NOTICE 2020 IL App (5th) 180396-U NOTICE Decision filed 01/27/20. The This order was filed under text of this decision may be NO. 5-18-0396 Supreme Court Rule 23 and changed or corrected prior to may not be cited as precedent the filing of a Petition for by any party except in the Rehearing or the disposition of IN THE limited circumstances allowed the same. under Rule 23(e)(1).
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT ________________________________________________________________________
APEX OIL COMPANY, INC. (successor- ) Appeal from the by-merger to Clark Oil & Refining ) Circuit Court of Corporation), ) Madison County. ) Plaintiff-Appellant, ) ) v. ) No. 12-L-1962 ) ARROWOOD INDEMNITY COMPANY ) (f/k/a Royal Indemnity Company, individually ) and as successor by merger with Royal ) Insurance Company of America f/k/a ) Royal Globe Insurance Company), ) Honorable ) William A. Mudge, Defendant-Appellee. ) Judge, presiding. ________________________________________________________________________
JUSTICE OVERSTREET delivered the judgment of the court. Justices Barberis and Boie concurred in the judgment.
ORDER
¶1 Held: Complaint allegations that exposure to asbestos caused asbestos-related disease and conditions clearly fell within coverage for “bodily injury by disease” afforded by employers’ liability insurance policies, “bodily injury by disease” coverage exclusion was applicable, and therefore, the insurer’s duty to defend was not triggered.
¶2 The plaintiff, Apex Oil Company, Inc. (Apex), successor-by-merger to Clark Oil
& Refining Corporation (Clark), filed an action in the circuit court of Madison County
1 against the defendant, Arrowood Indemnity Company (Arrowood), an employers’
liability insurer. Apex alleged that in declining to defend it in an underlying asbestos-
related suit filed by a former employee’s estate, which resulted in settlement between
Apex and the estate, Arrowood breached obligations to defend and indemnify Apex
pursuant to its employers’ liability policies. Arrowood filed a counterclaim seeking a
declaratory judgment that it had no duty to defend or indemnify Apex in the underlying
action. On cross-motions for summary judgment, the circuit court granted summary
judgment in Arrowood’s favor, finding that Arrowood had no duty to defend Apex under
the policy language.
¶3 Apex appeals the circuit court’s order, arguing that the circuit court erred because
the underlying complaint alleged facts potentially within the coverage provisions of the
employer’s liability policy and that in breaching its duty to defend, Arrowood was
estopped from raising policy defenses and must indemnify Apex for the settlement of the
underlying suit. For the following reasons, we affirm the circuit court’s judgment.
¶4 I. BACKGROUND
¶5 On December 3, 2012, Apex filed a complaint against Arrowood for breach of
contract and for penalties and costs pursuant to section 155 of the Illinois Insurance Code
(215 ILCS 5/155 (West 2012)). In its complaint, Apex alleged that Arrowood had issued
to Apex’s predecessor applicable employers’ liability insurance policies, in effect through
various policy periods from 1966 through 1982. 1 Apex alleged that on August 4, 2010,
1 The Arrowood employers’ liability policies were issued to Apex’s predecessor in Wisconsin. The circuit court applied Illinois law, and Arrowood does not argue on appeal that Illinois law was 2 Mary Krohn, on behalf of the estate of Richard Krohn, filed suit alleging, inter alia, that
Richard had been exposed to asbestos while working as a laborer for Apex’s predecessor
from 1957 to 1996, was diagnosed on December 1, 2008, with mesothelioma caused by
the asbestos exposure, and died on December 21, 2009. Apex alleged that because its
predecessor was an insured under the employers’ liability policies and Krohn’s
allegations fell within coverage provisions of the policies, Arrowood had a duty to defend
and indemnify Apex in the underlying Krohn suit. Apex alleged that on September 24,
2010, it tendered the Krohn complaint to Arrowood for defense and indemnity but that on
December 6, 2010, Arrowood denied Apex’s tender of defense. Apex alleged that it
thereafter incurred costs associated with its defense in the Krohn suit, including a
confidential settlement amount. Apex also sought recovery under section 155 of the
Illinois Insurance Code (215 ILCS 5/155 (West 2012)) for Arrowood’s vexatious and
unreasonable refusal to defend or pay indemnity for the underlying Krohn lawsuit.
