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08/25/97 ZURICH INSURANCE COMPANY v. CARUS

August 25, 1997

ZURICH INSURANCE COMPANY, PLAINTIFF-APPELLEE,
v.
CARUS CORPORATION, DEFENDANT-APPELLANT AND COUNTERPLAINTIFF-APPELLANT, (ZURICH INSURANCE COMPANY, AMERICAN GUARANTY & LIABILITY COMPANY, AND CONTINENTAL INSURANCE COMPANY, COUNTERDEFENDANTS-APPELLEES).



Appeal from the Circuit Court of Cook County. Honorable MARGARET McBRIDE, Judge Presiding.

The Honorable Justice Buckley delivered the opinion of the court. O'brien and Gallagher, JJ., concur.

The opinion of the court was delivered by: Buckley

The Honorable Justice BUCKLEY delivered the opinion of the court:

This case is a declaratory judgment action in which the parties seek a determination as to whether Zurich Insurance Company (Zurich), American Guarantee and Liability Insurance Company (American), and Continental Insurance Company (Continental) must reimburse Carus Corporation (Carus), under general liability policies the insurers issued to Carus, for expenses incurred investigating possible contamination. The circuit court ruled that the insurers have no duty to defend or indemnify in the absence of a lawsuit brought against Carus. Carus now appeals.

Since 1915, Carus has owned and operated a chemical manufacturing facility in LaSalle, Illinois, through its division Carus Chemical Company. Carus purchased a series of general liability policies from Zurich and American covering the period from 1970 through 1984, and from Continental covering the period from June 6, 1985, to September 1, 1985. Each policy contained the following provision:

"The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:

Coverage A. bodily injury

Coverage B. property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suits against the insured seeking damages ***."

Pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (42 U.S.C. ยง 9601 et seq. (1994)), Carus was placed on a list of waste disposal sites known as the Comprehensive Environmental Response, Compensation, and Liability Information System, in August 1990, because it had operated a chemical facility on the same property for an extended period of time. CERCLA and its Illinois counterpart, the Illinois Environmental Protection Act (415 ILCS 5/1 et seq. (West 1994)), impose liability on owners and operators of facilities that release hazardous substances into the environment.

In May 1991, the Illinois Environmental Protection Agency (IEPA), in agreement with the United States Environmental Protection Agency (USEPA), conducted a preliminary assessment of the Carus chemical facility (the Carus Chemical action). The preliminary assessment report recommended that a "Screening Site Inspection" (SSI) be conducted to determine if there is any environmental contamination on the site. In November 1991, the IEPA conducted the SSI. In May 1992, the SSI report was released, showing the presence of hazardous substances in the soil and groundwater in and around the facility.

Carus notified its insurers of the SSI results in October 1992. Continental denied coverage; Zurich and American acknowledged receipt of the claim, but they neither admitted nor denied coverage.

In December 1992, the final SSI report was released. The report indicated that contaminants in the soil and groundwater were sufficient to put Carus on the USEPA's "National Priorities List" (NPL) of sites targeted for cleanup. In an effort to avoid being placed on the NPL, Carus petitioned the IEPA to proceed under its site remediation program (the program). See 415 ILCS 5/58 et seq. (West 1996). This program provides participants with "expeditious alternatives for the review of site investigation and remedial activities." 415 ILCS 5/58(4)(West 1996).

After making a payment of $5,000, Carus was accepted into the program. The program required Carus to conduct a remedial investigation and feasibility study, consistent with the mandates of CERCLA, under the supervision of the IEPA. The IEPA then would use the results of those studies to determine the remedial action necessary for the site to comply with CERCLA and other applicable laws.

In October 1993, after acceptance into the program, Carus received notice that the IEPA was preparing to conduct an SSI on property formerly owned by the Matthiessen & Hegeler Zinc Company that is adjacent to the Carus Chemical facility and is now partially owned by Carus. The SSI occurred in December 1993. In July 1994, Carus notified Zurich, American, and Continental of the IEPA's investigation of the Matthiessen & Hegeler property (the M&H action) as ...


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