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Velsicol Chemical, LLC v. Westchester Fire Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

September 7, 2017

VELSICOL CHEMICAL, LLC, Plaintiff,
v.
WESTCHESTER FIRE INSURANCE COMPANY, as successor in interest to INTERNATIONAL INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER

          AMY J. ST. EVE United States District Court Judge

         On March 25, 2015, Plaintiff Velsicol Chemical, LLC filed a Complaint seeking contractual damages and to enforce its rights to defense and indemnity under an excess insurance policy, number 523 2388653 (the “Policy”), issued to it by International Insurance Company. Before the Court is Defendant Westchester Fire Insurance Company's Motion for Summary Judgment on all remaining counts in Plaintiff Velsicol Chemical, LLC's Complaint for contractual damages and declaratory judgment. (R. 76.)[1] For the following reasons, the Court denies Defendant's motion. (R. 76.)

         BACKGROUND

         Velsicol is a limited liability company with its principal place of business in Rosemont, Illinois. (R. 78, Def's 56.1(a)(3) Stmt. of Facts, at ¶ 2.) Until September 30, 2008, Velsicol was known as Velsicol Chemical Corporation. (Id. at ¶ 3.) International Insurance Company (“International”) issued the Policy to Velsicol for the period of January 1, 1983 to January 1, 1986. (Id. at ¶ 4.) Pursuant to an Assumption and Indemnity Reinsurance Agreement effective January 1, 1993, the Policy was reinsured by Westchester, with Westchester assuming all of the rights and obligations of International under the Policy. (Id. at ¶ 5.) Westchester is a Pennsylvania corporation that conducted business within the State of Illinois at all relevant times. (Id.)

         I. The Policy

         During the pertinent time period, Velsicol had two underlying primary comprehensive general liability insurance policies. For the period from January 1, 1983 through January 1, 1985, the comprehensive general liability insurance policy was Transportation Insurance Company Policy No. MAN 007 436 945, which had a $1, 000, 000 per occurrence limit. (R. 1, Compl. at ¶ 14.) For the period from January 1, 1985 through January 1, 1986, the comprehensive general liability insurance policy was Transportation Insurance Company Policy No. CCP 001 702094, which had a $1, 000, 000 per occurrence limit. (Id. at ¶ 15.) Under the terms of the Policy, Westchester is not responsible for claims until the underlying primary coverage is exhausted. (R. 60, Pl's 56.1(b)(c)(3) Stmt. of Facts, at ¶ 25.)

         The Policy defines the following relevant terms, in pertinent part, as follows:

         A. Occurrence

         With respect to Coverage 1(a) and 1(b) “occurrence” means either an accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to persons or tangible property during the policy period. All damages arising out of such exposure to substantially the same general conditions are to be considered as arising out of one occurrence. (R. 1-1, Policy at p. 25-26.)

         B. Notice of Occurrence

         Upon the happening of an occurrence reasonably likely to involve the company hereunder, written notice shall be given as soon as practicable to the company or any of its authorized agents. Such notice shall contain particulars sufficient to identify the insured and the fullest information obtainable at the time.

         The Insured shall give like notice of any claim made on account of such occurrence. If legal proceedings are begun the insured, when requested by the company, shall forward to it each paper thereon, or a copy thereof, received by the insured or the insured's representatives, together with copies of reports of investigations made by the insured with respect to such claim proceedings.

         (R. 1-1, Policy at p. 27 at ¶ D.)

         C. Personal Injury

         “Personal injury” means (a) bodily injury, sickness, disease disability, shock, mental anguish and mental injury; (b) false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution or humiliation; (c) libel, slander, defamation of character or invasion of rights of privacy, unless arising out of any advertising activities; (d) discrimination not committed by or at the direction of the insured; and (e) assault and battery not committed by or at the direction of the insured, unless committed for the purpose of protecting the property of the insured or the person or property of others. (R. 1-1, Policy at p. 25.)

         D. Property Damage

         “Property damage” means physical injury to, destruction of or loss of use of property. (R. 1-1, Policy at p. 25.)

