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Montgomery Ward and Company, Inc. v. Home Insurance Company

May 18, 2001

MONTGOMERY WARD AND COMPANY, INCORPORATED, AND STANDARD T CHEMICAL COMPANY, INC., PLAINTIFFS-APPELLANTS,
v.
THE HOME INSURANCE COMPANY, IMPERIAL CASUALTY AND INDEMNITY COMPANY AND CENTURY INDEMNITY COMPANY, AS SUCCESSOR TO CCI INSURANCE COMPANY, AS SUCCESSOR TO INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Justice Reid

Not Released For Publication

MONTGOMERY WARD AND COMPANY, INCORPORATED, AND STANDARD T CHEMICAL COMPANY, INC., PLAINTIFFS-APPELLANTS,
v.
THE HOME INSURANCE COMPANY, IMPERIAL CASUALTY AND INDEMNITY COMPANY AND CENTURY INDEMNITY COMPANY, AS SUCCESSOR TO CCI INSURANCE COMPANY, AS SUCCESSOR TO INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, DEFENDANTS-APPELLEES.

The opinion of the court was delivered by: Justice Reid

Appeal from the Circuit Court of County Cook

Honorable Dorothy Kirie Kinnaird, Judge Presiding.

 Plaintiff Montgomery Ward & Company, Inc. (Ward), appeals from the trial court's grant of summary judgment in favor of Imperial Casualty and Indemnity Company (Imperial) and Century Indemnity Company (Century). The central issue considered by the trial court was whether there was insurance coverage for Ward's liability for pollution at a Superfund site in Griffith, Indiana, known as the American Chemical Services, Inc. (ACS), site. The trial court granted the insurance companies' motion for summary judgment, finding that Ward gave the defendant insurance companies late notice of an occurrence and therefore had no right to obtain coverage for the pollution claim asserted against it. The issues considered on appeal are: (1) whether the notice of occurrence clauses in the Imperial and Century insurance policies were satisfied; (2) whether the insurance companies have to show they were prejudiced because of Ward's late notice in order to avoid indemnifying Ward; (3) whether Imperial and Century are estopped from relying upon the late notice defense; (4) whether late notice was waived due to the insurance companies' failure to inform Ward of their intention to rely on a late notice defense; and (5) whether the mend the hold doctrine applies. For the reasons that follow, we affirm in part and reverse in part.

BACKGROUND

Ward owned two subsidiaries, Standard T Chemicals, Inc. (Standard), and Montgomery Ward Paint (Ward Paint), both of which manufactured paint. The process of manufacturing paint produces hazardous waste, which Standard and Ward Paint shipped off-site to recycling centers. One of the sites they sent their waste products to was American Chemical Services, Inc. (ACS), which is located in Griffith, Indiana.

From 1956 through 1983 Ward Paint and Standard shipped wastes for reclamation to the solvent recovery facility operated by ACS. The United States Environmental Protection Agency (EPA) identified the ACS site as a hazardous waste site in need of remediation, in 1984, by placing it on the National Priorities List, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) (42 U.S.C. §9601 et seq. (1994)).

On February 21, 1986, Standard received a letter from the EPA which stated that Standard was a "Potentially Responsible Party" (PRP) for the contamination and remediation of the ACS site. Standard informed Ward of its communication with the EPA. Judith Lipson, Ward's general attorney, informed the EPA that Standard was willing to cooperate with the EPA and the other PRPs in negotiating a resolution. Lipson also requested that the EPA send all further correspondence concerning the matter to Ward's legal department.

On February 24, 1986, ACS sent Ward a letter confirming that a portion of the ACS site had been listed as a Superfund site under CERCLA due to on-site disposal from 1955 to 1975. ACS also stated that it believed the EPA incorrectly identified PRPs. ACS informed Ward that on-site disposal at the site ceased in 1975 and that ACS supplied the EPA with the names of the approximately 200 customers who sent materials to the site during the disposal period. ACS claimed the EPA developed the list of PRPs from ACS's 1982 and 1983 annual waste generator reports, which contained companies that did not do business with ACS during the period of on-site disposal.

On March 11, 1986, Standard received a letter from the EPA requesting that Standard attend a meeting of PRPs on May 5, 1986, in Chicago. The EPA also sent Ward a request for copies of Standard's shipping activities at the ACS site during the relevant time period. In a letter dated March 31, 1986, Lipson informed the EPA that the only documents located were for shipments Standard made from 1978 to 1983.

On April 18, 1986, Ward received a letter from the EPA which informed Ward that it was also a PRP at the ACS because of the activities of Ward Paint. Lipson responded, informing the EPA that Ward Paint merged with Standard in 1963 and that Ward was willing to cooperate to negotiate a resolution to the matter. On May 5, 1986, Lipson attended the PRP meeting as a representative of Ward and Standard.

At the meeting, the PRPs agreed to retain an environmental consultant, Clean Sites, Inc., to analyze ACS's records in order to determine the volume of waste each PRP sent to the site so that the PRPs could agree upon an allocation scheme. The EPA also agreed to modify the PRP list to only include pre-1975 ACS customers and delete the post-1975 ACS customers who were mistakenly included as PRPs.

On September 25, 1986, Lipson received a letter from Harvey Sheldon, an attorney who represented other PRPs, informing her that he received an unofficial list of PRPs from Clean Sites and that Ward and Standard were listed. Sheldon stated that Standard was shown has having 214 solvent shipments and 38 other transactions at the ACS site, and Ward Paint was shown as having 62 shipments and 4 other transactions. Sheldon stated that Ward and Standard represented a significant share in any allocation and went on to categorize their shipments as one of the larger shares by number of transactions, as opposed to the other PRPs. Sheldon suggested that Ward become actively involved with a steering committee which was formed by other PRPs because the ACS "site and its remedy appear to be complicated and expensive."

On October 16, 1986, Lipson advised Ward's general counsel, Spencer Heine, and Standard's president or chief executive officer, Stu Hodes, that Clean Sites had yet to determine the volume of waste involved with each transaction but commented that "the ACS ...


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