United States District Court, Central District of Illinois, Springfield Division
December 30, 1992
STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., PLAINTIFF,
W.R. GRACE & COMPANY, DEFENDANT.
The opinion of the court was delivered by: Richard Mills, District Judge:
This cause is before the Court on Grace's motion for summary
judgment pursuant to Fed.R.Civ.P. 56(c). Because the
overwhelming majority of court decisions favor the position of
the State Farm, the Court denies this motion except as to
Count III of State Farm's complaint (breach of express
State Farm filed its original complaint on January 30, 1989.
Pursuant to Grace's motion to dismiss and State Farm's
withdrawal of certain claims, State Farm filed an amended
complaint on December 12, 1991. In the amended complaint,
State Farm relies on five different theories of recovery,
including strict liability, negligence, breach of express
warranties, fraud and misrepresentation, and willful and
wanton misconduct. All claims seek compensation for property
damage allegedly caused by the incorporation of
asbestos-containing fireproofing in State Farm's corporate
headquarters in Bloomington, Illinois, and its regional office
buildings in Austin, Texas, and Tempe, Arizona. [hereinafter
I. Standard for Summary Judgment
Under Fed.R.Civ.P. 56(c), summary judgment shall be granted
if the record shows 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." Black v. Henry Pratt Co.,
778 F.2d 1278, 1281 (7th Cir. 1985). The moving party has the
burden of providing proper documentary evidence to show the
absence of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A
genuine issue of material fact exists when "there is sufficient
evidence favoring the nonmoving party for a jury to return a
verdict for that party." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).
Unquestionably, in determining whether a genuine issue of
material fact exists, the evidence is to be taken in the light
most favorable to the non-moving party. Adickes v. S.H. Kress &
Co., 398 U.S. 144, 90 S.Ct. 1598 (1970). Once the moving party
has met its burden, the opposing party must come forward with
specific evidence, not mere allegations or denials of the
pleadings, which demonstrates that there is a genuine issue for
trial. Howland v. Kilquist, 833 F.2d 639 (7th Cir. 1987).
Grace argues that State Farm's claim is time barred because
of various Illinois statutes of limitation.
(a). Personal Injury Statute of Limitation
Grace has asserted correctly that Illinois statute of
limitations apply to State Farms' claims. A federal court
sitting in diversity follows the choice of law rules of the
forum state. Klaxon v. Stentor, 313 U.S. 487, 61 S.Ct. 1020, 85
L.Ed. 1477 (1941). Grace first argues that Ill.Rev.Stat., ch.
110, ¶ 13-205 (1989), establishes a five year limit on actions
"to recover damages for an injury done to property, real or
personal. . . ." This period began to run as soon as the
alleged asbestos product was installed in the buildings in
1970-73. Because State Farm did not file this action until
1989, Grace argues that the five year statute of limitation
precludes this action.
Defendant also argues that this limitation period should not
be tolled because of any "fraudulent concealment." A statute
of limitation may be tolled pursuant to Ill.Rev.Stat., ch.
110, ¶ 13-215 (1989), if a person liable for the action
fraudulently conceals the cause of the action. However, in this
case, the architect of the buildings knew the composition of
the fireproofing material that was installed in the buildings
as early as 1971. Because the architect was an agent of State
Farm, and because an agent's knowledge is imputed to its
principal, Defendant argues that there is no fraudulent
concealment because State Farm had knowledge through its
architect of the alleged asbestos materials.
Grace's argument has not withstood judicial scrutiny. First,
as State Farm points out, the mere presence or knowledge of
asbestos is insufficient to trigger the personal injury
statute of limitation. Rather, the statute of limitation did
not begin to run until State Farm had sufficient knowledge of
asbestos contamination. AFM Insurance Co. v. Board of
Education, No. 90 C 6040, Slip op. at 37, 39, 1992 WL 409442
(N.D.Ill., October 5, 1992); Heider v. W.R. Grace & Co., No. 89
C 9067, 1992 WL 189254 (N.D.Ill., July 15, 1992); In re: School
Asbestos Litigation, No. 83-0268, Pre-trial Order No. 268
(E.D.Pa, April 12, 1990); Plaza 600 Corporation v. W.R. Grace &
Co., No. C89-1562D
(W.D.Wa. June 19, 1991); County of San Diego v. W.R. Grace &
Co., No. 208188 (Cal.Super.Ct., Riverside Cty., Jan. 31, 1992);
Board of Education v. AC & S, Inc., 131 Ill.2d 428, 137
Ill.Dec. 635, 546 N.E.2d 580 (1989). Therefore, the relevant
factual inquiry for this Court is not whether State Farm had
knowledge that asbestos was being used, but whether State Farm
had knowledge that asbestos was being released from the
fireproofing material and that it presented a hazard.