¶6 Apex attached to its complaint the underlying Krohn complaint. In the underlying
cause of action against Apex, Mary alleged that during the course of Richard’s
employment, he was exposed to and inhaled, ingested, or otherwise absorbed large
amounts of asbestos fibers emanating from certain products he was working with and
around, which were manufactured, sold, distributed, or installed by Apex, among others.
In count IV of the Krohn complaint, alleging fraudulent misrepresentation against Apex,
Mary alleged that as a proximate cause of Richard’s exposure to asbestos, he inhaled,
ingested, or otherwise absorbed asbestos fibers and became injured. Mary alleged that
inapplicable. See Ill. S. Ct. R. 341(h)(7) (eff. Feb. 6, 2013) (points not argued are forfeited). 3 Richard expended large sums of monies for the treatment of his “asbestos-induced
disease and conditions.” Krohn further alleged that Richard had experienced great
physical pain and mental anguish as a result of the inhalation, ingestion, and absorption
of said asbestos fibers and as a result of his “asbestos-induced disease and conditions”
had been prevented from pursuing his normal course of employment. In count V of the
Krohn complaint, alleging battery against Apex, Mary alleged that Apex caused asbestos
fibers to become trapped in Richard’s lungs and engaged in a course of conduct intending
that Richard would inhale, ingest, or otherwise absorb asbestos fibers and become
injured. In count VI, alleging negligence against Apex, Mary alleged that Richard had “in
the past been compelled to expend and become liable for large sums of monies for
hospital, medical and other health care services necessary for the treatment of his
asbestos-induced disease and conditions.” In count VII, alleging willful and wanton
conduct against Apex, Mary alleged that Apex intentionally or with reckless disregard for
Richard’s safety induced him to continue to work at its facility, causing him bodily harm.
In count VIII, alleging premises liability against Apex, Mary alleged that Richard “was
exposed to and inhaled, ingested or otherwise absorbed great amounts of asbestos fibers
causing [Richard] to develop the asbestos disease aforesaid, which disabled and
disfigured [Richard]; [Richard] ha[d] in the past been compelled to expend and become
liable for large sums of monies for hospital, medical and other health care services
necessary for the treatment of his asbestos-induced disease and conditions; and [Richard]
ha[d] in the past experienced great physical pain and mental anguish as a result of the
inhalation, ingestion and absorption of said asbestos fibers.” 4 ¶7 Apex also attached to its complaint an applicable workers’
compensation/employers’ liability insuring agreement with the relevant policy language
found in the numerous policies involved. The limit of liability in each policy was
$100,000, and the policy language involved two parts: “Coverage A—Workmen’s
Compensation” and “Coverage B—Employers’ Liability.” The policy language provided
that the insurer agreed as follows:
“I. Coverage A—Workmen’s Compensation
To pay promptly when due all compensation and other benefits required of
the insured by the workmen’s compensation law.
Coverage B—Employers’ Liability
To pay on behalf of the insured all sums which the insured shall become
legally obligated to pay as damages because of bodily injury by accident or
disease, including death at any time resulting therefrom, *** by any
employee of the insured arising out of and in the course of his employment
by the insured ***
II. Defense, Settlement, Supplementary Payments
As respects the insurance afforded by the other terms of this policy the
company shall:
(a) defend any proceeding against the insured seeking such benefits and any
suit against the insured alleging such injury and seeking damages on
account thereof, even if such proceeding or suit is groundless, false or
fraudulent *** 5 (b) ***
pay all expenses incurred by the company, all costs taxed against the
insured in any such proceeding or suit and all interest accruing after
entry of judgment until the company has paid or tendered or deposited
in court such part of such judgment as does not exceed the limit of the
company’s liability thereon.”
