The attleboro mutual liquidating trust
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On November 7, 1994, the circuit court entered an order denying Wausau's motion to dismiss Ehlco's counterclaim regarding the Mena site. The court must also examine the pleadings to determine whether an issue of material fact exists, and, if not, determine whether the controversy can be resolved solely as a matter of law. Our analysis is confined to the pleadings that were before the circuit court when it ruled on the motions. Ehlco maintains that Wausau's duty to defend was triggered when the EPA filed its lawsuit against Ehlco in the federal district court in Arkansas. In the present case, the comprehensive general liability insurance policies at issue imposed on Wausau the “duty to defend any suit against the insured.” The question to be resolved, therefore, is whether a “suit” was filed against Ehlco sufficient to trigger Wausau's duty to defend. Ehlco presented a memorandum of law in support of its pleadings in which Ehlco maintained that Wausau's duty to defend had been triggered.
The circuit court found that Wausau was estopped from asserting Hines' purported late notice as a defense to Ehlco's claim. Our decision in Lapham-Hickey is dispositive of this issue. Under Lapham-Hickey, it is clear that a “suit” was filed against Ehlco with respect to the Mena site. Wausau argued that no triggering event had occurred because there was no suit within the meaning of its policies.
Wausau also moved to dismiss Ehlco's counterclaim as barred, asserting that Ehlco breached a notice condition in the insurance policies. Curiously, both Ehlco and Wausau rely on allegations contained in this fourth amended complaint to support their respective arguments, and neither party challenges the propriety of doing so. Ehlco initially contends that the appellate court erred in holding that Wausau had no duty to defend Ehlco as to the Mena site because no true suit was filed against Ehlco concerning that site. E.2d 72 (1997); Outboard Marine Corp., 154 Ill.2d at 108-09, 180 Ill. The record does not support Wausau's waiver argument. E.2d 833 (1965) (involving late notice of an accident); Maneikis v. Paul Insurance Co., 655 F.2d 818, 821-23 (7th Cir.1981) (involving late notice of a suit); see Petersen Sand & Gravel, Inc. In effect, this argument is that the insurer is free to disregard its duty to defend where the insured first breaches the contract of insurance by failing to provide timely notice. To accept it would be to contradict long established law governing the insurers' duty to defend and the consequences of breaching that duty.
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The circuit court held, as to each underlying matter, that Wausau owed a duty to defend Ehlco; that Wausau's duty to defend had been triggered; that Wausau wrongly breached its duty to defend, by (1) failing to defend Ehlco and by (2) failing to file a timely declaratory judgment action; and that, as a result, Wausau was estopped from asserting its defenses to coverage. For purposes of resolving the motion, the court must consider as admitted all well-pleaded facts set forth in the pleadings of the nonmoving party, and the fair inferences drawn therefrom. During the investigation, the MPCA sent Lapham-Hickey a proposed consent order, which stated that Lapham-Hickey was a PRP and which required certain remedial actions. Following negotiations, the MPCA issued Lapham-Hickey a “no-action” letter, and Lapham-Hickey agreed to conduct a voluntary investigation of its facility. Later, upon discovering contamination at its facility, Lapham-Hickey filed its own declaratory judgment action against its insurer seeking reimbursement of costs expended. Lapham-Hickey established a bright-line test for determining when a “suit” exists in this context. The EPA's action thus constitutes a “suit” because it was a proceeding in a court of law, and it was instituted with a complaint. As discussed above, the Arkansas complaint meets Lapham-Hickey 's definition of suit. Wausau's interpretation would then compete with the definition of suit, set forth above. Liberty Mutual Insurance Co., 154 Ill.2d 90, 108-09, 180 Ill. Given that Ehlco argued to the circuit court that the Arkansas complaint was a suit requiring a defense, this claim was preserved. A tender pursuant to Institute of London Underwriters required the insured to notify the insurer that a suit, which potentially falls within the policy coverage, was filed and that the insured desires the insurer's assistance in defending the suit. E.2d 499 (1998), we held that the lack of a tender by the insured does not relieve the insurer of its duty to defend if the insurer had “actual notice” of the underlying suit. We therefore consider whether Wausau had actual notice of the suit. E.2d 1071 (1989), overruled, Lapham-Hickey, 166 Ill.2d 520, 211 Ill. Despite this omission in the pleadings, Ehlco attempts to preserve its judgment on the pleadings as to the Mena site by pursuing another argument.
Based on the foregoing holdings, the circuit court declared that, with regard to the Mena site, Wausau was liable for clean-up and defense costs, as well as prejudgment interest. The insurance policy at issue provided that the insurer would “defend any suit against the Insured” that alleged liability for certain damages. “Suit” “refers to a proceeding in a court of law” and requires a complaint. Nonetheless, Wausau urges us to adopt the appellate court's reasoning that the Arkansas complaint was not a true suit because it was “a mere formality” and “but an extension or implementation of the administrative proceeding,” since the parties had executed and contemporaneously filed the proposed consent decree with the Arkansas complaint. Even assuming, arguendo, that Wausau's interpretation of “any suit” is reasonable, at best it would create an ambiguity in the policy language. Where competing reasonable interpretations of a policy exist, a court is not permitted to choose which interpretation it will follow. That Ehlco also argued in the circuit court that Wausau's duty to defend was triggered by the PRP letter is of no consequence with regard to waiver. Wausau contends that Ehlco failed to tender its defense to Wausau and, as a result, Wausau's duty to defend was never triggered. West American Insurance Co., 183 Ill.2d 317, 233 Ill. “[A]ctual notice” means that the insurer knows both “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.” Cincinnati Cos., 183 Ill.2d at 329-30, 233 Ill. The pleadings, however, are also silent on the factual issue of whether Wausau had actual notice that the Arkansas suit had been filed. In addressing Wausau's tender contention, Ehlco asserts that, under the facts of this case, Wausau should be equitably estopped from requiring any further notice from Ehlco because Wausau had already flatly denied coverage to Ehlco on other grounds in 1982 and continuing through 1983. E.2d 228 (1989) (involving late notice of an occurrence); Del Grosso v.
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