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Illinois Tool Works, Inc v. Commerce and Industry Insurance Company and

August 16, 2011


Appeal from the Circuit Court of Cook County Honorable Kathleen M. Pantle, (United National Insurance Company, Defendant). Judge Presiding. No. 06 CH 09619

The opinion of the court was delivered by: Justice Karnezis

JUSTICE KARNEZIS delivered the judgment of the court, with opinion.

Presiding Justice Cunningham and Justice Harris concurred in the judgment and opinion.


¶ 1 Plaintiff Illinois Tool Works filed an action against defendants Commerce and Industry Insurance Company (C&I) and United States Fire Insurance Company (USF) seeking a declaration that defendants had a duty to defend plaintiff in an underlying lawsuit and to reimburse plaintiff for its defense costs in that suit. The court granted judgment on the pleadings to defendants. Plaintiff argues on appeal the court erred in finding defendants had no duty to defend plaintiff in the underlying action because (1) plaintiff was assigned the benefits of insurance policies issued by defendants; (2) the underlying lawsuit had sought to impose liability on plaintiff as successor to the corporation which was the insured under the policies; (3) plaintiff was a putative insured under the policies because the underlying complaint alleged plaintiff was the successor to the insured under the policies; (4) the court relied on documents that were not part of the pleadings; and (5) the court considered new and contradictory facts raised in defendants' motions for judgment on the pleadings. We reverse and remand.

¶ 2 Background

¶ 3 Bruno Enssle owned a building and property (collectively the property) in Boulder, Colorado. In 1959, Binks Manufacturing Company began leasing the property from Enssle. In 1963, Binks R&D, a wholly owned subsidiary of Binks Manufacturing, began leasing and occupying the property. Binks R&D designed and manufactured electrostatic coating application equipment and related industrial products. In 1979, Frieda E. Enssle, Burke E. Enssle and Heidi Enssle Wilson (the Enssles) became the owners of the property. They continued leasing the property to Binks R&D.

¶ 4 Binks Manufacturing subsequently changed its name to Binks Sames Corporation then to Sames Corporation (collectively referred to as Binks). In 1998, plaintiff entered into an agreement with Binks for the purchase and sale of assets and stock relating to Binks' electrostatic coating application equipment and related products business. With the Enssles' consent, Binks R&D assigned the lease for the property to Binks and Binks assigned it to plaintiff. Binks R&D dissolved in 1999 and its remaining assets were distributed. In 2001, Binks filed for chapter 7 bankruptcy in federal court in Illinois. Plaintiff continued to lease and use the Enssles' property until 2003.

¶ 5 In 2003, the Enssles filed suit against plaintiff, Binks, Binks R&D and assorted former Binks officers in the United States District Court in Colorado (Enssle action or lawsuit).*fn1 They sought a judgment of joint and several liability against the defendants, whom they referred to as "tenant(s)," for their alleged environmental contamination of the property and refusal to clean it up. They asserted a myriad of claims, including breach of contract, negligence and violation of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9607(a) (2006)) (CERCLA). They requested common law and statutory damages, reimbursement and assorted other relief.

¶ 6 The Enssles alleged that Binks' and plaintiff's business activities throughout their tenancy on the property caused the release of hazardous materials into the building and environment, including soils and groundwater. The Enssles alleged that, in anticipation of the termination of the lease and in preparation for the Enssles' sale of the property, plaintiff informed them in 2002 that it would fix the environmental problems at the property prior to expiration of the lease on July 31, 2003. The Enssles hired a consultant to perform a limited environmental investigation of the property.

