Appeal from the Circuit Court of Cook County Honorable Lester Foreman, Judge Presiding.
The opinion of the court was delivered by: Justice Karnezis
Plaintiff, the Board of Education of Maine Township High School District No. 207 (the school district), filed a declaratory judgment action against defendant, International Insurance Company (International), seeking a determination of coverage for $18 million in asbestos-related property damage under seven insurance polices issued by International from 1985 through 1991 (hereinafter referred to individually by the policy year, i.e., 1985 policy, 1986 policy, etc.).
This appeal concerns the parties' cross-motions for summary judgment filed with regard to the 1985, 1986, 1987, 1988 and 1989 policies. The court found that a "latent defect" exclusion for asbestos-related losses in the policies precluded the school district's claims and that asbestos-related costs the school district allegedly incurred pursuant to the Illinois Asbestos Abatement Act (Asbestos Abatement Act) (105 ILCS 105/1 (West 1992)) and its implementing regulations were not a covered loss under the policies' "Ordinance Deficiency Clause." The court granted summary judgment to International and denied the school district's motion for summary judgment.
The school district appeals the court's order regarding the 1986, 1987, 1988 and 1989 policies, arguing that the court erred in entering summary judgment for International on those policies because (1) the policies' ordinance deficiency clause extended coverage over the school district's claims; and (2) supplemental coverage applied to the school district's claims pursuant to the "All-Risk" clause. The school district, having abandoned its claims under the 1985 policy, concedes that summary judgment should be affirmed with regard to the 1985 policy. The school district does not appeal the court's denial of its cross-motion for summary judgment. We affirm summary judgment for International with regard to the 1985 policy and reverse with regard to the 1986, 1987, 1988 and 1989 policies.
In 1979, pursuant to a guidance document published by the Environmental Protection Agency regarding the dangers of asbestos exposure in schools, the school district inspected its schools for asbestos-containing building materials and found such materials in the schools. In 1984, the Asbestos Abatement Act took effect, requiring Illinois schools to identify, contain and remove "all asbestos materials that constitute a significant health hazard" and to repair and maintain those which do not constitute a significant health hazard. Board of Education of the City of Chicago v. A C & S, Inc., 131 Ill. 2d 428, 437, 546 N.E.2d 580, 584 (1989); 105 ILCS 105/2 (West 1992).
In 1985, the school district, as a member of the CLIC Insurance Cooperative, purchased a one-year insurance policy from International for coverage of loss or damage to the school district's property during the policy period. Pursuant to Agreement A contained in the "Property Insurance" section of the policy, International agreed, "subject to the limitations, terms and conditions of this Insurance, to indemnify the Insured for all risks of physical loss or damage to All Property of the Insured of every kind and description wherever located occurring during the period of this Insurance." The property insurance section of the policy contained numerous coverage exclusions, including exclusions for wear, tear and contamination, but no exclusion for asbestos-related loss or damage. The 1985 policy did, however, contain an "asbestos endorsement" which excluded losses
"[i]n connection with any claim (i) arising out of or (ii) related to any event or happening, or (iii) directly or indirectly caused by based upon or resulting from:
(a) Asbestos or any asbestos related injury or damage; or
(b) Any alleged act, error, omission or duty involving asbestos, its use, exposure, presence, existence, detection, removal, elimination or avoidance; or
(c) The use, exposure, presence, existence, detection, removal, elimination or avoidance of asbestos in any environment, building or structure."
The school district renewed the policy six times, from 1986 to 1991.
In 1986, International eliminated the asbestos endorsement but added a latent defect exclusion to the exclusions subsection of the policy's property insurance section. The new exclusion provided that there would be no coverage for
"[l]oss by latent defect including damage or loss caused by, aggravated by or contributed by the presence of asbestos and all asbestos related products including but not limited to paint, ceiling tile, floor tile, insulation and/or other sources.
UNLESS LOSS BY A PERIL INSURED AGAINST ENSUES AND THEN ONLY FOR SUCH ENSUING LOSS."
This exclusion was included in subsequent polices until the 1990 and 1991 policies, wherein it was slightly modified. The modification is not relevant here.
The property insurance section of the 1985 through 1989 policies also included a "Conditions" subsection consisting of eight clauses, one of which was the ordinance deficiency ...