Emerson Elec. Co. v. Aetna Cas. & Sur. Co.

• Decision Date: 30 August 2004
• Docket Number: No. 1-02-3661.,1-02-3661.
• Citation: 815 N.E.2d 924,352 Ill. App.3d 399,287 Ill.Dec. 280
• Parties: EMERSON ELECTRIC COMPANY et al., Plaintiffs-Appellants, v. AETNA CASUALTY AND SURETY COMPANY et al., Defendants-Appellees.
• Court: United States Appellate Court of Illinois

815 N.E.2d 924

352 Ill. App.3d 399

287 Ill.Dec. 280

EMERSON ELECTRIC COMPANY et al., Plaintiffs-Appellants, v. AETNA CASUALTY AND SURETY COMPANY et al., Defendants-Appellees.

No. 1-02-3661.

Appellate Court of Illinois, First District, First Division.

August 30, 2004.

Rehearing Denied August 18, 2004.

Stephan G. Weil, Mark H. Kolman, Keisha A. Gary, and Erica J. Dominitz, of Dickstein Shapiro Morin & Oshinsky, L.L.P., Washington, D.C.; Kevin M. Forde, of Kevin M. Forde, Ltd., Chicago, for Appellants.

Maria G. Enriquez and Nina Markoutsis, of Bates & Carey, Chicago, for Appellee Republic Insurance Company.

Justice GORDON delivered the opinion of the court:

This appeal arises from ongoing complex litigation pending in the circuit court of Cook County. In 1993, Emerson Electric Co. (Emerson) and 15 of its subsidiaries brought an action for declaratory judgment¹ against 57 separate insurance carriers. Plaintiffs sought a determination that the insurers owed them coverage under comprehensive general liability (CGL) insurance policies purchased by Emerson for liabilities incurred as a result of damage to the environment at 64 sites located in 26 different states. The numbers of parties and sites have since been reduced, primarily through settlements and dismissals.² Republic Insurance Company (Republic) is the only insurer party to this appeal.³

In January of 2001, we considered an earlier appeal brought by plaintiffs and found that Missouri law applies to the interpretation of the insurance policies at issue.⁴ Our ruling, in relevant part, reversed an interlocutory order in favor of Republic concerning the site in Hatfield, Pennsylvania, reversed certain grants of summary judgment in favor of Republic concerning plaintiffs' claims for coverage with respect to sites in Maysville, Kentucky; Erie and York, Pennsylvania; and Dixiana, South Carolina, and remanded the matter for further proceedings.

On remand, the trial court regranted summary judgments in favor of Republic with respect to plaintiffs' claims for coverage for polluted sites located in Erie and Hatfield, Pennsylvania, and Dixiana, South Carolina. The court also granted summary judgments in favor of Republic with respect to polluted sites not implicated in the prior appeal, which were located in Vernon, Alabama; Shreveport, Louisiana; Philadelphia, Mississippi; and Melville, New York. Plaintiff Emerson and its subsidiaries, Ridge Tool Company, Therm-O-Disc Inc., Wiegand Appliance, Poulan/Weed Eater, U.S. Electrical Motors, McPhilben Lighting Company and Brooks Instruments (hereinafter referred to collectively as plaintiffs), now appeal. For the reasons that follow, we affirm in part, and reverse and remand in part.

BACKGROUND

The facts of this case were set out in detail in our opinion deciding the previous appeal in this matter in Emerson Electric Co. v. Aetna Casualty & Surety Co., 319 Ill.App.3d 218, 252 Ill.Dec. 761, 743 N.E.2d 629 (2001) (hereinafter Emerson I). Therefore, we will only focus on the facts relevant to this appeal.

There are two categories of polluted sites at issue on this appeal: (1) two third-party waste disposal sites (third-party sites or waste disposal sites), with respect to which plaintiffs are seeking insurance coverage for costs associated with investigation and remediation of the sites, and (2) five sites owned by plaintiffs (owned sites), with respect to which plaintiffs are seeking insurance coverage for pollution arising out of manufacturing activities.

Republic had issued two excess CGL policies to Emerson in connection with those sites. Policy No. CDU15502 (the 1983-84 policy) was effective from November 1, 1983, to November 1, 1984, and Policy No. CDU16724 (the 1984-85 policy) was effective from November 1, 1984, to November 1, 1985. The 1983-84 policy contains the following relevant language:

"I. COVERAGES:

To indemnify the Insured for all sums which the Insured shall be obligated to pay by reason of the liability imposed upon him by law or liability assumed by him under contract or agreement for damages, and expenses, all as included in the definition of `ultimate net loss,' because of:

* * * (b) [p]roperty damage * * * as defined herein and caused by or arising out of an occurrence[.]

