Opinion ID: 2092445
Heading Depth: 1
Heading Rank: 2

Heading: suits seeking damages

Text: We turn now to Liberty Mutual's appeal. Liberty Mutual contends that it is not obligated to defend OMC against the underlying actions brought by the governmental agencies under the terms of its CGL policies. To determine whether the insurer has a duty to defend the insured, the court must look to the allegations in the underlying complaint and compare these allegations to the relevant provisions of the insurance policy. (See, e.g., United States Fidelity & Guaranty Co. v. Wilkin Insulation Co. (1991), 144 Ill.2d 64, 73, 161 Ill.Dec. 280, 578 N.E.2d 926; Conway v. Country Casualty Insurance Co. (1982), 92 Ill.2d 388, 393, 65 Ill.Dec. 934, 442 N.E.2d 245.) If the facts alleged in the underlying complaint fall within, or potentially within, the policy's coverage, the insurer's duty to defend arises. (See, e.g., Wilkin, 144 Ill.2d at 73, 161 Ill.Dec. 280, 578 N.E.2d 926; Weiss v. Bituminous Casualty Corp. (1974), 59 Ill.2d 165, 169, 319 N.E.2d 491.) Refusal to defend is unjustifiable unless it is clear from the face of the underlying complaint that the facts alleged do not fall potentially within the policy's coverage. See, e.g., Wilkin, 144 Ill.2d at 73, 161 Ill.Dec. 280, 578 N.E.2d 926; Conway, 92 Ill.2d at 393, 65 Ill.Dec. 934, 442 N.E.2d 245. The construction of an insurance policy's provisions is a question of law. (See, e.g., Maryland Casualty Co. v. Chicago & North Western Transportation Co. (1984), 126 Ill.App.3d 150, 155, 81 Ill. Dec. 289, 466 N.E.2d 1091; Rivota v. Kaplan (1977), 49 Ill.App.3d 910, 914, 7 Ill.Dec. 176, 364 N.E.2d 337.) In construing an insurance policy, the court must ascertain the intent of the parties to the contract. (See, e.g., International Minerals & Chemical Corp. v. Liberty Mutual Insurance Co. (1988), 168 Ill.App.3d 361, 370, 119 Ill.Dec. 96, 522 N.E.2d 758; Rivota, 49 Ill.App.3d at 915, 7 Ill.Dec. 176, 364 N.E.2d 337.) To ascertain the meaning of the policy's words and the intent of the parties, the court must construe the policy as a whole (see, e.g., Zurich Insurance Co. v. Raymark Industries, Inc. (1987), 118 Ill.2d 23, 50, 112 Ill.Dec. 684, 514 N.E.2d 150; Western Casualty & Surety Co. v. Brochu (1985), 105 Ill.2d 486, 493, 86 Ill.Dec. 493, 475 N.E.2d 872), with due regard to the risk undertaken, the subject matter that is insured and the purposes of the entire contract (see Dora Township v. Indiana Insurance Co. (1980), 78 Ill.2d 376, 378, 36 Ill.Dec. 341, 400 N.E.2d 921). If the words in the policy are unambiguous, a court must afford them their plain, ordinary, and popular meaning. (See, e.g., Wilkin, 144 Ill.2d at 74, 161 Ill.Dec. 280, 578 N.E.2d 926; Weiss, 59 Ill.2d at 170-71, 319 N.E.2d 491.) However, if the words in the policy are susceptible to more than one reasonable interpretation, they are ambiguous ( Wilkin, 144 Ill.2d at 74, 161 Ill.Dec. 280, 578 N.E.2d 926) and will be construed in favor of the insured and against the insurer who drafted the policy (see, e.g., Wilkin, 144 Ill.2d at 74, 161 Ill.Dec. 280, 578 N.E.2d 926; Brochu, 105 Ill.2d at 495, 86 Ill.Dec. 493, 475 N.E.2d 872; Dora Township, 78 Ill.2d at 379, 36 Ill.Dec. 341, 400 N.E.2d 921). In this case, each CGL policy issued by Liberty Mutual and purchased by OMC contained, in relevant part, the following provision: [Liberty Mutual] will pay on behalf of the insured all sums which the insured shall become obligated to pay as damages because of    property damage to which this policy applies, caused by an occurrence, and the company shall have the right and duty to defend any suits against the insured seeking damages on account of such property damage   . In this appeal, Liberty Mutual argues that the appellate court erroneously determined that the word damages is ambiguous. Liberty Mutual asserts that damages has a technical, accepted meaning and the phrase suits seeking damages provides coverage only for actions at law which seek compensatory, legal damages. Liberty Mutual contends that this phrase is unambiguous and cannot be construed to include coverage for suits seeking equitable or injunctive relief. Therefore, Liberty Mutual contends that the appellate court erroneously held that Liberty Mutual had a duty to defend OMC in the underlying actions. The question presented before this court is whether the underlying actions, which seek primarily equitable relief, fall potentially within the coverage afforded by Liberty Mutual's CGL insurance policies for suits seeking damages, thereby triggering Liberty Mutual's duty to defend OMC. Before resolving this issue, it is necessary to set forth some of the facts underlying the instant litigation. OMC is a large manufacturer of outboard motors. Since the 1940s, OMC has operated a die-casting facility in Waukegan, Illinois, near Waukegan Harbor. From approximately 1959 to 1972, OMC used a hydraulic