¶8 Section III of the policy, entitled “Definitions,” described “Bodily Injury by
Accident” and “Bodily Injury by Disease.” Specifically, section III stated as follows:
“Bodily Injury by Accident; Bodily Injury by Disease. The contraction of disease
is not an accident within the meaning of the word ‘accident’ in the term ‘bodily
injury by accident’ and only such disease as results directly from a bodily injury
by accident is included within the term ‘bodily injury by accident.’ The term
‘bodily injury by disease’ includes only such disease as is not included within the
term ‘bodily injury by accident.’ ”
¶9 Section IV of the policy, entitled “Application of Policy,” stated:
“This policy applies only to injury (1) by accident occurring during the policy
period, or (2) by disease caused by or aggravated by exposure of which the last
day of the last exposure, in the employment of the insured, to conditions causing
the disease occurs during the policy period.”
¶ 10 Pertinent to this dispute, the “Exclusions” section of the policy stated that the
policy did not apply:
6 “(e) under coverage B, to bodily injury by disease unless prior to [36] months after
the end of the policy period written claim is made or suit is brought against the
insured for damages because of such injury or death resulting therefrom.”
Coverage for “bodily injury by accident” is not similarly constrained by a 36-month time
limitation for filing suit found in exclusion (e).
¶ 11 On February 7, 2013, Arrowood filed an answer and counterclaim to Apex’s
complaint. In its answer, Arrowood admitted that it issued the employers’ liability
policies from April 30, 1970, until April 30, 1973, and from January 1, 1974, to January
1, 1982. Arrowood also admitted that, on or about September 24, 2010, Apex tendered
the Krohn action to Arrowood for defense and indemnity under alleged general liability
policies issued to Apex’s predecessor, but Arrowood otherwise denied that Apex had
tendered the Krohn complaint to Arrowood for defense and indemnity. Arrowood
admitted that it did not agree to defend and indemnify Apex under the general liability
policies but otherwise denied that on or about December 6, 2010, Arrowood had denied
Apex’s tender of defense. Among other affirmative defenses, Arrowood asserted that it
was not liable under the policies to the extent the claims in the Krohn action did not
involve damages because of bodily injury by accident or by disease. Arrowood also
asserted a counterclaim against Apex, seeking a declaration that it had no duty to defend
or indemnify Apex under the policies and seeking dismissal of Apex’s section 155
damages and fees claim.
¶ 12 On October 23, 2017, Apex filed a motion for summary judgment, wherein it
sought $186,945.40 for its attorney fees in defending the Krohn case, the cost of its 7 confidential settlement of the Krohn suit, and $49,570.44 for its attorney fees in
defending this case through April 20, 2018. In its motion for summary judgment, Apex
argued that its notification to Arrowood of the claim in the underlying lawsuit referenced
its general liability policies, and thus Arrowood was considered to have received notice in
regard to all Arrowood policies running in Apex’s favor, including any workers’
compensation/employers’ liability policies. Apex argued that Arrowood was estopped
from raising policy defenses to coverage because Arrowood had refused to defend Apex
under a reservation of rights and failed to file a declaratory judgment action.
¶ 13 On January 17, 2018, Arrowood filed a combined opposition to Apex’s motion for
summary judgment and a cross-motion for summary judgment. In its motion, Arrowood
argued that coverage for Richard’s “bodily injury by disease” was precluded based on the
last-day-of-last-exposure provision in the policy because Richard’s last date of last
exposure to asbestos took place in 1996, which did not occur during the period of any
Arrowood policy, the last of which expired in 1982. Arrowood also noted that its policies
contained a 36-month provision that precluded coverage for any written claim or suit
against the insured for damages because of “bodily injury by disease” if suit was not
made or brought within 36 months after the end of any Arrowood policy period.
Arrowood argued that the Krohn complaint was first filed in the circuit court on August
4, 2010, 28 years after the end of the last Arrowood policy expired in 1982. Arrowood
thus argued that this provision also precluded coverage for the Krohn action. Arrowood
argued that a straightforward comparison of the allegations of the Krohn action against
8 the provisions of the policy demonstrated that Arrowood did not have a duty to defend
Apex.
¶ 14 In its motion for summary judgment, Arrowood also argued that it filed a timely
declaratory judgment action against Apex. Arrowood argued that Apex had sought
coverage for the Krohn action in 2010 under separate commercial general liability
policies issued by Arrowood and that Arrowood had no record of receiving any tender
from Apex under the policies at issue here. Arrowood argued that the first time it knew
Apex was seeking coverage under the employers’ liability policies was Apex’s service of
the complaint upon Arrowood on December 8, 2012, after the Krohn action had settled.
