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02/17/94 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY v.

February 17, 1994

CENTRAL ILLINOIS PUBLIC SERVICE COMPANY, APPELLEE,
v.
ALLIANZ UNDERWRITERS INSURANCE COMPANY ET AL. (INTERNATIONAL SURPLUS LINES INSURANCE COMPANY ET AL., APPELLANTS).



Heiple, McMORROW

The opinion of the court was delivered by: Heiple

JUSTICE HEIPLE delivered the opinion of the court:

Defendants are insurance companies who filed this interlocutory appeal following the trial court's determination that a series of facts found by a jury in an earlier phase of this complex litigation could not be relitigated. For the reasons that follow, we reverse.

BACKGROUND FACTS

Central Illinois Public Service Company (CIPS) is a public utility corporation which provides electric and gas services to a large number of consumers in central Illinois.

CIPS had several plants where it manufactured gas from coal, including one in Taylorville, Illinois, and one in Du Quoin, Illinois. It owned and operated these plants for several decades before it sold the Taylorville site in 1961 and parts of the Du Quoin site in 1978 and again in 1985.

To shield itself from liability, CIPS contracted with the 47 insurance companies named in this action for liability insurance. Three of these companies issued "Environmental Impairment Liability" (EIL) insurance policies, and the vast majority (and all of the appellants on appeal) issued "Comprehensive General Liability" (CGL) insurance policies. In the CGL policies issued after 1964, each of the carriers promised to indemnify. CIPS for all claims against CIPS resulting from occurrences which CIPS neither expected nor intended. Before 1964 the policies used the term "accident" instead of "occurrence" and did not articulate an "unexpected and unintended" requirement, although this would certainly be anticipated from the term "accident." In addition, most CGL policies included a pollution exception, which specifically exempted coverage for damage caused by pollution, except to the extent that the pollution was sudden and accidental.

The EIL insurers agreed to indemnify CIPS for claims made against it for environmental impairment. Again, this basically provided coverage for unintended and unexpected damage to the environment.

In November 1985, the Illinois Environmental Protection Agency (Agency) notified CIPS that it was a "potentially responsible party" for violations of the Illinois Environmental Protection Act (the Act) (Ill. Rev. Stat. 1985, ch. 111 1/2, par. 1001 et seq.) at the Taylorville site. This resulted in part from the rupturing of an underground tank by contractors of the owner of the Taylorville property in 1985. It also resulted in part from the buildup of by-products from gas-to-coal manufacturing.

In 1987, the Agency notified CIPS that it was a potentially responsible party for environmental violations at the Du Quoin site. Again, these violations occurred from the buildup of by-products from gas-to-coal manufacturing. CIPS notified its insurers of these events.

On August 21, 1987, CIPS filed a complaint in the circuit court of Morgan County. It named the 47 insurance companies as defendants and sought a declaration of coverage. A defense raised by all CGL insurers was that the damage was expected or intended, and therefore there was no coverage.

In June of 1989, CIPS added two more sites and pled separate causes of action against each defendant. Eventually, CIPS expanded the complaint to its present form. As presently constituted, the action involves 15 former gas manufacturing sites.

On June 28, 1989, CIPS filed a motion for partial summary judgment directed at the EIL policies issued by American Empire Surplus Lines (American Empire), Evanston, and First State Insurance Companies concerning the Taylorville site.

On July 10, 1989, the circuit court entered its first case management order, requiring defendants to conduct discovery jointly by submitting joint document requests, joint interrogatories, and jointly designating a lead questioner for each deposition. Parties were to "avoid or minimize" duplicative motions, briefs and discovery to the extent consistent with the parties' individual interests; in other words, join in or adopt pleadings with which they agreed.

On March 22, 1990, Judge J. David Bone recused himself from the case due to its size and the limited resources of the Morgan County court. On June 26, 1990, this court entered an order transferring the cause to Cook County, where the case was assigned to Judge Warren D. Wolfson.

On October 19, 1990, the trial court entered an order establishing a discovery committee, which was to coordinate all defense discovery efforts and to lead each deposition. On that day it also entered an order allowing insurers whose liability would attach after $25 million the option of being placed on inactive status. If an insurer exercised this option, it could not participate in further discovery but no order, decision or finding entered after October 19, 1990, would be binding on that insurer.

Also on that day, CIPS expressed a desire to go forward at one time against all insurers with respect to the Taylorville site. The trial court complied with this request and entered a case management order one week later which limited discovery to matters relevant to the Taylorville site so that priority could be given to the claims as to that site.

A number of summary judgment motions relating to the CGL policies were filed and briefed through the spring and into the summer of 1991. On June 12, 1991, the circuit court ruled on cross-motions for summary judgment regarding the EIL policies as to the Taylorville site. It found that several issues of material fact would require determination at trial. Several days later, the court scheduled a trial to begin on September 30, 1991, which was to be confined to the EIL issues. The trial Judge reserved ruling on whether any findings at the EIL trial would be binding on the non-EIL defendants, and also stated that he would not allow the non-EIL defendants to take part in the trial.

On July 12, 1991, several CGL defendants moved for leave to participate in the EIL trial. In the alternative, they moved for complete severance of the actions against the CGL insurers from the actions pending against the EIL insurers. In that motion, the CGL defendants recognized that "the coverage issues pertaining to the EIL carriers and the coverage issues pertaining to the non-EIL carriers are in some ways similar and will probably involve some of the same evidence," but argued that the differing interests of the parties required that the CGL insurers should not be bound by findings adjudicated only by the EIL insurers. The trial court denied the motion.

Shortly before the trial, the Evanston and First State insurance policies were dismissed from the Taylorville action. Those policies indemnified CIPS for damages in excess of the American Empire coverage, and it became clear that the American Empire coverage would not be exhausted. The trial between CIPS and American Empire lasted 12 days. At its Conclusion, special interrogatories were tendered to the jury.

In Special Interrogatory A, the jury was asked:

"Was a liquid containing irritants, contaminants, or pollutants emitted, discharged, disposed of, dispersed or released directly from the separator to the surface area of Area A of the Taylorville site in 1912 or thereafter?"

The jury's answer was "NO," thus ending its inquiry into contamination of "Area A" of the Taylorville site. The second set of questions concerned the "gas plant site area" of the Taylorville site. The questions and the jury's answers were:

"1. Did CIPS know the water gas tar was an irritant, contaminant, or pollutant at the time it was emitted, discharged, disposed of, dispersed, released, seeped or escaped from the separators or holder at the gas plant ...


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