fluid, Pydraul, in its die-casting process. Pydraul was manufactured by Monsanto Company (Monsanto) and contained PCBs. During the die-casting process, OMC frequently experienced heavy leaks and spills of Pydraul which it routed through its wastewater collection system. This PCB-laden effluent from OMC's facility was routed to a ditch on OMC's property known as the North Ditch and eventually found its way into Waukegan Harbor and Lake Michigan. This declaratory judgment action involves several underlying actions. In March 1978, the EPA filed one of the underlying actions at issue in the instant case against OMC in the United States District Court for the Northern District of Illinois. In this complaint, the EPA alleged that, from 1959 until 1972, OMC had discharged PCBs into the North Ditch, Waukegan Harbor, and Lake Michigan, severely contaminating the bottom sediments of these bodies of water. The complaint alleged that, because OMC was not authorized by permit to discharge PCBs into these bodies of water, OMC's conduct violated the Rivers and Harbors Act of 1899 (33 U.S.C. § 407 (1988)) and the Federal Water Pollution Control Act (33 U.S.C. § 1311(a) (1988)). The agency sought injunctions enjoining OMC from further contaminating these bodies of water and requiring OMC to: (1) dredge the North Ditch; (2) undertake an expedited study on the safest method for removal and disposal of the contaminated sediments of Waukegan Harbor; and (3) remove and dispose of these sediments. In addition, the EPA prayed for the assessment of civil penalties against OMC and the costs of the action. In August 1978, the State of Illinois also filed a complaint against OMC in the same Federal district court. Containing basically the same factual allegations as the EPA complaint, the State's complaint alleged that OMC's conduct violated the Federal Water Pollution Control Act, the Illinois Public Nuisance Act (Ill.Rev.Stat.1977, ch. 100½, par. 26 et seq. ), the Illinois Environmental Protection Act (Ill.Rev.Stat.1977, ch. 111½ par. 1001 et seq. ), the Federal and State common law of nuisance, and the State common law of trespass. Like the EPA, the State requested the district court to enter injunctions enjoining OMC from engaging in any future PCB discharge and requiring OMC to: (1) conduct a study of methods to dredge, remove, and dispose of the contaminated sediments and (2) to remove and dispose of the contaminated sediments from these bodies of water as well as the contaminated soil on its own land. The State also requested that the district court impose civil penalties and the costs of the litigation on OMC. In November 1978, OMC filed a third-party complaint against Monsanto, the manufacturer of Pydraul, in the EPA action. The EPA then amended its complaint to join Monsanto as a party-defendant in its action against OMC. In September 1980, Monsanto filed a cross-claim against OMC praying for indemnification and/or contribution from OMC for any liability it might incur as a result of the EPA action. In January 1982, the EPA filed a second-amended complaint which added counts against OMC and Monsanto for violations of section 106(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) (42 U.S.C. § 9606(a) (1988)). The EPA also prayed for additional injunctive relief requiring OMC and Monsanto to construct a bypass of the North Ditch and an alternative piping system and to install groundwater purge wells and a treatment system to remove PCBs from the groundwater underneath OMC's property. In February 1985, the governmental agencies moved for voluntary dismissal, which the district court granted without prejudice. Both agencies reserved their right to response costs under section 107(a)(4)(A) of CERCLA (42 U.S.C. § 9607(a)(4)(A) (1988)). In October 1988, the EPA filed a new complaint against OMC in the United States District Court for the Northern District of Illinois which contained factual allegations similar to those made in its initial complaint. On the same day, the State of Illinois also filed a new complaint against OMC which was similar to its initial complaint. Both of these complaints prayed for response costs and damages for injuries to natural resources pursuant to section 107 of CERCLA (42 U.S.C. § 9607 (1988)). In April 1989, the district court approved of and entered a consent decree which was negotiated and entered into by OMC, the EPA, and the State of Illinois. Pursuant to the consent decree, OMC was required to make payments into a trust fund for the costs associated with the cleanup of the North Ditch, Waukegan Harbor, and Lake Michigan. Liberty Mutual initially asserts that the governmental agencies' 1988 complaints are not involved in this appeal and cannot be considered in determining whether the insurers had a duty to defend OMC. However, it is clear from the record that the 1988 complaints were before the trial court when it ruled on