II. DEFINITIONS:

* * *

10. Occurrence.

The term `occurrence' shall mean (a) an accident, or (b) an event, or continuous or repeated exposure to conditions, which results during the policy period, in personal injury, property damage, or advertising liability * * * neither expected nor intended from the standpoint of the Insured.

POLLUTION EXCLUSION

It is agreed that this policy does not apply to liability for personal injury or property damage arising out of the discharge, dispersal, release, escape or seepage of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste material, or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water, unless such discharge, dispersal, release or escape is accidental." (Emphasis added.)

With respect to the foregoing pollution exclusion, Emerson had requested and paid consideration for deletion of the words "sudden and" from the standard-form "sudden and accidental" exception to that exclusion, resulting in the language stated above in italics, which only utilizes the term "accidental." The 1984-85 policy contains the same relevant language as the 1983-84 policy, with the only difference being that its exception to the pollution exclusion contains the standard-form language "sudden and accidental."

In Emerson I, we held, in pertinent part, that: (1) Missouri law must be applied to determine defendants' coverage obligations regardless of the location of the site; (2) under Missouri law, the standard-form "sudden and accidental" language of the exception to the pollution exclusion means both abrupt and unexpected and precludes coverage for property damage caused by gradual, nonabrupt releases of pollutants; (3) under Missouri law, the amended "accidental" language of the exception to the pollution exclusion means unexpected and does not preclude coverage for property damage caused by gradual, nonabrupt releases of pollutants; (4) under Missouri law, in determining whether the pollution was accidental, the focus is on the resulting damage, as opposed to the initial discharge or shipment of pollutants, and whether the resulting damage was intentional; and (5) under Missouri law, plaintiffs' showing of an "exposure to conditions" resulting in continuing damage to property during the policy period satisfies the initial burden of proving an "occurrence,"⁵ as defined in the policies at issue; plaintiffs need not identify a specific event or release which caused the exposure to conditions. Emerson I, 319 Ill.App.3d at 241, 243, 244-46, 253-54, 252 Ill.Dec. 761, 743 N.E.2d at 646, 647, 648-50, 655. As noted, the matter was remanded for further proceedings.

On remand, the trial court granted summary judgments in favor of Republic concerning the two third-party waste disposal sites based on the lack of "occurrence" as it is defined in the 1983-84 policy,⁶ discussed more fully below. the court also gRanted summary judgments in favor of Republic concerning the owned sites based on the 1984-85 policy's standard-form "sudden and accidental" exception to the pollution exclusion and the 1983-84 policy's customized "accidental" exception to the pollution exclusion, as detailed, respectively, below. Notably, in granting summary judgments with respect to the owned sites, the trial court, in contrast to its focus in determining coverage as to the third-party sites, did not look to the definition of "occurrence" but, rather, looked to the language of the pollution exclusion as precluding coverage because it found the pollution at the owned sites not "accidental," irrespective of whether or not the discharges were "sudden."

The Third-Party Sites'"No Occurrence" Judgments

Plaintiffs moved for partial summary judgment on the issue of coverage under the 1983-84 policy with respect to the liabilities for the Pennsylvania and South Carolina third-party sites. In response, Republic cross-moved for summary judgment on the basis of several defenses, one of which being that plaintiffs either expected or intended the damage at the two third-party sites. The essential facts concerning each third-party site are as follows.

1. The Erie, Pennsylvania, Waste Disposal Site

From 1973 to 1981, Urick Foundry (Urick), a division of Emerson's Ridge Tool Company (Ridge Tool) located in Erie, Pennsylvania, hired a licensed local hauler, Sitter Trucking Company (Sitter), to dispose of Urick's foundry sand and other nonhazardous wastes at an off-site location to be selected by Sitter. Plaintiffs offered evidence that Urick expected and intended that Sitter would dispose of the wastes at a proper disposal facility and did not expect or intend the wastes to be discharged from a disposal facility or to cause damage to the environment.

However, Sitter commingled Urick's foundry sand along with other companies' wastes and improperly disposed of the wastes at the Erie, Pennsylvania, site, an unlicensed landfill owned in part by Sitter. Plaintiffs offered evidence that Sitter's actions were unknown to Urick and contrary to its expectation and intention, that Sitter did not inform Urick that it was hauling Urick's foundry sand to the site, and that none of the shipping records indicate where Sitter was hauling the sand.

The landfill in question, known as the Millcreek Landfill, was operated from 1941 until it was closed by the State of Pennsylvania in 1981, subsequent to the state's discovery that it was being illegally operated. In 1982, pursuant to its Superfund authority, the United States Environmental Protection Agency (the EPA) conducted an investigation of soil, sediment, groundwater and surface water contamination at the site. The tests...