Outboard Marine Corp. v. Liberty Mut. Ins. Co.

• Decision Date: 04 December 1992
• Docket Number: Nos. 71753,71761,s. 71753
• Citation: 154 Ill.2d 90,607 N.E.2d 1204,180 Ill.Dec. 691
• Parties: , 180 Ill.Dec. 691, 36 ERC 1188, 61 USLW 2391 OUTBOARD MARINE CORPORATION, Appellant and Cross-Appellee, v. LIBERTY MUTUAL INSURANCE COMPANY et al. (Liberty Mutual Insurance Company, Appellee and Cross-Appellant).
• Court: Illinois Supreme Court

Page 1204

607 N.E.2d 1204

154 Ill.2d 90, 180 Ill.Dec. 691, 36

ERC 1188, 61 USLW 2391

OUTBOARD MARINE CORPORATION, Appellant and Cross-Appellee, v. LIBERTY MUTUAL INSURANCE COMPANY et al. (Liberty Mutual Insurance Company, Appellee and Cross-Appellant).

Nos. 71753, 71761.

Supreme Court of Illinois.

Dec. 4, 1992.

Rehearing Denied Feb. 1, 1993.

[180 Ill.Dec. 694] Louis W. Brydges, Sr., and Leslie A. Peterson, Brydges, Riseborough, Morris, Franke & Miller, Waukegan, Thomas W. Johnson, Jr., and Michael G. Ermer, of Irell & Manella, Newport Beach, CA, and Richard Kissel, Gardner, Carton & Douglas, Chicago, for appellant and cross-appellee Outboard Marine Corporation

James P. Whitters III, Kim V. Marrkand, Anthony A. Bongiorno and Jeffrey W. Kobrick, of Gaston & Snow, Boston, MA and Paul S. Chervin and Linda E. Spring, Wildman, Harrold, Allen & Dixon, Waukegan, for appellee and cross-appellant Liberty Mutual Insurance Co.

Jay V. Krafsur and Jeffrey L. Kaser, Rivkin, Radler & Kremer, Chicago, for appellee Commercial Union Insurance Co.

Margaret J. Orbon, Clausen, Miller, Gorman, Caffrey & Witous, P.C., Chicago, and Paul R. Koepff, John L. Altieri, Jr., and Aaron F. Fishbein, Mudge, Rose, Guthrie, Alexander & Ferdon, of New York City, for appellee Insurance Company of North America.

Mary Beth Denefe, Audrey S. Hanrahan and Eileen N. Miller, Haskell & Perrin, Chicago, and Lorraine M. Armenti and Gary S. Kull, McElroy, Deutsch & Mulvaney, Morristown, NJ, for appellee International Insurance Co.

Gleason, McGuire & Shreffler, Chicago (Philip J. McGuire and Charles L. Philbrick, of counsel), for appellee Northbrook Insurance Co.

Robert A. Creamer, John S. Vishneski III, Michael J. Hughes and Todd G. Zimmerman, Keck, Mahin & Cate, Chicago, for amicus curiae Rust-Oleum Corporation.

James T. Price, Stephanie A. Mathews and Thomas J. Wilcox, Spencer, Fane, Britt & Browne, Kansas City, MO, and Kevin M. Forde and Katrina Veerhusen, Chicago, for amici curiae Illinois Manufacturers' Association et al.

Robert L. Graham, John H. Mathias, Jr., Barry Sullivan, Thomas C. Buchele and John D. Schugrue, Jenner & Block, Chicago, for amici curiae Peoples Gas Light & Coke Co. et al.

Thomas W. Brunner, Robert B. Bell and Stephen D. Goldman, Wiley, Rein & Fielding, Washington, DC, and Terry Rose Saunders, Susman, Saunders & Buehler, Chicago, for amicus curiae Insurance Environmental Litigation Association.

Lord, Bissell & Brook, Chicago (John B. Haarlow, Stephen M. Murray, Daniel I. Schlessinger and Diane I. Jennings, of counsel), and Peterson & Ross, Chicago (Richard L. Blatt, Larry R. Eaton and Brian A. Frankl, of counsel), for amicus curiae John Richard Ludbrook Youell.

Terry Rose Saunders, Susman, Saunders & Buehler, Chicago, for amici curiae Bituminous Casualty Corporation et al. and amici curiae Western States Insurance Co. et al.

Martha Churchill, Chicago, and Eugene R. Anderson, Jordan S. Stanzler and Michael R. Magaril, Anderson, Kill, Olick & Oshinsky, PC, of New York City, for amicus curiae Mid-America Legal Foundation.

