Court Rules Insurance Policy Does Not Cover Claims

Court Rules Insurance Policy Does Not Cover Claims

Morsheda Hashem - Querrey & Harrow, Ltd. - Chicago, Illinois

In Illinois Tool Works, Inc. v. ACE Specialty Insurance Co, 2019 IL App (1st) 181945, the Illinois Appellate Court affirmed the trial court’s holding that insurer had no duty to defend plaintiff manufacturers, Illinois Tool Works, Inc., from a pre-suit mediation of environmental claims because such claims did not constitute a “suit” under the policy. The court thus affirmed that the trial court properly granted partial summary judgment to the insurer.

In this matter, the plaintiff filed a declaration judgment action against its insurer in order to have the insurer defend the plaintiff from claims regarding environmental contamination. The underlying claims of the environmental contamination began in the 1980s when the defendant issued a series of policies to the plaintiff and a manufacturing company that the plaintiff acquired. The manufacturer produced stencils, stencil machines, ink, duplicators, and similar products from 1947 to 2002 at multiple manufacturing facilities within a location in south-central Illinois known as the Crab Orchard Site.

In 1987, the Environmental Protection Agency (“EPA”) conducted an investigation of the Crab Orchard Site, finding that certain areas of the site allegedly posed risks to human health and the environment, which was partly as a result of the hazardous substances released from the manufacturing facilities that were at the Crab Orchard Site. The plaintiff entered into mediation with the EPA and other parties to allocate responsibility for the costs of the cleanup of the site. The insurer refused to defend the plaintiff in the mediation, claiming that the policies only required the insurer to defend suits made against the plaintiff.

The plaintiff then filed a lawsuit against the insurer, seeking a declaration from the court that the defendant had a duty to defend and indemnify it for claims made against the plaintiff in the mediation. The defendant filed a partial summary judgment, claiming it did not have a duty to defend the mediation because that did not rise to the level of a “suit” under the relevant insurance policies. The lower court granted the partial summary judgment in favor of the insurer. The plaintiff subsequently appealed.

The appellate court in the instant matter then decided on the issue of whether the insurer had a duty to defend the plaintiff manufacturer in the mediation. The court distinguished the difference between a “suit” and a “claim” in its determination on whether defendant had a duty to defend. It reasoned that the term “suit” in an insurance policy is unambiguous and is triggered by the commencement of some action in court. The court suggested that a “claim” is much broader and can be resolved without a suit. Thus, a “claim” does not necessarily equate to a “suit.” The holding in Illinois Tool Works follows earlier Illinois cases holding that an insurer’s duty to defend is not implicated until a lawsuit has been filed, if the policy so requires.