OMC's motion for partial summary judgment and are, therefore, part of the record on appeal. The 1988 complaints are the only complaints which specifically pray for response costs and damages pursuant to section 107 of CERCLA. Therefore, these 1988 complaints clearly constitute suits seeking damages. Accordingly, with respect to these 1988 complaints, we hold that, absent an applicable policy exclusion, Liberty Mutual had a duty to defend OMC and we affirm the appellate court in this regard. However, our determination does not necessarily dispose of the issue of whether Liberty Mutual had a duty to defend OMC against the underlying complaints which were voluntarily dismissed prior to the filing of the 1988 complaints. Unlike the 1988 complaints, these prior complaints prayed solely for equitable relief in the form of mandatory injunctions, the assessment of civil penalties, and the costs of the litigation. Liberty Mutual contends that, since these pre-1988 complaints did not pray for relief in the form of monetary damages paid to an injured third party as compensation for its injury, its policies provided no coverage for these underlying actions. In support of its argument, Liberty Mutual relies primarily on Ladd Construction Co. v. Insurance Co. of North America (1979), 73 Ill.App.3d 43, 29 Ill.Dec. 305, 391 N.E.2d 568, wherein the Ladd court, addressing a similar argument, interpreted the word damages to mean compensatory, legal damages. Therefore, the Ladd court found that, since the underlying complaint prayed only for equitable relief, there was no coverage under the CGL policy and the insurer had no duty to defend its insured. In the case at bar, however, both the circuit and the appellate courts declined to follow Ladd. Instead, both of these courts relied on United States Fidelity & Guaranty Co. v. Specialty Coatings Co. (1989), 180 Ill.App.3d 378, 129 Ill.Dec. 306, 535 N.E.2d 1071. The appellate court found that the term damages was ambiguous, that numerous jurisdictions have rejected the outdated distinction between equity and law, and that insureds have a right to rely on their common-sense interpretation of the word damages. Therefore, the appellate court construed the term damages to include the insured's cost of complying with mandatory injunctions and held that the CGL policies at issue provided coverage for the underlying complaints, thereby triggering Liberty Mutual's duty to defend OMC. (212 Ill.App.3d at 238-43, 156 Ill. Dec. 432, 570 N.E.2d 1154; see Specialty Coatings Co., 180 Ill.App.3d at 390-92, 129 Ill.Dec. 306, 535 N.E.2d 1071.) Although we affirm the holding of the appellate court, we do so on different grounds. We begin our analysis by noting that this issue has been litigated nationwide in both Federal and State courts. Some courts have determined that the word damages in similar CGL policies is ambiguous and have construed it in favor of the insured. (See, e.g., Hays v. Mobil Oil Corp. (1st Cir.1991), 930 F.2d 96, 100-01; AIU Insurance Co. v. Superior Court (1990), 51 Cal.3d 807, 841, 799 P.2d 1253, 1278, 274 Cal.Rptr. 820, 845; Aerojet-General Corp. v. San Mateo County Superior Court (1989), 211 Cal.App.3d 216, 226, 257 Cal. Rptr. 621, 626; United States Fidelity & Guaranty Co. v. Specialty Coatings Co. (1989), 180 Ill.App.3d 378, 391-94, 129 Ill. Dec. 306, 535 N.E.2d 1071; Hazen Paper Co. v. United States Fidelity & Guaranty Co. (1990), 407 Mass. 689, 700, 555 N.E.2d 576, 583.) Other courts have found that this term is unambiguous and excludes the cost of compliance with mandatory injunctions and/or response costs sought pursuant to CERCLA. (See, e.g., Cincinnati Insurance Co. v. Milliken & Co. (4th Cir. 1988), 857 F.2d 979, 981; Mraz v. Canadian Universal Insurance Co. (4th Cir.1986), 804 F.2d 1325, 1329; Aetna Casualty & Surety Co. v. Hanna (5th Cir.1955), 224 F.2d 499, 503; Continental Insurance Co. v. Northeastern Pharmaceutical & Chemical Cos. (8th Cir.1988), 842 F.2d 977, 985-87 ( en banc) ; Desrochers v. New York Casualty Co. (1954), 99 N.H. 129, 131, 106 A.2d 196, 198; cf. School District of Shorewood v. Wausau Insurance Cos. (1992), 170 Wis.2d 347, 365-72, 488 N.W.2d 82, 88-91.) Still other courts have found that damages is unambiguous and that its ordinary, plain meaning includes the costs of compliance with mandatory injunctions and/or response costs. (See, e.g., National Indemnity Co. v. United States Pollution Control, Inc. (W.D.Okla.1989), 717 F.Supp. 765, 766-67; Broadwell Realty Services, Inc. v. Fidelity & Casualty Co. (1987), 218 N.J.Super. 