Appeal from the Circuit Court of Cook County. Honorable Lester D. Foreman, Judge Presiding.
Released for Publication October 9, 1997.
The Honorable Justice Rakowski delivered the opinion of the court. McNULTY, P.j., and Tully, J., concur.
The opinion of the court was delivered by: Rakowski
The Honorable Justice RAKOWSKI delivered the opinion of the court:
Plaintiff Board of Education of Maine Township High School District 207 (the Board) filed a declaratory judgment action against defendant international Insurance Company (International) seeking determination of insurance coverage for asbestos-related property damage to its schools. The circuit court granted International's motion for partial summary judgment, finding that the latent defect exclusion of the "all risks" policies barred coverage. We have jurisdiction pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308). The issue certified on appeal is whether the first-party property insurance policies issued by International provide coverage for the Board's claim of asbestos-related property damage to its schools, where the insuring agreement provides for "all risks" coverage and contains a latent defect exclusion and an exception to the exclusion for "a loss from covered peril that follows; and then only for the following loss." We answer this question in the negative and, therefore, affirm.
The Board claims over $16 million in asbestos-related property damage to its high schools based on "all risks" insurance policies, which provide that International "agree[s] to indemnify the Insured [the Board] for all risks of physical loss or damage to all property of the Insured." The policies contain certain exclusions, which provide that the insurance does not cover loss or damage caused by "latent defect." This includes damage or loss caused by, aggravated by, or added to by asbestos-related products, including, among others, paint, ceiling tile, floor tile, insulation, and/or any other sources. The policies also contain an "exceptions" clause, which states "the only exception to these exclusions is a loss from covered peril that follows; and then only for the following loss."
The Board maintains it is entitled to coverage under the "all risks" policies because forces external to the asbestos materials themselves caused the property damage. That is to say the asbestos materials alone did not create hazardous conditions in the schools. Rather, the asbestos materials became harmful only when, because of damage, disturbance, or deterioration, they released carcinogenic fibers into the air. According to the Board, because external forces, which are not expressly excluded in the policies, resulted in hazardous conditions in the schools and caused the Board's loss, the policies provide coverage for the Board's loss and damage to its schools.
The circuit court disagreed with the Board's contentions, holding that the latent defect provision excluded coverage of loss or damage caused by, aggravated by, or added to by asbestos-related products. The court said it could not think of another way for International to have made the policies as inclusive as it did by using the words "caused by, aggravated by, [and] added to."
The Board filed a motion for certification for review pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308). The circuit court certified the following question for review:
"Whether a policy of first-party property insurance, as found in International policies 503-075704-5 and 503-086924-8, provides coverage for the claims for asbestos-related property damage of the Board of Education of Maine Township High School District No. 207's schools at issue in this litigation, where the insuring agreement provides:
We agree to indemnify the Insured for all risks of physical loss or damage to all property of the insured, wherever located, occurring during any year of this insurance. This agreement is subject to the exclusions, conditions and definitions of this insurance.
where the insuring agreement contains a 'Latent Defect Exclusion' that provides:
This insurance also does not cover loss or damage caused by latent defect. This includes damage or loss caused, aggravated by or added to by ...