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SECOND DIVISION
November 26, 2002

No. 1-00-3954

Plaintiffs-appellants, Whitman Corporation (Whitman) andPneumo Abex Corporation (Pneumo Abex) (collectively plaintiffs),appeal from the trial court's dismissal of counts III and IV ofplaintiffs' third amended declaratory judgment complaint undersection 2-615 of the Illinois Code of Civil Procedure. 735 ILCS5/2-615 (West 1998). Defendants-appellees are Commercial UnionInsurance Company (Commercial Union), Michigan Mutual InsuranceCompany (Michigan Mutual),⁽¹⁾ and United States Fire InsuranceCompany (U.S. Fire)(collectively the Insurers). In May of 1993,Pneumo Abex sold certain assets to B.F. Goodrich Company (BFG) inthe form of facilities at four separate locations pursuant to anasset purchase agreement. The agreement included indemnificationprovisions, including special provisions pertaining toenvironmental liabilities, where the parties agreed to indemnifyeach other for certain environmental remediation expenses at thefour site locations. On March 12, 1996, Pneumo Abex filed acomplaint against BFG alleging that BFG had violated certainindemnity terms in the agreement. In response, BFG filed acounterclaim alleging that Pneumo Abex had breached the agreementby failing to indemnify it for environmental expenses at the sitelocations.

In plaintiffs' third amended complaint, plaintiffs allegedthat the Insurers had an obligation to defend them against thecounterclaim filed by BFG under several policies issued to theplaintiffs by the Insurers. According to plaintiffs, the Insurers'failure to defend amounted to a breach of the policies and resultedin defense costs incurred by plaintiffs in the amount of$1,953,186. The Insurers field a motion to dismiss plaintiffs'third amended complaint for declaratory judgment which was grantedby the trial court on October 10, 2000.

The trial court's primary ground for dismissal was that theallegations in the BFG counterclaim arose out of the alleged breachof the asset purchase agreement and did not amount to propertydamage caused by an "occurrence" as defined in the policies issuedby the Insurers. As a result, it found that the allegations in thecounterclaim did not fall within or potentially within thepolicies' coverage for environmental contamination or propertydamage. The trial court further found that "plaintiffs" failed toprecisely allege when the damage, for which BFG soughtreimbursement, occurred.

We first review whether the trial court properly granted theInsurers' motion to dismiss on the grounds that the allegations inthe BFG counterclaim did not amount to property damage caused by an"occurrence" under the policies and therefore did not fall withinor potentially within the policies' coverage. We state thefollowing additional facts.

The Insurers provided primary general liability and umbrellainsurance coverage to Cleveland Pneumatic Company through 46separate policies that were collectively effective from December 1,1960, to February 1, 1985. The policies contained similar languagewith regard to coverage. Specifically, the policies stated:

"The company will pay on behalf of theinsured all sums which the insured shallbecome legally obligated to pay as damagesbecause of *** property damage *** to whichthis policy applies, caused by an occurrence,and the company shall have the right and dutyto defend any suit against the Insured seekingdamages on account of such *** propertydamage."

An "occurrence," as defined in the policies, "means an accident,including continuous or repeated exposure to conditions, whichresults in bodily injury or property damage neither expected norintended from the standpoint of the insured."

Cleveland Pneumatic was a subsidiary of Pneumo DynamicsCorporation, which was subsequently named Pneumo Corporation. Cleveland Pneumatic owned or leased and operated several facilitiesat four sites: two of which were located in Cleveland, Ohio; one inTullahoma, Tennessee; and one in Miami, Florida, respectively. In1984, Whitman acquired Pneumo Corporation, which remained a whollyowned subsidiary of Whitman until August 28, 1988. Pneumo Abex isa successor to Pneumo Corporation. The record reveals that a stock purchase agreement (SPA) existed as part of the financialrelationship between Pneumo Abex and Whitman.

On May 15, 1993, Pneumo Abex sold the Cleveland Pneumaticsassets, including the four sites identified above, to BFG pursuantto an asset purchase agreement. The agreement includedindemnification provisions, including special provisions pertainingto environmental liabilities, whereby each party agreed toindemnify and hold the other party harmless for certainenvironmental liabilities. "Environmental Liabilities" weredefined in the agreement as:

"Losses or expenses incurred for responseand compliance measures undertaken as a resultof Environmental Laws and relating to theownership of the Purchased Assets or operationof the Purchased Business. 'EnvironmentalLaws' are in turn defined as those laws andordinances pertaining to the environment as ineffect on the closing date of the Agreement."

