M. H. Detrick Co. v. Century Indemnity Co.

SIXTH DIVISION
September 25, 1998


No. 1-97-0027


M.H. DETRICK COMPANY,

Plaintiff-Appellant,

v.

CENTURY INDEMNITY COMPANY, as Successor
to Insurance Company of North America;
CIGNA FIRE UNDERWRITERS INSURANCE
COMPANY, as Successor to Aetna Fire
Underwriters Insurance Company; and TIG
INSURANCE COMPANY, as Successor to
Transamerica Insurance Company,

Defendants-Appellees.)
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)Appeal from the
Circuit Court of
Cook County

No. 96 CH 2988

Honorable
Albert Green,
Judge Presiding.


JUSTICE QUINN delivered the opinion of the court:

This declaratory judgment action involves a dispute over the
scope of insurance coverage provided by defendants to plaintiff.
On October 16, 1996, the circuit court granted summary judgment in
favor of the defendants pursuant to section 2-1005 of the Illinois
Code of Civil Procedure. 735 ILCS 5/2-1005 (West 1996). On
appeal, plaintiff maintains that: (1) the circuit court erred in
finding that a subsequent agreement between the parties superseded
and extinguished plaintiff's rights under insurance policies issued
by defendants; and (2) the circuit court erred in relying upon
evidence of plaintiff's postagreement conduct in granting summary
judgment.
For the following reasons, we affirm.
The facts relevant to this appeal are as follows. Plaintiff,
M.H. Detrick Company (Detrick), manufacturer and distributor of
asbestos-containing products, was sued by a number of parties in
the 1980s who alleged injury due to exposure to plaintiff's
products. In 1984, plaintiff turned to defendants, Century
Indemnity Company, as Successor to Insurance Company of North
America; Cigna Fire Underwriters Insurance Company, as Successor to
Aetna Fire Underwriters Insurance Company, and TIG Insurance
Company, as Successor to Transamerica Insurance Company for
coverage under its insurance policies. In 1988, plaintiff and
defendants entered into an agreement that covered all pending and
future asbestos-related claims against plaintiff (1988 Agreement).
Payment by defendants under the agreement was subject to the total
available aggregate limits set forth in the insurance policies.
Once that limit was exhausted, the defendant that provided the
policy was excused from further contribution to plaintiff's damages
and defense costs. On October 10, 1990, counsel for plaintiff
informed plaintiff's excess insurers that plaintiff's primary
coverage under the policies provided by defendants was exhausted
and that the claims against plaintiff would thereafter be
transferred to the excess insurers. The claims were then shifted
to the excess carriers, which began payment, and defendants closed
their primary policy files.
Defendants, with the exception of Century Indemnity Company,
received no further communication from plaintiff regarding primary
coverage until 1995 when counsel for plaintiff contacted defendants
and maintained that plaintiff had not exhausted its coverage under
the insurance policies. Specifically, counsel for plaintiff
maintained that the policies' limits were not exhausted because
suits involving injuries that occurred during plaintiff's
installation of asbestos-containing products were erroneously
included in calculating the aggregate limits under the policies.
The reasoning behind this position was that the aggregate limits in
the policies applied only to claims that would fall under the
"products" hazard category of coverage, and any claim alleging
injury occurred before plaintiff relinquished its product, i.e.,
during installation, would be a general liability claim and not a
products hazard claim. Hence, plaintiff alleged that any payments
made for installation injuries should not have been included in
calculating the aggregate limits under the policies. Defendants
rejected this claim, and plaintiff filed the present suit in the
circuit court on March 26, 1996. On October 16, 1996, the circuit
court granted defendants' motion for summary judgment pursuant to
section 2-1005 of the Illinois Code of Civil Procedure. 735 ILCS
5/2-1005 (West 1994). This timely appeal followed.
Plaintiff's first argument on appeal is that the circuit court
erred in finding that the 1988 Agreement superseded and
extinguished plaintiff's rights under the policies issued by
defendants.
In granting defendants' motion for summary judgment, the
circuit court made the following finding:
"The defense and indemnity agreement supersedes
[sic] the insurance policies and resolved fully Detrick's
claim for coverage under its primary policies for all
asbestos-related cases; that is, all cases against
Detrick alleging body [sic] injury on account of exposure
to Detrick's asbestos containing product [sic].
The agreement does not mirror the insurance
policies. It applies to and sets forth the agreed to
maximum indemnity limits that each insurer would be
required to pay for; [sic] all asbestos claims against
Detrick that allege exposure to Detrick's product without
any regard to whether the claimant's injury occurred
before, during, or after relinquishment of Detrick's
asbestos-containing product.
* * *
Accordingly, the product hazard definition in the
policies is irrelevant because the language in the
defense and indemnity agreement is different from and
broader than the language in the moving insurers'
policies.
* * *
All the asbestos claims against Detrick are
encompassed in the plain terms of the parties' agreement
which should be enforced according to such terms."

