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1-00-3523

JUSTICE HARTMAN delivered the opinion of the court:

Plaintiff-appellant and cross-appellee, Spirit of Excellence (SOE), through atrustee in bankruptcy, appeals the grant of a motion to reconsider a prior summaryjudgment favoring SOE, and entry of summary judgment for defendant-appellee and cross-appellant, Intercargo Insurance Company (Intercargo). SOE also appeals the order infavor of defendant-appellee, Abaco International Shippers, Inc. (Abaco), dismissingSOE's third-amended complaint. On cross-appeal, Intercargo challenges the circuitcourt's finding that SOE had an insurable interest in certain property under itspolicy.

The issues to be considered on appeal will be limited to those concerned withSOE's standing and damages and, on cross-appeal, to the circuit court's grant ofsummary judgment for SOE on the insurable interest question.

As recounted by SOE, the final orders entered in this case terminated years oflitigation, including motions to dismiss, motions in limine, twenty-seven depositions,motions for summary judgment and other proceedings. Only those facts essential todeciding this appeal, gleaned from the described proceedings, need be set forth.

On December 10, 1994, two Russian companies, Too Objective (Objective) and TooRuno (Runo), contracted to export used American vehicles to Rostov, Russia. Runo andObjective agreed to buy 200 to 300 used automobiles in the United States, remove theengines and transmissions and ship them to Russia, where they would be reassembled (theproject). The contract stated that Objective, the "supplier," would provide allnecessary documents, including insurance policies. Runo would prepay all projectfunds, including all costs for the purchase of the automobiles, their disassembly,packing them into ocean containers, transportation and shipping, equipment forreassembly and insurance. After the vehicles were reassembled and sold in Russia,Objective would get 20% of the profits and Alexandre Grigorian, Objective's principal,would receive 10 percent.

Previously, SOE, an exporter of goods from the United States to Russia,contracted in writing with Objective and Grigorian, nonparties to this lawsuit, for thepurpose of introducing "goods [consisting of used automobiles] and services providedby [SOE] into the consumer market of Russia as well as export of goods and servicesfrom Russia" in furtherance of the project. Objective would act as a "middleman" byfacilitating the transactions with Runo in Russia. The contract made SOE responsiblefor "[a]ppropriately packing the goods," and that "[t]he packing should provide for thesafety of the goods and prevention [of] their damages at transport ***." Objectivewould arrange for prepayments by Runo of the goods by means of non-cash bank transfersto SOE's account. Upon the shipment of goods, SOE was required to provide Objectivewith a copy of the insurance policy and a statement of the total insurance amount.

Runo prepaid SOE for all the following costs of sale: (1) SOE's purchase costfor the used cars in the United States; (2) SOE's costs in disassembling theautomobiles; (3) SOE's costs in paying a shipper selected by SOE to have the carspacked within ocean containers for transportation to Russia; and (4) all the costsassociated with transporting by rail and ocean, and insuring the cars. Runo paid SOEin advance for these costs by wiring funds directly to SOE, in the amount of$5,000,000.

In early 1995, Runo began wiring funds from Doninvest Bank in Russia totaling$100,000 to $250,000 in weekly stages over a four-month period directly to SOE's bankaccount. Grigorian and Oleg Gryzlov, Runo's principal, determined the criteria forpurchasing the vehicles, including the year, make, model and mileage. SOE began buyingthe specified vehicles from dealerships and auctions. Separate commercial invoicesreflecting monetary values of the automobile bodies to Runo and the engines and fluidsto two other Russian consignees, Too Leks (Leks) and Too Kristall (Kristall), indicatedthat these goods were sold to Runo and the other parties in order to present proof ofpossession to Russian customs agents upon their arrival in Rostov.

SOE hired Abaco, an Illinois corporation engaged in the business of stow, designand building of custom containers for the overseas transport of goods to foreigndestinations, to design and custom build containers sufficient to withstand the normalrigors of truck, rail and ocean transit. Abaco also arranged the bookings with thesteamship lines in a freight forwarding capacity. SOE had no written contract withAbaco, but previously had done business with it for other shipping projects.

