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December 12, 1995


Appeal from the Circuit Court of Cook County. The Honorable Arthur Dunne, Judge Presiding.

The Honorable Justice DiVITO delivered the opinion of the court: Scariano, P.j., and Hartman, J., concur.

The opinion of the court was delivered by: Divito

The Honorable Justice DiVITO delivered the opinion of the court:

Plaintiff Industrial Coatings Group, Inc. (ICG), as successor to Joanna Western Mills Co. (Joanna), appeals from a summary judgment ruling in favor of the defendant insurance companies in a declaratory judgment action involving the issue of whether there was insurance coverage for ICG's liability for pollution at a Superfund site in Griffith, Indiana, known as the American Chemical Services site (ACS site). The circuit court found that ICG gave the defendants late notice, that ICG thereby breached a condition precedent to coverage under the insurance policies, and that ICG therefore had no right to obtain coverage for the pollution claim which had been asserted against it. For reasons that follow, we affirm.

ICG is a manufacturer of window shades, industrial fabrics, and film extrusions and coatings. Prior to 1987, ICG was known as Joanna. The company is located in Chicago.

From 1959 to 1985, Joanna sent "dirty" or "spent" solvent to the ACS site in Griffith, Indiana, in order for ACS to remove the impurities. The solvents were used to clean machines in Joanna's "Art Leather" department during changes in the colors used in the fabrics produced there. As a result, the solvents would become dirty or spent with the color resins, fillers, talc, and pigments used in Joanna's processes. The impurities were removed by ACS through a distillation process, and Joanna would repurchase the recycled solvent from ACS. Joanna knew, by its course of dealings over the years, that it received only approximately 70% by volume back from ACS. The materials Joanna sent included such pollutants as methyl ethyl ketone and toluene.

Between 1965 and 1986, Joanna had purchased insurance policies from a variety of insurers, including American Motorists Insurance Co. (AMICO), Commercial Union Insurance Co. (CUICO), and Lumbermen's Mutual Casualty Co. (Lumbermen's) (collectively, the Insurers). AMICO and Lumbermen's are both part of the "Kemper Group" of insurance companies. All Kemper Group claims are handled by Lumbermen's. ICG claimed that it purchased a total of 20 policies from the Insurers, including 14 from AMICO, three from Lumbermen's, and three from CUICO. The three policies purchased from Lumbermen's were excess general liability policies; the other 17 policies were comprehensive general liability policies.

The AMICO and CUICO policies each contained the following notice provisions:

"4. Insured's Duties in the Event of Occurrence, Claim or Suit.

(a) In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the insured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.

(b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative."

The policies also stated: "No action shall lie against the [insurance] companies unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy."

ACS operated several manufacturing and recycling businesses at its site from 1955 to the early 1990s. As one of those businesses, ACS recycled and reclaimed solvents from hundreds of companies. Before 1970, all solvents sent to ACS for recycling arrived at ACS in drums; after 1970, some were shipped in tank trucks. Used, dirty, or spent solvent was distilled by ACS to separate impurities from the solvent. The reclaimed solvent was then shipped in clean drums to ACS's customers. The impurities (called "still bottoms") were put in barrels or in retention ponds at the site.

Because of ACS's practices, and the practices of other companies at the site, hazardous materials were released at several locations at the site on many occasions. Drums containing hazardous substances and still bottoms leaked at several locations; over 20,000 drums containing hazardous materials, still bottoms, and other materials were buried at the site, many of which leaked or were punctured; still bottoms containing hazardous materials were pumped into retention ponds at the site; and hazardous materials were spilled at several areas at the site.

The Indiana State Board of Health made several visits to the site in the 1970s, focusing on waste handling, spill prevention, and maintenance. The United States Environmental Protection Agency (USEPA) conducted tests there in 1980, and in 1983 placed the site under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) (42 U.S.C. ยงยง 9601-07 (1988)).

On February 19, 1986, USEPA notified Joanna that it was a potentially responsible party (PRP) under CERCLA and would be held liable for the cost of investigation and cleanup of the ACS site. USEPA stated to Joanna in this letter:

"Based on data we received during our investigation concerning the hazardous substances disposed of at this site from 1955 up until at least 1975, EPA has information that indicates that you and/or your firm may be a responsible party."

The letter went on to state: "Also, enclosed for your information is a list of PRPs who contributed waste to the site." Joanna is identified on the list as a PRP.

ICG admitted as much in its complaint:

"On or about February 19, 1986, the EPA notified ICG (as well as numerous other identified PRP's) that ICG was a contributor to, and ultimately a PRP for, the contamination occurring at the ACS Griffith Site. The EPA claim that its notice was based upon ACS's disposal of unreclaimed solvent waste originating at ICG's Chicago facility.

Upon being identified as PRPs, ICG and the other PRPs became faced with potentially debilitating liability for clean-up under CERCLA without regard to who was at fault for the contamination that occurred."

The February 19, 1986 letter requested that Joanna voluntarily participate in the cleanup of the ACS site, under the threat that if it did not do so, it could be held jointly and severally liable under CERCLA:

"Before the government undertakes necessary action at the site, we would like to know if you will voluntarily perform the work required to abate any releases or threatened releases of hazardous substances, pollutants, and contaminants from the site. You should be aware that under Section 107(a) of CERCLA, where the Agency uses public funds to achieve the cleanup of the hazardous substances, you may be liable for all costs associated with the removal or remedial action and all other necessary costs incurred in cleaning up the site, including investigation, planning and enforcement.

EPA will consider an offer from you to participate in the remedial investigations and feasibility studies (RI/FS) described above. *** Also, enclosed for your information is a list of PRPs who contributed waste to the site. You should notify EPA in writing within 30 calendar days of your willingness to conduct or participate with other potentially responsible parties in the RI/FS."

On March 6, 1986, USEPA sent a second, separate letter to Joanna which reiterated that Joanna was a PRP and that Joanna would be held responsible for the costs of cleanup at the ACS site. This letter stated:

"Recently, the United States Environmental Protection Agency (U.S. EPA) sent you a letter notifying you that U.S. EPA considers you a potentially responsible party for expenditures U.S. EPA has made or will incur in the future at the [ACS site]. *** The other deadlines in our original letter remain unchanged (specifically, the date for you to notify the U.S. EPA of your willingness to participate, and the deadline for ...

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