The agreement further required both parties to acknowledge theSPA between Pneumo Abex and Whitman. As part of the asset purchaseagreement, BFG received a copy of the SPA and was to comply withthe SPA and the asset purchase agreement's indemnificationprovisions so that Pneumo Abex could in turn be indemnified byWhitman for certain environmental remediation expenditures.

On March 12, 1996, Pneumo Abex filed a complaint against BFG(Pneumo complaint) alleging that BFG violated certain indemnityterms of the asset purchase agreement. In it, Pneumo Abex claimedthat BFG sought indemnification for environmental expenses thatwere outside the scope of the agreement. Specifically, Pneumo Abexalleged that BFG attempted to shift to Pneumo Abex the obligationto pay for a wide array of expenses associated with environmentalactivities that BFG had chosen to incur voluntarily and that werebeyond the scope of "covered losses" enumerated in theindemnification provisions of the agreement.

Further, according to Pneumo Abex, BFG failed to notify it ofenvironmental claims with reasonable promptness and specificity asrequired under section 13.5 of the asset purchase agreement. Inparticular, section 13.5 of the agreement, which governedindemnification between the parties for certain environmentalliabilities, required that either party, upon becoming aware of anyenvironmental claim, was to notify the other party with reasonablepromptness and reasonable specificity.

Pneumo Abex claimed that, in 1994, it began receivingcommunications from BFG vaguely describing various environmentalconditions discovered at the Miami, Tullahoma, and Clevelandfacilities. Beyond these vague communications, Pneumo Abex allegedthat BFG failed to provide reasonable advance notice or anopportunity to monitor and/or consult on all proposed actions andfailed to provide reasonable specificity of its claims in violationof the agreement. Specifically, Pneumo Abex alleged that BFG: (1)failed to provide it with proposed work plans, draft reports,consultant correspondence, or work schedules so that field andsampling activities could be monitored by Pneumo Abex; (2) failedto advise or consult with Pneumo Abex concerning the anticipatedselection of possible consultants; (3) withheld consultant'sinvoices and other invoices related to the claimed activities, riskassessment reports, data, and results of other remediation studies;and (4) supplied Pneumo Abex with information that was inconsistentand outdated.

The Pneumo complaint alleged that BFG sent Pneumo Abex letterson August 25, 1994, and October 27, 1994. The August 25, 1994,letter concerned a situation at the Miami facility regardingenvironmental permits but stated that the letter was "preliminaryto any formal notification" for indemnification under theagreement. The October 27, 1994, letter contained a summary of theresults of BFG's environmental reviews at the Cleveland andTullahoma facilities for which BFG sought costs to be shared underthe agreement. However, Pneumo Abex alleged that the letter failedto explain the basis for BFG's belief that these remedialprocedures were indemnifiable claims under the agreement.

The Pneumo complaint further alleged that Pneumo Abexrequested in writing that BFG provide information relating tomatters on which BFG sought indemnity. It informed BFG that, underthe agreement, BFG could not pursue indemnification claims whereadvance notice had not been provided to Pneumo Abex. The Pneumocomplaint claimed that, in response, BFG failed to provide PneumoAbex with the required information, and furnished only limitedinformation, all of which was provided months after the activitieshad been completed. According to Pneumo Abex, BFG's deliberateviolation of the agreement prejudiced Pneumo Abex by, among otherthings, "precluding Pneumo Abex from monitoring BFG's activitiesand/or from consulting with respect to actions taken." In aletter dated February 1, 1995, Pneumo Abex reiterated its concernsthat BFG had disregarded the indemnification procedures outlinedin the agreement and specifically requested that BFG specify anyindemnification claims under the agreement. Four months later, BFGresponded with a letter notifying Pneumo Abex of an allegedobligation to indemnify BFG for all investigative work performed todate and for all identified contamination, regardless of the causeor source or legal obligation. Pneumo Abex responded with twoletters communicating that it could not acknowledge or disclaim anyindemnification obligations without being supplied with theinformation contemplated by the agreement. On November 3, 1995,BFG responded stating that it had supplied sufficient informationnecessary to satisfy the terms of the agreement. In response toanother letter from Pneumo Abex requiring more information, BFGsent a letter demanding payment in the amount of $130,349.65.

