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United Conveyor Corp. v. Allstate Insurance Co.

Court of Appeals of Illinois, First District, Second Division

December 5, 2017

UNITED CONVEYOR CORPORATION, Plaintiff-Appellant,
v.
ALLSTATE INSURANCE COMPANY, as Successor in Interest to NORTHBROOK INSURANCE COMPANY, NORTHBROOK EXCESS AND SURPLUS INSURANCE COMPANY, and NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY; THE CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA; COLUMBIA CASUALTY COMPANY; FEDERAL INSURANCE COMPANY; TIG INSURANCE COMPANY, Formerly Known as INTERNATIONAL INSURANCE COMPANY; NATIONAL SURETY CORPORATION; and ST. PAUL SURPLUS LINES INSURANCE COMPANY, Defendants(The Travelers Indemnity Company; Travelers Casualty and Surety Company, Formerly Known as The Aetna Casualty and Surety Company, Defendants-Appellees.

         Appeal from the Circuit Court of Cook County, Illinois. No. 12 CH 30321HonorableFranklin U. Valderrama, Judge Presiding.

          JUSTICE MASON delivered the judgment of the court, with opinion. Justices Pucinski and Hyman concurred in the judgment and opinion.

          OPINION

          JUSTICE MASON

         ¶ 1 In this insurance declaratory judgment action, the insured, plaintiff United Conveyor Corporation (United), appeals the trial court's entry of summary judgment in favor of the insurers, defendants The Travelers Indemnity Company and Travelers Casualty and Surety Company (Travelers), claiming the trial court erred in finding that United's asbestos related losses resulted from the single occurrence of continuous manufacturing and selling ash-handling conveyor systems containing asbestos parts. The insurance policies carried a higher aggregate limit than the per-occurrence limit.[1] United claims that the asbestos losses should have been characterized as multiple occurrences because the asbestos exposure resulted from the separate installation and maintenance of the custom-designed conveyor systems. United also claims the trial court abused its discretion in denying United's motion for leave to amend its complaint after entry of summary judgment in Travelers' favor because the proposed amendment would have conformed the complaint to the arguments the parties raised during the summary judgment hearing and to the evidence adduced during discovery. Finding no error in the trial court rulings, we affirm.

         ¶ 2 BACKGROUND

         ¶ 3 Founded in 1920, United is a family owned engineering company. United's business consists of designing, manufacturing, and selling ash-handling conveyor systems for coal plants according to each customer's individual specifications. United's ash-handling conveyor systems remove ash and other byproducts from furnaces where coal is burned and transport the ash to holding tanks through pipes sealed with gaskets. The gaskets prevent ash from escaping into the air. United's customers installed, operated, and maintained each conveyor system. A United field engineer would, as needed, assist customers with the system's assembly, installation, initial operation, and maintenance, but United did not independently install and maintain the conveyor systems.

         ¶ 4 United designed each conveyor system according to its customer's specifications and supplied various component parts, including nuts, bolts, rivets, and cement used to assemble the system. From the 1930s to early 1984, United sold asbestos-containing gaskets manufactured by a third party that were used as a component in the conveyor system's assembly. In the 1930s, United also sold raw chysotile asbestos supplied by third parties and Lumnite cement that United's customers would mix with water to form asbestos cement. The cement was used on gaskets to create an airtight and heat-resistant seal between pipes in the conveyor systems. From the 1940s through 1979, United compounded and sold the brand name product "Nuvaseal" cement for use in the assembly, installation, and maintenance of the conveyor systems. United mixed asbestos fibers and Lumnite cement to form the Nuvaseal product, to which United's customers added water, forming the cement sealant. Nuvaseal was an ancillary component in the conveyor system.

         ¶ 5 Gaskets were used, as necessary, in the assembly of and as replacement parts for United's conveyor systems. Repairing a gasket involved chipping off hardened Nuvaseal. Not all of United's conveyor systems required asbestos containing products. Asbestos generally was a component in conveyor systems operating under high temperatures that required sealants to withstand the intense heat expelled from coal burners, but asbestos was unnecessary in systems operating at low temperatures.

         ¶ 6 From 1952 to 1977, Travelers issued United several primary-level comprehensive general liability and umbrella liability policies. Travelers issued 22 policies from December 3, 1952, to December 31, 1974, which had aggregate limits that were higher than the per-occurrence limits.[2]In these policies, the term "occurrence" was consistently defined as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury." The number of occurrences determined whether the policies' per-occurrence limits or higher aggregate limits applied.

         ¶ 7 Beginning in 1983, United was named as a defendant in thousands of lawsuits filed in multiple jurisdictions by individuals claiming to have sustained bodily injury allegedly from inhaling asbestos fibers from asbestos containing products in United's conveyor systems while installing, maintaining, or repairing the systems. Travelers defended United against the suits under a full reservation of rights. In particular, Travelers reserved the right to enforce the policies' applicable "limits of liability."

         ¶ 8 On January 21, 2009, United received a letter from Travelers, stating the insurer's position that "all of the primary policies issued by Travelers to United have been exhausted, " which United interpreted to mean that the policies' per-occurrence, and not the aggregate, limits applied. The record contains no contemporaneous writings reflecting United's disagreement with this position or its belief that, until 2009, Travelers treated the design and installation of each conveyor system as a separate occurrence.

         ¶ 9 More than three years later, on August 8, 2012, United filed a complaint, seeking a declaration that the asbestos claims constituted multiple occurrences, triggering the policies' higher aggregate limits and not the per-occurrence limits. United's complaint also included a breach of contract count, asserting that Travelers' treatment of the asbestos losses as a single occurrence breached the policies' terms and conditions.

         ¶ 10 After several years of litigation, United filed a motion for partial summary judgment, asserting that the underlying asbestos claims arose out of multiple occurrences-the installation and ongoing maintenance of each of the conveyor systems-and that Travelers breached the insurance policies by contending that the underlying asbestos claims arose from a single occurrence. United also asserted that Travelers waived and was estopped from asserting the argument that the underlying asbestos bodily injury claims constituted a single occurrence because Travelers failed to reserve its rights under the policies, given that it treated and defended United's asbestos losses as multiple occurrences for decades.

         ¶ 11 On March 13, 2015, Travelers cross-moved for summary judgment, asserting that the underlying asbestos claims arose from a single occurrence because they were based on United's continuous manufacture and sale of conveyor systems containing asbestos components. Travelers also asserted that United's waiver and estoppel claims were themselves waived because the claims were not included in United's complaint. United opposed Travelers' cross-motion for summary judgment, but United did not move to amend its complaint in response to Travelers' assertion that it was precluded from pursuing its waiver and estoppel claims because they were not pled in the complaint.

         ¶ 12 During the litigation, the parties stipulated that,

"[f]or purposes of determining the limit of [Travelers'] liability, all ...

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