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United National Insurance Company v. Faure Brothers Corporation

May 17, 2011

UNITED NATIONAL INSURANCE COMPANY,
PLAINTIFF-APPELLEE,
v.
FAURE BROTHERS CORPORATION, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County No. 08 CH 13595 Honorable Sophia H. Hall, Judge Presiding.

The opinion of the court was delivered by: Justice Harris

JUSTICE HARRIS delivered the judgment of the court, with opinion. Justices Karnezis and Connors concurred in the judgment and opinion.

OPINION

Here we are called upon to determine whether a duty to defend arises under a general liability insurance policy. Plaintiff, United National Insurance Company (United National), issued a commercial general liability insurance policy to defendant, Faure Brothers Corporation (Faure Brothers). One of Faure Brothers divisions, Gateway Warehouse Company, Inc. (Gateway), is in the business of warehousing chemical products, relabeling them and having them shipped as per the direction of it's customers. Gateway was sued by Air Products and Chemicals, Inc. (Air Products), alleging negligence resulting in the mislabeling of its products. Faure Brothers demanded that United National defend the negligence lawsuit, which was refused, and Faure Brothers undertook its own defense. United National filed a complaint for declaratory judgment, seeking a declaration that it had no duty to defend Faure Brothers, or to indemnify it, in the No. 1-10-2214 underlying action. Faure Brothers answered and filed a counterclaim for declaratory judgment, seeking a declaration that United National had a duty to defend and a duty to indemnify Faure Brothers in the underlying action. The parties each filed motions for summary judgment. The circuit court granted summary judgment in United National's favor holding it had no duty to defend. The circuit court reasoned that the complaint filed by Air Products in the underlying action did not allege an "occurrence" as defined by the policy. After construing the allegations of the underlying complaint liberally in favor of the insured, Faure Brothers, we hold that the allegations fall within, or potentially fall within, the policy's coverage. United National has a duty to defend Faure Brothers in the underlying action. We reverse the circuit court's summary judgment order.

JURISDICTION

On June 9, 2010, the circuit court granted United National's motion for summary judgment and denied Faure Brothers' motion for summary judgment and set the matter for status on June 30, 2010. On June 30, 2010, the circuit court ordered that the June 9, 2010, entry of summary judgment in United National's favor is final and appealable, stating "[t]here is no just cause to delay the enforcement or appeal of the order of June 9, 2010." Accordingly, this court has jurisdiction pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010).

BACKGROUND

United National issued its commercial general liability insurance policy No. L7169715-B to Faure Brothers with an effective date of February 1, 2006 through February 1, 2007. Section I of the policy outlines the insurance coverage and exclusions United National agreed to provide Faure Brothers. Section I also includes what was excluded from United National's coverage. Section I of the policy, states in relevant part:

"1. Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' *** to which this insurance does not apply. ***. But:

b. This insurance applies only to 'bodily injury' and 'property damage' only if:

(1) The 'bodily injury' or 'property damage' is caused by an 'occurrence' that takes place in the 'coverage territory'; and

(2) The 'bodily injury' or 'property damage' occurs during the policy period. ***

2. Exclusions.

This insurance does not apply to:

(n) Recall of Products, Work, or Impaired Property

Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of:

(1) 'your product';

(2) 'your work'; or

(3) 'impaired property'; if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it."

Section V of the policy provides definitions for the terms "occurrence", "property damage", and "your work." The policy does not define the term "accident." Section V, states, in relevant part:

"12. 'Occurrence' means an accident, including continuous or repeated exposure to substantially the same ...


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