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06/16/94 PEKIN INSURANCE COMPANY v. (4-93-0765)

June 16, 1994

PEKIN INSURANCE COMPANY, PLAINTIFF-APPELLEE,
v.
(4-93-0765), JANES & ADDEMS CHEVROLET, INC. AND MYERS, INC., DEFENDANTS-APPELLANTS, AND JANES CHEVROLET, INC., PEOPLES BANK OF LEXINGTON, AS TRUSTEE UNDER MCLEAN COUNTY LAND TRUST NO. 164, BYRON TUCCI, PAMELA TUCCI, HENRY JANES, AND MARY LOU JANES, DEFENDANTS, AND AMERICAN STATES INSURANCE COMPANY, PLAINTIFF-APPELLEE, V. JANES & ADDEMS CHEVROLET, INC. AND MYERS, INC., DEFENDANTS-APPELLANTS, AND JANES CHEVROLET, INC., PEOPLES BANK OF LEXINGTON, AS TRUSTEE UNDER MCLEAN COUNTY LAND TRUST NO. 164, BYRON TUCCI, PAMELA TUCCI, HENRY JANES, AND MARY LOU JANES, DEFENDANTS. GRE INSURANCE GROUP, D/B/A THE MIDWESTERN INDEMNITY COMPANY, AN OHIO CORPORATION, PLAINTIFF-APPELLEE, V. (4-93-0820), JANES & ADDEMS CHEVROLET, INC., AN ILLINOIS CORPORATION, DEFENDANT-APPELLANT.



Appeal from Circuit Court of McLean County. Nos. 91MR113, 92MR113. No. 92L256. Honorable William T. Caisley, Judge Presiding.

As Corrected July 15, 1994. Released for Publication July 25, 1994. Petition for Leave to Appeal Denied October 6, 1994.

Honorable James A. Knecht, J., Honorable Carl A. Lund, J., Concurring, Honorable Robert W. Cook, J., Dissenting

The opinion of the court was delivered by: Knecht

JUSTICE KNECHT delivered the opinion of the court:

These are the consolidated appeals of parties making claims under four insurance policies issued by three insurance companies: GRE Insurance Group (GRE) (No. 4-93-0820), and American States Insurance Company (American States) and Pekin Insurance Company (Pekin) (No. 4-93-0765). The companies filed declaratory judgment complaints seeking determination of coverage and the duty to defend their insured Janes & Addems Chevrolet, Inc. (Janes & Addems). On March 28, 1990, a fire destroyed a warehouse owned by Myers, Inc. (Myers), which was on property adjacent to Janes & Addems' property. The policies in question expired in January 1984, January 1987, and February 23, 1990. At the time of the fire no policy relevant to this appeal was in effect. Myers, in a suit against insured Janes & Addems (McLean County case No. 90-L-194), alleged the fire started on the property formerly owned by Janes & Addems and, as a result of previously dumped petroleum products, moved onto Myers' property, damaging it. Plaintiffs sought summary judgment, claiming there was no coverage as the loss occurred after the policies expired. These motions were granted. Janes & Addems appeals in No. 4-93-0820, and both Janes & Addems and Myers appeal in No. 4-93-0765. We affirm.

I. BACKGROUND

This dispute arises out of a March 28, 1990, fire and explosion which destroyed a warehouse of Myers and chemicals and fertilizer stored in it. In addition to the loss of building and inventory, Myers was forced to expend large sums of money to clean up contaminated water and soil. This soil and water contamination resulted from the spraying of water onto the warehouse to extinguish the fire. Myers filed suit in No. 90-L-194 against the present owners of an adjacent automobile dealership, Janes Chevrolet (Janes), to recover damages caused by the fire. Myers alleged the present owners allowed petroleum products to accumulate on the ground behind the dealership's garage. Myers further alleged Janes' employees negligently burned garbage, which ignited the accumulated petroleum. As a result of accumulated petroleum and petroleum which had saturated the ground and escaped to Myers' property, the fire spread to and destroyed Myers' warehouse.

In April 1991, Myers, in an amendment to its amended complaint, included claims against Janes & Addems, the former ownersand operators of the auto dealership. In this amendment, Myers alleged Janes & Addems allowed petroleum products to accumulate on the property and these products and chemicals accreted on the surface as well as infiltrating the underlying soil. The chemicals then spread and percolated to and across the boundary between the properties.

Specifically Myers alleged Janes & Addems:

"(a) Failed to remove stored petroleum products, chemicals and flammable substances which were located upon the ground adjacent to the MYERS property;

(b) Failed to abate the apparent hazard existing from the accumulation of petroleum products, chemicals and flammable substances upon the ground adjacent to the MYERS property; [and]

(c) Permited the continued presence of flammable pollutants and chemicals which created a hazard to the health and safety of those in the area and impairing the use of their property."

As a result of these acts of negligence, Myers alleged Janes & Addems was liable for damages caused by the fire because the chemicals it allowed to accumulate allowed the fire to spread from Janes to Myers' warehouse. Myers also alleged Janes & Addems created a nuisance by allowing the petroleum products and other chemicals to accumulate. This caused the fire to cross the border between the properties and destroy Myers' warehouse. After the filing of the amendment to the amended complaint, American States retained counsel for Janes & Addems under a reservation of rights.

On August 7, 1991, Pekin, previous insurer of Janes & Addems, filed a declaratory judgment action (case No. 91-MR-113) against Myers and all those named in Myers' suit who may make a claim against Pekin. Pekin had issued two insurance policies to Janes & Addems. The first policy, effective January 1, 1989, through January 1, 1990, was a garage liability policy. This policy provided:

"The company will pay on behalf of the insured all sums which the insured shall become legally obligated ...


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