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03/25/88 Plaintiff- v. Liberty Mutual Insurance

March 25, 1988

APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION INTERNATIONAL MINERALS & CHEMICAL CORPORATION, PLAINTIFF-APPELLANT

v.

LIBERTY MUTUAL INSURANCE COMPANY, DEFENDANT (CONTINENTAL INSURANCE COMPANY ET AL., DEFENDANTS-APPELLEES)



522 N.E.2d 758, 168 Ill. App. 3d 361, 119 Ill. Dec. 96 1988.IL.426

Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.

APPELLATE Judges:

JUSTICE SULLIVAN delivered the opinion of the court. PINCHAM and MURRAY, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SULLIVAN

This is an appeal from summary judgment for defendants in a declaratory judgment action.

The facts and events giving rise to this litigation have been presented to us by way of 15 briefs *fn1 and a nine-volume, 6000-page record, which we have attempted to condense in the following prefatory summary.

In January 1983, the United States, on behalf of the Environmental Protection Agency , filed a second-amended complaint in the United States District Court for the District of New Hampshire against International Minerals and Chemicals Corporation . *fn2 The complaint alleged that IMC had violated various provisions of the Resource Conservation and Recovery Act of 1976 , 42 U.S.C. § 6901 et seq. (1982) and the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 , 42 U.S.C. § 9601 et seq. (1982) -- also known as the Superfund Act -- by reason of activities which resulted in environmental contamination at a Kingston, New Hampshire, barrel reconditioning facility which IMC had owned between May 1973 and August 1976, when it sold the site to Great Lakes Container Corporation (the GLCC site). The State of New Hampshire and the Town of Kingston, as intervening plaintiffs, also filed amended complaints asserting violations of State statutes and common law nuisance based on factual allegations substantively identical to those in the EPA complaint.

In April 1984, IMC, a New York corporation with its principal place of business in Northbrook, Illinois, filed this action in the circuit court of Cook County against six primary and 31 excess liability insurance carriers seeking a declaration that, contrary to their disclaimers of coverage, the insurers were obligated to defend it in the EPA action and/or to indemnify it for the amount of any judgments entered against it therein. Eleven of the insurers were dismissed as defendants following a determination by the trial court that the policies of insurance issued by them had time-expired or otherwise terminated prior to IMC's acquisition of the GLCC site in 1973. On September 9, 1985, IMC moved for partial summary judgment, declaring that the two remaining primary insurers, Continental Insurance Company and National Union Fire Insurance Company, owed a duty under their comprehensive general liability policies to defend it in the EPA action. Continental and National Union filed answers, in which they raised various affirmative defenses, and cross-motions for summary judgment that they owed no duty to defend or indemnify IMC in relation to the EPA action. The excess insurers joined in the cross-motions for summary judgment as to the question of indemnification only, and on January 6 and January 21, 1987, the trial court entered orders denying IMC's motion for partial summary judgment and granting summary judgment in favor of all of the insurers. This appeal followed.

