look  to Illinois' conflict-of-laws rules. When an  insurance policy lacks a choice of law provision,  Illinois courts employ a "most significant  contacts" test to determine the governing  substantive law for the contract. Under this  test

21
Absent an express choice of law, insurance  policy provisions are generally governed by the  location of the subject matter, the place of  delivery of the contract, the domicile of the  insured or of the insurer, the place of the last  act to give rise to a valid contract, the place  of performance, or other place bearing a rational  relationship to the general contract.

22
Lapham-Hickey Steel Corp. v. Protection Mut. Ins.  Co., 655 N.E.2d 842, 845 (Ill. 1995) (quotation  marks and citation omitted). "While all these  factors must be considered in the choice of law  analysis, the location of the insured risk is  given special emphasis." Society of Mount Carmel  v. National Ben Franklin Ins. Co. of Ill., 643 N.E.2d 1280, 1287 (Ill. Ct. App. 1994) (citing  Restatement (Second) of Conflict of Laws sec. 193  (1971)).6 However, "the location of the subject  matter of the contract, such as the location of  the risk insured by an insurance policy, is  entitled to little weight when the subject matter  or risk is located in more than one state."  Employers Ins. of Wausau v. Ehlco Liquidating  Trust, 723 N.E.2d 687, 694 (Ill. Ct. App. 1999)  (citing the Restatement sec. 193).

23
Jupiter submits that, under Illinois' "most  significant contacts" test, this case should be  governed by Illinois law. According to Jupiter,  Illinois has the most significant contacts with  this insurance policy. It emphasizes that the  policy was purchased, delivered and signed by an  Illinois company, the insurance broker that  obtained the policy for Jupiter was based in  Illinois, the loss was suffered by a company  incorporated in Illinois, and the suit was filed  originally in an Illinois court. Jupiter also  emphasizes that in Lapham-Hickey, which also  involved an insurance policy obtained by an  Illinois company, the Supreme Court of Illinois  applied the substantive law of Illinois even  though the insured property was not located in  Illinois.

24
Jupiter is correct in pointing out that the  policy at issue here was purchased, delivered and  signed by an Illinois company, that Jupiter  obtained the policy from an Illinois-based  broker, that the loss was suffered by an Illinois  company, and that Jupiter initially filed suit in  an Illinois court. Nevertheless, we cannot accept  the contention that the courts of Illinois would  apply Illinois law in resolving the merits of  this action. Both of the properties insured by  Jupiter's policy are located in the same state--  Indiana. Thus, the situation in Lapham-Hickey is  inapposite, and the rationale of that case cannot  control the analysis here. The policy at issue in  Lapham-Hickey insured properties located in six  different states; had the Supreme Court of  Illinois ruled that it would interpret the policy  according to the law of the states in which the  insured properties were located, the same  insurance policy would have been subject to  different interpretations under the laws of six  different states. See Lapham-Hickey, 655 N.E.2d  at 845. The court in Lapham-Hickey applied  Illinois law in that case in order "to obtain a  consistent interpretation of the policy." Id. The  concern over obtaining different interpretations  of the same insurance policy, which animated the  court's decision in Lapham-Hickey, simply is not  present in Jupiter's situation.

25
When we have applied Illinois' "most significant  contacts" test to other insurance policies  covering properties or risks located in one  state, we have held that the law of the state in  which the insured property can be found will  usually govern. See West Suburban, 141 F.3d at  724; Massachusetts Bay Ins. Co. v. Vic Koenig  Leasing, Inc., 136 F.3d 1116, 1122-23 (7th Cir.  1998); GATX Leasing Corp. v. National Union Fire  Ins. Co., 64 F.3d 1112, 1115 (7th Cir. 1995).  Because Jupiter's policy insured against property  damage and business interruption loss for  properties located only in Indiana, we shall  follow our previous application of Illinois'  "most significant contacts" test. Therefore, we  apply the substantive law of Indiana to this  case.