Also in the Pneumo complaint, Pneumo Abex claimed that BFG'sactions threatened its ability to seek indemnification from Whitmanunder the SPA. Section 13.5(f) of the agreement provided, inpertinent part: "Buyer and Seller at all times shall use theirreasonable best efforts to comply with the procedures of the SPAand to reasonably cooperate with each other in obtaining thebenefit of any Whitman obligations under the SPA."

On the above grounds, the Pneumo complaint sought five formsof relief: (1) a declaration that the agreement between Pneumo Abexand BFG was a valid and existing contract, that Pneumo Abex hadperformed all of its existing obligations under the agreement, thatan actual dispute existed as to whether BFG had failed to fulfillits obligations under the indemnification provisions under theagreement, and that as a result of BFG's breach, it had noobligations under the agreement to indemnify BFG for any money itsought in connection with environmental liability; (2) adeclaration that an actual dispute existed as to whether PneumoAbex had an obligation to indemnify BFG until BFG fulfilled itsobligations under the agreement and a determination whether suchenvironmental liabilities were covered by the agreement; (3) adeclaration that BFG materially breached the asset purchaseagreement; (4) a declaration of repudiation of the asset purchaseagreement; and (5) a declaration that BFG breached the covenant ofgood faith and fair dealing by failing to notify Pneumo Abex withreasonable promptness and reasonable specificity of indemnificationclaims under the agreement.

On April 1, 1996, BFG filed a counterclaim against PneumoAbex. The parties agree that the allegations of the counterclaimare the sole grounds upon which the duty to defend could arise inthis case. BFG's counterclaim stated that Pneumo Abex agreed toindemnify and hold BFG harmless under section 13.5(b) of the assetpurchase agreement. It also alleged that, under section 13.5(e) ofthe agreement, the parties would each bear 50% of the environmentalliabilities until the total amount of those liabilities reached $14million. BFG further claimed that, based upon environmentalinvestigations conducted at all four sites, contamination hadoccurred which exceeded human health and environmental protectionstandards. It stated that these conditions were attributable toevents that occurred prior to BFG's current "stewardship" of thefacilities. BFG argued that its expenditures all constitutedenvironmental liabilities for which Pneumo Abex had agreed toindemnify it under section 13.5 of the asset purchase agreement. The counterclaim further alleged that BFG had complied with allconditions of section 13.5 and that it had properly and timelynotified Pneumo Abex of the environmental conditions at the foursites and of BFG's costs incurred in connection with remediatingthose conditions.

For its relief in the counterclaim, BFG sought a declarationthat the agreement constituted a valid and existing contractbetween it and Pneumo Abex and also that BFG and Pneumo Abex had anactual dispute over whether Pneumo Abex had an obligation under theagreement to indemnify BFG for costs "it [had] incurred to date,[and expected] to incur in the future, in connection withEnvironmental Liabilities, in accordance with the indemnityprovisions of the Agreement." BFG also sought a declaration thatBFG had fulfilled its obligations under the agreement, that PneumoAbex had failed to fulfill its obligations under theindemnification provisions of the agreement, and that Pneumo Abex'sfailure to fulfill its obligations under the agreement constituteda material breach of contract with regard to environmentalliabilities incurred by BFG. BFG also sought a declaration thatPneumo Abex's action constituted a wrongful repudiation of itsobligations under the agreement with regard to environmentalliabilities incurred by BFG. Finally, BFG sought a declarationthat Pneumo Abex breached the covenants of good faith an fairdealing by failing to cooperate with BFG in the performance ofactions in response to known environmental liabilities and byrefusing to remit payments to BFG as requested, for costs incurred,to address environmental liabilities.

In plaintiffs' third amended complaint (the subject of thisappeal), plaintiffs alleged that the Insurers had an indivisibleobligation to defend or indemnify them against the counterclaimfiled by BFG and that the failure to defend or indemnify themamounted to a breach of the policies issued by the Insurers. Specifically, plaintiffs alleged that the policies providedcoverage on behalf of the insureds for "all sums which theinsured[s] shall become legally obligated to pay as damages becauseof *** property damage *** caused by an occurrence." In paragraph36 of the complaint, plaintiffs alleged that they had received"claims and demands alleging damages because of property damage" atthe four sites at issue. Further, paragraph 36 stated, "theproperty damage [at issue] *** is allegedly continuous andprogressive beginning before 1961 and continuing to 1986 orthereafter." Because of the Insurers' refusal to defend the BFGcounterclaim, plaintiffs alleged that they incurred defense costsof $1,953,186. The record reveals that the BFG suit was resolvedby settlement whereby plaintiffs were ordered to pay BFG $1million.