¶ 15 On April 26, 2018, at the hearing on the parties’ cross-motions for summary
judgment, Apex argued that Arrowood’s duty to defend was triggered pursuant to the
policies, especially considering that the allegations of the complaint must be construed
liberally in favor of the insured and that a mere possibility of coverage triggered the duty
to defend. Apex noted that the Krohn complaint alleged bodily injury due to asbestos
exposure during employment years that the policies were in effect. Apex argued that
“there was a possibility of coverage under the policy, [Arrowood] did no[t] defend,” and
therefore, Arrowood was estopped from raising coverage defenses not mentioned in the
denial letter.
¶ 16 On July 20, 2018, the circuit court, adopting Arrowood’s tendered order, denied
summary judgment in favor of Apex and granted summary judgment in favor of
Arrowood. In its order, the circuit court held that because the Krohn complaint alleged
“bodily injury by disease” and that Richard had been exposed to asbestos from 1957 to 9 1996, his last day of last exposure did not occur during any Arrowood policy as required
to trigger coverage under the policies. The circuit court also concluded that the 36-month
provision applicable to “bodily injury by disease” in the policy provided a separate basis
to preclude coverage under the policies. The circuit court concluded that because of the
applicable exclusions, Arrowood had no duty to defend Apex, and thus, Apex’s argument
that Arrowood was estopped from relying upon its defenses because it did not file an
earlier declaratory judgment action was unavailing. On August 16, 2018, Apex filed its
timely notice of appeal.
¶ 17 II. ANALYSIS
¶ 18 On appeal, Apex argues that the circuit court erred in denying summary judgment
in its favor because the underlying Krohn complaint alleged a potentially covered claim
for “bodily injury by accident” that triggered Arrowood’s duty to defend. Arrowood
counters that the underlying allegations did not trigger duties pursuant to the policy
because the allegations involved “bodily injury by disease” and thus the 36-month
limitation and the last-day-of-last-exposure limitation precluded coverage. Arrowood
further argues that Apex is precluded from asserting that the underlying complaint
alleged “bodily injury by accident” for failing to raise it in the trial court.
¶ 19 Initially, we address Arrowood’s argument that Apex has waived the argument
that Arrowood had a duty to defend under the policies because the underlying Krohn
complaint’s allegations stated facts bringing the case within, or potentially within, the
policy’s coverage for “bodily injury by accident.” Apex filed its action alleging
Arrowood’s failure to defend and indemnify Apex for the underlying claims pursuant to 10 the policy at issue. Like the circuit court below, to determine the issue before us, i.e.,
whether the allegations in the Krohn complaint triggered Arrowood’s duty to defend
Apex in the underlying cause, we must compare the four corners of the underlying
complaint with the four corners of the insurance policy and determine whether the facts
alleged in the underlying complaint fall within, or potentially within, the insurance
policy’s coverage. Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.
2d 384, 393 (1993); Pekin Insurance Co. v. Dial, 355 Ill. App. 3d 516, 519-20 (2005).
Specifically, we must determine whether the underlying action alleged only claims for
“bodily injury by disease,” subject to the clauses that the circuit court relied on to deny
relief to Apex, including the 36-month limitation, or whether the underlying action also
alleged claims for “bodily injury by accident.” To review the order entered in
Arrowood’s favor on the basis that the allegations in the underlying complaint did not
trigger Arrowood’s duty to defend pursuant to the insurance policy language, we cannot
ignore relevant language in the policy or in the complaint.