SOE directed Abaco to place four cars in each container for a total of 81containers. Although the titles of the vehicles initially were in SOE's name, SOEissued its commercial invoices evidencing the vehicle sales to Runo prior totransportation of each container. The commercial invoices do not state the preciseterms of sale, however, according to the deposition testimony of SOE's president,Michael Vilner, there was an oral agreement that the sale was on a "CIF" basis,including cost, insurance and freight prepaid by the purchaser, Runo. The prepaymentof all costs also had the effect of rendering the sale CIF.

Abaco held the Intercargo open marine policy which allowed the privilege ofcountersigning certificates of insurance as part of a profit sharing agreement, to beissued strictly in accordance with the terms and conditions of the policy. Abacoissued 81 such certificates to SOE, showing their issuance "for the account of Abaco"and loss payable to SOE. Most of the containers each were insured in the amounts of$17,600 or $17,995.

The containers were transported in a series of shipments over a five-monthperiod, between February 7, 1995 and July 7, 1995. The first container departedAbaco's premises by truck and rail transit to Montreal, Canada, where it was receivedby Cast Lines, which issued bills of lading listing Runo as the consignee. The billsof lading state that "[s]ubject to Section 7 of conditions of applicable bill oflading, if the shipment is to be delivered to the consignee without recourse on theconsignor, the consignor shall sign the following statement." The area provided forthe consignor's signature was left blank. The bills of lading noted that charges forshipment were to be prepaid. In addition, the bills of lading defined "loss" as"shortage, non-delivery, misdelivery, damage, deterioration, and all physical orconsequential loss or damage of any nature whatsoever to or in connection with GOODSor any other thing referred to."

The first containers began arriving in Rostov in April 1995, and were acceptedby Runo. There was minor damage to the automobiles in the first two containers opened,but significant damage to the vehicles was observed in the next 79 containers. Thereis no evidence in the record, however, that Runo ever rejected any shipped vehicle.

Konstantin Kaymakov, president of Tamga-Ug Insurance Company in Rostov, agent forthe insurance company listed on Intercargo's insurance certificates, testified bydeposition that he is familiar with methods of packing and securing automobiles forshipment. Kaymakov testified that Runo contacted him in April 1995 about the damagedvehicles. He surveyed all the containers and prepared reports of damages, includingrubbed off paint, scratches, dents, broken windows and mirrors and dented bumpers. From his observations, Kaymakov concluded that the packaging of the vehicles wasimproper, as evidenced by broken wooden planks supporting vehicles on the upper tiersand torn nylon straps securing the automobiles. In further support of his opinion wasthe fact that the automobiles were shipped at different times over various routes, butthe damages were similar. Kaymakov limited his communication to Runo officials, whopaid him for the surveys. He did not analyze the cost of repairing the vehicles.

Alexander Bondarev, a representative of Runo, testified by deposition that Runohired various companies in Russia to repair the damages to the cars, which had beennoted in the survey reports upon arrival, and Runo paid for all the repairs. All theinvoices for these repairs are addressed to Runo as the party which ordered and paidfor the repairs. After the repairs were completed, the vehicles were sold by Runo topurchasers in Russia. Thereafter, Runo communicated directly to Intercargo itsposition that "all losses according to the Contract was incured [sic] by company'Runo,'" on April 12, 1996.

Grigorian testified by deposition that Runo and SOE conducted their businessthrough Objective. Runo decided how much insurance to purchase. Runo paid a total of$1.9 million for all the repairs made and wanted Objective to reimburse it in thatamount. An assignment of claims from Runo to Objective, dated March 20, 2000, assigned all legal and equitable rights, claims, demands, actions, causes of action, suits,judgments and orders against Abaco and Intercargo arising out of the damages to theautomobiles shipped in the 81 containers. SOE paid Grigorian $150,000 for his projectservices.