In an order entered October 10, 2000, the trial court grantedthe Insurers' motion to dismiss plaintiffs' third amended complaintfor declaratory judgment. The trial court concluded that theallegations in the BFG counterclaim arose out of an alleged breachof the asset purchase agreement and did not amount to an"occurrence" as defined in the policies. Therefore, the trialcourt found the allegations in the underlying complaint did notfall within or potentially within the policies' coverage forenvironmental contamination or property damage.

The trial court further found that the BFG counterclaim didnot precisely allege when the damage, for which BFG soughtreimbursement under the asset purchase agreement, occurred. Sincethe policies expired eight years before the asset purchaseagreement was executed, the trial court concluded that it wasimpossible to determine on the face of the pleadings whether thepolicies would have been in effect when the alleged environmentaldamage occurred. In another order entered October 19, 2000, thetrial court confirmed the dismissal order of October 10, 2000, andmade a written finding under Supreme Court Rule 304(a). 155 Ill.2d. R. 304(a). Plaintiffs now appeal.

We first address whether the trial court correctly granted theInsurers' motion to dismiss on the ground that the allegations inthe BFG counterclaim did not constitute an occurrence under thepolicies and, thus, did not fall within or potentially within thepolicies' coverage. This court reviews a trial court's ruling upona motion to dismiss de novo. Royal Insurance Co. of America v.Insignia Financial Group, Inc., 323 Ill. App. 3d 58, 63, 751 N.E.2d164 (2001); Stokes v. Pekin Insurance Co., 298 Ill. App. 3d 278,280, 698 N.E.2d 252 (1998).

It is well settled in Illinois:

"To determine whether the insurer has a dutyto defend the insured, the court must look tothe allegations in the underlying complaintand compare these allegations to the relevantprovisions of the insurance policy.[Citations.] If the facts alleged in theunderlying complaint fall within, orpotentially within, the policy's coverage, theinsurer's duty to defend arises. [Citations.] Refusal to defend is unjustifiable unless itis clear from the face of the underlyingcomplaint that the facts alleged do not fallpotentially within the policy's coverage." Outboard Marine Corp. v. Liberty MutualInsurance Co., 154 Ill. 2d 90, 107-08, 607N.E.2d 1204 (1992).

Plaintiffs contend that the allegations in the counterclaimfall within the policies' coverage. In support their argument,they primarily rely upon paragraphs 79 through 85 of thecounterclaim filed by BFG. These paragraphs alleged the following:

"79.Environmental investigationsperformed on behalf of BFG confirm that awide-range of 'Hazardous Substances,' as thatterm is defined by the [Asset Purchase]Agreement, have been identified at levelsexceeding those allowable under human healthand environmental protection standards insoils and groundwater at the facilitiesformerly operated by Pneumo Abex andtransferred to BFG.

80.Environmental investigations conductedat the Cleveland New Main facility establishthat the soils and groundwater in and aroundthe facility are contaminated with volatileorganic compounds, solvents, heavy metals, andtotal petroleum hydrocarbons at levelsexceeding human health and environmentalprotection standards established under'Environmental Laws,' as that term is definedin the Agreement.

81.The contamination at the Cleveland NewMain facility, if left unremediated, threatensthe quality of site groundwater, the safety ofworkers and others that may become involved insite operation, construction or maintenanceactivities, and soils and groundwater atneighboring properties, including residences. These conditions are attributable to eventsand activities that occurred prior toPlaintiff's current stewardship of thefacility.

82.Environmental investigations conductedat the Cleveland Plating facility establishthat the soils and groundwater at the facilityare contaminated with chlorinate organiccontaminants and petroleum at levels exceedinghuman health and environmental protectionstandards established under 'EnvironmentalLaws,' as that term is defined in theAgreement.

83.The contamination at the ClevelandPlating facility, if left unremediated,presents a substantial risk for off-sitemigration, and thus threatens the soils andgroundwater at neighboring properties. Theseconditions are attributable to events andactivities that occurred prior to BFG'scurrent stewardship of the facility.

84.Environmental investigations conductedat the Tullahoma facility establish that thesoils and subsurface areas of the facility arecontaminated with volatile organic compounds,heavy metals and total petroleum hydrocarbonsat levels exceeding human health andenvironmental protection standards establishedunder 'Environmental Laws,' as that term isdefined in the Agreement.

