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Erie Insurance Exchange v. Imperial Marble Corporation

September 15, 2011


Appeal from the Circuit Court for the 13th Judicial Circuit, LaSalle County, Illinois Circuit No. 07--CH--796 Honorable James A. Lanuti, Judge, Presiding

The opinion of the court was delivered by: Justice O'brien

JUSTICE O'BRIEN delivered the judgment of the court, with opinion.

Justices Schmidt and Holdridge concurred in the judgment and opinion.


¶ 1 Plaintiff Erie Insurance Exchange filed a declaratory judgment action seeking a declaration that it did not have a duty to defend or indemnify under a comprehensive general liability (CGL) policy it issued to defendant Imperial Marble Corporation in an underlying class action lawsuit for personal injury and property damage purportedly due to emissions from Imperial's manufacturing operations. Imperial asserted estoppel as an affirmative defense and filed a counterclaim seeking a declaration that Erie owed it a defense and indemnification, and for breach of contract based on Erie's denial of coverage. Both parties moved for summary judgment and the trial court granted Erie's motion on Imperial's counterclaim and its affirmative defense, and denied Imperial's motion. Imperial appealed. We reverse and remand.


¶ 3 Plaintiff Erie Insurance Exchange sought a declaration from the trial court that it had no duty to defend defendant Imperial Marble Corporation in the underlying action filed against it by homeowners residing within one mile of Imperial's manufacturing plant. Imperial Marble manufactures cultured marble vanities, countertops and other synthetic products at its facility in Somonauk. Along with other chemicals, Imperial uses styrene and methyl methacrylate (MMA) in its manufacturing processes which create odorous emissions that are dispersed into the atmosphere. The emissions are authorized under a permit issued by the Illinois Environmental Protection Agency (IEPA) in compliance with the federal Clean Air Act (CAA) (42 U.S.C. § 7401 et seq. (2006)); 415 ILCS 5/39.5(3), (9) (West 2006).

¶ 4 Imperial's permit was issued on November 21, 2002, and modified on May 8, 2006. In February 2007, Imperial submitted a permit renewal application that was still under evaluation at the time the briefs were filed. Imperial's permit prohibits emissions of particulate matter that block more than 30% of the available sunlight (35 Ill. Adm. Code 212.123 (2011)); precludes discharge of more than eight pounds of organic material into the atmosphere from any one emission unit (35 Ill. Adm. Code 215.301 (2011)); requires compliance with all other applicable state and federal regulations; and includes a permit shield which "provides that compliance with the conditions of this permit shall be deemed compliance with applicable requirements which were applicable as of the date the proposed permit for this source was issued." See 415 ILCS 5/39.5(7)(j) (West 2006); 42 U.S.C. § 7661c(f) (2006).

¶ 5 Erie issued a CGL policy to Imperial in 2002 with effective dates of December 31, 2002, to December 31, 2003. The policy was renewed for several terms, including December 31, 2006, to December 31, 2007, the policy term that covers the May 2007 filing of the underlying action. Imperial procured the policy through Dennis Wiley of the Somonauk Insurance Agency, an independent insurance brokerage that represents Erie per a written agency agreement. The written agency agreement provided that Somonauk, on behalf of Erie, quote and bind coverage; bill and accept premium payments; accept and deliver policy applications, renewals and notices; issue insurance cards and additional insured certificates; accept notices of claims; and assist Erie in claim investigation and handling. Somonauk performed these functions for Imperial and served as the primary vehicle for communication between Imperial and Erie.

¶ 6 The policy issued to Imperial included the following pertinent provisions. The policy's insuring agreement provided, in part:

"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 the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury' or 'property damage' to which this insurance does not apply."

The policy states that the insurance applies to bodily injury and property damage "caused by an 'occurrence' that takes place in the 'covered territory' " and "occurs during the policy period."

The policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the ...

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