Drawing all reasonable inferences from the evidence
presented by State Farm, as this Court must in this summary
judgment proceeding, the Court finds that State Farm has met
the requisite showing of a material fact to preclude summary
judgment. The statute of limitation statute begins to run
"when a party knows or reasonably should know that an injury
has occurred and that it was wrongfully caused." Nolan v.
Johns-Manville Asbestos, 85 Ill.2d 161, 52 Ill.Dec. 1, 5,
421 N.E.2d 864, 868 (1981). State Farm's evidence indicates that it
was not until June of 1986 that State Farm was aware of the
presence of asbestos in the buildings. (Pl's exhibit 14, Strong
Aff., at ¶¶ 5-8) (Pl's exhibit 15, Aldridge Aff., at ¶¶ 2-8).
It was not until December of 1988 that dust sample analysis
test results were available which indicated that the buildings
were contaminated with an asbestos. (Pl's Exhibit 16).
Therefore, the Court finds there is sufficient evidence for a
jury to find that State Farm acted reasonably in filing its
claim within the statute of limitations period.
The Court makes this finding despite Grace's evidence that
there was some awareness on the part of State Farm, prior to
1986, of the presence of asbestos in the buildings.
Nevertheless, Defendant failed to show that State Farm was
aware of an asbestos contamination problem. For example, even
if Defendant's architect was aware of the usage of asbestos in
the building (a fact disputed by State Farm), and if the
architect was an agent of State Farm (disputed by State Farm
and the holding of Blue Cross & Blue Shield v. W.R. Grace &
Co., 781 F. Supp. 420, 423-24 (D.S.C. 1991)), and an agent's
knowledge of the asbestos could be imputed to State Farm (again
disputed by State Farm and the holding of Cheshire Medical
Center v. W.R. Grace & Co., No. 85-516D, 1992 WL 544949
(D.N.H., Feb. 18, 1992)), this knowledge still does not prove
that State Farm was aware of any asbestos contamination problem
Second, the Court finds that State Farm submitted sufficient
evidence to toll the five year statute of limitations
provision pursuant to Ill.Rev.Stat. ch. 110, ¶ 13-215 (1989).
For a plaintiff to avail itself of ¶ 13-215, it must show that
"defendant . . . made representations or performed acts which
were known by it to be false, with the intent to deceive the
plaintiff, and upon which plaintiff detrimentally relied."
Harvey v. Harris Trust & Savings Bank, 73 Ill. App.3d 280, 287,
29 Ill.Dec. 198, 391 N.E.2d 461 (1979). Though this issue is
close, the Court finds that a jury could find for the State
Farm on each of these elements of fraudulent concealment.
State Farm's evidence shows that in November of 1972, a
Grace official visited State Farm's buildings and assured
Plaintiff that it would have "a problem free future with
respect to dusting." (Pl's Ex. 11). By this time, however,
Grace was aware that the fireproofing material used had a
chronic cracking problem (Pl's Ex. 19), knew that the product
was being forced off the market in some areas of the country
because of health concerns (Pl's Ex. 20), and had developed a
non-asbestos substitute product because of the
asbestos-containing product's problems. (Pl's Ex. 20). Perhaps
even more damaging is the evidence that Grace adopted a policy
of intentionally withholding information about whether their
fireproofing products contained asbestos in 1972. (Pl's Ex.
8). Grace also sent information to State Farm in 1986 which
was found by a Federal Court*fn1 to be misleading or
incomplete at best. The Court finds that this evidence, taken
as a whole, presents a question of material fact from which a
jury could find fraudulent concealment.
(b). Fraud and Misrepresentation
Grace also moves for summary judgment on Count IV of
Plaintiff's complaint labeled "Fraud and Misrepresentation."
Because the Court has already found that material issues of
fact exist concerning whether there was "fraudulent
concealment," the Court finds there is also a factual dispute
as to whether there was "Fraud and Misrepresentation." Motion
(c). Statute of Repose
Count I of State Farm's amended complaint seeks relief under
the doctrine of strict liability in tort. Grace moves for
summary judgment on this Count pursuant to Ill.Rev.Stat., ch.
110, ¶ 13-213 (1989). Paragraph 13-213 bars any product
liability action based on the doctrine of strict liability in
tort which is not brought within twelve years from the date of
first sale of the product. State Farm alleges that the
buildings were constructed between 1970 and 1973, during which
time Grace's product was installed. Therefore, because State
Farm did not file its claim until 1989, Grace argues that its
claim is time-barred by ¶ 13-213 (the statute of repose).