85.The contamination at the Tullahomafacility, if left unremediated, threatens thequality of groundwater and presents asubstantial risk for migration to off-siteproperties. These conditions are attributableto events and activities that occurred priorto BFG's current stewardship of the property."

In order to find a duty to defend, we would have to concludethat the above allegations, along with any other in thecounterclaim, fall within or potentially within the subjectpolicies' coverage. As noted above, the instant policies providedthat: "'occurrence' means an accident, including continuous orrepeated exposure to conditions, which results in bodily injury orproperty damage neither expected nor intended from the standpointof the insured." An accident has been interpreted to mean " 'anunforeseen occurrence *** of untoward or disastrous character' or'an undesigned sudden or unexpected event.'" Bituminous CasualtyCorp. v. Gust K. Newberg Construction Co., 218 Ill. App. 3d 956,965-66, 578 N.E.2d 1003 (1991), quoting Aetna Casualty & Surety Co.v. Freyer, 89 Ill. App. 3d 617, 619 (1980). Our review thereforerequires us to compare the allegations of the complaint with thepolicies and determine whether the allegations of the counterclaimallege or potentially allege an "occurrence" as that term isdefined in the policy.

We now compare the allegations of the counterclaim and therelevant policy provisions. Paragraph 71 of the counterclaimstates that "BFG's counterclaims arise out of the transactions oroccurrences, relating to the parties' actions and obligations toeach other under the Agreement with respect to coveredenvironmental matters, which are the subject matter of [PneumoAbex's] complaint ***." In paragraph 72 of the counterclaim, BFGsought a declaration of Pneumo Abex's obligation to reimburse BFGfor environmental remediation expenses provided for under "theAgreement." In paragraph 74 of the counterclaim, BFG claimed thatPnuemo Abex agreed to indemnify it for environmental liabilitiesrelating to purchased assets or business under the agreement.

Paragraph 79 indicated that "Hazardous Substances," as definedin the agreement, had been identified at the various sites owned byBFG. Paragraphs 80, 82, and 84 indicated the presence ofcontamination at the Cleveland New Main, Cleveland Plating, andTullahoma facilities exceeding human health and environmentalprotection standards established under "Environmental Laws," asthat term was defined in the agreement. Paragraphs 81, 83, and 85alleged that the contamination, if left unremediated, threatenedhuman health and environmental concerns. Those same paragraphsalso alleged that the contamination occurred before BFG maintained"stewardship" over the property.

Paragraph 86 alleged:

"To date, BFG has incurred over $400,000to identify and characterize the presence atthe properties of 'Hazardous Substances'within the meaning of the Agreement, at orabove levels of regulatory concern, toevaluate the risks posed by those substancesto site occupants, ground water resources andneighboring properties, and to implementappropriate response actions."

Paragraph 88 further provided:

"These expenditures all constitute'Environmental Liabilities' for which PneumoAbex has agreed to indemnify BFG under theterms of Article 13.5 of the Agreement."

Considering all of the allegations above, we do not find thatthey alleged "an accident, including continuous or repeatedexposure to conditions, which [resulted] in bodily injury orproperty damage neither expected nor intended from the standpointof the insured." We also find that the counterclaim did not seekrelief for property damage. Instead, the counterclaim soughtindemnification for expenses incurred for remediating theenvironmental contamination contemplated by the parties in theasset purchase agreement. Because the contamination and theexpenses for remediating the contamination were contemplated by theparties, the damages complained of could not have arisen from anunforeseen occurrence.

On appeal, plaintiffs rely primarily upon Outboard Marine, 154Ill. 2d at 111, and United States Fidelity & Guaranty Co. v.Specialty Coatings Co., 180 Ill. App. 3d 378, 382, 535 N.E.2d 1071(1989). They state that broad insuring language in Outboard Marineand Specialty Coatings is similar if not identical to the policylanguage in this case. Plaintiffs also suggest that theallegations of environmental property damage caused by the insuredin the BFG suit are similar to the allegations in the third-partyactions in Outboard Marine and Specialty Coatings. Because thethird party actions in those cases triggered the duty to defend,plaintiffs claim that the BFG suit triggered the duty to defend inthis case.