We agree with the circuit court.
A trial court may grant a motion for summary judgment when the
pleadings, depositions, and affidavits show that there is no
genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law. 735 ILCS 5/2-1005(c)
(West 1996). On appeal, we conduct a de novo review of an order
granting summary judgment. Olson v. Etheridge, 177 Ill. 2d 396,
404, 686 N.E.2d 563 (1997); Davies v. Grauer, 291 Ill. App. 3d 863,
867, 684 N.E.2d 924 (1997).
A settlement agreement is considered a contract, and
construction and enforcement of settlement agreements are governed
by principles of contract law. Hills of Palos Condominium Ass'n,
Inc. v. I-Del, Inc., 255 Ill. App. 3d 448, 476, 626 N.E.2d 1311
(1993). Accordingly, a settlement agreement is enforceable if
there is an offer, an acceptance, and a meeting of the minds.
Lampe v. O'Toole, 292 Ill. App. 3d 144, 146, 559 N.E.2d 20 (1997).
If there is no ambiguity in the language of a settlement, "the
determination of the intent of the parties is governed by the
contract language alone." Haisma v. Edgar, 218 Ill. App. 3d 78,
87, 578 N.E.2d 163 (1991).
In the present case, we find no ambiguity in the 1988
Agreement. The agreement specifically states:
"1. Scope. This Agreement sets forth an
arrangement by and among Detrick and the carriers for the
allocation and payment of (a) amounts incurred in
defending Detrick against Asbestos-Related Cases *** and
(b) amounts which Detrick becomes legally obligated to
pay as damages because of Asbestos-Related Cases ***.

***

'Asbestos-Related Cases' are those claims or
lawsuits or portions of claims or lawsuits, past,
present, or future *** that seek recovery from Detrick
for personal injuries, illnesses, ailments, or diseases
of any kind, or death resulting therefrom, or claims for
loss of services or loss of consortium *** which are
alleged to have occurred as a result of exposure to
asbestos-containing products allegedly manufactured,
sold, or otherwise distributed by Detrick."