¶ 20 Further, Apex’s argument that Arrowood had a duty to defend based on the
insurance policy language, in light of the Krohn complaint, was raised below. Apex’s
argument on appeal, that Krohn’s allegations fell within the policy’s “bodily injury by
accident” coverage, is merely one argument addressing the issue of policy construction in
light of the complaint. Parties must preserve issues or claims for appeal, but “[t]hey are
not required to limit their arguments in this court to the same ones made in the trial
[court].” 1010 Lake Shore Ass’n v. Deutsche Bank National Trust Co., 2015 IL 118372,
¶ 18; see also Brunton v. Kruger, 2015 IL 117663, ¶ 76 (“We require parties to preserve 11 issues or claims for appeal; we do not require them to limit their arguments here to the
same arguments that were made below.”). Moreover, the rule of waiver is a limitation on
the parties, not the courts. Appellate courts have disregarded the waiver rule in order to
achieve a just result, and may do so to maintain sound and uniform precedent. People
ex rel. Resnik v. Curtis & Davis, Architects & Planners, Inc., 58 Ill. App. 3d 28, 31
(1978), aff’d, 78 Ill. 2d 381 (1980). Accordingly, we will consider the arguments raised
on appeal.
¶ 21 Apex argues that the circuit court improperly entered summary judgment in
Arrowood’s favor, finding it had no duty to defend. Apex argues that ambiguity in the
policy language, which purported to distinguish “bodily injury by disease” from “bodily
injury by accident,” should be construed in favor of coverage. Apex argues that the
Krohn complaint alleged facts involving “bodily injury by disease” and “bodily injury by
accident” in that the underlying complaint alleged asbestos-induced mesothelioma, in
addition to unspecified injuries, conditions, pain, and loss as a result of absorbing
asbestos. Apex thus argues that Krohn’s complaint presented, at a minimum, a potentially
covered claim such that Arrowood’s duty to defend was triggered, even if other
allegations in the complaint did not trigger the duty to defend.
¶ 22 “Summary judgment is appropriate when there is no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law.” Virginia Surety Co. v.
Northern Insurance Co. of New York, 224 Ill. 2d 550, 556 (2007); 735 ILCS 5/2-1005(c)
(West 2012). “A circuit court’s entry of summary judgment is subject to de novo review
(General Agents Insurance Co. of America, Inc. v. Midwest Sporting Goods Co., 215 Ill. 12 2d 146, 153 (2005)), and the construction of an insurance policy, which presents a
question of law, is likewise reviewed de novo (Central Illinois Light Co. v. Home
Insurance Co., 213 Ill. 2d 141, 153 (2004)).” Virginia Surety Co., 224 Ill. 2d at 556.
¶ 23 “[I]n construing the terms in an insurance policy, the court must ascertain the
intent of the parties.” Outboard Marine Corp v. Liberty Mutual Insurance Co., 154 Ill. 2d
90, 119 (1992). “If the terms in the policy are clear and unambiguous, the court must give
them their plain, ordinary, popular meaning.” Id. “If a term in the policy is subject to
more than one reasonable interpretation within the context in which it appears, it is
ambiguous.” Id. “Ambiguous terms are construed strictly against the drafter of the policy
and in favor of coverage.” Id. “This is especially true with respect to exclusionary
clauses.” Id. Policy provisions that purport to exclude or limit coverage will be read
narrowly and will be applied only where the terms are clear, definite, and specific. Gillen
v. State Farm Mutual Automobile Insurance Co., 215 Ill. 2d 381, 393 (2005). “This is so
because there is little or no bargaining involved in the insurance contracting process
(Canadian Radium & Uranium Corp. v. Indemnity Insurance Co. of North America
(1952), 411 Ill. 325, 335)), the insurer has control in the drafting process, and the policy’s
overall purpose is to provide coverage to the insured (see United States Fidelity &
Guaranty Co. v. Specialty Coatings Co. (1989), 180 Ill. App. 3d 378, 384).” Outboard
Marine Corp., 154 Ill. 2d at 119.
¶ 24 In Illinois, the duties to defend and to indemnify are not coextensive. Id. at 108.
“An insurer’s duty to defend its insured is much broader than its duty to indemnify.” Id.
at 125. “An insurer may not justifiably refuse to defend an action against its insured 13 unless it is clear from the face of the underlying complaint[ ] that the allegations fail to
state facts which bring the case within, or potentially within, the policy’s coverage.”
