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Rockhill Insurance Co. v. Carri Scharf Materials Co.

United States District Court, C.D. Illinois

December 5, 2019

CARRI SCHARF MATERIALS COMPANY, an Illinois corporation, Defendant.


          James E. Shadid United States District Judge.

         This matter is now before the Court on Plaintiff's Motion [34] for Judgment on the Pleadings. Defendant filed a response [38] and the matter is ripe for disposition. For the reasons set forth below, Plaintiff's Motion is GRANTED.


         Plaintiff, Rockhill Insurance Company (“Rockhill”), brought this action against Defendant, Carri Scharf Materials Company (“Scharf”), seeking a declaratory judgment that Rockhill owes no duty to defend or indemnify Scharf under the commercial general liability policies issued to Scharf from September 1, 2014 to September 1, 2018 for the case People of the State of Illinois v. Carri Scharf Materials Company, No. 12-CH-320, Circuit Court of Peoria County, Illinois (“Underlying Complaint”).

         Scharf is a concrete aggregate mineral and mining operation, and the owner of a salt storage facility and barge unloading terminal. D. 38-1, at 3.[1] As part of its operations, Scharf conveys salt over the Illinois River levee from barges and then stockpiles the salt for future sale at a storage facility located in Bartonville, Peoria County, Illinois. Id.

         The State of Illinois (the “State”) filed the Underlying Complaint against Scharf in May 2012, which contained six counts: two counts of surface water pollution; one count for ground water contamination; two counts for failing to obtain necessary permits; and one count for failure to comply with a necessary permit. D. 38-1, at 4-5. It alleged generally that Scharf's conduct caused, threatened, or allowed the discharge of contaminants into the Illinois River, a nearby marsh, a runoff pond, a ditch and storm water resulting in pollution. Id. On various dates between 2008 and 2011, the Illinois Environmental Protection Agency (“IEPA”) inspected Scharf's storage facility, noting evidence of salt spillage into the river, salt pile runoff, and salt stockpiled and uncovered. Id. at 5-8. The IEPA also collected water samples from areas on or surrounding Scharf's property during that same period, with results indicating elevated levels of chloride concentrations and/or cyanide. Id. The Underlying Complaint further alleged Scharf did not obtain necessary permits for construction and industrial activities between 2008 and 2011. Id. at 7-8.

         From September 1, 2014 to September 1, 2018, Rockhill issued four commercial general liability policies (“Rockhill Policies”) to Scharf. Id. at 10. Subject to all terms, conditions and exclusions described in the policies, the Rockhill Policies provided “bodily injury” liability coverage, “property damage” liability coverage, and “personal injury” or “advertising injury” liability coverage. Id. at 11. The parties agree Rockhill owes no obligation to Scharf under the “bodily injury, ” “personal injury, ” or “advertising injury” coverages of the Rockhill Policies. Id. The parties do not agree as the “property damage” liability coverage. With regards to the “property damage” provisions of the Rockhill Policies, it provides in part that the insurance coverage applies to “property damage” that “occurs during the policy period.” Id. at 12.

         The Rockhill Policies contain exclusions for coverage, in relevant part, regarding pollution and pre-existing damage or injury. The “TOTAL POLLUTION EXCLUSION ENDORSEMENT” declares the Rockhill Policies do not apply to any “request, demand, order or statutory or regulatory requirement” to the insured to respond to assess the effects of “pollutants.” Id. at 14. The Rockhill Policies define “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Id. There is also a provision entitled “EXCLUSION - PRE-EXISTING DAMAGE OR INJURY”. Id. at 15. It states the insurance coverage does not apply to any property damage that occurred before the effective date of the policy, are alleged to be in the process of occurring as of the effective date, or are in the process of settlement, adjustment, or suit as of the effective date. Id.

         The Rockhill Policies also contain certain conditions (“Notice Conditions”) governing when the insured must notify Rockhill in the event of an occurrence or offense that may result in a claim or suit, or in the event that a claim or suit is filed against the insured. D. 38-1, at 17. The Notice Conditions state an insured must notify Rockhill “as soon as practicable” of any occurrence or offense which may result in a claim. Id. The insured must also notify Rockhill in writing “as soon as practicable” of any claim made or suit brought against the insured. Id. at 18. The insured must immediately send copies of any demands, notices, summonses, or legal papers to Rockhill. Id. Scharf notified Rockhill of the Underlying Complaint on May 21, 2018. Id. at 18.

         In March 2018, the Office of the Attorney General for the State of Illinois sent a letter to counsel for Scharf and Compass Minerals America, Inc., notifying them of its intent to amend the Underlying Complaint to include Morton Salt, Inc. (“Morton Salt”) and Compass Minerals America, Inc. D. 17-1, at 2. A copy of the letter was also sent to Morton Salt. Id. at 3. Morton Salt sent a letter to Scharf on April 23, 2018, demanding defense and indemnification in the State's action. D. 17-2, at 2. Scharf then sent Morton Salt's demand letter to Rockhill on May 21, 2018. D. 38, at 3.

         Legal Standard

         A judgment on the pleadings may be granted if the pleadings disclose no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Cincinnati Ins. Co. v. Allen, 347 F.Supp.2d 586, 589 (C.D. Ill. 2004). In this case, both parties agree on the material facts concerning the language in the Rockhill Policies and the Underlying Complaint. The parties also agree Illinois law should be applied to this case. See D. 35, at 10, and D. 38, at 2-3.

         “To determine whether an insurer has a duty to defend its insured, we compare the factual allegations of the underlying complaint … to the language of the insurance policy.” Amerisure Mut. Ins. Co. v. Microplastics, Inc., 622 F.3d 806, 810 (7th Cir. 2010). If the underlying complaint contains alleged facts within or potentially within the policy's coverage, the insurer's duty to defend arises. Id. The duty to defend is broader than the duty to indemnify, and a finding of no duty to defend precludes a finding of no duty to indemnify. Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing Ctr., Inc., 566 F.3d 689, 693 (7th Cir. 2009).

         Notice provisions within insurance policies impose valid prerequisites to coverage. W . Am. Ins. Co. v. Yorkville Nat. Bank, 238 Ill.2d 177, 185 (2010); Williams v. BNSF Ry. Co., 2015 IL App (1st) 121901-B, P37, 29 N.E.3d 1097, 1105. A policy provision requiring notice “as soon as practicable” means notice must be given “within a reasonable time.” Yorkville, 238 Ill.2d at 185. The timeliness of the notice given is generally a question of ...

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