U.S. Fidelity & Guar. Co. v. Wilkin Insulation Co., s. 70029

• Court: Supreme Court of Illinois
• Writing for the Court: BILANDIC
• Citation: 161 Ill.Dec. 280,578 N.E.2d 926,144 Ill.2d 64
• Parties: , 161 Ill.Dec. 280, 59 USLW 2735 UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant, v. WILKIN INSULATION COMPANY et al., Appellees (Commercial Union Insurance Company et al., Intervenors-Appellants).
• Docket Number: Nos. 70029,70030,70032 and 70036,s. 70029
• Decision Date: 20 May 1991

Page 926

578 N.E.2d 926 144 Ill.2d 64, 161 Ill.Dec. 280, 59
USLW 2735 UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant,
v.
WILKIN INSULATION COMPANY et al., Appellees (Commercial
Union Insurance Company et al., Intervenors-Appellants). Nos. 70029, 70030, 70032 and 70036. Supreme Court of Illinois. May 20, 1991.
Rehearing Denied Sept. 30, 1991.

Page 928

[161 Ill.Dec. 282] Mary Kay McCalla, Hopkins & Sutter, Chicago, for Truck Ins. exchange.

[144 Ill.2d 68] James K. Horstman, Williams & Montgomery, Ltd., Chicago, for Commercial Union Ins.

[144 Ill.2d 67] Robert L. Kiesler, Kiesler & Berman, Chicago, for United States fidelity.

[144 Ill.2d 68] Marion B. Adler, Kirkland & Ellis, Chicago, Mr. Craig S. Mielke, Murphy, Hupp, Foote, Mielke & Kinnally, Aurora, for Wilkin Insulation Co.

Rivkin Radler Dunne, Mr. Steven R. Merican, Rivkin, Radler, Dunne & Bayh, Chicago, for Aetna Casualty & Surety.

D. Kendall Griffith, Hinshaw & Culbertson, Chicago, for Argonaut Ins. Co., and Argonaut Midwest Ins. Co.

Don E. Glickman, Rudnick & Wolfe, Chicago, Thomas W. Brunner, Wiley, Rein & Fielding, Washington, D.C., for Insurance Environmental.

Richard L. Sandler, McDermott, Will & Emery, Chicago, Wilson M. Brown, III, Drinker, Biddle & Reath, Philadelphia, Pa., for amicus American Motorists Ins., American Manufacturers Mutual, Lumbermens Mutual Casualty Com.

[144 Ill.2d 69] Roland W. Burris, Atty. Gen., Springfield, for amicus Neil F. Hartigan.

Robert A. Creamer, Keck, Mahin & Cate, Chicago, for amicus W.R. Grace & Co., Armstrong World Industries, Borg-Warner Corp., Owens-Corning Fiberglass Corp.

[144 Ill.2d 68] Matthew J. Gehringer, Pope & John, Ltd., Chicago, for Zurich Ins. Co.

[144 Ill.2d 69] Justice BILANDIC delivered the opinion of the court:

We are called upon to interpret certain provisions of comprehensive general liability insurance policies dealing with the duty of insurance companies to defend their insureds. This litigation originates as a result of underlying lawsuits instituted by school districts and public building owners against a multitude of defendants that collectively make up the "asbestos industry." The defendant herein, Wilkin Insulation Company (Wilkin), is alleged to be a part, although relatively insignificant, of the "asbestos industry." The underlying lawsuits seek reimbursement of costs incurred in asbestos abatement procedures from Wilkin and its codefendants. The events giving rise to the underlying litigation coincide with the periods of coverage of one or more of the comprehensive general liability insurance policies issued by plaintiff insurance companies to Wilkin.

Wilkin promptly notified its insurers of these asbestos-related cases and asked plaintiffs to defend it and to pay the resulting damages, if any, within the policy limits. Plaintiff United States Fidelity & Guaranty Company (USF & G) refused to defend Wilkin and denied all coverage. The other plaintiffs, Commercial Union Insurance Company and Employers Fire Insurance Company (collectively, Commercial Union), Argonaut Insurance Company [144 Ill.2d 70] and Argonaut Midwest Insurance Company (collectively, Argonaut), Aetna Casualty & Surety Company (Aetna) and Zurich Insurance Company (Zurich), undertook Wilkin's defense under a reservation of rights.

USF & G instituted the instant declaratory judgment action, in the circuit court of Cook County, against Wilkin Insulation Company, Wilkin Properties, Inc., and Architectural

Page 929

[161 Ill.Dec. 283] Sales, Inc., the named insureds under its comprehensive general liability policy (collectively, Wilkin). USF & G sought a determination that it had no duty to defend or indemnify Wilkin in the underlying lawsuits. Thereafter, Commercial Union, Argonaut, Aetna and Zurich intervened in this action as party plaintiffs, seeking the same declarations with regard to their duties to defend and indemnify Wilkin.

During consecutive policy terms between 1964 and 1985, Wilkin was insured under comprehensive general liability insurance policies issued at varying times by plaintiffs. Under the terms of these policies, each plaintiff agreed to defend and provide coverage for Wilkin in any action seeking damages on account of "property damage" caused by an "occurrence."