C.
1.

26
Having determined that Indiana law governs this  action, we next address Jupiter's contention that  it should not be bound by the appraisal award.  "The Courts of Indiana will not hesitate to set  aside an appraisal award if it is tainted with  fraud, collusion or partiality for appraisers, though selected by the respective parties, 'must  act free from bias, partiality, or prejudice in  favor of either of the parties.'" Atlas, 309 N.E.2d at 813 (quoting Insurance Co. of N. Am. v.  Hegewald, 66 N.E. 902, 905 (Ind. 1903)). "When,  however, the award is uninfected with such  unfairness or injustice, it is not to be set  aside and replaced by the subjective judgment of  a reviewing court." Id. The Supreme Court of  Indiana has endorsed the approach taken by the  Court of Appeals of Indiana in Atlas. See Carroll  v. Statesman Ins. Co., 509 N.E.2d 825, 827 (Ind.  1987) (adopting the Atlas holding as applied by  the Court of Appeals of Indiana in Carroll v.  Statesman Ins. Co., 493 N.E.2d 1289 (Ind. Ct.  App. 1986)).

27
Applying the holding in Atlas to the present  dispute, the district court held that Jupiter and  the insurance companies were bound by the  appraisal award because, like the parties in  Atlas, they had submitted voluntarily to the  appraisal as provided by the insurance policy. We  agree with the district court's assessment. Under  Indiana law, an appraisal is binding unless it  can be shown that the appraisal is infected with  unfairness or injustice. See Atlas, 309 N.E.2d at  813. This was also our holding in FDL, Inc. v.  Cincinnati Insurance Co., 135 F.3d 503 (7th Cir.  1998). See id. at 505.

28
Jupiter contends that the policy does not state  that an appraisal would be binding and that it  never agreed to a binding appraisal. Jupiter also  insists that our decision in FDL, Inc. is  inapplicable to the present case because the  appraisal clause in FDL, Inc. explicitly stated  that the appraisal would be binding. We cannot  accept Jupiter's argument. Under Indiana law as  set forth in Atlas, an appraisal is binding even  if the appraisal provision does not state  explicitly that the appraisal will be binding.  The appraisal clause for the insurance policy at  issue in Atlas did not state that the appraisal  would be binding; nevertheless, the court ruled  that the parties were bound by it absent a  showing of unfairness or injustice. See 309 N.E.2d at 813. In fact, the language in the  appraisal provision in Atlas is strikingly  similar to the one in Jupiter's policy. The  appraisal provision in Atlas stated

29
"'Appraisal. In case the insured and this Company  shall fail to agree as to the actual cash value  of the amount of loss, then, on the written  demand of either, each shall select a competent  and disinterested appraiser and notify the other  of the appraiser selected within twenty days of  such demand. The appraisers shall first select a  competent and disinterested umpire; and failing  for fifteen days to agree upon such umpire, then,  on request of the insured or this Company, such  umpire shall be selected by a judge of a court of  record in the state in which the property covered  is located. The appraisers shall then appraise  the loss, stating separately actual cash value,  and loss to each item, and, failing to agree,  shall submit their differences, only, to the  umpire. An award in writing, so itemized, of any  two when filed with this Company shall determine  the amount of actual cash value and loss. Each  appraiser shall be paid by the party selecting  him and the expenses of appraisal and umpire  shall be paid by the parties equally.'"

30
Atlas, 309 N.E.2d at 811-12 (quoting the policy)  (court's emphasis omitted). Just as in the policy  at issue in Atlas, the strongest indication in  Jupiter's policy that the appraisal would be  binding can be found in the statement that the  appraisal award "shall determine" the amount of  the loss. R.89 (Policy TR 789281, sec. I, K).  These two appraisal provisions are not  distinguishable in a principled manner. Under  Atlas, therefore, Jupiter and the insurance  companies are bound by the appraisal that they  voluntarily undertook--unless Jupiter can  establish that the appraisal was unfair or unjust  as defined by the court in Atlas.

2.

31
In an effort to establish that the appraisal was  unfair and unjust, Jupiter claims that the  appraisal should not be binding because of the  umpire's "[m]isfeasance." Appellant's Br. at 21.  According to Jupiter, the appraisal should be  cast aside because the umpire allowed the  insurance companies' appraiser to pick the award  amount, never visited Jupiter's aluminum mill,  and made other mistakes in his appraisal. At the  very least, Jupiter submits, it should be able to  explore these alleged problems at trial and,  "[i]f true," the problems would make the  appraisal nonbinding. Appellant's Br. at 22.

