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ELJER MFG. v. LIBERTY MUT. INS. CO.

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


August 23, 1991

ELJER MANUFACTURING, INC., a Delaware corporation, and Successor in Interest to HOUSEHOLD MANUFACTURING, INC., Plaintiff, THE TRAVELERS INDEMNITY COMPANY OF ILLINOIS, and HIGHLANDS INSURANCE COMPANY, Intervening Plaintiffs
v.
LIBERTY MUTUAL INSURANCE COMPANY, a Massachusetts corporation, Defendant

The opinion of the court was delivered by: HART

MEMORANDUM OPINION AND ORDER ON RECONSIDERATION

 WILLIAM T. HART, UNITED STATES DISTRICT JUDGE

 On June 14, 1991, this court ruled on the pending cross motions for summary judgment and directed the Clerk of the Court to enter judgment. A judgment was entered on June 18. On June 24, Eljer filed a notice of appeal. On June 28, Travelers filed a timely Rule 59(e) motion and on July 2 Eljer filed a timely Rule 59(e) motion. *fn1" See Fed. R. Civ. P. 59(e). The timely filing of the Rule 59(e) motions result in the notice of appeal having no effect *fn2" and this court has jurisdiction to consider the pending motions for reconsideration. *fn3" Turner v. Chicago Housing Authority, 771 F. Supp. 924, 925 & n. 1 (N.D. Ill. July 26, 1991).

  Travelers contends, and Liberty agrees, that Travelers' intervention as a plaintiff was proper and that Travelers was entitled to intervene as of right pursuant to Fed. R. Civ. P. 24(a). Travelers contends that it was adverse to Liberty on the noncumulation issue involved in Count I and that, even though adverse to Eljer on Count II, Liberty could not adequately represent Travelers' interests as to that issue. Count I was settled and Travelers does not dispute that presently it should be aligned as a defendant adverse to Eljer. Eljer expresses the view that the June 14 ruling as to intervention was correct.

 There is no need to reconsider the issue of intervention. The better course is to realign Travelers and grant the pending motion to intervene as a defendant so as to cure any possible jurisdictional defects.

 All three parties agree that the only issue they considered to be before the court was interpretation of the primary policies issued by Liberty. Although the umbrella policies "follow in form" and therefore any ruling would appear to apply equally to the umbrella policies, the parties are the masters of their lawsuit. The declaratory judgment will be amended to indicate that only the primary policies are at issue. Travelers and Liberty also contend that the issue of loss of use without physical injury to property was not before the court. That issue, however, was referred to in the briefs and the court agrees with Eljer that there is a sufficient factual foundation to bring that issue before the court.

 Eljer argues that the holding of Wilkin I, that incorporation of a defective product into a building constitutes property damage, must be deferred to as a statement of Illinois law. See United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 193 Ill. App. 3d 1087, 550 N.E.2d 1032 (1st Dist. 1989) ("Wilkin I"), aff'd, No. 70029, slip op. (Ill. May 20, 1991) ("Wilkin II"). The holdings of Wilkin I and earlier Illinois Appellate Court cases that Eljer relies on were fully discussed in the June 14 order and it was explained why that holding of Wilkin I could not be followed in light of Wilkin II.4 Eljer does not raise any issues that require further discussion.

 Eljer and Liberty are correct in pointing out that the ruling as to loss of use without physical injury is superficially inconsistent with the ruling in the earlier suit between Eljer and Liberty. See Household Manufacturing, Inc. v. Liberty Mutual Insurance Co., No. 85 C 8519 (N.D. Ill. Feb. 10, 1987), reconsideration granted, (Nov. 16, 1987). In that case, it was held that all claims based on Qest System failures resulted from a single occurrence. Since loss of use without physical injury claims are based on the time of the occurrence that caused the loss of injury, it can be argued that the occurrence that caused the loss of use is the one continuous occurrence underlying this entire litigation. *fn5" The clause at issue provides: "' property damage ' means . . . loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period." *fn6" Loss of use is only caused during the time that the Qest System is in the residential unit and not yet repaired. Therefore, the June 14 ruling and declaratory judgment is consistent with the 1987 ruling that there is only one occurrence.

 IT IS THEREFORE ORDERED that:

 (1) Travelers' motion to intervene as a party defendant is granted.

 (2) Travelers' motion to amend this court's memorandum opinion and order and judgment and Eljer's motion to alter or amend the judgment are granted in part and denied in part.

 (3) The judgment dated June 14, 1991 and entered on the docket June 18, 1991 is vacated.

 (4) The Clerk of the Court is directed to enter a final judgment dismissing Count I of Eljer's complaint as settled and Highland's complaint in intervention as settled and as to all other pending matters issue a final declaratory judgment as follows: "Household Manufacturing, Inc. n/k/a Eljer Manufacturing, Inc. ("Eljer"), Liberty Mutual Insurance Company ("Liberty"), and The Travelers Indemnity Company of Illinois have requested a declaration as to the policy period within which certain claims related to the Qest Qick/Sert II residential polybutylene system ("Qest System") fall under the various policies of primary insurance issued by Liberty to Eljer and its predecessor corporations. It is hereby declared that: (1) all covered claims for water damage are covered by the policy or policies in effect at the time the water damage occurred; (2) all covered claims for loss of use of structure as a result of a leak or leaks in the Qest system are covered by the policy or policies in effect at the time or times the leak or leaks occurred; (3) all covered claims for repairing or replacing the Qest System are covered by the policy or policies in effect at the time the repair or replacement work is performed irrespective of whether or not a leak occurred; and (4) all covered claims where water damage has not occurred at the residential unit but where there has been a loss of use of property are covered by the policy or policies in effect from the time the Qest System was first installed until the unit's plumbing system was repaired or replaced."


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