¶ 7 The consultant found that, in 1987, Binks had notified the Colorado Department of Public Health and Environment (CDPHE) that Binks was generating various hazardous waste solvents.*fn2 He found that, in 1990, the CDPHE had issued an inspection report identifying numerous environmental contamination violations by Binks, including improper storage and disposal of hazardous wastes without a permit and soil contamination emanating from the outdoor storage area. After the CDPHE report, Binks had an evaluation done of the groundwater at the property. The evaluation showed hazardous wastes were in the ground water and had migrated to the property boundary. Binks proposed a remediation plan for the contaminated soil and ground water to the CDPHE. The CDPHE required Binks to implement the plan but Binks did not perform any of the cleanup. The Enssles alleged Binks continued contaminating the soil and groundwater and allowing the passive migration of the illegally disposed hazardous wastes after the CDPHE's order.

¶ 8 Inspecting the inside of the building in 2002, the Enssles' consultant found assorted areas contaminated by hazardous substances. The Enssles alleged they required Binks and plaintiff to investigate the extent of the environmental contamination but they refused. The Enssles asserted that, in violation of the lease, plaintiff told them it would not perform investigation and cleanup and would not allow them access to the interior of the premises.

¶ 9 The Enssles alleged that, after plaintiff purchased Binks R&D in 1998, plaintiff substantially continued the Binks company with the same name, same operation, same products, same customers and same lease and held itself out to be a continuation of Binks. They contended that plaintiff was assigned the lease by Binks and, by that assignment, assumed and agreed to discharge all of Binks' obligations under the lease from and after the date of its purchase of Binks R&D. The lease requires, in part, that tenants indemnify the Enssles and hold them harmless from and against all obligations or liabilities arising from any violation of the law arising from the tenants' conduct; surrender the property at the end of the lease in good condition except for reasonable wear and tear; maintain and repair the property; and not commit waste. The Enssles claimed plaintiff refused to investigate the extent of the environmental contamination of the property and to clean up the contamination in violation of the lease and CERCLA. Plaintiff filed a cross claim against Binks for indemnification.*fn3

¶ 10 Defendants had each issued liability insurance policies to Binks. C&I's policies covered the period from December 1976 to December 1981. USF's policies covered from December 1981 to December 1984. Defendants defended Binks in the Enssle action. They refused to defend plaintiff in the Enssle action. The Enssle case and plaintiff's cross-claim against Binks were ultimately settled.

¶ 11 In May 2006, plaintiff filed a declaratory judgment action in the circuit court of Cook County against defendants.*fn4 Plaintiff sought a declaration that defendants had (a) owed it a duty to defend in the Enssle action because it was an insured under the policies defendants had issued to Binks and (b) breached their insurance policies by refusing to defend plaintiff. It asserted it was an insured because it was a successor to Binks R&D and/or it had been assigned the benefits of the policies under its purchase agreement for Binks R&D. Plaintiff requested, in part, reimbursement for all defense costs it expended in the Enssle action and damages for defendants' breach of their duties to defend plaintiff under the policies.

¶ 12 On the parties' cross-motions for judgment on the pleadings pursuant to section 2-615(e) of the Illinois Code of Civil Procedure (735 ILCS 5/2-615(e) (West 2008)) (the Code), the court granted defendants' motion and denied plaintiff's motion. The court found defendants had no duty to defend plaintiff in the Enssle case, holding that the benefits of a defense had not been assigned to plaintiff in 1998 and plaintiff was, by its own admission in the underlying Enssle action, not a corporate successor to Binks. Plaintiff timely appealed.

¶ 13 Analysis

¶ 14 Standard of Review

¶ 15 Plaintiff argues the court erred in granting defendants' motion for judgment on the pleadings based on its finding defendants had no duty to defend plaintiff against the Enssle complaint. "Any party may seasonably move for judgment on the pleadings" pursuant to section 2-615(e) of the Code. 735 ILCS 5/2-615(e) (West 2008). Judgment on the pleadings is proper when the pleadings disclose no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Gillen v. State Farm Mutual Automobile Insurance Co., 215 Ill. 2d 381, 385 (2005); Intersport, Inc. v. National Collegiate Athletic Ass'n, 381 Ill. App. 3d ...

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