Michael Vilner, president of SOE, testified by deposition that SOE conducts itsbusiness on a consignment basis. He met with Grigorian, Gryzlov and Mark Von Ebers,general manager of Abaco, where insurance coverage was discussed. Von Ebers explainedthe concept of partial insurance, which provides for the recovery of loss of only thatpercentage covered. According to Vilner, Abaco issued the insurance certificates afterthe vehicles were packed into the containers. Vilner testified that he instructed VonEbers to provide 50% insurance coverage for the shipments, as requested by theconsignee, Runo.

Vilner claimed he did not know if money wired to SOE came from Objective or Runo. SOE had no contact with Intercargo during the packing process. Grigorian and Gryzlovcalled Vilner immediately upon discovering damage to the vehicles. SOE was to havefiled the insurance claim, but Runo possessed the insurance certificates. After Vilnerreceived the initial telephone call regarding damages, he contacted Von Ebers, who gaveVilner the telephone number of Tamga-Ug, the local insurance representative in Rostov. Vilner telephoned Grigorian and gave him the information. Vilner did not know how manycontainers were shipped after the initial report of damages. He was told by Von Ebersthat the vehicles were packaged correctly.

According to Vilner, SOE profited from the project in the amount of $365,000. SOE and Abaco both filed for bankruptcy in 1997. Objective, Runo's assignee, filed abankruptcy claim against SOE in the amount of $1.9 million.

Von Ebers, a 20-year Abaco employee, testified by deposition that when thecontainers left Abaco's warehouse, he was given bills of sale for the cars to satisfyU.S. customs requirements for proof of ownership, which listed SOE as the owner. Regarding procurement of insurance for SOE, Von Ebers did not deal directly withIntercargo; rather, all insurance issues were handled by Trade Insurance Services,Abaco's insurance broker.

Alan Spear, of Intercargo, testified by deposition that he is a marine claimsadjuster and loss prevention analyst for Intercargo. He performed a "failure analysis"for this project. A February 7, 1996 letter from Spear to Runo and SOE representativesacknowledged the receipt of 90 claims. Spear stated that the insured knew that apattern of loss was occurring from April 28, 1995, and did nothing to change thecircumstances. Ten shipments may have left after April 29, 1995. Spear testified thathe was told by Von Ebers that the damage was minor, so the method of packaging was notchanged. If he had known about the damage, he would have stopped the last tenshipments.

An April 9, 1996 report prepared by Spear noted that as the damaged vehicles wereunloaded from their containers, they were taken to an automotive plant where theengines were re-installed. During this time, the cars were inspected by a repaircompany, Transtourservice, which developed estimates for the repairs. TheTranstourservice estimates were between 30% and 50% over the amount of average prices. Transtourservice made the repairs. Runo sold the repaired cars at random prices, butdid not profit because the community had heard about the damages.

A letter from Spear to SOE, dated May 8, 1996, denied coverage by Intercargo forall claims due to the following: (1) late notice of the claims; (2) the named insured,SOE, had no insurable interest in the goods at the time of loss; (3) an exclusion forimproper packing applied; (4) coverage for damages of goods shipped to Russia ceased30 days after arrival of the goods in port; (5) an exclusion for used merchandiseapplied; (6) SOE failed to make immediate claims against the carriers; (7) SOE's claimswere time-barred; (8) the certificates were void because SOE breached its obligationof utmost good faith and fair dealing with Intercargo; and (9) SOE vastly underinsuredthe shipments.

On May 20, 1996, SOE filed its initial complaint against Intercargo for breachof contract, and later added Abaco as a defendant in an amended complaint, allegingnegligence. In its third-amended complaint, SOE sought damages for repair costs of$924,356, an amount later increased to $1,912,863.32.

In September 1997, a creditor unrelated to the instant case filed an involuntarypetition against SOE pursuant to chapter 7 of the United States Bankruptcy Code (11U.S.C.