In Outboard Marine, several complaints were filed againstOutboard Marine Corporation (OMC) by the state and federalenvironmental protection agencies for the discharge ofpolychlorinated byphenyls into the North Ditch, Waukegan Harbor,and Lake Michigan. The underlying suits also included a third-party complaint filed by OMC against the Monsanto Corporation. TheEnvironmental Protection Agency (EPA) then joined Monsanto as aparty defendant in an amended complaint. Monsanto filed a cross-claim for indemnification against OMC in the event it was foundliable as a result of the EPA action. OMC tendered the defense ofthe underlying actions to its insurers under comprehensive generalliability insurance policies. The policy language stated:

" '[The insurer] will pay on behalf of theinsured all sums which the insured shallbecome obligated to pay as damages because of*** property damage to which this policyapplies, caused by an occurrence, and thecompany shall have the right and duty todefend any suits against the insured seekingdamages on account of such property damage***.' " Outboard Marine, 154 Ill. 2d at 109.

The question presented in Outboard Marine was whether theunderlying actions, which sought primarily equitable relief, fellpotentially within the coverage afforded by the insurer'scommercial general liability policies for "suits seeking damages,"thereby triggering the insurer's duty to defend OMC. The supremecourt reasoned that a comprehensive general liability insurancepolicy is a very broad policy where the insurer assumes a widescope of risks. It found that the insurer in that case intended tooffer and OMC intended to purchase comprehensive protection againstliability for property damage caused by an occurrence, andconcluded that the underlying actions were "suits seeking damages"which triggered the insurer's duty to defend. Outboard Marine, 154Ill. 2d at 117.

Outboard Marine is distinguishable from the instant case. First, the underlying actions in Outboard Marine were filed bystate and federal environmental protection agencies against OMC forenvironmental contamination. In this case, the underlying actionarose from the alleged breach of the asset purchase agreementbetween the parties. Thus, the Pneumo complaint here does notinvolve an action for environmental pollution. Instead, the suitfrom which plaintiffs seek relief is the counterclaim filed by BFGconcerning Pneumo Abex's alleged failure to comply with theagreement's indemnification provisions. Such a claim did not existin Outboard Marine.

Second, the third-party complaint and cross-claim in OutboardMarine sought indemnification or contribution from the respective contaminators in the event of liability incurred as a result of the action from the environmental protection agencies. Here, thePneumo complaint and BFG counterclaim sought declaratory reliefthat the breaching party failed to fulfill its respectiveobligations under the asset purchase agreement.

Specialty Coatings is also distinguishable. In SpecialtyCoatings, Unites States Fidelity and Guaranty Co. (USF&G) issued the defendants-insureds, who were producers of industrial coatings,sealants, and adhesives, comprehensive general liability policies. The defendants tendered to USF&G the defense of two separate claims for environmental damage. The first was filed by the state for thealleged delivery and disposal of industrial wastes in KankakeeCounty. The second action was a potentially responsible party(PRP) letter issued from the United States Environmental ProtectionAgency. A third-party action was also filed against the defendantsfor contribution in connection with the defendants' disposal ofhazardous wastes at a certain site.

The relevant issue decided was whether the PRP lettertriggered USF&G's duty to defend. The appellate court found thatthe duty to defend was triggered because the PRP letter amounted toa suit and the concomitant duty to defend. Specialty Coatings, 180Ill. App. 3d at 389.

Specialty Coatings is distinguishable because the underlyingallegations in that case involved direct action by environmentalagencies for alleged pollution by the defendants. The third-partyclaim was directly related to contribution for potential expensesincurred by another defendant named in the action taken by theenvironmental agencies. In Specialty Coatings, no asset purchaseagreement with indemnification provisions existed between theparties.

Although we find Specialty Coatings distinguishable, there islanguage in that decision which supports our conclusion in thiscase. In Specialty Coatings, the court found that, "where thegenesis of the relief sought is 'physical injury to tangibleproperty' or 'loss of use of tangible property,' the claim seeksrelief from 'property damage' as defined by the contract. [Citations.]" Specialty Coatings, 180 Ill. App. 3d at 393-94. Inthe instant case, the genesis for the relief sought was not for"physical injury to tangible property" or "loss of use of tangibleproperty" but, rather, for monies owed as a result of a breach ofthe indemnification agreement.

