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Northern Illinois Gas Company v. Home Insurance Company

September 3, 2002

NORTHERN ILLINOIS GAS COMPANY, PLAINTIFF-APPELLANT,
v.
THE HOME INSURANCE COMPANY, CERTAIN UNDERWRITERS AT LLOYD'S AND CERTAIN LONDON MARKET INSURANCE COMPANIES, LEXINGTON INSURANCE COMPANY, CENTURY INDEMNITY COMPANY, NORTHWESTERN NATIONAL INSURANCE COMPANY, STONEWALL INSURANCE COMPANY, AND YASUDA FIRE AND MARINE INSURANCE COMPANY OF EUROPE LIMITED, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County 95 L 17549 Honorable James F. Henry, Judge Presiding.

The opinion of the court was delivered by: Justice McBRIDE

UNPUBLISHED

This dispute arises out of a declaratory judgment action filed by plaintiff-appellant, Northern Illinois Gas Company, now known as Nicor Gas (Nicor), against defendant-appellees: The Home Insurance Company (Home); Certain Underwriters at Lloyd's and Certain London Market Insurance Companies (London); Lexington Insurance Company (Lexington); Century Indemnity Company (Century); Northwestern National Insurance Company (Northwestern); Stonewall Insurance Company (Stonewall); and Yasuda Fire and Marine Insurance Company of Europe Limited (Yasuda) *fn1 (collectively referred to as the Insurers). Nicor filed the declaratory action seeking indemnification from the Insurers to recover the costs of investigating and remediating environmental contamination at six manufactured gas plant (MGP) sites located in Illinois. The Insurers filed various motions for summary judgment. The trial court granted some of those motions on February 10, 2000. Nicor now appeals those rulings.

Two issues are raised on review. First, whether the trial court erred in granting the Insurers' motions for summary judgment on the ground that Nicor should not be indemnified for expenses it voluntarily incurred for investigation and remediation of five MGP sites. Second, whether the trial court erred in granting the Insurers' motions for summary judgment on the ground that the environmental contamination at the various sites did not constitute "occurrences" under the policies at issue. We state the following background facts.

Nicor seeks indemnification for the costs of investigating and remediating property damage at several MGPs located in Aurora, Belvidere, Bloomington, Lockport, *fn2 Ottawa, and Streator, Illinois. The record reveals that some of these MGPs were in operation as early as the mid 1800s. One of the by-products of the gas manufacturing process was tar, which was either sold or stored in various underground containment structures located on site at the the MGPs. In the 1900s, the introduction of natural gas made manufactured gas production obsolete. Thus, by the early 1950s, all six of the facilities in question were no longer operational.

At the time the MGPs were retired, the owners made efforts to extract some of the tar from the underground containers, but some of the tar remained in these structures. The underground tanks were then emptied of usable material and filled with building debris or alternative materials to bring them to ground level.

The record reveals that in the years after the MGPs were sealed, coal tar and coal tar water mixtures were released from the structures into the surrounding soil and groundwater. The release of these substances contaminated the groundwater, soil, and the surrounding environment.

James Janssen, an official with the Illinois Environmental Protection Agency (IEPA), testified that the IEPA became aware of environmental pollution at MGP sites in 1983. From 1983 to the present, the IEPA has been involved with the immediate removal and voluntary cleanup program at MGP sites in Illinois. Although the name of the voluntary cleanup program changed to the "pre-notice program," and then to the "site remediation program" over the years, Janssen said that these programs were one and the same. In 1987, Janssen said that a meeting was held at which Illinois utility companies were informed by the IEPA that "they may want to investigate" potential environmental problems at MGPs under their control. He further testified that the purpose of the voluntary cleanup program was to allow the State to offer its review, comment, and ultimately concurrence on the clean up activities undertaken at sites where contamination was present. According to Janssen, no consent decree or court filing was required for a utility to become involved with the voluntary cleanup program. He further stated that no representation was ever made to a landowner that it was "legally obligated" to enroll a site in the voluntary cleanup program, and that the program was "non-adversarial." In essence, Janssen explained that the property owners were coming to the IEPA and seeking the IEPA's input into the process of handling contamination.

Robert O'Hara, an IEPA project manager for the site remediation program, testified that the site remediation program is voluntary in nature as opposed to action taken by the IEPA under section 4(q) of the Environmental Protection Act (415 ILCS 5/4(q) (West 1998)). Action taken by the IEPA under section 4(q) involves the IEPA providing notice to a utility that it intends to take certain adversarial action in the event the utility fails to adequately respond to a cleanup request. 415 ILCS 5/4(q) (West 1998).

