Tool Works v. Commerce and Industry Ins.
962 N.E.2d 1042
Ill. App. Ct.2011Background
- ITW seeks declaration that C&I and USF must defend it in the Enssle action and reimburse defense costs; Enssles sued Binks and its successor ITW for environmental contamination and CERCLA claims; the underlying policyholders insured Binks for pre-Closing periods; ITW purchased Binks' assets in 1998 and asserted an assignment of defense rights under purchase agreement §1.2.9; insurers defended Binks but refused to defend ITW; circuit court granted judgment for defendants; ITW appeals arguing valid assignment, successor status, and putative insured status.
- Enssle action alleged contamination occurring during Binks' tenancy prior to ITW’s purchase; Enssles sought joint/several liability, damages, and CERCLA relief; contamination involved soil/groundwater and CDPHE findings from 1990; ITW cross-claimed for indemnification against Binks.
- Purchase agreement identified assets and assignment of defense/coverage rights under pre-Closing policies to ITW if liabilities were threatened against ITW; §1.3.4 reserved Binks’ retained policies; consent provisions (§5.4) contemplated third-party consent issues; Enssle suit premised on Binks-era contamination; assignment occurred pre-loss (contamination) and was later deemed after-loss.
- It was disputed whether consent was required for assignment and whether ITW, as assignee, could claim defense under policies for pre-Closing losses.
- Court held assignment of benefits occurred and no insurer consent was required; loss occurred before assignment, but assignment after loss of defense rights is permissible under Illinois law for third-party occurrence policies; insured risk remained the same and ITW could be defended; reversal and remand for judgment on pleadings for counts I-II in ITW’s favor.
- Holding: Assignment valid; no consent needed; ITW entitled to defense; remand for counts I-II on pleadings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was there a valid assignment of defense rights to ITW under §1.2.9? | ITW; assignment of defense rights arose under §1.2.9, transferring benefits of defense and indemnity coverage to ITW. | Insurers: no consent or full transfer of policies; assignment would increase insurer risk. | Assignment valid; no insurer consent required. |
| Did Enssle trigger a defense duty for ITW as assignee? | Enssle action seeks liability for pre-Closing contamination, within ITW’s assigned rights. | Only Binks was named insured; ITW not guaranteed defense. | Under assignment, Enssle allegations fall within coverage; duty to defend ITW exists. |
| Did the loss occur before or after the assignment, affecting assignability? | Loss occurred before assignment; assignment post-loss should be effective for post-loss rights. | Assignment may be post-loss for claims arising from pre-loss occurrences; consent not required. | Loss occurred prior to assignment but defense rights attach as after-loss chose in action; assignment valid. |
| Did consent provisions bar the assignment? | Anti-assignment clauses apply to pre-loss assignments; after-loss assignments permitted. | Consent required to transfer policy benefits. | Consent not required for post-loss assignment of defense rights under third-party policies. |
Key Cases Cited
- Cincinnati Insurance Co. v. American Hardware Manufacturers Ass'n, 387 Ill.App.3d 85 (2008) (assignment of insurance defense rights; definition of assignment and scope)
- Loyola University Medical Center v. Med Care HMO, 180 Ill.App.3d 471 (1989) (assignment of conditional rights; after-loss assignments)
- Ginsburg v. Bull Dog Auto Fire Insurance Ass'n of Chicago, 328 Ill. 571 (1928) (consent/anti-assignment clauses; after-execution rights)
- Young v. Chicago Federal Savings & Loan Ass'n, 180 Ill.App.3d 280 (1989) (post-loss assignment of policy benefits; chose in action)
- National Discount Shoes, Inc. v. Royal Globe Insurance Co., 99 Ill.App.3d 54 (1981) (anti-assignment clauses apply to pre-loss assignments)
- Pilkington North America, Inc. v. Travelers Casualty & Surety Co., 112 Ohio St.3d 482, 861 N.E.2d 121 (2007) (pre/post-loss distinctions in assignment of insurance rights)