Failure to Buy Full Retroactive Coverage is Expensive

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Medline Industries, Inc. (Medline), appealed an order of the circuit court of Lake County granting judgment on the pleadings in favor of plaintiff and counter defendant, Illinois Union Insurance Company (Illinois Union). Medline also appealed the dismissal with prejudice of its second amended counterclaim. In Illinois Union Insurance Company v. Medline Industries, Inc.; et al, No. 2-21-0175, Court of Appeals of Illinois, Second District, 2022 IL App (2d) 210175 (March 4, 2022) the Court of Appeals resolved the dispute.

Background

In 2019, defendants (collectively the underlying plaintiffs) sued Medline in Cook County for injuries allegedly caused by emissions of ethylene oxide gas (EtO) from Medline's medical instruments sterilization facility in Waukegan (the Waukegan facility). Medline tendered those lawsuits to its insurer, Illinois Union, for defense. Illinois Union declined to defend or indemnify Medline.

Illinois Union contended that it did not owe a duty to either defend or indemnify Medline in the underlying lawsuits. Section IA further provided that coverage applied only to "pollution conditions" that "first commence, in their entirety, on or after the retroactive date *** and prior to the expiration of the 'policy period.'" 

The court granted Illinois Union's motion for judgment on the pleadings.  The policy provides coverage for pollution conditions that "first commence, in their entirety, on or after the retroactive date." The words "first commence" and "in their entirety" should not be ignored and the court of appeal refused to ignore it.

"Entirety" is the aggregating language. As discussed, "entirety" in this context means the totality of the emissions from the Waukegan facility. Medline sought to convert its policy into one with full retroactive coverage. 

ZALMA OPINION

Medline took a calculated risk in seeking insurance with a retroactive date that only covered the date it purchased the facility rather than seeking full retroactive coverage that the court believed was available. Knowing that the entity they purchased was issuing pollutants before the purchase date, if full retroactive coverage was available, Medline should have purchased it. However, to do so, it would have been required, in good faith, to advise the insurer of the previous acts of pollution. The litigation tried to get the policy purchased to do what the coverage they needed was not purchased and was probably not available.

© 2022 – Barry Zalma

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