Zurich Ins. Co. v. Raymark Industries, Inc.
| Decision Date | 14 September 1987 |
| Docket Number | Nos. 63886,63910 and 63916,s. 63886 |
| Parties | , 112 Ill.Dec. 684 ZURICH INSURANCE COMPANY et al., Appellants and Cross-Appellees, v. RAYMARK INDUSTRIES, INC., Appellee and Cross-Appellant. |
| Court | Illinois Supreme Court |
Terrence E. Kiwala, Rooks, Pitts and Poust, Chicago, for First State Ins. Co.; John P. Arness, P.C., Andrew D. Klingenstein, Neil M. Corwin, Hogan & Hartson, Washington, D.C., of counsel.
Gerald V. Weigle, Jr., Dinsmore & Shohl, Cincinnati, Ohio, for amicus curiae Liberty Mut. Ins. Co.
Peter C. John, Mary Patricia Benz, Phelan, Pope & John, Ltd., Chicago, for Zurich Ins. Co.
Frank K. Heap, Larry L. Thompson, Joan S. Kato, P. Andrew Fleming, Laurie D. Jaffe, Chicago, for Raymark Industries Dowd and Dowd, Ltd., Chicago, for Northbrook Excess and Surplus Ins. Co.; Michael E. Dowd, Nancy J. Gleason, Philip J. McGuire, of counsel.
[112 Ill.Dec. 686] Inc.; Bell, Boyd & Lloyd, Chicago, of counsel
Arthur G. Leisten, Christopher J. McElroy, U.S. Gypsum Co., James T. Otis, Robert A. Creamer, Robert C. Gislason, Patty J. Dyer, Jeanine M. Jiganti, Keck, Mahin & Cate, Chicago, for amicus curiae U.S. Gypsum Co.
Stewart Dalzell, Wilson M. Brown, III, Steven P. Chawaga, Drinker Biddle & Reath, Philadelphia, Pa., Walter M. Jones, Gary E. Jackson, McDermott, Will & Emery, Chicago, for amici curiae American Motorists Ins. Co. and American Mfrs. Mut. Ins. Co.
Malcolm M. Gaynor, Richard Bendix, Jr., Schwartz, Cooper, Kolb & Gaynor, Chtd., Chicago, Ronald M. Oster, Carl W. Shapiro, Philip Heller, Paul Hastings, Janofsky & Walker, Santa Monica, Cal., for amicus curiae UNR Industries, Inc.
Gary M. Elden, Donald A. Vogelsang, Darrell J. Graham, Isham, Lincoln & Beale, Chicago, for amicus curiae, Fireman's Fund Ins. Co.
Robert N. Sayler, William P. Skinner, Frederick G. Herold, Covington & Burling, Washington, D.C., for amicus curiae, Armstrong World Industries, Inc.
White & Case, New York City, Paul J. Bschorr, Thomas McGanney, Richard B. Sypher, Joan Morgan McGivern of counsel; Peterson, Ross, Schloerb & Seidel, Chicago, Robert G. Schloerb, Michael M. Lane, Richard R. Ryan of counsel, for Federal Ins. Co.
Williams & Montgomery, Ltd., Chicago, for Commercial Union Ins. Co.; James K. Horstman, Barry L. Kroll, Anthony P. Katauskas, Lloyd E. Williams, Jr. of counsel.
Ronald L. Motley, Thomas H. Hart, III, Blatt & Fales, Barnwell, S.C., for amicus curiae, Blatt & Fales.
This declaratory judgment action involves the construction of various comprehensive general liability insurance policies issued to the defendant, Raymark Industries, Inc. (Raymark). In 1978, Zurich Insurance Company (Zurich), one of Raymark's primary insurers, filed this action in the circuit court of Cook County against Raymark and two of Raymark's other primary insurers, Federal Insurance Company (Federal) and Commercial Union Insurance Company (Commercial Union). Zurich sought a declaration of its obligations and the obligations of Federal and Commercial Union to defend and indemnify Raymark in thousands of underlying actions filed by individuals alleging personal injuries or wrongful death resulting from exposure to asbestos-containing products manufactured by Raymark. Federal (and another insurer which is not a party to this appeal) filed jury demands with their answers. In February 1979, Northbrook Excess and Surplus Insurance Company (Northbrook), one of Raymark's excess insurers, intervened as a plaintiff, seeking relief identical to that sought by Zurich. In October 1982, Raymark filed a counterclaim seeking a declaration that each of its primary insurers is obligated to provide a complete defense in all present and future asbestos-related actions and that the insurers' defense obligations continued even after the aggregate policy limits had been exhausted. Commercial Union filed a jury demand with its answer to Raymark's counterclaim. The circuit court struck the jury demands of Federal and Commercial Union, holding that the claims raised were essentially equitable in nature.