516, 526, 528 A.2d 76, 82; Boeing Co. v. Aetna Casualty & Surety Co. (1990), 113 Wash.2d 869, 877-81, 784 P.2d 507, 511-13.) We agree with this third group of courts. Our primary purpose in construing the instant policy provision is to ascertain the intent of the parties. Initially, we look to the nature of the policy at issue and the risks undertaken by the insurer. The policies before us are comprehensive general liability insurance policies. Such a policy is a very broad liability policy whereby the insurer assumes a wide scope of risks. (See Dora Township v. Indiana Insurance Co. (1980), 78 Ill.2d 376, 378-79, 36 Ill.Dec. 341, 400 N.E.2d 921.) In the instant case, Liberty Mutual intended to offer and OMC intended to purchase comprehensive protection against liability for property damage caused by an occurrence. With this in mind, we turn to the interpretation of the term damages. This term is not defined in the policies. Therefore, we must interpret this term by affording it its plain, ordinary, and popular meaning. ( Canadian Radium & Uranium Corp. v. Indemnity Insurance Co. of North America (1952), 411 Ill. 325, 332, 104 N.E.2d 250.) As one authority on insurance law has written: `Usual and ordinary meaning' has been stated variously to be that meaning which the particular language conveys to the popular mind, to most people, to the average, ordinary, normal [person], to a reasonable [person], to persons with usual and ordinary understanding, to a business[person], or to a lay[person]. (2 Couch on Insurance 2d § 15:18 (rev.ed. 1984).) Webster's dictionary defines damages as the estimated reparation in money for detriment or injury sustained: compensation or satisfaction imposed by law for a wrong or injury caused by a violation of a legal right. (Webster's Third New International Dictionary 571 (1986).) This definition does not distinguish between legal compensatory damages or the costs of complying with a mandatory injunction. It merely indicates that damages stands for the money required to be expended in order to right a wrong. To the popular mind, to most people, to ordinary laypersons, damages connotes money one must expend to remedy an injury for which he or she is responsible, irrespective of whether that expenditure is compelled by a court of law in the form of compensatory damages or by a court of equity in the form of compliance with mandatory injunctions. (See Areojet-General Corp. v. San Mateo County Superior Court (1989), 211 Cal.App.3d 216, 226, 257 Cal.Rptr. 621, 626.) Whether OMC expends the money and conducts the cleanup itself or pays the money to the government as the injured public's representative and the government conducts the cleanup is of little consequence. In either case, OMC would have to expend money to remedy the environmental damage it has caused. For precisely this purpose, OMC insured itself by purchasing CGL policies. That it is of little consequence whether the remedy is in the form of legal or equitable relief is especially true in the context of the broad protective purposes of a CGL insurance policy. Such a policy would be of little utility in protecting its purchaser if its coverage rises or falls upon the whim of the underlying plaintiff and whether the underlying complaint prayed for legal or equitable relief. (See 212 Ill.App.3d at 242, 156 Ill.Dec. 432, 570 N.E.2d 1154; Areojet-General Corp., 211 Cal.App.3d at 228, 257 Cal.Rptr. at 628.) In this regard, we note that, although the governmental agencies' initial complaints were not brought pursuant to CERCLA, these complaints were later amended to add counts alleging CERCLA violations. CERCLA was designed to allow governmental agencies flexibility in choosing the method by which they would protect our natural environment and enforce the Federal statute. (See 212 Ill. App.3d at 242, 156 Ill.Dec. 432, 570 N.E.2d 1154.) CERCLA allows the agencies to exercise discretion in choosing from several forms of relief including mandatory injunctions, response or cleanup costs, and damages for injury to natural resources. (See 42 U.S.C. §§ 9606, 9607 (1988).) The utility of a CGL policy would be questionable if its coverage varied according to the discretion of a governmental agency in choosing the method by which it would enforce CERCLA and the type of relief it requested. We cannot find that the parties intended the coverage of this comprehensive general liability policy to be so precarious. On the contrary, we find that, in light of the broad scope of this type of policy and the popular meaning of damages, the parties intended these policies to cover liability for property damage caused by an occurrence regardless of whether that liability is equitable or legal in nature. (Accord Minnesota Mining & Manufacturing Co. v. Travelers Indemnity Co. (Minn. 1990), 457 N.W.2d 175, 181-82.) If the insurer had desired to restrict coverage to only those suits seeking legal, compensatory damages, it could have easily included among its exclusionary provisions an exclusion pertaining to the costs of complying with mandatory injunctions. We therefore affirm the appellate court and hold that, under the facts of this case, the underlying actions were suits seeking damages which triggered Liberty Mutual's duty to defend OMC.