The opinion of the court was delivered by: Presiding Justice Hoffman
APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY HONORABLE MICHAEL B. GETTY, JUDGE PRESIDING.
In these consolidated cases, Eljer Industries, Inc., Eljer Manufacturing, Inc., United States Brass Corporation, and Household International, Inc. appeal from orders of the circuit court of Cook County denying their motions for summary judgment and granting summary judgments determining certain insurance coverage issues in favor of: National Surety Corporation; Hartford Accident & Indemnity Company; First State Insurance Company; Old Republic Insurance Company; Travelers Casualty & Surety Company, formerly known as Aetna Casualty & Surety Company; Allstate Insurance Company, successor in interest to Northbrook Excess and Surplus Insurance Company, formerly known as Northbrook Insurance Company; Century Indemnity Company, successor to CIGNA Specialty Insurance Company, formerly known as California Union Insurance Company; Constitution State Insurance Company; Continental Insurance Company, successor in interest to certain policies of insurance issued by Harbor Insurance Company; Employers Mutual Casualty Company; Federal Insurance Company; Gibraltar Casualty Company; Granite State Insurance Company; Insurance Company of North America; International Insurance Company; Lexington Insurance Company; National Union Fire Insurance Company of Pittsburgh, PA.; The North River Insurance Company; Royal Insurance Company; Stonewall Insurance Company; and Zurich International, Ltd. (hereinafter collectively referred to as the "Carriers"). For the reasons which follow, we affirm in part, reverse in part, and remand this cause to the circuit court for further proceedings.
These appeals arise from four declaratory judgment actions filed in the circuit court to resolve insurance coverage issues spawned by continuing claims surrounding a certain polybutylene plumbing system, known as Qest Quick/Sert II (Qest System), which was manufactured and sold by United States Brass Corporation (Brass) from 1979 through 1990. For purposes of this appeal, certain relevant facts giving rise to these consolidated actions are not in dispute.
From 1979 through 1990, hundreds of thousands of the Qest Systems were installed in homes, apartment buildings, condominiums, mobile homes, and manufactured housing. These plumbing systems were almost always installed behind walls, under floors, or above ceilings. Brass ceased to manufacture and market the Qest System for residential site-built installation on December 31, 1986, but continued to market the system for mobile homes and prefabricated housing through 1990. As a result of certain alleged defects in the Qest System, claims have been made against Brass and its parent corporations by homeowners, homeowner associations, developers, builders, and plumbing contractors. Based on approximately 61,300 claims received by the end of 1993, Brass estimated that approximately 4.6% of the Qest Systems installed for the period from 1979 through 1990 were the subject of claims. According to the affidavit of one of Brass's attorneys, the majority of the claims involve leaks in the system. These claims generally seek recovery for: the cost of past repairs to the plumbing system, the building in which the system was installed and the building's contents; the cost of any unrepaired damage caused by the leaks; the cost of replacing the plumbing system; and the diminution in the value of the building into which the Qest system was installed resulting from the presence of the defective plumbing system. A minority of the claims involve buildings in which the Qest System was installed but which have not yet experienced leaks (Pre-Leak Claims). Claims within this group seek recovery for the cost of replacing the plumbing systems and the diminution in the value of the buildings into which they were installed. All of the claimants assert that the Qest System is a defective product because it is subject to leaking well before a reasonably designed and installed plumbing system. According to documents filed by Brass with the United States Bankruptcy Court for the Eastern Division of Texas, 108 lawsuits covering approximately 30,000 claims involving the Qest System remained pending as of March 31, 1994. The affidavit of another of Brass's attorneys asserts that "liabilities, in excess of $1 billion, have been alleged against U.S. Brass as a result of the Qest Quick/Sert II plumbing system."
Eljer Industries, Inc. owns all of the stock of Eljer Manufacturing, Inc., which in turn owns all of the stock of Brass. For a period of time relevant to this litigation, Household International, Inc. owned all of the stock of Brass's former parent corporation, Wallace-Murray Corporation. For ease of analysis, we will refer to Brass, Eljer Industries, Eljer Manufacturing and Household International, collectively, as the "Policyholders."
The Policyholders maintained multiple layers of comprehensive general liability (CGL) insurance. The Carriers are insurance companies that issued excess CGL insurance policies, which were in effect for various annual periods from 1979 until 1990, to certain of the Policyholders. These excess CGL policies are "form following" policies, meaning that they follow the form of the policy in the layer of coverage below them. All of the policies issued by the Carriers provide coverage for an "occurrence" resulting in "property damage" taking place during the respective policy period. By reason of the provisions of the underlying policies, the Carriers' policies in effect from 1979 through 1981 (Pre-1982 Policies) define "property damage" as "injury to tangible property," and their policies in effect from 1982 through 1990 (Post-1981 Policies) define "property damage" as, inter alia, "physical injury to or destruction of tangible property."
The issue presented by the parties' cross-motions for summary judgment involves the question of when the coverage afforded under the Carriers' excess CGL policies is "triggered." The circuit court determined that "property damage" for purposes of triggering coverage does not occur until a Qest System leaks, the interpretation advocated by the Carriers. The Policyholders have appealed, contending that coverage under the policies was triggered when the system was installed.
Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1996); Carruthers v. B.C. Christopher & Co., 57 Ill. 2d 376, 380, 313 N.E.2d 457 (1974). Since the issue presented in a summary judgment proceeding is one of law, our review is de novo. In re Estate of Hoover, 155 Ill. 2d 402, 411, 615 N.E.2d 736 (1993). By filing cross-motions for summary judgment, the parties invite the court to decide the issues presented as questions of law. Allen v. Meyer, 14 Ill. 2d 284, 292, 152 N.E.2d 576 (1958). However, the mere filing of cross-motions for summary judgment does not require that the court grant the requested relief to one of the parties where genuine issues of fact exist precluding summary judgment in favor of either party. Perlman v. Time, Inc., 64 Ill. App. 3d 190, 380 N.E.2d 1040 (1978).
For purposes of this appeal, the parties do not contest several basic matters. First, New York law controls the interpretation of the Pre-1982 Policies. Second, Illinois law controls the interpretation of the Post-1981 Policies. Third, the excess CGL policies which are the subject of this litigation provide, subject to their respective terms and conditions, excess coverage for property damage which occurs during the policy period.
The issue before us is one of contract interpretation. Consequently, we begin with an examination of the language of the disputed policies. As the parties agree, there must be an occurrence resulting in property damage during the policy period before coverage under any of the Carriers' policies is triggered. Put another way, it is the property damage, not its cause, which must occur during the policy period for coverage to be triggered. Both Illinois (see United States Gypsum Co. v. Admiral Insurance Co., 268 Ill. App. 3d 598, 644-47, 643 N.E.2d 1226 (1994)) and New York (see Maryland Casualty Co. v. W.R. Grace & Co., 23 F.3d 617, 625-26 (2d Cir. 1993)) have adopted this "injury-in-fact" trigger. The correct application of this coverage trigger necessarily depends upon the meaning of "property damage" as that phrase is used in the Carriers' policies.
As noted earlier, the Pre-1982 Policies define "property damage" as "injury to tangible property," and the Post-1981 Policies define "property damage" as, inter alia, "physical injury to or destruction of tangible property." The Policyholders argue that the very installation of the Qest System caused property damage within the meaning of the Pre-1982 Policies under New York law and within the meaning of the Post-1981 Policies under Illinois law. The Carriers argue that the mere inclusion of a defective component does not constitute "property damage" within the meaning of either group of policies. In support of their respective positions, the parties have cited a large number of cases from a variety of jurisdictions, including Illinois. However, we find the majority of these cases to be readily distinguishable and of little aid to our analysis.
The Policyholders rely heavily upon cases dealing with the installation of products containing asbestos or other toxic substances. Both Illinois and New York recognize that the installation of products containing asbestos in a structure constitutes an injury to property, i.e. the structure and its contents. See United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 75, 578 N.E.2d 926 (1991) (hereinafter "Wilkin"); Maryland Casualty, 23 F.3d at 627. These cases, however, are not based upon the general proposition that the mere inclusion of a defective component constitutes an injury to property as suggested by the Policyholders. Rather, they rest upon an acknowledgement that products containing toxic substances such as asbestos contaminate the structure into which they are incorporated and, therefore, the damage inflicted -- the contamination -- is complete upon installation. See Wilkin, 144 Ill. 2d at 75-76; Maryland Casualty, 23 F.3d at 627. Unlike the asbestos cases cited by the Policyholders, this case does not involve the installation of any contaminant. The Qest System is not alleged to contain any toxic substances. The defective nature of the system is related solely to its propensity to leak prematurely, that is, its failure to perform as intended. Consequently, the asbestos cases relied upon by the Policyholders provide little or no guidance in the resolution of the issues presented in this case.
The parties also rely upon a number of cases where the underlying claim was for bodily injury. Except in circumstances where the injury process continues progressively over time, occurrence policies affording coverage for bodily injury and those affording coverage for property damage are both governed by an injury-in-fact trigger. See U.S. Gypsum Co., 268 Ill. App. 3d at 639-647. This circumstance notwithstanding, bodily injury and property damage are two distinct concepts. Our function is to determine first what constitutes property damage within the meaning of the policies at issue. It is only from this initial determination that we can proceed to resolve the question of when such damage occurs for purposes of triggering coverage. Since the parties seem to agree that both Illinois and New York apply an injury-in-fact trigger for purposes of coverage, many of the bodily injury cases cited in the parties' briefs are of little assistance. In the main, these cases address the question of when bodily injury is said to occur for purposes of triggering coverage, but they do not resolve the question of what is meant by either an "injury to tangible property" or "physical injury to *** tangible property."
For these reasons, we do not feel compelled to further discuss or distinguish the asbestos related cases cited by the parties or those cases addressing the issue of when bodily injury is said to occur for purposes of triggering coverage. Instead, we will focus our attention on those cases which address the meaning of property damage as defined in a CGL insurance policy and the question of ...