Water Applications & Sys. Corp. v. Bituminous Cas. Corp.

• Decision Date: 15 February 2013
• Docket Number: No. 1–12–0983.,1–12–0983.
• Citation: 986 N.E.2d 124,2013 IL App (1st) 120983,369 Ill.Dec. 175
• Parties: WATER APPLICATIONS AND SYSTEMS CORPORATION, n/k/a Wasco LLC, Plaintiff–Appellant, v. BITUMINOUS CASUALTY CORPORATION, Defendant–Appellee.
• Court: United States Appellate Court of Illinois

2013 IL App (1st) 120983

986 N.E.2d 124

369 Ill.Dec. 175

WATER APPLICATIONS AND SYSTEMS CORPORATION, n/k/a Wasco LLC, Plaintiff–Appellant,

v.BITUMINOUS CASUALTY CORPORATION, Defendant–Appellee.

No. 1–12–0983.

Appellate Court of Illinois, First District, Sixth Division.

Feb. 15, 2013.

Daniel J. Biederman, Sr., Biederman & Novi, LLC, Chicago, for appellant.

John E. Rodewald, Richard B. Boroski, Bates, Carey, Nicolaides LLP, Chicago, for appellee.

OPINION

Justice R. GORDON delivered the judgment of the court, with opinion.

[369 Ill.Dec. 177]¶ 1 The plaintiff, WASCO LLC, filed this suit claiming that defendant Bituminous Casualty Corporation, an insurance company, breached its duties under two insurance policies when it did not defend plaintiff after receiving a notice of potential liability from the United States Environmental Protection Agency (EPA) during an EPA investigation process. Defendant claims that plaintiff cannot be an assignee of the policy without defendant's written consent pursuant to the terms of the insurance policy. Plaintiff claims that no written consent is required. The trial court granted defendant's motion for summary judgment dismissing the suit. Plaintiff appeals, and for the following reasons, we affirm.

¶ 2 BACKGROUND

¶ 3 Plaintiff filed a breach of contract action against defendant involving two general liability insurance policies where plaintiff was not named as an insured. Plaintiff argues that it assumed the policies by purchasing the assets of Palm Oil Recovery, Inc., a palm oil recycling company, the named insured. Defendant claims that plaintiff did not present sufficient evidence to create a material issue of fact about whether it was covered under the subject policies, and defendant further argues that the subject policies could not be assigned without defendant's consent.

¶ 4 I. The Policies and the Purchase Agreement

¶ 5 Policy A was issued as an “occurrence” liability policy (No. GA637258; hereinafter Policy A) for the policy period of November 6, 1968, through November 9, 1971. Under the section titled “Comprehensive General Liability Insurance,” Policy A provided the following coverage:

“The company [defendant] will pay on behalf of the insured [Palm Oil Recovery, Inc.,] sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations in the suit are groundless, false, or fraudulent, and may make any such investigation and settlement of any claim or suit as it deems expedient * * *.”

¶ 6 Policy A defines “occurrence” as “an accident, including injurious exposure to conditions, which results during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” It defines “damages” as including “damages for death and for care and loss of services resulting from bodily injury and damages for loss of use of property resulting from property damage.” “Property damage” is defined as “injury to or destruction of tangible property.” Policy A also contains an antiassignment clause, which states:

“9. Assignment: Assignment of interest under this policy shall not bind the company unless its consent is endorsed hereon * * *.”

On January 15, 1971, Policy A was amended by endorsement to add “PORI, INC.” as a named insured, effective January 1 of that year.

¶ 7 Palm Oil Recovery, Inc.'s corporate history since the issuance of Policy A is disputed between the parties. Plaintiff claims that, in 1971, Palm Oil Recovery, Inc., merged with some other companies to form Pori, Inc., which was then sold in 1981 to Pori Holdings, Inc., and thereafter renamed PORI International, Inc. We will discuss the evidentiary basis for plaintiff's factual claims in its proper sequence.

¶ 8 On November 30, 1971, defendant issued a second third-party liability insurance policy (No. GA686764; hereinafter Policy B), which covered Pori, Inc., as the named insured from November 9, 1971, through November 9, 1972. Policy B was issued with the same contract language as Policy A and included the same provisions. Under its declarations, Policy B states that it is a renewal of Policy A.

¶ 9 On February 28, 1997, PORI International, Inc., executed an asset purchase agreement (Purchase Agreement) to sell its assets to U.S. Filter Recovery Services (Midatlantic), Inc. (USFRSM), a subsidiary wholly owned by U.S. Filter Recovery Services, Inc. (USFRS). USFRS was a wholly owned subsidiary of United States Filter Corporation (USFC). At the time of the Purchase Agreement, plaintiff was known as USFC. On August 2, 2004, USFC changed its name to Water Applications & Systems Corporation, which was later renamed WASCO LLC on December 22, 2006.

