Fruit of the Loom v. Travelers Indemnity Co.
Case Date: 09/17/1996
Court: 1st District Appellate
Docket No: 1-95-1869
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1-95-1869 FRUIT OF THE LOOM, INC., ) Appeal from the ) Circuit Court of Plaintiff-Appellant, ) Cook County. ) v. ) ) THE TRAVELERS INDEMNITY COMPANY, ) and TRANSPORTATION INSURANCE ) COMPANY, ) Honorable ) Albert Green, Defendants-Appellees. ) Judge Presiding. PRESIDING JUSTICE HARTMAN delivered the opinion of the court: This appeal concerns environmental pollution at a plant Fruit of the Loom, Inc. (FOTL) formerly owned in Bridgeport, Connecticut. FOTL sought a declaratory judgment against defendants Travelers Indemnity Company (Travelers) and Transportation Insurance Company (Transportation) for failing to defend it in connection with the subject pollution. Travelers and Transportation filed answers and affirmative defenses. Travelers also filed a counterclaim seeking a declaration that it had no duty to defend or indemnify FOTL. Following cross-motions for summary judgment between Travelers and FOTL, the circuit court initially granted partial summary judgment for FOTL but, upon motion for reconsideration, vacated its earlier order and granted partial summary judgment for Travelers instead. Subsequently, the court granted summary judgment for Transportation as well. FOTL appeals. The issues presented include whether (1) a "suit" was filed giving rise to the insurers' duties to defend; (2) defendants are estopped from raising noncoverage as a defense where the underlying action was settled before either defendant filed a declaratory judgment action; (3) defendants' "intentional damage" exclusions bar coverage; (4) FOTL breached its duty to notify; (5) defendants' "pollution exclusions" bar coverage; and (6) FOTL waived its extra- contractual claims by not raising them on appeal. We need address only issue one, under point I of this opinion, and issue five, under point II of this opinion, for disposition of this appeal. From the mid-1950s to the late 1970s FOTL, through a former subsidiary, Universal Manufacturing Corporation (Universal), operated a leased facility in Bridgeport (Bridgeport plant) to manufacture electrical capacitors. Universal used low-chlorinated liquid polychlorinated biphenyls (PCBs) to impregnate the capacitors. One such agent, Aroclor 1242, was used until approximately 1972; another, Aroclor 1016, was used until 1978. PCBs, dielectric compounds that increase the efficiency of capacitors, are essentially insoluble in water. The Bridgeport plant initially used 55 gallons of PCBs each week to impregnate its capacitors, which rose to approximately 2,000 gallons per week prior to its discontinued use of PCBs in February 1978. Universal purchased the PCBs from Monsanto Company (Monsanto) which, as early as 1963, placed warning labels on its Aroclor products concerning toxicity, and distributed product bulletins informing customers of toxicity and safe handling of the product. In the late 1960s, Monsanto discovered PCBs' harmful effects on the environment of which it informed Universal in March 1969. Monsanto specifically advised Universal to keep all chemicals well contained and, subsequently, to exercise the highest degree of control in its storage of PCB products. In May of 1970, Monsanto began to label Aroclor 1242 with a caution stating "[e]xtreme care should be taken to prevent any entry into the environment through spills, leakage, use, disposal, vaporization or otherwise." Aroclor 1016 was similarly labeled. Monsanto's warnings about the dangers of PCBs also were placed on its shipping documents and invoices. In February of 1970, however, Monsanto notified Universal that low-chlorinated PCBs (less than 54%) "have not been found in the environment and appear to present no potential problem to the environment." Aroclor 1016 contained 42% chlorine. In July of 1971, Monsanto sent a product bulletin to Universal, urging that "every care should be taken by users of PCB-containing products to prevent entry into the environment ***." The bulletin proposed nine guidelines for users of PCBs to follow. The Bridgeport plant used large amounts of lower-chlorinated PCBs to impregnate the capacitors, about one million pounds each year. Some of these PCBs escaped from the capacitor impregnation room through the wood and steel flooring, down into the underlying oil reclamation room where it leached into the concrete slab beneath the plant and leached through the concrete into the soil and groundwater beneath the oil reclamation room. The "source point" for this contamination was the capacitor impregnation area at the Bridgeport plant. It was an ongoing process. A Universal foreman, Robert Delvy, testified that PCB drippage occurred all the time; it was an ongoing problem to keep certain areas clean. He later testified that the drippage occurred occasionally and that the drippage was always cleaned up because "it was slippery and somebody could fall." Universal used chipboard to absorb the oil and "spent tons of money trying to keep the floor in reasonably good condition." Some drippage soaked through a protective floor to the underlying wood floor and into the basement area. Delvy stated that during the early 1980s, Universal made several efforts to clean up the PCB contamination and that material from years before was contaminated, including wood, walls and floors. Universal had stored PCB drums in its plant parking lot at one time; it excavated most of the parking lot in an effort to clean up PCB contamination. In the past, Universal poured PCBs into the sewer drains. Delvy "pumped probably 3 or 400 gallons right out an exhaust port of a vacuum pump out onto the driveway and down the street and [it] ran into sewer drains and [it] ran into the railroad viaducts on more than one occasion." Delvy poured PCBs into the external drains in the plant; he and "other people" did this as a practice for a time when he was young until he was stopped. In the 1960s, the practice of pouring PCBs into the sewer was discontinued. Delvy did not know whether the drippage of PCBs was causing property damage. Despite Universal's precautionary measures, pipe leaks and overflows continually occurred in the impregnation area, for example, when "somebody forgot to put a clamp on a chamber door" or when a "bottom clamp was left open." When significant spills occurred, the employees used "speedy dry"; when lesser amounts spilled on the floor, the chipboard was "put there to soak it up." Employees often got PCB oil on their shoes and tracked the oil throughout the plant, which was "not specifically" cleaned up. Although one Monsanto employee reported that the Bridgeport plant was very clean, other Monsanto employees were concerned about the spillage at the plant. A Monsanto report indicated that Universal was losing about "6 |