St. Paul Fire & Marine Insurance Co. v. Lefton Iron & Metal Co.
Case Date: 05/06/1998
Court: 5th District Appellate
Docket No: 5-96-0130
IN THE APPELLATE COURT OF ILLINOIS FIFTH DISTRICT _________________________________________________________________ ST. PAUL FIRE & MARINE INSURANCE COMPANY ) Appeal from the and ST. PAUL MERCURY INSURANCE COMPANY, ) Circuit Court of ) St. Clair County. Plaintiffs and Counterdefendants- ) Appellees, ) ) v. ) No. 88-MR-143 ) LEFTON IRON & METAL COMPANY, INC., ) and LEFTON LAND & DEVELOPMENT COMPANY, ) ) Defendants and Counterplaintiffs and) Third-Party Plaintiffs-Appellants, ) ) v. ) ) TRANSPORTATION INSURANCE COMPANY, ) COMMERCIAL UNION INSURANCE COMPANY, ) CONTINENTAL CASUALTY COMPANY, GENERAL ) ACCIDENT INSURANCE COMPANY OF AMERICA, ) NATIONAL UNION FIRE INSURANCE COMPANY OF ) PITTSBURGH, PA, RANGER INSURANCE COMPANY,) and SAFETY NATIONAL CASUALTY CORPORATION,) Honorable ) Richard A. Aguirre, Third-Party Defendants-Appellees. ) Judge, presiding. _________________________________________________________________ JUSTICE GOLDENHERSH delivered the opinion of the court: The instant appeal involves a coverage dispute between defendants/counterplaintiffs/third-party plaintiffs, Lefton Iron & Metal Company, Inc. (Lefton Iron), and Lefton Land Development, Inc. (Lefton Land) (collectively referred to as Lefton), and its primary insurance carrier, plaintiff/counterdefendant, St. Paul Fire & Marine Insurance Company and St. Paul Mercury Insurance Company (collectively referred to as St. Paul), along with third- party defendants, excess insurance carriers, Commercial Union Insurance Company (Commercial), Ranger Insurance Company (Ranger), National Union Fire Insurance Company of Pittsburgh, PA (National Union), Continental Casualty Company (Continental), Transportation Insurance Company (Transportation), General Accident Insurance Company of America (General Accident), and Safety National Insurance Company (Safety National). St. Paul filed a declaratory judgment action in the circuit court of St. Clair County, seeking a determination that it had no duty to defend Lefton in litigation based on claims of alleged chemical contamination on and under a 42-acre industrial site owned by Lefton Land. Lefton Iron purchased the site in 1973 and transferred ownership to Lefton Land in 1984. The other insurers were joined by Lefton, which is seeking coverage from the insurers for claims during each insurer's respective policy period of either primary or excess coverage during the years 1973 through 1986. St. Paul filed a motion for summary judgment, in which the other insurers ultimately joined. The trial court granted summary judgment, finding that as a matter of law the insurers had no duty to defendant Lefton because the known-loss doctrine precluded Lefton from insuring its liability for the claims asserted against it. The trial court also ruled as a matter of law that St. Paul and Safety National, the excess insurance carrier over St. Paul, had no duty to defend pursuant to the pollution-exclusion clauses of their policies. On appeal, Lefton contends that (1) the trial court erred in applying the known-loss doctrine to the facts of this case, (2) the trial court erred in finding that no genuine issue of material fact existed as to Lefton's knowledge of the claims for which it seeks coverage at the time it purchased the insurance policies at issue herein, (3) the trial court erred in finding that evidence submitted by Lefton does not create a disputed issue of fact as to Lefton's knowledge as relevant to the known-loss issue, and (4) the chemical contamination alleged in the underlying complaint constituted a "sudden accident involving pollutants" within the written exception to the pollution-exclusion clause, thereby making summary judgment in favor of St. Paul and Safety National inappropriate. We reverse and remand with directions. I. FACTS From 1927 through 1969, the site in question was used for wood-treatment operations involving the use of various chemical preservatives, including creosote, creosote solutions, and pentachlorophenol (PCP). On January 18, 1973, Lefton Iron purchased the 42-acre industrial site in question from Moss- American, Inc. (Moss-American), the predecessor in interest of Kerr-McGee Chemical Corporation (Kerr-McGee), neither of which take any part in this action. Moss-American and Kerr-McGee merged in 1974. Lefton Iron conveyed the site to Lefton Land on October 31, 1984, by quitclaim deed. The property was originally purchased by Lefton Iron with the intention of moving its scrap metal operations to that site, but Lefton Iron decided to keep its scrap metal site where it was. It is undisputed that neither Lefton Land nor Lefton Iron ever utilized any hazardous substance at the site. Lefton never conducted any type of business on the site. The purchase in 1973 was on an "as is" basis. Lefton Iron was "aware of the existence of two waste water ponds containing oil and other wood preservatives in solution." Moreover, Lefton Iron expressly agreed to indemnify and to defend and hold harmless Moss-American. [Nonpublishable under Supreme Court Rule 23 omitted.] On June 8, 1981, Kerr-McGee, as past owner of the site, filed a "Notification of Hazardous Waste Site" with the United States Environmental Protection Agency pursuant to section 103(c) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, also known as the Superfund Act (the Act) (42 U.S.C.A. 9603(c) (West 1995)). On June 23, 1983, Ecology and Environmental, Inc., filed a preliminary assessment of the site on behalf of the United States Environmental Protection Agency. The assessment concluded that there were 11,518 cubic yards of persistent sludge at the site, containing creosote, polynuclear aromatic hydrocarbons, and soluble phenolic materials. The assessment warned of several potential hazards but made few explicit findings as to pollution at the site. On March 7, 1984, representatives of the Environmental Protection Agency inspected the site and took samples from two ponds on the property. An analysis of the samples showed "definite contamination of the two on-site ponds and a waste pile [with] a high concentration of organics." The report went on to state, "[T]his site is definitely a candidate site for the installation of ground water monitoring wells." Lefton admits to receiving a copy of this report in late August or early September 1985. The site was placed on the state remedial action priorities list. On September 26, 1985, Lefton was notified that the site had been placed on the list and that the site would be monitored further. On November 5, 1985, the Attorney General of Illinois sent Benjamin Lefton a letter regarding the environmental violations at the site, mainly due to creosote and creosote wastes. The letter explained that a multicount complaint alleging numerous violations of the Illinois Environmental Protection Act (Ill. Rev. Stat. 1985, ch. 111 |