Grace also strenuously argues that ¶ 13-213 should not be
tolled for fraudulent concealment (Ill.Rev.Stat., ch. 110, ¶
13-215 (1989)) because ¶ 13-213 does not expressly provide for
the fraudulent concealment tolling exception. For example,
Ill.Rev.Stat., ch. 110, ¶ 13-214(e) (repose statute for
construction) states that repose statute for construction does
not apply to cases arising out of fraudulent concealment. No
similar provision is found in ¶ 13-213. Thus, Grace argues that
the tolling statute for fraudulent concealment should not
supersede the repose statute for product liability (¶ 13-213).
However, the only Illinois Appellate Court to consider the
issue stated that the tolling statute for fraudulent
concealment does apply to product liability statute of repose
(or at least to ¶ 13-213(d)). Tate v. Beverly Chrysler
Plymouth, 182 Ill. App.3d 830, 131 Ill.Dec. 288, 291,
538 N.E.2d 663, 666 (1989). Therefore, regardless of the merits of
Grace's argument, it is apparently not the current state of
Illinois law. As a result, because the Court finds State Farm
has submitted a sufficient case of fraudulent concealment, the
Court denies Grace's motion for summary judgment on Count I of
State Farm's complaint.
(e). Breach of Express Warranties
In Count III, State Farm alleges that Grace "expressly
warrant[ed] . . . that Monokote could be safely used in
buildings, would not dust, that said product would require no
attention or special precautions, and furthermore, said
Defendant expressly warranted said products as being safe and
suitable for use in the building in the future." State Farm
then contends that Grace breached those warranties because its
representations were not true.
Grace argues that ¶ 2-725 of the Illinois Uniform Commercial
Code provides that an action for breach of any contract for
sale must be commenced within four years after the cause of
action is accrued. Ill.Rev.Stat., ch. 26, ¶ 2-725(1). Paragraph
2-725 further provides that a cause of action accrues when the
breach occurs, regardless of the agreed parties' lack of
knowledge of the breach. Paragraph 2-725 also provides that a
breach of warranty occurs when tender of delivery is made.
Ill.Rev.Stat., ch. 26, ¶ 2-725(2). Therefore, Grace argues,
that breach of warranty occurs at the time of delivery of
In the case of State Farm, Grace argues that tender of the
product took place at the latest in 1973. Accordingly, any
purported breach of warranty occurred at that time and State
Farm had four years thereafter to file its claim. Because
State Farm did not file this action until 1989, its claim for
breach of warranty is time-barred. The Court agrees.
State Farm argues that ¶ 2-725 does not preclude this action
because Grace "explicitly" extended the warranty to future
performance of the goods. Ill.Rev.Stat., ch. 26, ¶ 2-725.
However, this exception to ¶ 2-725 has been narrowly construed.
Jones & Laughlin Steel Corp. v. Johns-Manville Sales,
626 F.2d 280, 290-91 (3d Cir. 1980) (interpreting Illinois law);
Beckmire v. Ristokrat Clay Products Company, 36 Ill. App.3d 411,
412-13, 343 N.E.2d 530, 532 (1976). The
Court finds that the alleged express warranties contained in
Plaintiff's exhibits 11, 22, and 31 do not rise to the level
of an "explicit" extension of a warranty as required by ¶
2-725. See Johns-Manville Sales, 626 F.2d at 291. Therefore,
the Court grants Defendant summary judgment on Count III of
(f). Construction Statute of Repose
Grace next argues that State Farm's entire claim is barred
by the construction statute of repose (Ill.Rev.Stat., ch. 110,
¶ 13-214(b) (1989)). Paragraph 13-214(b) provides that no
action may be brought for any act or omission in "the design,
planning, supervision, observation or management of . . .
construction of an improvement to real property after 10 years
have elapsed from such act or omission." Because Grace
allegedly designed and manufactured the asbestos fireproofing,
Grace argues that it is entitled to protection under ¶ 13-214.
See St. Louis v. Rockwell Graphic Systems, Inc., 220 Ill. App.3d 704,
707-10, 163 Ill.Dec. 142, 143-46, 581 N.E.2d 93,
94-97 (1991) (Paragraph 13-214 "expressly applies to the design
and planning of the construction of an improvement to real
However, in this case, Grace is a mere manufacturer of
asbestos materials. It did not participate in any way in the
construction of the buildings. The Court finds that the
Monokote asbestos product manufactured by Grace was simply a
"bag of minerals" which must be installed by a contractor.
(Pl's Ex. 40, at p. 55). Grace did not furnish any equipment
for the application of the asbestos materials. (Pl's Ex. 42).
Nor did Grace approve of or direct the application of the
asbestos materials by the contractor. (Pl's Ex. 40 at p. 57).
Therefore, Grace was merely a manufacturer, not an active
participant in the construction of the buildings.
The distinction between a mere manufacturer of materials and
a designer or director of a construction project is crucial.