After denying cross-motions for summary judgment, the court heard extensive expert medical testimony. In a lengthy memorandum opinion and order, the circuit court found that the policy language was unambiguous and did not require extrinsic evidence to interpret its meaning. The court determined that a primary insurer is required to provide coverage of a claim if the claimant sustained either "bodily injury," "sickness," or "disease" during a policy period. The court concluded that "bodily injury" occurs simultaneously with, or shortly after, inhalation of asbestos fibers The court went on to declare that, under the terms of policies issued to Raymark on or before September 26, 1967 (the pre-1967 policies), the primary insurers are obligated to defend new claims and to continue to defend claims pending against Raymark even after the liability limits of those policies are exhausted by the payment of judgments or settlements. In addition, the court held that under the terms of the policies issued on and after September 26, 1967 (the post-1967 policies), a primary insurer that had undertaken the defense of a claim prior to the exhaustion of the limits of its policy must continue to defend that claim even after the exhaustion of the policy limits unless and until another primary insurer, that is also obligated to defend the claim, assumes the defense of that claim.
[112 Ill.Dec. 687] and that a "disease" occurs when it is reasonably capable of being diagnosed. The court further concluded that a claimant who has not been diagnosed as having an asbestos-related disease, but "suffers from a disordered, weakened or unsound condition," may be classified as having a "sickness" which would also give rise to an insurer's obligations under the policies. Exactly when a claimant's sickness or disease occurs, the court found, must be determined on a case-by-case basis. Accordingly, the court declared that a primary insurer is required to provide coverage of a claim if its policy was in effect either during the time when the claimant was exposed to Raymark's products [118 Ill.2d 30] or when the claimant's asbestos-related disease was reasonably able to be detected and diagnosed.
The court further held that as between Raymark and its primary insurers, when coverage is required under more than one policy, each primary insurer that is required to provide coverage is fully and independently obligated to defend and indemnify Raymark. In those cases, the court held that Raymark is entitled to designate any triggered policy for defense of a claim and any triggered policy for indemnification of the claim and that the policy designated for defense need not be the same as the one designated for indemnification. The court reserved ruling on the allocation of defense and indemnity costs among the various insurers. The insurers appealed and Raymark cross-appealed.
The appellate court affirmed in part, modified in part, and reversed in part. (145 Ill.App.3d 175, 98 Ill.Dec. 512, 494 N.E.2d 634.) First, the court affirmed in its entirety the circuit court's determination as to which events require an insurer to provide coverage for a claim. (145 Ill.App.3d 175, 192, 98 Ill.Dec. 512, 494 N.E.2d 634.) The court reversed the circuit court's order with respect to the pre-1967 policies and held that those policies do not require the insurers to defend new claims commenced against Raymark after the policy limits are exhausted by payment of judgments or settlements. (145 Ill.App.3d 175, 193, 98 Ill.Dec. 512, 494 N.E.2d 634.) The appellate court further held that those policies do not obligate a primary insurer to continue to fund the defense of actions pending against Raymark once its duty to indemnify has been terminated by the payment of judgments or settlements and the insurer has made an orderly withdrawal from Raymark's defense. (145 Ill.App.3d 175, 193-94, 98 Ill.Dec. 512, 494 N.E.2d 634.) Next, the court modified the circuit court's order to provide that upon exhaustion of the limits of its post-1967 policies, Zurich has no obligation to continue to pay the costs of defending cases that it had already undertaken to defend prior to the exhaustion of the policy limits. (145 Ill.App.3d 175, 196, 98 Ill.Dec. 512, 494 N.E.2d 634.) The court then concluded that the trial court did not err in denying Zurich's motion to order the pro rata allocation of the costs of defense and indemnity among the triggered policies. (145 Ill.App.3d 175, 200, 98 Ill.Dec. 512, 494 N.E.2d 634.) Finally, the court affirmed the circuit court's order striking the jury demands of Federal and Commercial Union. (145 Ill.App.3d 175, 198, 98 Ill.Dec. 512, 494 N.E.2d 634.) We granted Zurich, Raymark and Northbrook leave to appeal. The causes have been consolidated for the purposes of review.
Five issues have been raised in this court: (1) What event or events give rise to the primary insurers' obligation to provide coverage for asbestos-related claims under Raymark (formerly Raybestos-Manhatten, Inc.) has manufactured products containing asbestos since the 1920's. Raymark is currently a defendant in more than 30,000 lawsuits pending in both State and Federal courts throughout the United States in which plaintiffs have alleged injuries caused by exposure to asbestos products. The plaintiffs in these underlying actions typically allege that they or their decedents contracted asbestosis, mesothelioma or bronchogenic carcinoma (lung cancer) resulting from exposure to asbestos products, including products manufactured and sold by Raymark, during the 1940's, 1950's and 1960's.
[112 Ill.Dec. 688] the standard comprehensive general liability policy, and when do those events occur? (2) Do the terms of the policies issued to Raymark before September 26, 1967 (the pre-1967 policies), require the primary insurers to
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