(Emphasis in original.) United States Fidelity & Guaranty Co. v. Wilkin Insulation Co.,
144 Ill. 2d 64, 73 (1991).
¶ 25 “The duty to defend is much broader than the duty to indemnify because the duty
to defend is triggered if the complaint potentially falls within a policy’s coverage,
whereas the duty to indemnify is triggered only when the resulting loss or damage
actually comes within a policy’s coverage.” (Emphases in original.) Country Mutual
Insurance Co. v. Bible Pork, Inc., 2015 IL App (5th) 140211, ¶ 16. “To determine if a
claim is potentially covered under an insurance policy, a court must compare the
allegations in the underlying complaint to the policy language.” Id.; see also General
Agents Insurance Co. of America, Inc. v. Midwest Sporting Goods Co., 215 Ill. 2d 146,
154 (2005). “It is well settled that both the underlying complaint and the insurance policy
should be liberally construed in favor of the insured and against the drafter of the policy,
the insurer.” Country Mutual Insurance Co., 2015 IL App (5th) 140211, ¶ 16; see also
Wilkin Insulation Co., 144 Ill. 2d at 74. “The duty to defend extends to cases in which the
complaint contains several theories or causes of action against the insured and only one
of the theories is within the policy’s coverage limits.” Country Mutual Insurance Co.,
2015 IL App (5th) 140211, ¶ 16; see also Wilkin Insulation Co., 144 Ill. 2d at 74.
¶ 26 Once a duty to defend has been triggered, the insurer cannot ignore the claim or
simply refuse to defend the insured. See Employers Insurance of Wausau v. Ehlco
Liquidating Trust, 186 Ill. 2d 127, 150-54 (1999). Rather, if the insurer believes that 14 coverage is not provided, the insurer must either defend the suit under a reservation of
rights or seek a declaratory judgment that there is no coverage. Id. at 150. If the insurer
fails to take either of these steps and is later found to have wrongfully denied coverage,
the insurer is estopped from raising policy defenses to coverage, even if those defenses
would have proven to be successful. Id. at 150-52. It is then “ ‘liable for the award
against the insured and the costs of the suit, because the duty to defend is broader than the
duty to pay.’ ” Stoneridge Development Co. v. Essex Insurance Co., 382 Ill. App. 3d 731,
741 (2008) (quoting Murphy v. Urso, 88 Ill. 2d 444, 451 (1981)). This is an extraordinary
remedy, but is warranted in light of the fact that the insurer’s duty to defend is “so
fundamental an obligation that a breach of that duty constitutes a repudiation of the
contract.” Employers Insurance of Wausau, 186 Ill. 2d at 151.
¶ 27 Nevertheless, the “estoppel doctrine applies only where an insurer has breached its
duty to defend” the insured. Id. “Application of the estoppel doctrine is not appropriate if
the insurer had no duty to defend, or if the insurer’s duty to defend was not properly
triggered.” Id. “These circumstances include where the insurer was given no opportunity
to defend; where there was no insurance policy in existence; and where, when the policy
and the complaint are compared, there clearly was no coverage or potential for
coverage.” Id. (insurer has actual notice, triggering duty to defend, where it knows 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); see also Casualty Insurance Co. v. E.W.
Corrigan Construction Co., 247 Ill. App. 3d 326, 332 (1993) (where insurer received
15 timely notice by employer-insured of potential workers’ compensation claim, notice was
sufficient to charge the insurer on general liability policy running in favor of the insured).
¶ 28 With these principles in mind, we must determine whether the underlying
allegations in the Krohn complaint, construed liberally in favor of coverage, fall
potentially within “bodily injury by accident” policy provisions, also construed liberally
in favor of coverage. The particular allegations of the complaint at issue, even if
groundless, false, or fraudulent, are central to the evaluation of whether a potentially
covered claim has been asserted. In the Krohn complaint, Mary alleged that Richard
inhaled, ingested, and absorbed large amounts of asbestos fibers, became injured,
experienced great physical pain and mental anguish, and expended large sums for the
treatment of his asbestos-induced disease and conditions. Mary alleged that Richard had
“in the past experienced great physical pain and mental anguish as a result of the
inhalation, ingestion and absorption of asbestos fibers” and as a result of his asbestos-
induced disease and conditions, Richard was hindered from pursuing his normal course
of employment.