Wilkin is a small, family-run operation, whose business is the installation of insulation products in buildings under construction. From 1958 to 1970, a small percentage of Wilkin's business was the contract installation of spray-on fireproofing products which contained asbestos. Wilkin would act as a sub-contractor, applying the fireproofing products in accordance with the specifications and requirements of the general contractors, architects and engineers of various construction projects located in Indiana and Illinois.

Until roughly the mid-1970s, the use of asbestos-containing material for fireproofing and soundproofing was an accepted, and often required, specification in building construction. In the last decade, however, the well-recognized[144 Ill.2d 71] utility of these products has been overshadowed by the potential health hazard to human beings exposed to asbestos fibers. Concern over the effects of exposure to asbestos fibers has resulted in a maze of Federal and State regulations requiring local educational facilities and other public building owners to identify the presence of asbestos in their buildings and take corrective measures to contain or remove the asbestos products from their buildings. See, e.g., 20 U.S.C. § 3601 et seq. (1988); 40 C.F.R. § 763 (1990); Ill.Rev.Stat.1985, ch. 122, par. 1401 et seq.

These regulations have resulted in mass litigation brought by these building owners against the whole "asbestos industry" to recover the costs associated with the inspection, removal from and/or replacement of asbestos in their buildings. Wilkin has found itself a named defendant in this asbestos-related litigation brought against an enormous defendant class, made up of the entire chain of miners, manufacturers, distributors, sellers, architects, engineers, contractors and installers of asbestos-containing products. The instant action involves nine of these asbestos-related lawsuits, brought by various building owners against over 60 named defendants, including Wilkin.

In the case at bar, plaintiffs moved for summary judgment on the issues of their duty to defend and indemnify Wilkin in the underlying lawsuits. Wilkin responded with its cross-motion for summary judgment against plaintiffs, contending that each plaintiff had a duty to defend and indemnify Wilkin under the terms of their respective comprehensive general liability policies. (Aetna made no motion for summary judgment but agreed to be bound by the trial court's determination.) The trial court granted plaintiffs' motions for summary judgment and denied Wilkin's summary judgment motion, finding that plaintiffs had no duty to defend Wilkin in the underlying lawsuits. Because no determination of Wilkin's liability in the [144 Ill.2d 72] underlying lawsuits had yet been made, the trial court found that any determination as to plaintiffs' obligation to indemnify Wilkin was premature. Maryland Casualty Co. v. Chicago & North Western Transportation Co. (1984), 126 Ill.App.3d 150, 81 Ill.Dec. 289, 466 N.E.2d 1091.

In granting plaintiffs' motions for summary judgment, the trial court determined that the underlying complaints did not allege "property damage" caused by an "occurrence" under the terms of the various insurance policies. The trial court further found that various exclusionary clauses of the insurance policies precluded coverage and the duty to defend.

Page 930

[161 Ill.Dec. 284] Wilkin appealed the trial court's order granting summary judgment in favor of plaintiffs. The appellate court reversed, finding that the underlying complaints sufficiently alleged "property damage" caused by an "occurrence" to bring the cases within coverage by plaintiffs' insurance policies. The appellate court further found that the exclusionary clauses contained in plaintiffs' insurance policies were inapplicable. The appellate court, therefore, held that plaintiffs had a duty to defend Wilkin in the underlying lawsuits. The appellate court made no determination on the duty to indemnify. (193 Ill.App.3d 1087, 140 Ill.Dec. 907, 550 N.E.2d 1032.) We granted plaintiffs' petitions for leave to appeal (134 Ill.2d R. 315) and consolidated these actions for review. Amicus curiae briefs were filed in support of plaintiffs' position by the Insurance Environmental Litigation Association, American Motorists Insurance Company, American Manufacturers Mutual Insurance Company and Lumbermens Mutual Casualty Company. An amicus curiae brief was filed by the Attorney General of Illinois in support of Wilkin's position. An amici curiae brief was filed by W.R. Grace and Company, Armstrong World Industries, Inc., Borg-Warner Corporation, and Owens-Corning Fiberglass Corporation, also in support of Wilkin.

[144 Ill.2d 73] At the time of this appeal, no determination of Wilkin's liability in the underlying lawsuits has been made. Therefore, any determination of plaintiffs' duty to indemnify Wilkin with respect to the underlying lawsuits is premature. (Maryland Casualty Co. v. Chicago & North Western Transportation Co. (1984), 126 Ill.App.3d 150, 81 Ill.Dec. 289, 466 N.E.2d 1091.) The issue presented is whether the appellate court correctly determined that plaintiffs have a duty to defend Wilkin in the underlying lawsuits under the terms of their comprehensive general liability policies. We affirm.

I.

DUTY TO DEFEND STANDARD

Each plaintiff agreed to "defend any suit against [Wilkin] seeking damages on account of * * * property damage, even if any of the allegations of the suit are groundless, false or fraudulent." To determine an insurer's duty to defend its insured, the court must look to the allegations of the underlying complaints. If the underlying complaints...