Opinion ID: 2999561
Heading Depth: 1
Heading Rank: 3

Heading: investigation, defense, settlement,

Text: ASSISTANCE AND COOPERATION. With respect to any claim or suit seeking damages payable under this policy and for which no defense is provided by underlying insurance of by any other valid and collectible insurance available to the insured, (A) The Company may elect, but shall not be re- quired, to assume the investigation, defense or settlement of such claim or suit, or (B) In the absence of such election by the company, the insured shall arrange for and assume the inves- (continued...) No. 05-3412 13 Both the 1969-71 and the 1972-79 excess umbrella policies refer to claims or suits. Once again, the disjunctive “or” is significant. Its inclusion suggests that claims are to be distinguished from “suits.” This language suggests that, under the excess umbrella policies, Wausau’s duty to defend, like its duty to indemnify, may be triggered by something less than a lawsuit. The excess umbrella policies here are fundamentally different from policies imposing a duty to defend only in the event of lawsuits. If Wausau is correct that its duty to defend requires a formal suit, then the reference to “claims” would be mere surplusage, which is problematic. It is well settled that reviewing courts will give meaning to each term in an insurance policy. See CILCO, 821 N.E.2d at 214. There is a colorable argument, then, that the excess umbrella policies impose upon Wausau a duty to defend not only in the event of lawsuits but also in the event of claims not taking the form of suits. If, under the excess umbrella policies, a lawsuit is not necessary to trigger Wausau’s duty 6 (...continued) tigation, defense or settlement of such claim or suit ... Defense expenses, whether incurred by the Company or by the insured, shall be totaled with the amount of such judgment or settlement for the purpose of determining the liability of the Company in excess of the retained limit. The conditions portion of this policy provides: No action shall lie against the company unless, as a condition precedent thereto . . . the amount of the insured’s obligation to pay, in excess of the retained limit, shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company. (Appellant’s Br. 10; Appellee’s Br. 16-17.) 14 No. 05-3412 to defend, then—even under a narrow reading of the duty to indemnify—a lawsuit certainly would not be required to trigger the duty to indemnify. But although the potential construction of Wausau’s duty to defend under the excess umbrella policies provides interpretative support for the conclusion that a lawsuit is also not required to trigger its duty to indemnify, the duty to defend is not directly before us. The claims in this case center on Wausau’s duty to indemnify. Because a duty to indemnify separate from and independent of a duty to defend is cognizable under Illinois law and because both Keystone’s general liability and excess umbrella policies suggest that Wausau’s duty to indemnify is in fact based on different conditions from its duty to defend, the district court erred in granting summary judgment to Wausau on the grounds that a lawsuit was necessary to trigger the duty to indemnify. Yet that does not end our inquiry. Although the duty to indemnify and the duty to defend are separate and independent in Keystone’s policies, those policies require that Keystone be legally obligated to pay damages before Wausau’s duty to indemnify attaches. Understanding CILCO is therefore critical to understanding the indemnification terms of the Keystone policies. The CILCO policies, like those at issue here, also hinged indemnification on the insured’s “legal obligation” to pay damages. But CILCO specifically held that a statutory obligation standing alone was insufficient to trigger the duty to indemnify. Id. at 22425. In so holding, the Illinois Supreme Court concluded that “[a]t a minimum, the insured must be acting in response to a claim.” Id. at 225. That claim, however, “need not necessarily be in the form of a demand letter, particularly when the legal obligation being asserted is based on a strict liability statute.” Id. Thus, although a lawsuit is not always required to trigger an insurer’s duty to indemnify, here (as in CILCO) the policies require that some claim or articuNo. 05-3412 15 lated demand assert a legal obligation on the part of Keystone to remediate the environmental contamination. The key question with regard to each of the four sites, then, is whether Keystone undertook its cleanup measures gratuitously or in response to a demand or coercive or intimidating suggestion by an enforcement agency. See id. at 225 (concluding that CILCO was operating under a legal obligation when it agreed to participate in a voluntary cleanup program because the IEPA suggested that it could do the necessary cleanup “the easy way or the hard way”). No lawsuit was filed in connection with the Impex Site, the Chicago Steel & Wire Site or the Ninth Avenue Site. Keystone admits that it discovered contamination at the Impex Site and the Chicago Steel & Wire Site on its own initiative. Keystone also admits that it enrolled these sites in voluntary remediation programs. But the district court did not consider whether coercive suggestions caused Keystone to undertake this remedial action. Although CILCO precludes the argument that mere statutory liability is sufficient to trigger an insured’s legal obligation to remediate, this requirement does not eliminate the circumstance of demands or coercive suggestions made by enforcement agencies. Likewise, although there was no formal lawsuit against Keystone relating to the Ninth Avenue Site, the record indicates that Keystone undertook remedial action there only after the U.S. EPA ordered it to investigate and remediate. Since CILCO contemplates the possibility that such pressure may be sufficient to constitute a “claim” and to impose a sufficiently focused legal obligation on Keystone, the lack of a formal lawsuit does not seem to preclude indemnification under the policies. Id. at 225-26. Finally, Keystone contends that it undertook remedial action at the Peoria Site only in response to pressure from the IEPA, including the 1993 complaint alleging that 16 No. 05-3412 Keystone failed to meet its obligations under the 1988 consent decree. The district court concluded that the 1993 complaint did not trigger Wausau’s duty to defend (and therefore its duty to indemnify) because the complaint alleged only procedural violations on the part of Keystone. But this analysis does not consider whether Keystone acted voluntarily or in response to coercive invocation of its obligation to remediate. In addition, the district court’s statement is incorrect insofar as its rests on the belief that a lawsuit is necessary under Illinois law to trigger an insurer’s duty to indemnify. Thus, because the district court erroneously concluded that Wausau’s duty to indemnify depended on its duty to defend, it never reached the key issue whether Keystone undertook its remedial action voluntarily. The court’s incorrect interpretation of Illinois law is enough to justify reversal. No. 05-3412 17