Opinion

Initially, we note that it is well settled in Illinois that the duties to defend and to indemnify are not coextensive, the obligation to defend being broader than the obligation to pay. (Zurich Insurance Co. v. Raymark Industries, Inc. (1987), 118 Ill. 2d 23, 514 N.E.2d 150; Conway v. Country Casualty Insurance Co. (1982), 92 Ill. 2d 388, 442 N.E.2d 245; Murphy v. Urso (1981), 88 Ill. 2d 444, 430 N.E.2d 1079; Trovillion v. United States Fidelity & Guaranty Co. (1985), 130 Ill. App. 3d 694, 474 N.E.2d 953; Management Support Associates v. Union Indemnity Insurance Co. (1984), 129 Ill. App. 3d 1089, 473 N.E.2d 405; McFadyen v. North River Insurance Co. (1965), 62 Ill. App. 2d 164, 209 N.E.2d 833.) The duty to indemnify arises only when the insured becomes legally obligated for a judgment in the underlying action, whereas the duty to defend an action against an insured stems from the commitment to defend expressly undertaken in the contract of insurance. (Zurich Insurance Co. v. Raymark Industries, Inc. (1987), 118 Ill. 2d 23, 514 N.E.2d 150.) In Illinois, as in most States, the existence of a duty to defend is determined by comparing the allegations of the complaint and the terms of the policy; if the complaint contains allegations which bring the claims actually, or even potentially, within the coverage of the policy the insurer is obligated to defend. (Zurich Insurance Co. v. Raymark Industries, Inc. (1987), 118 Ill. 2d 23, 514 N.E.2d 150; Clemmons v. Travelers Insurance Co. (1981), 88 Ill. 2d 469, 430 N.E.2d 1104; Maryland Casualty Co. v. Peppers (1976), 64 Ill. 2d 187, 355 N.E.2d 24.) Thus an insurer may justifiably refuse to defend only where it is apparent from such a comparison that the allegations fail to state any claim within, or potentially within, the scope of policy coverage. (Conway v. Country Casualty Insurance Co. (1982), 92 Ill. 2d 388, 442 N.E.2d 245; Management Support Associates v. Union Indemnity Insurance Co. (1984), 129 Ill. App. 3d 1089, 473 N.E.2d 405; Maryland Casualty Co. v. Chicago & North Western Transportation Co. (1984), 126 Ill. App. 3d 150, 466 N.E.2d 1091; La Rotunda v. Royal Globe Insurance Co. (1980), 87 Ill. App. 3d 446, 408 N.E.2d 908.) Finally, where an exclusionary clause is relied upon to deny coverage, its applicability must be clear and free from doubt because any doubts as to coverage will be resolved in favor of the insured. Trovillion v. United States Fidelity & Guaranty Co. (1985), 130 Ill. App. 3d 694, 474 N.E.2d 953; Management Support Associates v. Union Indemnity Insurance Co. (1984), 129 Ill. App. 3d 1089, 473 N.E.2d 405.

Turning first to the EPA complaint, for purposes of accuracy, factual understanding and continuity, we set forth in full those of the allegations directed against and/or relating to IMC.

"1. This is a civil action instituted pursuant to Section 7003 of the Resource Conservation and Recovery Act , 42 U.S.C. § 6973, and [Sections] 106 and 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 , 42 U.S.C. §§ 9606 and 9607 for injunctive relief, restitution, and costs to remedy an imminent and substantial endangerment to health and the environment posed by the storage, disposal and release of hazardous wastes and substances, and for restitution concerning the release and threatened release of hazardous substances at two adjacent sites in Kingston, New Hampshire. . . . The second site, known as the 'Great Lakes Container Corporation' site, was used for barrel reconditioning. As part of that business, [drums] containing industrial wastes were reconditioned and the wastes from reconditioning [operations] were deposited onto and into the ground such that the disposal of wastes is contaminating soils, ground waters and surface waters.

20. Defendant, , is a corporation organized and existing under the laws of the State of New York. Its principal place of business is located [in] Northbrook, Cook County, Illinois. Defendant, was the former owner and operator of the site.

46. The site is composed of approximately seven acres of land owned by Defendant, , and an additional seven acres leased from Defendant, the Concord Realty Trust.

47. The site is unsecured by a fence, gate or other protective barrier.

48. Defendants, and , operated a barrel reconditioning business on the site. On this site, there was a storage area where up to 60,000 drums are stored pending reconditioning, a plant to recondition barrels, a small office and a storage area for reconditioned barrels.

49. In the course of reconditioning barrels, used barrels are emptied of all chemicals and other wastes and residues, washed and rinsed and stripped of rust by various industrial processes some of which include use of caustic solutions, physically de-dented and tightened, tested, painted and sold.

50. Wastes from used drums in the reconditioning operation have been deposited and discharged on the ground of the site, and have been and are stored on the site.

51. Wastes discharged and deposited on the ground have contaminated the soil, migrated toward ground water and entered ground water.

52. Ground water has been and continues to be contaminated. The wells that provided drinking water in the [GLCC's] plant and office have been contaminated and defendant, , has ...


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