Travelers Ins. Co. v. Eljer Mfg., Inc.

• Decision Date: 09 September 1999
• Docket Number: No. 1-98-2881, No. 1-98-2883.
• Citation: 241 Ill.Dec. 178,718 N.E.2d 1032,307 Ill. App.3d 872
• Parties: The TRAVELERS INSURANCE COMPANY OF ILLINOIS and The Travelers Indemnity Company, Plaintiffs, v. ELJER MANUFACTURING, INC., United States Brass Corporation, Liberty Mutual Insurance Company, and Highlands Insurance Company, Defendants. Gibraltar Casualty Company, Hartford Accident & Indemnity Company, and Allstate Insurance Company, successor in interest to Northbrook Excess and Surplus Insurance Company, formerly known as Northbrook Insurance Company, pursuant to merger effective January 1, 1985, Plaintiffs-Appellees, v. Eljer Manufacturing, Inc. and United States Brass Corporation, Defendants-Appellants (Liberty Mutual Insurance Company and Highlands Insurance Company, Defendants). National Surety Corporation, First State Insurance Company, Hartford Accident & Indemnity Company, and Old Republic Insurance Company, Plaintiffs-Appellees, v. Eljer Manufacturing, Inc. and United States Brass Corporation, Defendants-Appellants (Travelers Casualty & Surety Company, formerly known as Aetna Casualty & Surety Company; Allstate Insurance Company, successor in interest to Northbrook Excess and Surplus Insurance Company, formerly known as Northbrook Insurance Company, pursuant to merger effective January 1, 1985; Century Indemnity Company, successor to both CIGNA Specialty Insurance, formerly known as California Union Insurance Company, and CIC Insurance Company, successor to Insurance Company of North America; Constitution State Insurance Company; Continental Insurance Company, successor in interest to certain insurance policies issued by Harbor Insurance Company; Employers Mutual Casualty Company; Federal Insurance Company; Granite State Insurance Company; International Insurance Company; Lexington Insurance Company; National Union Fire Insurance Company of Pittsburgh, PA.; The North River Insurance Company; Royal Insurance Company; Stonewall Insurance Company; and Zurich International, Ltd., Defendants-Appellees, Highlands Insurance Company and Reliance Insurance Company of Illinois, Defendants). Century Indemnity Company, successor to CIGNA Specialty Insurance Company, formerly known as California Union Insurance Company, Plaintiff-Appellee, v. Eljer Industries, Inc.; Eljer Manufacturing, Inc., formerly known as Eljer Plumbingware, Inc.; United States Brass Corporation; and Household International, Inc., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

718 N.E.2d 1032

307 Ill. App.3d 872

241 Ill.Dec. 178

The TRAVELERS INSURANCE COMPANY OF ILLINOIS and The Travelers Indemnity Company, Plaintiffs, v. ELJER MANUFACTURING, INC., United States Brass Corporation, Liberty Mutual Insurance Company, and Highlands Insurance Company, Defendants.

Gibraltar Casualty Company, Hartford Accident & Indemnity Company, and Allstate Insurance Company, successor in interest to Northbrook Excess and Surplus Insurance Company, formerly known as Northbrook Insurance Company, pursuant to merger effective January 1, 1985, Plaintiffs-Appellees, v. Eljer Manufacturing, Inc. and United States Brass Corporation, Defendants-Appellants (Liberty Mutual Insurance Company and Highlands Insurance Company, Defendants).

National Surety Corporation, First State Insurance Company, Hartford Accident & Indemnity Company, and Old Republic Insurance Company, Plaintiffs-Appellees, v. Eljer Manufacturing, Inc. and United States Brass Corporation, Defendants-Appellants (Travelers Casualty & Surety Company, formerly known as Aetna Casualty & Surety Company; Allstate Insurance Company, successor in interest to Northbrook Excess and Surplus Insurance Company, formerly known as Northbrook Insurance Company, pursuant to merger effective January 1, 1985; Century Indemnity Company, successor to both CIGNA Specialty Insurance, formerly known as California Union Insurance Company, and CIC Insurance Company, successor to Insurance Company of North America; Constitution State Insurance Company; Continental Insurance Company, successor in interest to certain

insurance policies issued by Harbor Insurance Company; Employers Mutual Casualty Company; Federal Insurance Company; Granite State Insurance Company; International Insurance Company; Lexington Insurance Company; National Union Fire Insurance Company of Pittsburgh, PA.; The North River Insurance Company; Royal Insurance Company; Stonewall Insurance Company; and Zurich International, Ltd., Defendants-Appellees, Highlands Insurance Company and Reliance Insurance Company of Illinois, Defendants).

Century Indemnity Company, successor to CIGNA Specialty Insurance Company, formerly known as California Union Insurance Company, Plaintiff-Appellee, v. Eljer Industries, Inc.; Eljer Manufacturing, Inc., formerly known as Eljer Plumbingware, Inc.; United States Brass Corporation; and Household International, Inc., Defendants-Appellants.

Nos. 1-98-2881, 1-98-2883.

Appellate Court of Illinois, First District, Fourth Division.

September 9, 1999.

Freeborn & Peters, Chicago (Michael Freeborn & Michael Novak, of counsel); Hoyle Morris & Kerr LLP, Philadelphia, PA (R. Nicholas Gimbel, Elizabeth Fox & Kevin Kotch, of counsel), for Eljer and U.S. Brass.

Schiff Hardin & Waite, Chicago (Michael Brody & David Blickenstaff, of counsel); Clark & DeGrand, Chicago (Luke DeGrand, of counsel); Heller, Ehrman, White & McAuliffe, San Francisco, CA (Jonathan Hayden, of counsel), for Household.

Aronberg, Goldgehn, Davis & Garmisa, Chicago (Mitchell Goldgehn & James Smith, of counsel), for Allstate.