32
Although making these assertions, Jupiter has  not provided sufficient evidence to substantiate  them. Its most concrete argument, and one that is  supported by the record, is that the umpire  allowed the insurance companies' appraiser to  "pick" the award amount. Jupiter's allegation in  this regard, however, does not establish a  question of material fact regarding the propriety  of the appraisal; each of the umpire's three  independent calculations were lower than those  submitted by the appraisers for Jupiter and the  insurance companies. Standing alone, the fact  that the umpire's calculations were all lower  does not suggest that the umpire was somehow  partial or prejudiced. Because Jupiter has failed  to provide sufficient record evidence to support  its assertions of misfeasance, the appraisal is  binding, and the amount of Jupiter's business  interruption loss has been set. Thus, summary  judgment in favor of the insurance companies was  proper on both Jupiter's claim and the insurance  companies' counterclaim.

Conclusion

33
For the foregoing reasons, we affirm the  judgment of the district court.

AFFIRMED

Notes:

1
 An amended complaint was later filed in January  1998. The amended complaint sought damages under  the policy.

2
 This action falls within the district court's  diversity jurisdiction, 28 U.S.C. sec. 1332(a),  because the parties are of diverse citizenship  and because the amount in controversy exceeded  the $50,000 minimum required in 1996, when the  action was removed to federal court. See Cook v.  Winfrey, 141 F.3d 322, 326 (7th Cir. 1998). The  statutory minimum for establishing diversity  jurisdiction has since been increased to an  amount in excess of $75,000.

3
 On a motion for summary judgment, Local Rule  12(N) for the Northern District of Illinois  required the non-moving party to submit a  response "to each numbered paragraph in the  moving party's statement [of uncontested facts],  including, in the case of any disagreement,  specific references to the affidavits, parts of  the record, and other supporting materials relied  upon." No. Dist. Ill. Local Gen. R. 12(N)(3)(a).  Local Rule 12(N) further provided that "[a]ll  material facts set forth in the statement  required of the moving party will be deemed to be  admitted unless controverted by the statement of  the opposing party." No. Dist. Ill. Local R.  12(N)(3)(B).
We note that, effective September 1, 1999, the  Northern District of Illinois amended its local  rules. Local Rules 12(M) and 12(N) have been  replaced by Local Rule 56.1. The parties in this  case made their filings under the former  designation, and we have used that nomenclature  for the sake of clarity.

4
 See, e.g., Schneiker v. Fortis Ins. Co., 200 F.3d 1055, 1057 (7th Cir. 2000) (approving of the  district court's enforcement of a comparable  local rule and accepting as true all facts not  properly contested by the non-moving party);  Brasic v. Heinemann's Inc., 121 F.3d 281, 284  (7th Cir. 1997) (enforcing Local Rule 12(N) of  the Northern District of Illinois and accepting  those facts not properly contested).

5
 In its complaint, Jupiter claimed that the  appraisal clause was not binding under section 12  of the Uniform Arbitration Act, 710 ILL. COMP. STAT.  5/12. The district court held, however, that the  Uniform Arbitration Act was not applicable under  Indiana law because this case involved an  appraisal and not an arbitration. In its  submissions to this court, Jupiter has not  questioned the district court's ruling regarding  the applicability of the Uniform Arbitration Act;  consequently, Jupiter has forfeited this issue.

6
 The Restatement states
The validity of a contract of fire, surety or  casualty insurance and the rights created thereby  are determined by the local law of the state  which the parties understood was to be the  principal location of the insured risk during the  term of the policy, unless with respect to the  particular issue, some other state has a more  significant relationship under the principles  stated in sec. 6 to the transaction and the  parties, in which event the local law of the  other state will be applied.
Restatement (Second) of Conflict of Laws sec.  193. The commentary to this section further  states: The location of the insured risk will be  given greater weight than any other single  contact in determining the state of the  applicable law provided that the risk can be  located, at least principally, in a single  state." Id. sec. 193 cmt. b.