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07/09/96 MILLERS MUTUAL INSURANCE ASSOCIATION

July 9, 1996

MILLERS MUTUAL INSURANCE ASSOCIATION OF ILLINOIS, PLAINTIFF-APPELLANT,
v.
GRAHAM OIL COMPANY AND EUGENE GRAHAM, DEFENDANTS-APPELLEES (ROBERT WILLS, CAROL WILLS, AND PIONEER INSURANCE AGENCY, INC., INTERVENING DEFENDANTS-APPELLEES).



Appeal from the Circuit Court of McHenry County. No. 94--MR--34. Honorable James C. Franz, Judge, Presiding.

Released for Publication August 15, 1996.

The Honorable Justice Geiger delivered the opinion of the court: McLAREN, P.j., and Hutchinson, J., concur.

The opinion of the court was delivered by: Geiger

JUSTICE GEIGER delivered the opinion of the court:

The plaintiff, Millers Mutual Insurance Association of Illinois (Millers Mutual), brought this declaratory action seeking a determination that it was not obligated to defend or indemnify the defendants, Graham Oil Company (Graham Oil) and Eugene Graham (Graham), in connection with a lawsuit brought by the intervening defendants, Robert Wills, Carol Wills (collectively "the Wills"), and Pioneer Insurance Agency (Pioneer), for damages arising out of the escape of gasoline from underground storage tanks located on business premises owned by Graham and operated by Graham Oil (the Graham property). On cross-motions, the trial court granted Graham Oil judgment on the pleadings pursuant to section 2--615 of the Code of Civil Procedure (the Code) (735 ILCS 5/2--615 (West 1994)), finding that Millers Mutual owed both a duty to defend and a duty to indemnify Graham Oil in the underlying suit. Millers Mutual timely appealed.

At issue on appeal is the scope of the pollution exclusion contained in the commercial general liability (CGL) policies issued by Millers Mutual. Specifically, we must examine (1) whether gasoline is a "pollutant" within the meaning of the pollution exclusion; (2) whether the pollution exclusion operates to deny coverage for any damages resulting from the release of gasoline from underground storage tanks on Graham Oil's business premises; and (3) whether the underlying complaint's allegations of environmental contamination, brought under theories of trespass and nuisance, are sufficient to bring the complaint within, or potentially within, the policies' coverage for "personal injury." In addition, we must determine whether the trial court's grant of judgment on the pleadings in favor of Graham Oil on both the duty to defend and the duty to indemnify was proper. For the reasons which follow, we affirm in part, reverse in part, and remand.

The Wills and Pioneer filed their initial complaint in the underlying suit on August 17, 1993, and their first amended complaint on October 26, 1993. The complaint alleged, inter alia, that on or before October 31, 1991, a "sudden and calamitous spillage of a large quantity of gasoline" from the underground storage tanks on the Graham property caused a substantial portion of the subsoil on the Wills' property to be permeated and saturated with gasoline. They alleged further that the migration of the gasoline from the Graham property resulted in the severe pollution and contamination of their property, requiring corrective action to restore the parcel to the condition which existed prior to the spillage. The complaint also alleged that the Wills and their tenants noticed noxious and offensive gasoline odors on the parcel as a result of the spillage which led to their temporary evacuation of the parcel, causing the Wills bodily injury and emotional distress and resulting in loss of revenue and business opportunity to Pioneer. In addition, the Wills claimed that the contamination of the property resulted in a loss of rents and profits, loss of tenants, and diminution in value of their parcel. As against Graham Oil, the amended complaint sought recovery under various theories, including strict liability, trespass, nuisance, and negligence.

On March 7, 1994, Millers Mutual filed the instant declaratory action against Graham and Graham Oil, seeking a determination that it owed no liability coverage to the defendants in connection with the underlying lawsuit under three of its annual CGL policies, effective from April 10, 1989, to April 10, 1992. In particular, Millers Mutual alleged that (1) no coverage was afforded to Graham individually, as he was not a named insured under the policies; (2) no "bodily injury" or "property damage", as defined in the policies, occurred during the policy period; (3) the underlying plaintiff's claims against Graham Oil were not for "property damage" but for economic losses, for which no coverage was provided; (4) the policies' absolute pollution exclusion excluded all of the underlying claims from coverage; and (5) Graham Oil failed to comply with conditions precedent to coverage by its failure to timely notify Millers Mutual of the alleged spillage.

