Find Legal Information

Employers Insuance v. Ehlco Liquidating, No. 84684 (Ill. S.Ct.)

Docket No. 84684-Agenda 25-September 1998.

EMPLOYERS INSURANCE OF WAUSAU, Appellee, v. EHLCO LIQUIDATING TRUST et al., Appellants (C.E. Heath Compensation and Liability Insurance Company, Appellee).

Opinion filed January 22, 1999.

JUSTICE BILANDIC delivered the opinion of the court:

This appeal involves a dispute over insurance coverage for environmental property damage at industrial sites in Mena, Arkansas, and Albany County, Wyoming. Employers Insurance of Wausau (Wausau) filed this declaratory judgment action in the circuit court of Cook County against Ehlco Liquidating Trust; its trustee, Noel H. Goodman; and C.E. Heath Compensation and Liability Insurance Company (Heath).

Wausau is an insurance company that issued insurance policies to Edward Hines Lumber Company (Hines) and a subsidiary owned by Hines. Hines and its subsidiary operated lumber treatment facilities at the sites in Arkansas and Wyoming. Hines subsequently dissolved. Ehlco Liquidating Trust (Ehlco) is a trust created to resolve Hines' contingent liabilities. Heath was an excess insurer of Hines.

The circuit court ultimately granted Ehlco's motions for judgment on the pleadings with respect to insurance coverage for both sites. The appellate court reversed both judgments on the pleadings and remanded for further proceedings in accordance with its decision. 292 Ill. App. 3d 1036. We allowed the petition for leave to appeal filed by Ehlco and its trustee. 166 Ill. 2d R. 315.

BACKGROUND

The pleadings disclose the following undisputed facts pertinent to the issues in this appeal. Two underlying lawsuits are involved, one in Arkansas and one in Wyoming. Each underlying suit resulted from the operation of industrial wood-treatment facilities that dispersed hazardous wastes into the environment, thereby causing environmental contamination and property damage.

From January 1, 1968, to October 1, 1971, Wausau insured Hines and its subsidiary pursuant to certain comprehensive general liability insurance policies. These policies provided that Wausau "will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of *** property damage *** to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such *** property damage." Wausau discontinued insuring Hines in 1971.

Mena Site

The Mena site consists of 57 acres of land on which the Nebraska Bridge Supply and Lumber Company (Nebraska Bridge) constructed a post and pole production plant and, later, a wood-treatment facility. In 1967, Hines acquired all the stock of Nebraska Bridge, making Nebraska Bridge a wholly owned subsidiary of Hines. From 1967 to 1978, Nebraska Bridge, as a Hines subsidiary, continued to operate the wood-treatment facility on the Mena site. Hines sold the Mena site in 1978.

In 1980, the United States Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) (42 U.S.C.