In its recent decision in Ill. Tool Works Inc. v. Travelers Cas. & Sur. Co., 2015 IL App (1st) 132350 (Ill. App. Ct. 1st Dist. 2015), the Appellate Court of Illinois, First District, had occasion to consider whether an insurer has a duty to defend its insured against a toxic tort complaint that does not set forth when the exposure to the insured’s product occurred or when the injury manifested.
Between 1971 and 1987, Travelers Casualty & Surety Company and Century Indemnity Company (collectively, “Insurers”) insured manufacturing companies Illinois Tool Works Inc. and ITW Finishing LLC (collectively, “Illinois Tool”). The policies provided Illinois Tool with a defense in any suit brought against it for bodily injury even if the allegations of the suit were false or groundless.
Thousands of toxic tort lawsuits (“underlying lawsuits”) were filed against Illinois Tool alleging that the underlying plaintiffs were injured as a result of exposure to asbestos, benzene, manganese, and other harmful materials while engaging in welding activities. The typical underlying lawsuit named dozens of companies as co-defendants of Illinois Tool. The Insurers did not dispute whether the injuries alleged in the complaints would be covered by the policies but argued that there was no duty to defend because the last policy they issued expired in 1987, and Illinois Tool did not enter the welding product market until 1993.
Illinois Tools filed suit against the Insurers seeking a declaration that they owed a duty to defend the underlying lawsuits. The parties presented various complaints as being representative of the thousands of complaints filed against Illinois Tool. The appellate court divided the complaints into four categories in assessing the Insurers’ duty to defend.
The first category of complaints alleged that the plaintiffs suffered injury during the time the policies issued by the Insurers were in effect. The Insurers argued that extrinsic evidence established that Illinois Tool could not be found liable for these claims as Illinois Tool was not involved in the welding business until after the policies expired. The court found that the Insurer’s knowledge of evidence that would ultimately defeat liability could not function to preclude its defense obligation. The Insurers owed a duty to defend those claims.
With respect to the complaints that alleged that exposure to an Illinois Tool product resulted in an injury but did not set forth when the exposure occurred or when the injury manifested, the court similarly found that the duty to defend existed. The court relied on the principle that the duty to defend is broader than the duty to indemnify and the well-settled principle that vague and ambiguous allegations against an insured should be resolved in favor of finding a duty to defend. The court determined that the ambiguous or unstated time period must be resolved in favor of a duty to defend. The bare allegations of this category of complaints left open the possibility that the underlying plaintiffs’ exposure or injury occurred during the policy periods. The time of the injury was a factual uncertainty that, until resolved, gave rise to the Insurers’ duty to defend Illinois Tool.
In analyzing this second category of underlying suits, the court also addressed the allocation of defense costs. Illinois Tool chose to self-insure after 1987, so the Insurers argued they should only be responsible for their pro-rata share of defense costs for the suits that do not allege the date of injury. This would result in Illinois Tool being responsible for a portion of the defense costs for the time it was self-insured. The court examined the language of the insuring
agreements, which bound the Insurers to defend against “any suit” and pay “all sums” for claims of injury. The court found that this language imposed a joint and several obligation on the Insurers to pay defense costs, and freed Illinois Tool of any duty to contribute toward those costs.
The court also examined those suits that only asserted liability against Illinois Tool as a successor of various companies it purchased. As there was no dispute that Illinois Tool purchased the companies after the expiration of the last policy issued by the Insurers, Illinois Tool conceded it was not entitled to coverage for these lawsuits.
Finally, the court examined complaints that alternatively alleged direct liability and successor liability against Illinois Tool. As those pleadings left open the possibility that Illinois Tool would be directly responsible for injuries occurring during the Insurers’ policy periods, a defense was owed for those suits.