Paragraph 13-214 does not immunize a mere manufacturer of
products from liability. In Witham v. Whiting Corp.,
975 F.2d 1342, 1345-48 (7th Cir. 1992), the court held that a crane
specially manufactured for use at a manufacturing plant based
on information that the plant owner provided about the plant
was an "improvement" to real property within ¶ 13-214. However,
the court indicated that it might not apply ¶ 13-214 to a mere
manufacturer of materials:
There may be a problem with applying the
improvement to real property statute of repose to
a manufacturer of a product used in the
improvement who was otherwise uninvolved with the
particular construction project. The Missouri
Supreme Court recently concluded that:
manufacture at the manufacturer's factory or
production site of a standard product available
generally to the public that is manufactured and
furnished for inclusion in the improvement by the
persons constructing the improvement under
circumstances where the manufacturer has no
substantial on-site construction activity is not
within the protection of the statute. Blaske v.
Smith & Entzeroth, Inc., 821 S.W.2d 822, 837 (Mo.
1991); see also Herriott v. Allied Signal, Inc.,
801 F. Supp. 52 (N.D.Ill., 1992) ("We find the
analysis [in Blaske] useful and believe that the
Illinois Supreme Court would as well.").
Id. The Court also notes that this distinction is supported by
other Illinois Courts. People ex rel. Skinner v. Hellmuth,
Obata & Kassabaum, Inc., 135 Ill. App.3d 765, 90 Ill.Dec. 448,
453, 482 N.E.2d 155
, 160 (1985), rev'd on other grounds,
114 Ill.2d 252
, 102 Ill.Dec. 412, 500 N.E.2d 34
(1986); Board of
Educ. of the City of Chicago v. A.C. & S., Inc., No. 85CH00811
(Ill. Ct. Cl., Cook Cty., March 5, 1991) (text in Pl's Ex. 41).
The legislative history of ¶ 13-214 also indicates that the
provision was intended to protect only professional activities
directly related to the construction project — not mere
manufacturers of goods. See Lehmann v. Arnold, 137 Ill. App.3d 412,
91 Ill.Dec. 914, 916-17, 484 N.E.2d 473
, 475-76 (1985);
Hellmuth, 135 Ill. App.3d at 765, 90 Ill.Dec. at 452-53, 482
N.E.2d at 159-60. Therefore, because the Court has found that
Grace is a mere manufacturer of goods, it cannot avail itself
of the ¶ 13-214 immunity.
(g). Breach of Duty
Grace also moves for summary judgment on Count I of State
Farm's complaint. Grace argues that because State Farm was
aware of the asbestos-containing fireproofing material, Grace
was not negligent.
Because the Court ruled that there is a material question of
fact as to whether State Farm was aware of the asbestos
contamination, the Court denies Grace's motion for summary
judgment on Count I of State Farm's complaint.
Because the Court ruled that there is a material question of
fact as to whether there was fraud or fraudulent concealment,
the Court denies Grace's motion for summary judgment on Count
IV of State Farm's complaint.
(i). Willful and Wanton Conduct
Finally, Grace moves for summary judgment on Count V of
Plaintiff's complaint. Count V states a case of "willful and
wanton" conduct against Grace. Grace presents two arguments in
support of summary judgment: first, that the underlying claim
for willful and wanton conduct (negligence) is time-barred
pursuant to the applicable statutes of limitation and repose
(this argument was dismissed in the above discussion); second,
even if the underlying claim of negligence is tenable, the
facts do not support a claim of willful and wanton conduct.
The Court finds there is a genuine issue of material fact to
submit to the jury on the question of willful and wanton
conduct. To support a punitive damages award in a products
liability suit for a manufacturer's willful and wanton
conduct, a plaintiff must show facts supporting a
manufacturer's conscious disregard for the safety of others.
Davis v. International Harvester Co., 167 Ill. App.3d 814,
825-26, 118 Ill.Dec. 589, 596, 97, 521 N.E.2d 1282, 1289-90
(1988). Because the Court found above that, in its most
favorable light, the evidence indicated: (1) Grace was aware of
the hazards of asbestos in installed fireproofing and
consequently removed the asbestos and replaced it with paper
(Pl's Ex. 19, 20, 21); and (2) despite this knowledge, Grace
continued to sell the asbestos product to State Farm, the Court
finds that State Farm should be able to submit this claim to
the jury. See City of Greenville v. W.R. Grace & Co.,
640 F. Supp. 559 (D.S.C. 1986), aff'd, 827 F.2d 975 (4th Cir. 1987)
($2 million punitive damage verdict in asbestos property damage
Ergo, Defendant's motion for summary judgment (d/e 49) is
DENIED, except that Defendant's motion for summary judgment on
Count III of Plaintiff's amended complaint (breach of
warranties) is ALLOWED.