Plaintiffs also rely upon the Supreme Court of California'sdecision in Vandenberg v. Superior Court of Sacramento County, 21Cal. 4th 815, 982 P.2d 229, 88 Cal. Rptr. 2d 366 (1999). InVandenberg, the plaintiff leased a parcel of land from Eugene andKatherine Boyd (collectively the Boyds) for the purpose of sellingand servicing automobiles. In 1988, plaintiff discontinued thebusiness and possession of the land reverted to the Boyds. Testingof the property revealed contamination of soils and groundwater onthe property as the result of three underground waste oil storagetanks installed by the plaintiff. The Boyds filed a complaintagainst the plaintiff for several causes of action including waste,nuisance, and breach of the lease agreement.

The plaintiff held commercial general liability insurance fromseveral insurers. The policies provided coverage for sums theplaintiff was "legally obligated to pay as damages" for propertydamage. Vandenberg, 21 Cal. 4th at 825, 983 P.2d at 235, 88 Cal.Rptr. 2d at 372. The plaintiff tendered the defense of the Boydcomplaint to his insurers and only USF&G agreed to defend. Theparties reached a settlement, and it was agreed between the Boydsand the plaintiff that the breach of lease issues would be resolvedthrough arbitration. USF&G agreed to defend the plaintiff in thearbitration, but reserved its coverage and indemnity obligationsfor future resolution.

In the arbitration, the arbitrator ruled for Boyd in theamount of $4 million. The award was confirmed by a superior courtjudgment and the plaintiff requested indemnification from hisinsurers. The insurers rejected the plaintiff's indemnificationrequest and the plaintiff then filed the underlying action againsthis insurers alleging a failure to defend, settle, or indemnify inthe Boyd action. In a motion, the insurers sought summary judgmenton the ground that the arbitrator awarded damages for breach oflease, a contractual cause of action, and contractual damages werenot covered by the commercial general liability policies at issue. The trial court found that the plaintiff had no coverage under thepolicies for the arbitration award because the claims submitted tothe arbitrator were contractual. Vandenberg, 21 Cal. 4th at 827,982 P.2d at 236, 88 Cal. Rptr. 2d at 373.

The court of appeals reversed ruling that "coverage under theinsurance policies in question could not be determined by referenceto the 'general rule' that damages for an insured's nonperformanceof a contract are not covered under CGL insurance polices." Vandenberg, 21 Cal. 4th at 827, 982 P.2d at 236, 88 Cal. Rptr. 2d at 374. The court further reasoned that, "when there is damage toproperty, the focus of the inquiry should be the nature of the riskor peril that caused the injury and the specific policy language,not the form of the action brought by the injured party." Vandenberg, 21 Cal. 4th at 828, 982 P.2d at 246, 99 Cal. Rptr. 2dat 374. The supreme court affirmed the reasoning of the court ofappeals. Vandenberg, 21 Cal. 4th at 841, 982 P.2d at 246, 88 Cal.Rptr. 2d at 384-85.

In our view, Vandenberg is distinguishable. First, inVandenberg, a breach of contract theory was asserted against theplaintiff in the action filed by the Boyds in addition to claimsfor environmental damages. In the instant case, the Pneumocomplaint and BFG counterclaim sought damages for breach of theasset purchase agreement and for the alleged failure to comply withthe agreement's indemnification provisions. Thus, the Pneumoaction and BFG counterclaim amounted only to a breach of contract,which is unlike the breach of lease and environmental claimsbrought against the plaintiff in Vandenberg. Furthermore, we arenot bound by this decision.

We find that Indiana Insurance Co. v. Hydra Corp., 245 Ill.App. 3d 926, 615 N.E.2d 70 (1993), and Bituminous, 218 Ill. App. 3dat 966, are instructive in this case. In Hydra, Hydra Corporation(Hydra) contracted to construct a building for B.K. ProductionSpecialties (B.K.). The contract provided for arbitration in theevent of a dispute. When numerous cracks emerged in the building'sconcrete floor and the building developed an unsightly appearancedue to loose paint, B.K. initiated an arbitration proceeding forrepairs at Hydra's expense. The arbitrator ruled in favor of B.K.,yet Hydra did not make the repairs. B.K. then filed a complaintseeking enforcement of the arbitration award. Hydra tendered thecomplaint to its insurer, Indiana Insurance Company, for a defenseand indemnity.

The language in two policies Indiana issued to Hydra statedthe following:

" 'The company will pay on behalf of theinsured all sums which the insured shallbecome legally obligated to pay as damagesbecause of

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies caused by anoccurrence, and the company shall have theright and duty to defend any suit against theinsured seeking damages on account of suchbodily injury or property damage ***.' "Hydra, 245 Ill. App. 3d at 928.