Crowell & Moring LLP, Washington, D.C. (Mark Plevin & Amy Mauser, of counsel); Cohn & Baughman, Chicago (William Cohn & Michael Baughman, of counsel), for Century Indemnity.

Presiding Justice HOFFMAN delivered the opinion of the court:

In these consolidated cases, Eljer Industries, Inc., Eljer Manufacturing, Inc., United States Brass Corporation, and Household International, Inc. appeal from orders of the circuit court of Cook County denying their motions for summary judgment and granting summary judgments determining certain insurance coverage issues in favor of: National Surety Corporation; Hartford Accident & Indemnity Company; First State Insurance Company; Old Republic Insurance Company; Travelers Casualty & Surety Company, formerly known as Aetna Casualty & Surety Company; Allstate Insurance Company, successor in interest to Northbrook Excess and Surplus Insurance Company, formerly known as Northbrook Insurance Company; Century Indemnity Company, successor to CIGNA Specialty Insurance Company, formerly known as California Union Insurance Company; Constitution State Insurance Company; Continental Insurance Company, successor in interest to certain policies of insurance issued by Harbor Insurance Company; Employers Mutual Casualty Company; Federal Insurance Company; Gibraltar Casualty Company; Granite State Insurance Company; Insurance Company of North America; International Insurance Company; Lexington Insurance Company; National Union Fire Insurance Company of Pittsburgh, PA.; The North River Insurance Company; Royal Insurance Company; Stonewall Insurance Company; and Zurich International, Ltd. (hereinafter collectively referred to as the "Carriers"). For the reasons which follow, we affirm in part, reverse in part, and remand this cause to the circuit court for further proceedings.

These appeals arise from four declaratory judgment actions filed in the circuit court to resolve insurance coverage issues spawned by continuing claims surrounding a certain polybutylene plumbing system, known as Qest Quick/Sert II (Qest System), which was manufactured and sold by United States Brass Corporation (Brass) from 1979 through 1990. For purposes of this appeal, certain relevant facts giving rise to these consolidated actions are not in dispute.

From 1979 through 1990, hundreds of thousands of the Qest Systems were installed in homes, apartment buildings, condominiums, mobile homes, and manufactured housing. These plumbing systems were almost always installed behind walls, under floors, or above ceilings. Brass ceased to manufacture and market the Qest System for residential site-built installation on December 31, 1986, but continued to market the system for mobile homes and prefabricated housing through 1990. As a result of certain alleged defects in the Qest System, claims have been made against Brass and its parent corporations by homeowners, homeowner associations, developers, builders, and plumbing contractors. Based on approximately 61,300 claims received by the end of 1993, Brass estimated that approximately 4.6% of the Qest Systems installed for the period from 1979 through 1990 were the subject of claims. According to the affidavit of one of Brass's attorneys, the majority of the claims involve leaks in the system. These claims generally seek recovery for: the cost of past repairs to the plumbing system, the building in which the system was installed and the building's contents; the cost of any unrepaired damage caused by the leaks; the cost of replacing the plumbing system; and the diminution in the value of the building into which the Qest system was installed resulting from the presence of the defective plumbing system. A minority of the claims involve buildings in which the Qest System was installed but which have not yet experienced leaks (Pre-Leak Claims). Claims within this group seek recovery for the cost of replacing the plumbing systems and the diminution in the value of the buildings into which they were installed. All of the claimants assert that the Qest System is a defective product because it is subject to leaking well before a reasonably designed and installed plumbing system. According to documents filed by Brass with the United States Bankruptcy Court for the Eastern Division of Texas, 108 lawsuits covering approximately 30,000 claims involving the Qest System remained pending as of March 31, 1994. The affidavit of another of Brass's attorneys asserts that "liabilities, in excess of $1 billion, have been alleged against U.S. Brass as a result of the Qest Quick/Sert II plumbing system."

Eljer Industries, Inc. owns all of the stock of Eljer Manufacturing, Inc., which in turn owns all of the stock of Brass. For a period of time relevant to this litigation, Household International, Inc. owned all of the stock of Brass's former parent corporation, Wallace-Murray Corporation. For ease of analysis, we will refer to Brass, Eljer Industries, Eljer Manufacturing and Household International, collectively, as the "Policyholders."

The Policyholders maintained multiple layers of comprehensive general liability (CGL) insurance. The Carriers are insurance companies that issued excess CGL insurance policies, which were in effect for various annual periods from 1979 until 1990, to certain of the Policyholders. These excess CGL policies are "form following" policies, meaning that they follow the form of the policy in the layer of coverage below them. All of the policies issued by the Carriers provide coverage for an "occurrence" resulting in "property damage" taking place during the respective policy period. By reason of the provisions of the underlying policies, the Carriers' policies in effect from 1979 through 1981 (Pre-1982 Policies) define "property damage" as "injury to tangible property," and their policies in effect from 1982 through 1990 (Post-1981 Policies) define "property damage" as, inter alia, "physical injury to or destruction of tangible property."

The issue presented by the parties' cross-motions for summary judgment involves the question of when the coverage afforded under the Carriers' excess CGL policies is "triggered." The circuit court determined that "property damage" for purposes of triggering coverage does not occur until a Qest System leaks, the interpretation advocated by the Carriers. The Policyholders have appealed, contending that coverage under the policies was triggered when the system was installed.

Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1996); Carruthers v. B.C. Christopher & Co., 57 Ill.2d 376, 380, 313 N.E.2d 457 (1974). Since the issue presented in a summary judgment proceeding is one of law, our review is de novo. In re Estate of Hoover, 155 Ill.2d 402, 411, 185 Ill.Dec. 866, 615 N.E.2d 736 (1993). By filing ...