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07/31/96 CATERPILLAR v. AETNA CASUALTY AND SURETY

July 31, 1996

CATERPILLAR, INC. AND SOLAR TURBINES, INCORPORATED, PLAINTIFFS-APPELLANTS,
v.
THE AETNA CASUALTY AND SURETY COMPANY, ET AL., DEFENDANTS, AND AIU INSURANCE COMPANY, GRANITE STATE INSURANCE COMPANY, THE HOME INSURANCE COMPANY, INSURANCE COMPANY OF NORTH AMERICA, INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, INTERNATIONAL INSURANCE COMPANY AND NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court Cook County. The Honorable Thomas P. Durkin, Judge Presiding.

Released for Publication August 29, 1996.

The Honorable Justice Egan delivered the opinion of the court: Zwick, P.j., and Rakowski, J., concur.

The opinion of the court was delivered by: Egan

JUSTICE EGAN delivered the opinion of the court:

The plaintiffs, Caterpillar, Inc. (Caterpillar) and Solar Turbines Incorporated (STI), brought this 25 count action for a declaratory judgment seeking a determination of their rights under various comprehensive general liability (CGL) and excess insurance policies issued by the defendants. The defendants have denied coverage for certain liabilities incurred by the plaintiffs to pay for environmental damage and clean-up at various properties and waste sites throughout the United States.

The trial judge entered summary judgment in favor of the defendant Insurance Company of North America (INA) as to counts 4 and 9 of the complaint, each of which concerned toxic waste clean-up at sites in California. *fn1 The trial judge relied on the fact that Caterpillar, which entered into the contracts for insurance at issue, did not own or otherwise have any connection to these sites during the effective policy periods. That connection came later, when Caterpillar purchased assets which had connections to the sites. The trial judge ruled that these "after-acquired" assets were not insured under the policies. The plaintiffs contend questions of fact concerning the proper interpretation of the "named insured" clause under the policies precluded summary judgment.

Our review of an order granting summary judgment is de novo. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102, 607 N.E.2d 1204, 180 Ill. Dec. 691 (1992). Summary judgment is appropriate only when the pleadings, together with any depositions, admissions, or affidavits on file demonstrate that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1992); LaSalle National Bank v. Skidmore, Owings & Merrill, 262 Ill. App. 3d 899, 902, 635 N.E.2d 564, 200 Ill. Dec. 225 (1994). We construe all reasonable inferences to be drawn from the facts in a light most favorable to the non-moving party. LaSalle National Bank, 262 Ill. App. 3d at 902.

As noted, the plaintiffs are facing extensive liability for environmental clean-up at sites throughout the country and are defendants in underlying environmental litigation with various states. Insurance coverage for the costs of the investigation and clean-up at two of these, the Chatham Brothers Barrel Yard (the Chatham site) and STI's Harbor Drive facility (the Harbor Drive site), is the subject of this appeal. The defendant in the underlying Harbor Drive action is STI; the defendant in the underlying Chatham action is Caterpillar. Explanation of the issue in this case requires some factual background.

STI is a wholly owned subsidiary of Caterpillar. Around 1962, International Harvester acquired the assets of the Solar Aircraft Company (Solar Aircraft), which had been formed around 1927. International Harvester placed the assets of Solar Aircraft into its Solar Turbines International Division. On May 14, 1981, Caterpillar acquired the assets of the Solar Turbines International Division. On May 21, 1981, Caterpillar transferred these assets to STI.

The Chatham site, which is the subject of count 4 of the plaintiffs' complaint, was operated in Escondido, California between 1941 and 1981 "as a chemical and waste oil transportation recycling and disposal facility," as well as "a drum reclamation facility." The Chatham site "accepted, recycled, and disposed of industrial solvents and waste oil." The Chatham site is not owned by either plaintiff. However, Solar Aircraft, the assets of which are now apparently owned by STI, had sold waste materials to the Chatham site. Caterpillar has received "notice from the California Department of Toxic Substances seeking recovery of costs associated with the investigation and remediation of all of the environmental conditions at and around" the Chatham site.

STI owns and operates a "facility" at the Harbor Drive site, which is located in San Diego, California. The Harbor Drive site is the subject of count 9 of the complaint. The Harbor Drive site was originally owned and operated by Solar Aircraft and has been in operation since as early as 1927. STI faces "liability for investigation and remediation of property damage to the environment, including damage to natural resources at and around the Harbor Drive site," which occurred as a result of the operation of the site.

The plaintiffs sought coverage from the defendant for their liabilities in these underlying actions under CGL policies issued to Caterpillar by INA with policy periods ranging from sometime in 1952 until April 1, 1981. After April 1, 1981, INA no longer insured the plaintiffs. All of these policies generally obligated the defendant to pay on behalf of Caterpillar all sums for liability it incurred due to personal injury or destruction of property which occurred during the policy periods. The parties do not dispute that the property damage in the underlying actions occurred during the policy periods. Rather, the defendant refused to cover the plaintiffs' liabilities because it claims that neither STI nor Solar Aircraft was a "named insured" under any of the policies at issue. Furthermore, Caterpillar, the named insured, had no connection to the polluted sites during the relevant policy periods.

The term "named insured" is defined differently depending on whether the policy period began before or after January 1, 1970. With the exception of one policy, policies which began before January 1, 1970 (the pre-1970's policies) stated as follows:

"The words 'named insured', wherever used in this policy, include any subsidiary, allied or affiliated company of Caterpillar Tractor Co. or its subsidiaries."

The remaining policy which began before January 1, 1970 defined named insured as

"the organization designated in the declarations including any subsidiary company *** of such organization and any other company coming ...


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