Heather Isringhausen Gvillo Apr. 9, 2015, 2:13pm

The Fifth District Appellate Court concluded that an insurance company had a duty to defend an oil company accused of contaminating soil and groundwater in Hartford in property damage lawsuits, but may not have a duty in bodily injury claims.

Justice James R. Moore delivered the April 7 opinion, affirming in part and reversing in part an order out of the Madison County Circuit Court granting partial summary judgment in favor of plaintiff Sinclair Oil Corp., which owned an oil pipeline that leaked and contaminated soil and groundwater near Hartford

Defendant Allianz Underwriters Insurance Company, formerly known as Allianz Underwriters, Inc., appealed the Jan. 8, 2013, order.

The appeals court found that the circuit court properly determined that Allianz breached its duty to defend Sinclair in property damage claims and was liable for defense costs the plaintiff incurred defending those claims. However, the appeals court concluded that the lower court erred when it determined that Allianz breached its duty to defend Sinclair on claims for bodily injury.

Sinclair owned and operated the oil pipeline near Harford between 1979 and 1990. In 1981 and 1982, the pipeline leaked or spilled four separate times. As a result, Sinclair ceased operations of the pipeline in 1984, but some of the oil remained dormant in the pipeline. Then when Sinclair evacuated the pipeline in 1990, the plaintiff discovered that more petroleum had leaked from the pipeline over the years.

As a result of the contamination, several lawsuits were filed in Madison County beginning in 2003 for bodily injury and property damage.

Sinclair claims it entered into an insurance policy with Allianz, which was issued by the Home Indemnity Company, in the 1980s. As part of that policy, Sinclair alleges the two parties entered into an agreement in April 2004 to share the costs of remediating the contamination in and around Hartford with other entities that had operated in the area.

Sinclair claims Allianz breached its duty to defend it and sought declaratory judgment that Allianz has a duty to defend Sinclair with respect to the lawsuits filed against it.

Allianz filed a counterclaim for declaratory judgment that it had no duty to defend Sinclair, because its policy only contains a promise to indemnify Sinclair. It also argued that its aggregate coverage limits had been exhausted.

The appeals court disagreed, concluding that the policy contained a duty to defend.

“Accordingly, the circuit court was correct in its determination that there is a drop down provision in the Allianz policy which required Allianz to defend Sinclair in the event of exhaustion of the aggregate limits of the Home policy,” the opinion states.

The court further stated that only certain types of claims are subject to an aggregate limit, and that there is a distinction between bodily injury claims and property damage claims subject to the limit.

The appeals court explained that bodily injury claims only have a limit if they are included in the “completed operations hazard” or “products hazard.” Because the record does not reflect which claims fit into which type, the court held that there is insufficient evidence to determine whether the limits were exhausted in regards to claims for bodily injury.

As for the claims for property damage, the appeals court concluded that all claims are subject to a $500,000 aggregate limit, meaning Allianz had a duty to cover each claim.

“Thus the circuit court was correct in finding that Allianz was liable for defense costs from the time it received actual notice of the lawsuits in 2006, but only those defense costs related to the claims for property damage,” Moore wrote.

“Accordingly, we affirm in part, reverse in part, and remand for further proceedings not inconsistent with this opinion, in which the circuit court determines the amount of attorney’s fees attributable to the property damage claims in the underlying actions, and makes a determination, after further development of the record based on the analysis set forth above, regarding Allianz’s duty to defend Sinclair with regard to the bodily injury claims,” he added.

Justices Melissa A. Chapman and S. Gene Schwarm concurred in the decision.

Daniel L. Bradley of DeFranco & Bradley in Fairview Heights represents Allianz.

Bernard J. Ysursa of Cook, Ysursa, Bartholomew, Brauer & Shevlin in Belleville represents Sinclair.

Madison County Circuit Court case number 08-MR-602

More News