Patrick E. Maloney, Tressler, Soderstrom, Maloney & Priess, Chicago, for amici curiae Lumbermens Mutual Casualty Co. et al. Justice BILANDIC delivered the opinion of the court:

This consolidated appeal involves a coverage dispute between the plaintiff-insured, Outboard Marine Corporation (OMC), and its primary and excess insurance carriers, Liberty Mutual Insurance Company (Liberty Mutual), Commercial Union Insurance Company (Commercial Union), Insurance Company of North America (INA), International Insurance Company (International), and Northbrook Insurance Company (Northbrook). The coverage dispute between the parties originated when the United States Environmental Protection Agency (EPA) and the State of Illinois (collectively, governmental agencies) brought separate actions against OMC, both seeking redress from OMC for the discharge of polychlorinated byphenyls (PCBs) into the North Ditch, Waukegan Harbor, and Lake Michigan (underlying actions). OMC tendered the defense of the underlying actions to its insurers pursuant to comprehensive general liability (CGL) insurance policies which OMC had purchased from the insurers. The insurers, however, refused to defend OMC, alleging that the underlying actions were not covered under the CGL policies. As a result, OMC was forced to defend itself against the governmental agencies' complaints, incurring substantial defense costs. OMC eventually negotiated and entered into a consent decree with the governmental agencies under the terms of which OMC was required to make payments into a trust fund for the costs associated with the cleanup of these bodies of water.

Due to its insurers' refusal to defend it, OMC instituted this declaratory judgment action against its insurers in the circuit court of Lake County seeking: (1) a declaration that its primary insurers had a duty to defend OMC in the underlying actions; (2) reimbursement from these insurers of the costs it incurred in defending itself against the underlying actions; (3) a declaration that all of its insurers have a duty to indemnify OMC; (4) indemnity with respect to all sums it is required to pay because of property damage to the bodies of water; and (5) its costs and attorney fees for the declaratory action presently before us. Several amici curiae have submitted briefs in support of the parties before us. This court has received briefs in support of OMC from amici Rust-Oleum Corporation, Peoples Gas, Light & Coke Company, Illinois Manufacturers' Association, and Mid-America Legal Foundation. We have also received amicus briefs in support of the insurers from, among others, Insurance Environmental Litigation Association, John Richard Youell, Bituminous Casualty Insurance Company, Lumbermens Mutual Casualty Company, Western States Insurance Company, and Transamerica Insurance Company. We note at this juncture that OMC is only seeking coverage from its insurers for the contamination of Waukegan Harbor and Lake Michigan. OMC has assumed complete liability for the contamination of the North Ditch. Therefore, our discussion will entail only the alleged contamination of Waukegan Harbor and Lake Michigan: the contamination for which OMC now seeks coverage.

After initiating this declaratory action, OMC moved for partial summary judgment against Liberty Mutual, Commercial Union, and INA, its primary insurers, on the issue of their duty to defend OMC in the underlying actions brought by the governmental agencies. OMC contended that these actions were "suits seeking damages" within the coverage language of the CGL policies' issued by these insurers. Liberty Mutual, Commercial Union, and INA cross-moved for summary judgment on this duty to defend issue, asserting that the underlying actions were not "suits seeking damages" because they prayed for equitable relief rather than compensatory damages.

Additionally, each defendant insurance company moved for full summary judgment as to its duties to defend and indemnify OMC. The defendants argued that coverage was clearly barred by the "pollution exclusion" provisions of their respective CGL policies. Alternatively, the defendant insurance carriers contended that the underlying actions were "known risks" to OMC at the time that their respective policies The circuit court granted OMC's motion for partial summary judgment on the "damages" issue against Liberty Mutual. In ruling on this motion, the circuit court found that the technical difference between equity and law was outdated and that the term "damages" was ambiguous. Therefore, the circuit court strictly construed this term against the insurers and in favor of coverage. In addition, the circuit court granted all insurers' motions for summary judgment based on their respective policies' "pollution exclusion" provisions. The circuit court also granted INA's motion for summary judgment on the basis of the "known risk" doctrine but denied the other insurers' motions based on this principle.

[180 Ill.Dec. 696] commenced and, therefore, were not covered by their policies.

The parties appealed the circuit court's summary judgment rulings which were adverse to them. Liberty Mutual appealed the circuit court's ruling in favor of OMC on the "suits seeking damages" issue. OMC appealed the circuit court's rulings in favor of the defendant-insurers based on their respective policies' "pollution exclusion" provisions. In addition, OMC and Commercial Union appealed the circuit court's rulings regarding the "known risk" doctrine.

The appellate court consolidated the appeals and affirmed the circuit court's ruling granting OMC's motion for partial summary judgment against Liberty Mutual on the "suits seeking damages" issue. (212 Ill.App.3d 231, 238-43, 156 Ill.Dec. 432, 570 N.E.2d 1154.) It also affirmed the circuit court's grant of the insurers' motions for summary judgment premised on their "pollution exclusion" provisions. (212 Ill.App.3d at 243-49, 156 Ill.Dec. 432, 570 N.E.2d 1154.) The appellate court, however, did not consider the propriety of the circuit court's rulings regarding the "known risk" principle. 212 Ill.App.3d at 251, 156 Ill.Dec. 432, 570 N.E.2d 1154.

We allowed Liberty Mutual's petition for leave to appeal. (134 Ill.2d R. 315.) Before this court, Liberty Mutual appeals from the appellate court's ruling that the underlying actions constitute "suits seeking damages" within the language of its CGL policies, thereby triggering Liberty Mutual's duty to defend OMC.

We also allowed OMC's petition for leave to appeal. (134 Ill.2d R. 315.) OMC contests the appellate court's holding that the "pollution exclusion" provisions of the defendants' respective CGL policies apply to the facts alleged in the underlying actions, thereby negating any coverage which may have otherwise arisen.

Additionally, all parties urge this court to address the circuit court's rulings regarding the "known risk" princip...