United Nat'l Ins Co. v. Faure Brothers Corp.
949 N.E.2d 1185
Ill. App. Ct.2011Background
- United National issued a CGL policy to Faure Brothers (including Gateway Warehouse) covering 2006-02-01 to 2007-02-01.
- Air Products sued Gateway for negligence related to mislabeling chemicals and relabeling/shipping duties.
- Faure Brothers tendered defense to United National; United National denied and Faure Brothers defended itself.
- Air Products paid claims to Henkel, BD, and anticipated Smiths' claim, with Faure Brothers settling for $210,000 under a separate agreement.
- Illinois circuit court granted United National summary judgment ruling no duty to defend; Faure Brothers appealed seeking a defense duty; on appeal the court reverses and finds a potential duty to defend.
- Policy exclusions include recall of products/work or impaired property; occurrence defined as an accident; property damage defined with physical injury or loss of use; ‘your work’ defined in the policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the underlying complaint allege an occurrence under the policy? | Faure Brothers: mislabeling was an accident; occurrence. | United National: no occurrence; mislabeling not an accident. | Yes, allegations potentially within coverage; occurrence found. |
| Does the underlying complaint plead property damage under the policy? | Faure Brothers: loss of use and damage via defective products fall within property damage. | United National: claims do not amount to property damage. | Yes, allegations fall within either definition of property damage. |
| Does exclusion (n) preclude coverage for damages from recalled or defective products? | Faure Brothers: exclusion does not apply; product already caused damage. | United National: exclusion bars coverage for recalls/defects. | Exclusion (n) does not preclude coverage in this case. |
Key Cases Cited
- Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90 (1992) (duty to defend broader than duty to indemnify; liberally construe underlying allegations)
- Wilkin Insulation Co. v. United States Fidelity & Guaranty Co., 144 Ill.2d 64 (1991) (sistership exclusion analyzed for products withdrawn due to known defect)
- Pekin Insurance Co. v. Miller, 367 Ill.App.3d 263 (2006) (exclusions construed liberally against insurer)
- Rich v. Principal Life Insurance Co., 226 Ill.2d 359 (2007) (definition of accident for occurrence analysis)
- Travellers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill.2d 278 (2001) (evaluation of physical injury and property damage in interpretation)