In their answer, the defendants admitted tendering the defense of the underlying complaint to Millers Mutual on November 8, 1993, but denied that any spillage of gasoline had occurred on October 30, 1991. Following the trial court's grant of their motion for leave to intervene as defendants in the declaratory action, the Wills and Pioneer filed an answer admitting the spillage of the gasoline but denying the allegations as to noncoverage. The intervenors, like the other defendants, also sought dismissal of the declaratory action.

On August 5, 1994, Millers Mutual filed its motion for judgment on the pleadings based on the policies' pollution exclusion. Thereafter, Graham Oil filed its cross-motion for judgment on the pleadings. As in its response to Millers Mutual's motion, Graham Oil argued that gasoline could not be considered a "pollutant" within the meaning of the pollution exclusion, making such exclusion inapplicable, and that the "Garage Locations and Operations Medical Payments Coverage" endorsement afforded coverage for the injuries alleged in the underlying complaint. In addition, Graham Oil contended that the allegations of the underlying complaint fell within the "personal injury" coverage of the CGL policy, to which the pollution exclusion did not extend.

On January 11, 1995, the trial court denied Millers Mutual's motion and granted Graham Oil's cross-motion for judgment on the pleadings. At the hearing on Millers Mutual's motion for reconsideration or, alternatively, for clarification, the court stated, as to the applicability of the pollution exclusion to the discharge of gasoline, that it believed that gasoline "is a pollutant once it escapes and invades someone else's property or into a river or whatever else." The court, however, found "[an] ambiguity between the pollutant [sic ] section and the personal injury section" of the policy and, in construing the policy against Millers Mutual as the drafter, reaffirmed its entry of judgment on the pleadings in favor of Graham Oil. This appeal followed.

We note at the outset that the purpose of a motion for judgment on the pleadings is to test the sufficiency of the pleadings by determining whether the plaintiff is entitled to the relief sought by its complaint or, alternatively, whether the defendant by his answer has set up a defense which would entitle him to a hearing on the merits. Granville National Bank v. Alleman, 237 Ill. App. 3d 890, 894, 178 Ill. Dec. 685, 605 N.E.2d 124 (1992). The trial court must examine all the pleadings on file, taking as true the well-pleaded facts, and reasonable inferences to be drawn therefrom, set forth in the pleadings of the opposing party. Tim Thompson, Inc. v. Village of Hinsdale, 247 Ill. App. 3d 863, 890, 187 Ill. Dec. 506, 617 N.E.2d 1227 (1993). Judgment on the pleadings is proper only if questions of law, and not of fact, exist after the pleadings have been filed. Tim Thompson, 247 Ill. App. 3d at 890. On review, the court must determine whether any genuine issue of material fact exists and, if not, whether the prevailing party was indeed entitled to judgment as a matter of law. In re Estate of Davis, 225 Ill. App. 3d 998, 1000, 168 Ill. Dec. 40, 589 N.E.2d 154 (1992).

The construction of an insurance policy's provisions is a question of law. Lapham-Hickey Steel Corp. v. Protection Mutual Insurance Co., 166 Ill. 2d 520, 529, 211 Ill. Dec. 459, 655 N.E.2d 842 (1995). In construing the policy, the court must determine the intent of the parties to the insurance contract. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 108, 180 Ill. Dec. 691, 607 N.E.2d 1204 (1992). To ascertain the intent of the parties as well as the meaning of the policy's words, the court must construe the policy as a whole, with due regard to the risk undertaken, the subject matter insured, and the purposes of the entire contract. Outboard Marine, 154 Ill. 2d at 108. Ambiguities in an insurance policy will be construed in favor of the insured and against the insurer who drafted the policy. See Outboard Marine, 154 Ill. 2d at 108-09. However, unambiguous words in the policy--that is, words not susceptible to more than one reasonable interpretation--will be afforded their plain, ordinary, and popular meaning. See Outboard Marine, 154 Ill. 2d at 108. A policy term is not ambiguous because it is not defined within the policy or because the parties can suggest creative possibilities for its meaning; nor may a court read an ambiguity into the policy just to find in favor of the insured. Lapham-Hickey, 166 Ill. 2d at 529-530.

As to the duty to defend, it is well settled that an insurer's duty to defend its insured is much broader than its duty to indemnify. Outboard Marine, 154 Ill. 2d at 125. In determining the duty to defend, a court must compare the allegations of the underlying complaint, construed liberally in favor of the insured, to the language of the policy. See Outboard Marine, 154 Ill. 2d at 125. If the allegations of the underlying complaint fall within, or potentially within, the coverage of the policy, the duty to defend will arise. Outboard Marine, 154 Ill. 2d at 125. Moreover, if the underlying complaint alleges several theories of recovery against the insured, the insurer will have a duty to defend even if only one such ...


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