¶ 10 The Purchase Agreement set forth the terms of the sale of PORI International, Inc.'s assets to plaintiff. The Purchase Agreement designated California as the choice of law under section 8.7:

“8.7 Offset; Assignment; Governing Law. * * * This Agreement shall be governed by and construed in accordance with the laws of California without regard to its conflict of law doctrines.”

The preamble to the Purchase Agreement sets forth the following:

“Seller [PORI International, Inc.,] desires to sell and assign to Buyer [USFRSM] * * * substantially all of Seller's assets and certain of Seller's liabilities on the terms and subject to the conditions set forth below.”

Section 2.1 describes the sale of assets:

“2.1 Sale and Purchase of Assets. At the Closing, Seller shall sell and transfer to Buyer * * * all of Seller's properties and business as a going concern and goodwill and assets of every kind * * *.”

Section 2.3 sets forth the assumption of liabilities:

“2.3 Assumption of Liabilities. * * * Buyer shall * * * assume * * * the following Liabilities of Seller and only such Liabilities * * *: (i) those specific Liabilities accrued on the Adjustment Balance Sheet as they exist on the Closing Date * * *, and (ii) those Liabilities incurred after the Closing Date and pursuant to the express terms of the Contracts [disclosed on Schedule 3.13, 3.16, 3.20, or 3.21] * * *.”

Section 3.19 of the Purchase Agreement included the following regarding the assignment of insurance policies under which PORI International, Inc., was insured:

“3.19 Insurance. Schedule 3.19 discloses all insurance policies on an ‘occurrence’ basis with respect to which Seller is the owner, insured or beneficiary.”

It is important to note that schedule 3.19 did not list the subject policies. Section 5.5 provides that PORI International, Inc., would pay the insurance premiums until the closing date of the Purchase Agreement. The Purchase Agreement contained the following provision regarding retained liabilities:

“2.4 Retained Liabilities. Except for the Assumed Liabilities, Buyer does not hereby and shall not assume or in any way undertake to pay, perform, satisfy or discharge any other Liability of Seller, whether existing on, before or after the Closing Date or arising out of any transactions entered into, or any state of facts existing on, prior to or after the Closing Date (the ‘Retained Liabilities'), and Seller agrees to pay and satisfy when due all Retained Liabilities. Without limiting the foregoing, except for the Assumed Liabilities, the term ‘Retained Liabilities' shall include Liabilities:

* * *

(v) against which seller is insured or otherwise indemnified * * *.”

The Purchase Agreement additionally contained the following clause on consent rights:

“2.12 Certain Consents. Nothing in this agreement shall be construed as an attempt to assign any contract, agreement, Permit, franchise, or claim included in the Purchased Assets which is by its terms or in law nonassignable without the consent of the other party or parties thereto, unless such consent shall have been given, or as to which all the remedies for the enforcement thereof enjoyed by Seller would not, as a matter of law, pass to Buyer as an incident of the assignments provided for by this Agreement.”

The appellate record does not show that defendant consented to the alleged assignment of the subject policies. The appellate record does not contain the alleged assignment or any evidence that its premiums were prorated or paid by plaintiff.

¶ 11 II. EPA Investigation

¶ 12 On August 6, 2007, the EPA sent a “Notice of Potential Liability” to Siemens Water Technologies (Siemens). The “Notice of Potential Liability” identified Siemens as a “Potentially Responsible Party” (PRP) to an “Emergency Removal Action.” ¹ The PRP letter warned that Siemensmay incur, or may have incurred, liability under section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ( 42 U.S.C. § 9607(a) (2006)), and that it might be responsible for the cleanup of the Sauer Dump site in Dundalk, Maryland and/or costs the EPA has incurred in cleaning up the site. The PRP letter requested a response from Siemens within 30 days indicating its willingness or unwillingness to engage in future negotiations concerning the site. A copy of the PRP letter was forwarded to plaintiff, which entered into negotiations with the EPA on August 21, 2007.

¶ 13 On August 17, 2007, the EPA sent Siemens a draft of a proposed “Administrative Settlement and Order on Consent for Removal Response Action” naming several respondents. The draft order names Siemens as a successor in interest to PORI International, Inc., which it alleges improperly disposed of hazardous materials at the Sauer Dump site during the 1960s, 1970s, and 1980s. The draft order indicates that the EPA holds the respondents liable for the contamination and requires them to conduct a cleanup of the site. The time period of the claimed dumping coincides with the...