Indiana filed a declaratory judgment seeking a declaration that itneed not defend or indemnify Hydra because the damages suffered byB.K. were not caused by an occurrence. The trial court entered amotion for judgment on the pleadings in favor of Indiana.

On review, the appellate court affirmed the trial court on theground that the underlying complaint did not allege damagesresulting from an unforeseen occurrence as required by thepolicies. Instead, it reasoned that the cracks in the floor andthe loose paint on the building's exterior were the natural andordinary consequences of installing defective concrete and applyingthe wrong type of paint, bases for a breach of contract claim. Thus, the court determined that B.K.'s breach of contract claim wasnot covered under the policies issued by Indiana. Hydra, 245 Ill.App. 3d at 932.

In Bituminous, the defendants-insureds were sued by the Stateof Illinois for various acts and omissions related to the design,manufacture, and installation of the heating, ventilating, and airconditioning system (HVAC) in the State of Illinois Building. Thedefendants tendered the claims to their insurance company,Bituminous Casualty. The policy provided that the insurer woulddefend any suit seeking damage against the insured for propertydamage, which was defined in the policy as loss of the use oftangible property caused by an occurrence.

Bituminous filed a declaratory judgment action which sought adetermination that it had no duty to defend or indemnify on thegrounds that the complaint alleged a breach of contract and that acomprehensive general liability policy was not intended to pay thecosts for repairing or replacing the insured's defective work andproducts. The trial court found in favor of Bituminous and grantedits motion for summary judgment.

On review, the appellate court concluded that the State'scomplaint did not allege a loss of use of tangible property causedby an occurrence and affirmed the trial court. Bituminous, 218 Ill.App. 3d at 966.

In our view, the instant case is analogous to the facts inHydra and Bituminous. Upon de novo review of the paragraphs reliedupon by plaintiffs in the counterclaim, we conclude that theallegations concern a breach of the asset purchase agreement, anddo not amount to claims for environmental property damage caused byan "occurrence" as required under the policies at issue. Here, the Pneumo complaint and the counterclaim solely concern whether moniesare owed for the breach of the asset purchase agreement between theparties. Significantly, the first paragraph of the Pneumo complaintcharacterizes the nature of the action as "an action by Pneumo Abexfor declaratory and other relief arising out of a breach of awritten contract." Further, the "WHEREFORE" clause of the samepleading first seeks a declaration that "BFG has failed to fulfillits obligations under the [asset purchase] Agreement." A review ofthe counterclaim reveals that it too concerns the parties'obligations arising out of the asset purchase agreement. The meremention of the words "hazardous substances" or "contamination" inthe counterclaim does not establish that "those conditions" on theproperties were the result of an "occurrence."

The language of the policies in the instant case is identicalto the policy in Hydra where the Insurers were legally obligated topay damages because of property damage caused by an occurrence. Aswe noted above, an occurrence means an accident under the instantpolicies and an accident has been defined as " 'an unforeseenoccurrence *** of untoward or disastrous character' or 'anundesigned sudden or unexpected event.' " Bituminous, 218 Ill. App.3d at 965-66, quoting Aetna Casualty, 89 Ill. App. 3d at 619. Here,the underlying complaint reveals that the asset purchase agreementconcerns indemnity provisions pertaining to environmentalliabilities. We do not find that the environmental liabilitiesreferred to in BFG's counterclaim arose from an unforeseenoccurrence because the primary purpose of the asset purchaseagreement was to provide indemnification for their remediation. Therefore, we conclude that the trial court correctly ruled that themoney damages sought were not for property damage and were not aresult of an "occurrence" but, rather, were the result of a breachof the asset purchase agreement.

For the reasons above, we conclude that the trial courtcorrectly held the allegations in the counterclaim did not amountto property damages caused by an occurrence. As a result, theallegations did not fall within or potentially within the policies'coverage, and the Insurers' motion to dismiss was properly granted.

Because of our finding on the first issue, we need not addressthe second issue in this case. For the reasons above, the judgmentof the trial court is affirmed.

Affirmed.

CERDA and BURKE, JJ., concur.

1. Michigan Mutual and U.S. Fire joined Commercial Unions'motion to strike and dismiss counts III and IV of plaintiffs'third amended complaint under section 2-615 of the Illinois Codeof Civil Procedure. 735 ILCS 5/2-615 (West 1998).