¶ 29 Although the policy’s coverage under “Coverage B” insured Apex for damages
resulting from either “bodily injury by accident” or “bodily injury by disease,” the policy
precluded coverage for a claim for “bodily injury by disease” “unless prior to [36]
months after the end of the policy period written claim is made or suit is brought against
the insured for damages.” This 36-month limitation period, by its terms, applied only to
claims for “bodily injury by disease.” The policy language further provided that the
policy applied only to injury by disease “caused or aggravated by exposure of which the 16 last day of the last exposure, in the employment of the insured, to conditions causing the
disease occurs during the policy period.” This last-day-of-last-exposure provision, by its
terms, also applied only to claims for “injury *** by disease.” Unlike coverage for
“bodily injury by disease,” coverage for “bodily injury by accident” was not subject to
the last-day-of-last-exposure provision or the 36-month provision, exclusions upon which
Arrowood and the circuit court relied to defeat coverage. Instead, “bodily injury by
accident” is covered so long as it occurred during the policy period.
¶ 30 The policy language at issue provided coverage “only to injury (1) by accident
occurring during the policy period, or (2) by disease caused or aggravated by exposure
*** to conditions causing the disease.” The plain language of the policy thus
distinguished an accident as “occurring” and a disease as “caused or aggravated by
exposure.” The Krohn complaint alleged no accident “occurring” during the policy
period. Instead, the Krohn complaint clearly alleged asbestos-related disease, conditions,
and injury “caused or aggravated by exposure” to asbestos and would therefore be
considered “bodily injury by disease” pursuant to the plain language of the policy.
Moreover, the policy states that contraction of disease is not an accident within the
meaning of the policy. Accordingly, Richard’s contraction of mesothelioma and asbestos-
related conditions and injuries may not be considered “bodily injury by accident” within
the meaning of the policy.
¶ 31 Apex argues that the policy provisions reveal ambiguity as to the content and
scope of what constituted “bodily injury by accident,” and thus, the meaning of the words
most favorable to the insured should be accepted, since the insurer prepared the 17 document. See Canadian Radium & Uranium Corp., 441 Ill. at 334-35. In Section III, the
policy language indicated that “bodily injury by disease” and “bodily injury by accident”
were mutually exclusive; however, the policy then stated without further explication that
“only such disease as results directly from a bodily injury by accident is included within
the term ‘bodily injury by accident.’ ” Considering this language in the context of the
policy as a whole (Compton v. Country Mutual Insurance Co., 382 Ill. App. 3d 323, 330
(2008)), however, the language provides that a disease resulting from an accident
occurring during the policy period, as opposed to exposure alone, may be considered a
“bodily injury by accident” pursuant to the policy. In this case, however, the Krohn
complaint did not allege an accident resulting from an occurrence. The Krohn complaint
alleged asbestos-related disease, conditions, and unspecified injury resulting from
extended exposure to asbestos. The allegations thus fall within the policy’s “bodily injury
by disease” limitations.
¶ 32 Our construction of the terms “disease” and “accident” with respect to employers’
liability under Coverage B in the policy is further supported by their usage in the closely
related context of workers’ compensation claims. See USX Corp. v. Liberty Mutual
Insurance Co., 444 F.3d 192, 198 (3d Cir. 2006). Insurers write insurance for workers’
compensation in combination with employers’ liability claims to cover claims arising out
of employee workplace injuries, in order to provide protection over “ ‘those situations
where worker’s compensation may not apply and thus avoid a gap in protection because
employee claims subject to workers’ compensation law are generally excluded in other
types of liability policies.’ ” Id. at 199 (quoting 7B John Allan Applebaum, Insurance 18 Law and Practice § 4571, at 2 (Berdal ed. 1979)). Employers’ liability insurance is
written in conjunction with workers’ compensation insurance especially where, as here,
the workers’ compensation/employers’ liability policy contains a single “Definitions”
section applicable to both “Coverage A—Workmen’s Compensation” and “Coverage
B—Employers’ Liability.” Id. We may therefore consider the substantial body of
workers’ compensation precedent to construe the terms “disease” and “accident” in a
related employers’ liability policy. Id. “[I]t is logical that the contracting parties would
not use the term ‘accident’ in a [workers’ compensation/employers’ liability] policy
intending the term to have one meaning under Coverage A and another under Coverage
B, when the coverages are written in conjunction and are set forth in a single document
with one set of definitions.” Id.