         E. Products Hazard

         “Products Hazard” means (a) the handling or use of or the existence of any condition in or a warranty of goods or products manufactured, sold, handled, or distributed by the named insured or by others trading under its name, if the occurrence happens away from premises owned by, rented to or controlled by the named insured; provided such goods or products shall be deemed to include any container, thereof, other than a vehicle, but shall not include any vending machine or any property, other than such container rented to or located for use of others not sold; or (b) operations, if the occurrence happens after such operations have been completed or abandoned and happens away from premises owned by, rented to or controlled by the named insured; provided further, the following shall not be deemed to be “operations” within the meaning of this paragraph: (aa) pick-up or delivery except from or onto a railroad car, (bb) the maintenance of vehicles owned or used by or on behalf of the insured, (cc) the existence of tools, uninstalled equipment and abandoned or unused materials. (R. 1-1, Policy at p. 25 at ¶ 6.)

         F. Pollution Exclusion

         This policy shall not apply: . . . (e) under Coverage 1(a) or 1(b) to liability arising out of the discharge dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gasses, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, discharge dispersal, release or escape is sudden and accidental. (R. 1-1, Policy at p. 26 at ¶ (e).)

         Part I of this policy does not apply: . . . (h) to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gasses, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; course or body of water, but this exclusion does not apply if such discharge, discharge dispersal, release or escape is sudden and accidental. (R. 1-2, Gen. Liability Policy at p. 14 at ¶ (h).)

         II. Factual Background

         On October 15, 1998, Velsicol filed a Second Amended Complaint in the Circuit Court of Cook County captioned “Fruit of the Loom, Inc. and Velsicol Chemical Corporation v. Admiral Insurance Company, et al., ” (the “Illinois State Court Action”), against International, among others. (R. 78, Def's 56.1(a)(3) Stmt. of Facts, at ¶ 6.) In the Illinois State Court Action, Velsicol alleged claims for declaratory judgment and/or breach of contract against, among others, International and sought defense and indemnity coverage under the Policy for numerous sites, including certain sites at issue in this suit. (Id. at ¶ 7.) The sites at issue in the present suit and the Illinois State Court Action are: (a) Chattanooga Site (Counts VI and XIV of the present suit); (b) Marshall Site (Count VIII of the present suit); (c) Mathis Shaver's Farm Site (Count IX of the present suit); (d) Mathis Marble Top Site (Counts X and XV of the present suit); and (e) Memphis Site (Counts XI and XVI of the present suit). (Id.)

         A. Adame Case

         The plaintiffs in the Adame Case alleged that they were exposed to various dangerous neurotoxic, developmental, mutagenic, and carcinogenic toxins that had been applied to the vegetation and soil at various times over a period of time from 1921 until 2003 at a site located at 90 North Winchester Boulevard, San Jose, California. (Id. at ¶ 77.)

         B. Shenkel Case

         In 2008, Velsicol was sued in the State of California in a case captioned “Shenkel v. Velsicol, ” (the “Shenkel Case”). (Id. at ¶ 8.) The plaintiff in the Shenkel Case alleged that he was exposed to, and injured by, chemicals manufactured, sold, and distributed by Velsicol. (Id. at ¶ 9.) Velsicol first became aware of the Shenkel Case when it was filed. (Id. at ¶ 10.) Velsicol's corporate witness testified that Velsicol would have given notice to Westchester at that time but did not recall seeing a Velsicol document doing so. (Id. at ¶ 11.) Velsicol's corporate witness did testify that he had seen internal memos from International, showing that they were aware of the litigation. (R. 79-5, Orlando Declaration, Exh. D Harvell Dep. at 290: 18-24.)

         C. Acevedo Case

         In 2001, Velsicol was added as a defendant in a Texas suit against Union Pacific captioned “Acevedo, et al., v. Union Pacific, et al.” (R. 78, Def's 56.1(a)(3) Stmt. of Facts, at ¶¶ 79-80.) The plaintiffs in the Acevedo Case alleged that they were exposed to various chemicals, including chlordane that was manufactured sold, or distributed by Velsicol, released at chemical storage sites, chemical formulation sites, and from distribution sites, owned, controlled or used by various defendants. (Id.)

         D. ...


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