In 1992, the record demonstrates that Nicor began to enroll its sites into the IEPA's voluntary cleanup program. O'Hara testified that, to his knowledge, Nicor had enrolled all six sites at issue into the voluntary cleanup program.

With respect to the Ottawa site, the record reveals that Nicor drafted a review and evaluation services agreement concerning reimbursement of the IEPA's oversight costs incurred in overseeing the cleanup at the Ottawa location. Nicor asked the IEPA to sign this agreement. However, in a letter dated May 12 1997, the IEPA wrote back in response stating:

"Please be advised that the Division of Legal Counsel has determined that the draft Review and Evaluation Services Agreement is substantially in conflict with Title XVII of the Environmental Protection Act and contains misstatements of law and fact. Specifically, *** [t]he eighth paragraph beginning 'WHEREAS' states that the Illinois EPA has requested that Northern Illinois Gas and Commonwealth Edison Company perform necessary and appropriate actions at the site. The Illinois EPA has not provided notice to either Northern Illinois Gas or to Commonwealth Edison Company for the conduct of any response actions necessary to eliminate or mitigate significant risks to human health and the environment presented by the release of any hazardous substances at the site."

The record reveals that Nicor then undertook some measures to begin remediation at the sites in question. Nicor argues that in doing so, it has incurred millions of dollars in expenses for investigation and cleanup at the various sites. As a result, Nicor seeks reimbursement from the Insurers for the costs incurred for the remediation and cleanup of the sites at issue.

Nicor claims that for an extended period of time, including but not limited to the period 1955 to 1985, it purchased a series of comprehensive general liability policies from a variety of insurance companies. In addition to the general liability policies, certain excess and umbrella policies were purchased. These policies were issued by the Insurers, specifically Home, Lexington, and Century. There are slight variations in the language of the Insurers' policies, but they are all policies that provide coverage in the event of an "occurrence." For instance, the applicable coverage language in the Home policies states:

"The Company hereby agrees to indemnify the Insured for all sums which the insured shall be obligated to pay by reason of the liability imposed upon the insured by law, or assumed by the Insured under contract or agreement, for damages, direct or consequential, and expenses, all as more fully defined by the term 'ultimate net loss,' on account of personal injuries and property damage caused by or growing out of each occurrence."

Similar language in one of the Lexington policies provides:

"Underwriters hereby agree to indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability imposed upon by law *** for damages *** on account of *** property damage caused by or growing out of each occurrence."

The policies define the term "occurrence" as follows: "The term 'occurrence,' wherever used herein, shall mean one happening or series of happenings, arising out of or due to one event taking place during the term of this policy" (or "contract" in the case of the Home policies). None of the policies in question was in effect during the time the Nicor MGPs at issue were operational.

On December 20, 1995, Nicor filed a declaratory judgment action against the Insurers. Home (joined by Lexington and Century) moved for summary judgment concerning policies issued between 1955 and 1976 on the ground that no "occurrences" as defined in the policies occurred during those years. The trial court granted the Insurers' motions for summary judgment concluding that there was "only mere speculation that any occurrence, as defined in the policy, took place during the policy period."

Home (joined by Lexington and Century) also moved for summary judgment on the ground that Nicor was not "legally obligated to pay" for the investigation and remediation at the Aurora, Belvidere, Bloomington, Ottawa, and Streator sites. As noted above, the Lockport site was not included in the summary judgment motions made by these insurers because Nicor had been sued by a private party for response costs associated with contamination at that site. The trial court granted the summary judgment motions of these insurers on the grounds that the insurance contracts did not contain a duty to indemnify Nicor's voluntary cleanup actions and that there was no genuine issue of material fact which would preclude summary judgment in favor of the movant insurers.

We first consider whether the trial court erred in granting the Insurers' motions for summary judgment on the basis that Nicor voluntarily incurred expenses in investigating and cleaning the applicable sites. The relevant policy language provides the following:

"Underwriters hereby agree to indemnify the ASSURED for all sums which the ASSURED shall be obligated to pay by reason of the liability imposed upon the ASSURED by law, or assumed by the ASSURED under contract or agreement, for damages *** on account of personal injuries and the property damage caused by or growing out of each occurrence."

The parties are in agreement that, while there are slight variations among the policies at issue, the basic wording is substantially the same.

Nicor claims that because it was legally obligated to pay the costs of responding to the contamination by reason of liability imposed by law or alternatively based upon its agreements with the IEPA, the Insurers were obligated to ...


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