¶ 33 As noted by Arrowood, workers’ compensation and occupational disease laws
deem an “accident” under the Workers’ Compensation Act (820 ILCS 305/1 et seq.
(West 2012)) as traceable to a “definite time, place and cause.” Peoria Motors, Inc. v.
Industrial Comm’n, 92 Ill. 2d 260, 265 (1982); Bunney v. Industrial Comm’n, 75 Ill. 2d
413, 420 (1979); Canadian Radium & Uranium Corp., 411 Ill. at 330 (an accident, to be
within the Workmen’s Compensation Act, must be traceable to a definite time, place, and
cause). Arrowood argues that the alleged microscopic impact of asbestos fibers to
Richard’s body over the course of years of exposure cannot reasonably be considered a
workplace “accident” traceable to a “definite time, place, and cause,” but must be
considered the “contraction of disease” that, by the express terms of the policy language,
cannot be considered “bodily injury by accident.” 19 ¶ 34 We agree that the Krohn complaint, even when liberally construed, did not allege
a palpable injury traceable to a definite time, place, and cause. Instead, the Krohn
complaint alleged injury caused by extended exposure to asbestos. Pursuant to the plain
language of the policy, an injury resulting from such exposure is considered a “bodily
injury by disease.” The only reasonable interpretation of the term “bodily injury by
accident” excluded the underlying claims for asbestos-related disease and conditions.
¶ 35 Our conclusion is also consistent with that reached by other courts. See USX
Corp., 444 F.3d at 201 (asbestos-related injury not “bodily injury by accident” under
policy language); Riverwood Internship Corp. v. Employers Insurance of Wausau, 420
F.3d 378, 384 (5th Cir. 2005) (asbestos-related illness constituted “bodily injury by
disease” under the policy, and thus was subject to the 36-month exclusion provision);
Hubbs v. Anco Insulations, Inc., 747 So. 2d 804, 808 (La. Ct. App. 1999) (contraction of
asbestosis was not “bodily injury by accident” within meaning of policy, and thus, 36-
month exclusion applied). In these cases, the courts concluded that the terms at issue here
were subject to only one reasonable interpretation—that an asbestos-related injury was
not a “bodily injury by accident” under the policies. Id. The courts agreed that to find
otherwise “would be to subsume the definition of bodily injury by disease into the
definition of bodily injury by accident.” Hubbs, 747 So. 2d at 807-08 (“to find that
disease that results from accidental contact with a foreign body, such as an asbestos fiber,
is bodily injury by accident would be to subsume the definition of bodily injury by
disease into the definition of bodily injury by accident”); Riverwood, 420 F.3d at 383.
Although we are not bound to follow decisions by federal courts other than the United 20 States Supreme Court, and we are not bound to follow decisions of reviewing courts of
foreign jurisdictions (Skipper Marine Electronics, Inc. v. United Parcel Service, Inc., 210
Ill. App. 3d 231, 239 (1991)), we find their construction of identical terms in the standard
employers’ liability policies to be persuasive and to comport with our understanding of
the plain meaning of the policy at issue here. See USX Corp., 444 F.3d at 201.
¶ 36 We therefore hold that the circuit court properly concluded that the only
reasonable interpretation of the policies led to the conclusion that the alleged asbestos-
related disease and conditions did not constitute “bodily injury by accident” but were
rather “bodily injury by disease.” Accordingly, because the Krohn suit was filed more
than 36 months after the applicable policies terminated, the 36-month exclusion of
coverage provision applied, and the policy unambiguously excluded the possibility of
coverage for the allegations in the Krohn action. Therefore, even considering the broad
duty to defend standard set forth above, we find that the circuit court properly entered
summary judgment in favor of Arrowood based on its exclusionary provisions with
respect to “bodily injury by disease.” Accordingly, we affirm the judgment of the circuit
court of Madison County.
¶ 37 III. CONCLUSION
¶ 38 For the reasons stated, we affirm the judgment of the circuit court of Madison
County.
¶ 39 Affirmed.