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Illinois Tool Works Inc. v. Travelers Casualty and Surety Co.

Court of Appeals of Illinois, First District, Second Division

January 13, 2015

ILLINOIS TOOL WORKS INC. AND ITW FINISHING LLC, Plaintiffs-Appellees,
v.
TRAVELERS CASUALTY AND SURETY COMPANY, CENTURY INDEMNITY COMPANY, AND THE TRAVELERS INDEMNITY COMPANY OF CONNECTICUT, Defendants-Appellants

Page 422

Appeal from the Circuit Court of Cook County. No. 04 CH 21325. Honorable Kathleen Kennedy, Judge Presiding.

SYLLABUS

When plaintiffs' decision to expand their product line to include welding products and other items involving harmful materials such as asbestos and benzene resulted in toxic tort cases filed on behalf of those injured by exposure to the dangerous material, plaintiffs sought declaratory relief that their insurers owed them a duty to defend the underlying suits and the trial court's order finding in favor of plaintiffs was affirmed, since the insurers were required to provide a defense in the cases where the bare underlying allegations, if proved, would render plaintiffs liable, and if plaintiffs are alleged to be individually liable or liable directly and as successors, the insurers had a duty to defend, but if plaintiffs are alleged to be liable only as successors, there would be no duty to defend.

For Defendants-Appellants: Clifton S. Elgarten, Paul W. Kalish, Jennifer R. Devery, Kelly H. Tsai, Crowell & Morning LLP, Washington, D.C.; Brian C. Coffey, Cohn Baughman & Martin, Chicago, IL; Robert C. Johnson, Daniel E. Feinberg, Dentons US, LLP, Chicago, IL.

For Plaintiffs-Appellees: John S. Vishneski, III, Stanley Nardoni, Jessica E. Brown, Reed Smith LLP, Chicago, IL.

PRESIDING JUSTICE SIMON delivered the judgment of the court, with opinion. Justices Neville and Pierce concurred in the judgment and opinion.

OPINION

Page 423

SIMON, PRESIDING JUSTICE

[¶1] At issue in this case is whether defendants, plaintiffs' former insurers, have a duty to defend plaintiffs in a multitude of cases brought by individuals that were allegedly injured as a result of exposure to harmful materials while welding or engaging in other building or maintenance activities. The trial court found that defendants have a duty to defend and that they should bear the entire cost. We agree and, accordingly, we affirm.[1]

[¶2] BACKGROUND

[¶3] Plaintiffs Illinois Tool Works Inc. and ITW Finishing LLC (collectively, Illinois Tool) are companies engaged in the manufacture and distribution of tools, equipment, finishing systems, and consumables. Defendants Travelers Casualty & Surety Company and Century Indemnity Company (collectively, Insurers) are companies in the insurance business that issued policies to Illinois Tool as early as 1971, but no later than 1987. In the late 1980s, Illinois Tool endeavored to expand its product line through a series of acquisitions. One market Illinois Tool entered was the distribution of welding products, beginning with its acquisition of Miller Electric in 1993. It is undisputed that Illinois Tool was not involved in the welding product market prior to its acquisition of Miller Electric.

[¶4] The underlying suits are toxic tort cases alleging that the plaintiffs therein were injured as a result of exposure to asbestos, benzene, manganese, and other harmful materials. The suits broadly allege that certain companies are liable and the typical case names dozens of companies as defendants. Illinois Tool is named in different capacities in the underlying cases: individually, as a successor in interest to the welding companies it later acquired, or both. Illinois Tool has been successful in getting the claims against it dismissed or obtaining summary judgment on the basis that it was not in the welding consumable business before 1993.

[¶5] This dispute concerns 10 policies issued to insure Illinois Tool for certain periods between 1971 and 1987. The policies contain different language, but each covers Illinois Tool for claims resulting from bodily injury. All policies also contain a provision that requires the Insurers to defend Illinois Tool in any suit brought against it for bodily injury even if the

Page 424

allegations of the suit are false or groundless. The parties do not currently dispute whether the injuries alleged in the underlying welding cases would be of the type covered by the policy. Instead, the Insurers argue that they cannot be liable because the last policy they issued expired in 1987 and Illinois Tool did not enter the welding product market until 1993.

[¶6] Illinois Tool filed an action in the Circuit Court of Cook County seeking, among other things, a declaration that the Insurers owed it a duty to defend the underlying suits. The Insurers filed counterclaims. The parties proceeded to file cross-motions for summary judgment on the duty to defend issue. In a 41-page written order, the trial court found in favor of Illinois Tool. The trial court subsequently entered an order pursuant to Illinois Supreme Court Rule 304(a) indicating that there was no just reason for delaying enforcement or appeal of its summary judgment order. This appeal followed.

[¶7] ANALYSIS

[¶8] We review the grant of summary judgment de novo. Cook v. AAA Life Insurance Co., 2014 IL App. (1st) 123700, ¶ 24, 382 Ill.Dec. 607, 13 N.E.3d 20. Summary judgment is appropriate when the pleadings, depositions, admissions and affidavits, viewed in a light most favorable to the nonmovant, fail to establish a genuine issue of material fact, thereby entitling the moving party to judgment as a matter of law. 735 ILCS 5/2-1005 (West 2012); Progressive Universal Insurance Co of Illinois. v. Liberty Mutual Fire Insurance Co., 215 Ill.2d 121, 127-28, 828 N.E.2d 1175, 293 Ill.Dec. 677 (2005). If disputes as to material facts exist or if reasonable minds may differ with respect to the inferences drawn from the evidence, summary judgment may not be granted. Associated Underwriters of America Agency, Inc. v. McCarthy, 356 Ill.App.3d 1010, 1016-17, 826 N.E.2d 1160, 292 Ill.Dec. 724 (2005). However, when parties file cross-motions for summary judgment, they agree that no genuine issues of material fact exist and that the dispute involves only questions of law, which the court may decide based on the record. Progressive Insurance Co. v. Universal Casualty Co., 347 Ill.App.3d 10, 17, 807 N.E.2d 577, 282 Ill.Dec. 953 (2004).

[¶9] The construction of an insurance policy and the determination of the parties' rights and obligations thereunder are questions of law. Cook, 2014 IL App. (1st) 123700, ¶ 24. To determine whether an insurer has a duty to defend the insured, a court must compare the allegations in the underlying complaint to the relevant provisions of the insurance policy. G.M. Sign, Inc. v. State Farm Fire & Cas. Co., 2014 IL App. (2d) 130593, ¶ 25, 385 Ill.Dec. 70, 18 N.E.3d 70. When determining whether an insurer has a duty to defend an insured, the allegations in the underlying complaint must be liberally construed in favor of coverage. Id. The duty to defend is broader than the duty to indemnify. American Country Insurance Co. v. Cline, 309 Ill.App.3d 501, 512, 722 N.E.2d 755, 242 Ill.Dec. 971 (1999). An insurer's refusal to defend an insured is justified only if it is clear from the face of the underlying complaint that the allegations fail to state facts which bring the cause within or potentially within coverage. Rosalind Franklin Univ. of Med. & Sci. v. Lexington Ins. Co., 2014 IL App. (1st) 113755, ¶ 80, 380 Ill.Dec. 89, 8 N.E.3d 20. When the underlying complaint alleges facts within or potentially within the policy's coverage, the insurer's duty to defend arises even if the allegations are groundless, false, or fraudulent. Ill. Emcasco Ins. Co. v. Waukegan

Page 425

Steel Sales, Inc., 2013 IL App. (1st) 120735, ¶ 12, 996 N.E.2d 247, ...


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