Settlement agreements are encouraged and should be given their
full force and effect. Vogt v. Bartelsmeyer, 264 Ill. App. 3d 165,
171, 636 N.E.2d 1185 (1994). Here, the 1988 Agreement is a valid
settlement agreement which provides broader coverage than the
insurance policies. Specifically, the 1988 Agreement covers both
injuries that resulted from Detrick's products before it
relinquished the product and after the product left Detrick's
control. Therefore, we find it unnecessary to determine whether
defendants erroneously calculated the aggregate limits under the
insurance policies, as plaintiff claims. As such, we do not reach
the issue of whether injuries incurred during the installation of
asbestos-containing products are covered under the products hazard
category of coverage. Furthermore, both parties concede that the
issue of whether some asbestos-related claims against plaintiff
might constitute general liability claims rather than
products/completed operations claims is not before this court on
appeal.
Plaintiff further maintains that it has coverage rights from
defendant Century Indemnity Company (Century) due to an agreement
which was executed between plaintiff and Century in 1990 (1990
Agreement).
In 1990, plaintiff and Century, as successor to Insurance
Company of North America, entered into an agreement in which
Century agreed to provide coverage under three additional policies
that were not included in the 1988 Agreement. Similar to the
original insurance policies, the 1990 Agreement specifically
provided coverage for claims or lawsuits arising under the products
hazard and/or completed operations hazard categories. The 1990
Agreement further provided that, in the event that there was an
inconsistency between the two agreements, the terms of the 1990
Agreement would control. Plaintiff maintains that, because an
inconsistency exists between the two agreements, the 1990 Agreement
controls and plaintiff therefore is entitled to further coverage
under the 1990 Agreement.
Initially, we note that the 1988 and 1990 Agreements must be
read together. This conclusion is necessary given the language of
the agreements. The 1988 Agreement explicitly recognized that
additional acknowledged policies that were not covered by the
agreement could have been in existence at the time of signing. Per
the terms of the 1988 Agreement, such additional policies were to
be incorporated into the 1988 Agreement as though they were part of
the original agreement. The 1990 Agreement provided that Insurance
Company of North America would recognize the three additional
policies and that administration of those policies was to be
conducted pursuant to the terms of the 1988 Agreement. Because the
terms of these agreements not only reference one another, but also
address the additional policies at issue here, the two agreements
must be read together. See Community State Bank v. Hartford
Insurance Co., 187 Ill. App. 3d 110, 114, 542 N.E.2d 1317 (1989).
Plaintiff maintains that there is an inconsistency between the
1988 and 1990 Agreements because the 1990 Agreement only covers
"claims or lawsuits arising under the products hazard and/or the
completed operations hazard." Accordingly, plaintiff argues, the
1990 Agreement should be construed to provide coverage only for the
products hazard and/or completed operations hazard categories.
Plaintiff then realleges the argument discussed above; that
defendant Insurance Company of North America/Century erred in
attributing the damages resulting from the installation of
plaintiff's product to the total aggregate limit because
installation damages are not part of the products hazard and/or
completed operations hazard categories. We find plaintiff's
argument unpersuasive.
As noted above, the 1988 and the 1990 Agreements must be read
together, and we find no inconsistency between the agreements. The
1988 Agreement provides coverage for a wide spectrum of claims,
including coverage for those claims that fall into the products
hazard and/or completed operations hazard categories. As such, the
terms of the 1990 Agreement are not inconsistent with the terms of
the 1988 Agreement; rather, the terms of the two agreements are
consistent with one another, because the scope of the 1988
Agreement includes coverage for the damages covered by the 1990
Agreement. Therefore, we find it unnecessary to determine whether
plaintiff has further rights under the three additional policies
issued by defendant Insurance Company of North America/Century
given that administration of those policies is subject to terms of
the 1988 Agreement, which provides broader coverage than the
policies.
Plaintiff next asserts that the circuit court erred in relying
upon evidence of plaintiff's postagreement conduct in granting
summary judgment.
Upon determining the terms of a contract, a circuit court must
first determine, as a question of law, whether the language of the
purported contract is ambiguous as to the parties' intent. Quake
Construction, Inc. v. American Airlines, Inc., 141 Ill. 2d 281,
288, 565 N.E.2d 990 (1990). If there is no ambiguity, the
interpretation of the contract is a question of law to be
determined solely from the terms of the contract itself. Rakowski
v. Lucente, 104 Ill. 2d 317, 323, 472 N.E.2d 791 (1984); Countryman
v. Industrial Comm'n, 292 Ill. App. 3d 738, 741, 686 N.E.2d 61
(1997).
Here, we find that it was appropriate for the circuit court to
recognize that plaintiff had turned to its excess carriers for
coverage. In ruling on defendants' motion for summary judgment,
the circuit court found the terms of the 1988 Agreement to be
unambiguous. The court then found that "Detrick's post-agreement
conduct demonstrates that the insurers [sic] payments under the
defense and indemnity agreement extinguished further coverage
agreement for Detrick's asbestos case." The circuit court then
cited instances of plaintiff's postagreement conduct that supported
defendants' motion. Specifically, the court cited plaintiff's
reliance on the excess insurers after plaintiff acknowledged that
the primary coverage by defendants was exhausted.
Summary judgment is inappropriate where the intentions of the
parties are subject to explanation by extrinsic evidence. Pepper
Construction Co. v. Transcontinental Insurance Co., 285 Ill. App.
3d 573, 576, 673 N.E.2d 1128 (1996). In the present case, however,
the intent of the parties is unambiguously set forth in the 1988
Agreement. Thus, the circuit court did not have to rely on
extrinsic evidence in reaching its decision. In addition, the
circuit court may consider pleadings, depositions, and affidavits
when ruling on a motion for summary judgment. Grot v. First Bank,
292 Ill. App. 3d 88, 91, 684 N.E.2d 1016 (1997). At most, the
court's comments appear to be a reiteration of the well-founded
principle that an insured party may only approach its excess
carriers for coverage after the insured party has exhausted its
primary coverage. See United States Gypsum Co. v. Admiral
Insurance Co., 268 Ill. App. 3d 598, 653-54, 643 N.E.2d 1226
(1994); Missouri Pacific R.R. Co. v. International Insurance Co.,
288 Ill. App. 3d 69, 80-84, 673 N.E.2d 801 (1997). Once the
applicable indemnity limits of a policy are exhausted by the
payment of judgments or settlements, no insurance is afforded by
that policy. We therefore hold that when an insurer has properly
exhausted its policy limits by the payment of judgments and/or
settlements, it is no longer obligated to defend or indemnify
plaintiff, whether such actions are pending at the time of
exhaustion or commenced thereafter.
Indeed, this case does not represent a situation where the
plaintiff requests declaratory judgment in order to compel the
defendant insurance company to provide coverage after the insurer
has declined to defend or indemnify the insured. Rather,
defendants in the present cause fully complied with the terms of
the 1988 and 1990 Agreements and provided plaintiff with coverage
to the limits of their policies. We do not find plaintiff's
attempt to return to the primary carriers for further coverage to
be persuasive. Furthermore, we note that if summary judgment had
not been granted, the excess carriers could have intervened in this
case based on an assertion that they should not have been required
to pay those claims that were attributable to the period of
installation.
We have also considered all further contentions of plaintiff
and find that no additional discussion is necessary.
For the foregoing reasons, the judgment of the circuit court
of Cook County is affirmed.
Affirmed.
CAMPBELL, P.J., and GREIMAN, J., concur.