Ill. Tool Works Inc. v. Travelers Cas. & Sur. Co.

• Decision Date: 13 January 2015
• Docket Number: No. 1–13–2350.,1–13–2350.
• Parties: 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.
• Court: United States Appellate Court of Illinois

26 N.E.3d 421

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.

No. 1–13–2350.

Appellate Court of Illinois, First District, Second Division.

Jan. 13, 2015.

Clifton S. Elgarten, Paul W. Kalish, Jennifer R. Devery, and Kelly H. Tsai, all of Crowell & Morning LLP, of Washington, D.C., and Brian C. Coffey, of Cohn Baughman & Martin, and Robert C. Johnson and Daniel E. Feinberg, both of Dentons US, LLP, both of Chicago, for appellants.

John S. Vishneski III, Stanley Nardoni, and Jessica E. Brown, all of Reed Smith LLP, of Chicago, for appellees.

OPINION

Presiding Justice SIMON

delivered the judgment of the court, with opinion.

¶ 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 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, 293 Ill.Dec. 677, 828 N.E.2d 1175 (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, 292 Ill.Dec. 724, 826 N.E.2d 1160 (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, 282 Ill.Dec. 953, 807 N.E.2d 577 (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, 382 Ill.Dec. 607, 13 N.E.3d 20

. 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 & Casualty 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, 242 Ill.Dec. 971, 722 N.E.2d 755 (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 University of Medicine & Science v. Lexington Insurance 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. Illinois Emcasco Insurance Co. v. Waukegan Steel Sales Inc.,

2013 IL App (1st) 120735, ¶ 12, 374 Ill.Dec. 800, 996 N.E.2d 247.

¶ 10 The Insurers argue that they have no duty to defend because there are no allegations made in the underlying complaints that Illinois Tool caused injuries to any underlying plaintiff during the periods covered by their policies. That assertion is incorrect. While it is clear from the record, and the parties do not dispute, that Illinois Tool is unlikely to actually be found liable in the underlying suits, that question is not before us. Our inquiry must focus on whether the facts pled by the underlying plaintiffs, if true, would potentially bring the claims within coverage. Lorenzo v. Capitol Indemnity Corp., 401 Ill.App.3d 616, 619, 340 Ill.Dec. 677, 928 N.E.2d 1274 (2010)

; Illinois Emcasco, 2013 IL App (1st) 120735, ¶ 12, 374 Ill.Dec. 800, 996 N.E.2d 247. We must even consider false and groundless allegations. Id. When we analyze the underlying complaints under that standard, it is clear that the Insurers have a duty to defend.

¶ 11 Throughout the proceedings in the trial court, the parties relied upon representative examples of the underlying complaints rather than insisting on an examination of thousands of complaints. To some extent, the parties continue that process in their appellate briefs. However, the parties do not clearly set forth which underlying complaints in the appellate record are considered representative examples of the different categories of complaints. Accordingly, we have examined the complaints that are attached as exhibits to Illinois Tool's fifth amended complaint, the complaints discussed in the parties' briefs, and a number of other complaints that are in the record.

¶ 12 Also during the trial court proceedings, the parties categorized the underlying complaints as follows: (1) complaints with no exposure dates; (2) complaints with first exposure prior to 1972; (3) complaints with first exposure between 1972 and 1976; and (4) complaints with first exposure between 1976 and 1987. In this appeal, the parties do not consistently adhere to a categorization scheme that is conducive to explaining their respective duties. After examining the record, we have determined that we can best address the merits of this appeal by dividing the underlying complaints into groups based on whether they contain allegations of: (1) direct liability with exposure dates during a policy period; (2) direct liability with unstated injury or exposure dates; (3) pure successor-in-interest liability claims; and (4) a combination of direct liability and successor-in-interest claims. We will address the parties' arguments concerning allocation where it is warranted.

¶ 13 Direct Liability Claims, Exposure During a Policy Period

¶ 14 The first category of complaints we address is the group in which the underlying plaintiff alleges that he was exposed to an Illinois Tool product during at least some point within a relevant policy's period.

¶ 15 In Steinberg v. BP Amoco Chemical Co. , No. 05 L 857 (Cir. Ct. Madison Co.), the plaintiffs named Illinois Tool individually as a defendant. Steinberg specifically alleges that he was “exposed to and inhaled, ingested or otherwise absorbed benzene which was contained in products which were designed,...