Opinion ID: 3134619
Heading Depth: 3
Heading Rank: 2

Heading: Tender by Ehlco

Text: Wausau claims that it owed no duty to defend the 1988 Arkansas complaint concerning the Mena site because Ehlco failed to tender its defense of that suit to Wausau. Relying on Institute of London Underwriters v. Hartford Fire Insurance Co. , 234 Ill. App. 3d 70 (1992), Wausau insists that an insured must tender its defense to an insurer in order to trigger the insurer’s duty to defend. A tender pursuant to Institute of London Underwriters required the insured to notify the insurer that a suit, which potentially falls within the policy coverage, was filed and that the insured desires the insurer’s assistance in defending the suit. Wausau contends that Ehlco failed to tender its defense to Wausau and, as a result, Wausau’s duty to defend was never triggered. This court recently rejected the tender requirement set forth in Institute of London Underwriters . In Cincinnati Cos. v. West American Insurance Co. , 183 Ill. 2d 317 (1998), we held that the lack of a tender by the insured does not relieve the insurer of its duty to defend if the insurer had “actual notice” of the underlying suit. “[A]ctual notice” means that the insurer knows both “that a cause of action has been filed and that the complaint falls within or potentially within the scope of the coverage of one of its policies.” Cincinnati Cos. , 183 Ill. 2d at 329-30. The pleadings here do not disclose whether Ehlco tendered its defense of the underlying Arkansas suit to Wausau. We therefore consider whether Wausau had actual notice of the suit. The pleadings, however, are also silent on the factual issue of whether Wausau had actual notice that the Arkansas suit had been filed. Because the pleadings fail to demonstrate that Wausau had actual notice of the Arkansas suit, which would trigger Wausau’s duty to defend that suit, we must affirm the appellate court’s reversal of the circuit court’s grant of Ehlco’s motion for judgment on the pleadings with regard to the Mena site. The pleadings before us do not entitle Ehlco to judgment as a matter of law. We note, however, that in the circuit court Ehlco prevailed in its motion for judgment on the pleadings with regard to the Mena site because the court was persuaded that Wausau’s duty to defend had been triggered by events that preceded the filing of the 1988 Arkansas suit, particularly the EPA’s 1982 PRP letter. This result is not surprising given that, when the circuit court ruled upon the pleadings in 1994, notice of a PRP letter had been held sufficient to trigger the duty to defend. See United States Fidelity & Guaranty Co. v. Specialty Coatings Co. , 180 Ill. App. 3d 378 (1989), overruled , Lapham-Hickey , 166 Ill. 2d 520. Consequently, there was no need in the circuit court for Ehlco to raise arguments pertaining to tender or actual notice of the Arkansas complaint, and the parties did not design their pleadings to address such issues. Under these circumstances, we hold that the parties should be given the opportunity to amend their pleadings to address the actual notice issue in the circuit court. Despite this omission in the pleadings, Ehlco attempts to preserve its judgment on the pleadings as to the Mena site by pursuing another argument. In addressing Wausau’s tender contention, Ehlco asserts that, under the facts of this case, Wausau should be equitably estopped from requiring any further notice from Ehlco because Wausau had already flatly denied coverage to Ehlco on other grounds in 1982 and continuing through 1983. The pleadings show that Ehlco first advised Wausau of the EPA’s intention to assert CERCLA liability against it on March 18, 1982. Ehlco wrote that although it had “received no formal notice,” it had been informed by the EPA of its intentions to assert CERCLA liability against it with regard to the Mena site. The letter stated: “We therefore hereby give you notice of such claims.” On March 29, 1982, Wausau responded by letter that its policies did not appear to provide coverage for the potential claim. Wausau stated that there was no coverage for property damage occurring after the policies expired in 1971, and that one of the policies contained a pollution exclusion clause. Ehlco maintains that this March 29, 1982, letter from Wausau constituted a flat denial of coverage on grounds other than notice. The pleadings further disclose that, on August 2, 1982, and again on March 8, 1983, Ehlco wrote to Wausau and requested it to reconsider its refusal to defend Ehlco against the EPA’s investigation and proceeding concerning the Mena site. Wausau apparently did nothing in response. Ehlco asserts that Wausau’s repeated failures to retract its earlier denial of coverage left Ehlco with no doubt that Wausau would not treat the Mena site as covered. Ehlco insists that, given Wausau’s actions in 1982 and 1983, Ehlco was not required to give Wausau any further notice regarding the subsequent lawsuit, which was filed by the EPA on March 17, 1988. Rather, Ehlco’s position is that Wausau should be equitably estopped from asserting further notice requirements of Ehlco. We decline Ehlco’s invitation to equitably estop Wausau based on the pleadings before us. As with the actual notice issue discussed above, the parties did not design their circuit court pleadings to address this theory of the case. Consequently, the parties should be given the opportunity to raise and rebut this argument in the circuit court in the first instance.