EMPLOYERS INSURANCE OF WAUSAU v. EHLCO LIQUIDATING TRUST (1997)

This insurance coverage dispute involves two underlying proceedings against Ehlco Liquidating Trust (Ehlco) and affiliated entities for environmental property damages allegedly caused by those parties at two industrial sites, one located in Wyoming and the other in Mena, Arkansas.   Apparently, Ehlco Liquidating Trust is a trust created by order of the Delaware Chancery Court to resolve the contingent liabilities of Edward Hines Lumber Company (Hines), a dissolved Delaware corporation.   The instant appeal arises from a declaratory judgment action filed by plaintiff Employers Insurance of Wausau, A Mutual Company (Wausau) against Ehlco;  Ehlco's trustee, Noel H. Goodman;  and C.H. Heath Compensation and Liability Insurance Company (Heath), which is identified as the successor to Employers Surplus Lines Insurance Company, Hines' excess liability carrier.   Wausau's original declaratory complaint also named 15 other insurance carriers in addition to Heath as defendants, who with the exception of Heath were each dismissed from this action prior to the entry of the orders from which this appeal was taken.   In its first-amended complaint filed in this action, Wausau sought a declaration that it owed no duty to defend or indemnify Ehlco in an underlying suit concerning environmental property damage at an Ehlco-affiliated industrial site in Wyoming.   Ehlco filed its answer and a motion for judgment on the pleadings pursuant to section 2-615(e) of the Illinois Code of Civil Procedure (735 ILCS 5/2-615(e) (West 1994)), seeking defense and indemnification coverage with respect to the underlying Wyoming action.   While that motion was pending, Ehlco moved for leave to file a counterclaim for declaratory judgment against Wausau and Heath seeking defense and indemnification coverage with respect to underlying administrative proceedings and a subsequent consent decree action initiated by the United States Environmental Protection Agency (USEPA) concerning environmental property damage at an Ehlco-affiliated site in Mena, Arkansas.   The underlying proceedings in Mena, Arkansas concerned allegations of environmental property damage similar to that which allegedly occurred at the Wyoming site.   On February 28, 1994, the court granted Ehlco leave to file its Mena counterclaim.

Contemporaneously on that date, Wausau obtained leave of court to file its second-amended complaint (in lieu of filing an answer to Ehlco's Mena counterclaim), in which it reiterated its allegations regarding the Wyoming site and additionally sought declaratory relief with respect to the Mena site.   Thereafter, Wausau moved to dismiss Ehlco's Mena counterclaim pursuant to sections 2-615(e) and 2-619(a)(5) of the Code of Civil Procedure (735 ILCS 5/2-615(e), 2-619(a)(5) (West 1994)) on statute of limitations grounds and on the grounds that Hines' notice to Wausau regarding the Mena contamination had been untimely.   Ehlco then filed a cross-motion for judgment on the pleadings with respect to the Mena counterclaim.   Prior to any ruling on these motions, Wausau filed a motion seeking leave of court to file its third-amended complaint.   The trial court granted Wausau leave to file its third-amended complaint without prejudice to Ehlco's right to oppose the legal and factual sufficiency thereof and without waiver of any defenses to it.   That order also provided that Ehlco's pending motions for judgment on the pleadings as to both sites would stand as to the third-amended complaint, and that Ehlco's answer, affirmative defenses and counterclaim would stand to the extent that Wausau's third-amended complaint repeated the allegations and claims of its second-amended complaint.   In its third-amended complaint, Wausau repeated the allegations in its previous complaint and added several new counts seeking a determination of noncoverage under the subject policies.   In response, Ehlco filed a motion to strike all of the new counts of the third-amended complaint, arguing that the new claims were unsupported by sufficient factual allegations.   In addition, Ehlco sought to strike Wausau's jury demand.

On November 7, 1994, the trial court granted both of Ehlco's motions for judgment on the pleadings, finding that there was coverage in favor of Ehlco as to both sites.   In its order, the trial court held that Wausau had a duty to defend Ehlco in both underlying actions, and that Ehlco had breached that duty.   The trial court therefore held that Ehlco was estopped from raising any policy defenses to coverage and from arguing that Ehlco had failed to satisfy conditions precedent to coverage such as timely notice.   The trial court also granted Ehlco's motion to strike the new counts and allegations of Wausau's third-amended complaint, apparently on the grounds that the new allegations therein were conclusory and unsupported by allegations of fact, and because in any event, Wausau was estopped from asserting any of the policy defenses in those new counts because of its breach of its duty to defend.   In sustaining that motion, the court also said that “the court agrees with all of Ehlco's arguments presented in this motion,” which Wausau now construes to be a determination that the court struck its jury demand as well.   After the denial of various post-trial motions to reconsider filed by Wausau (addressed more fully below in our discussion of our jurisdiction to hear this appeal), Wausau appealed.

I. THE UNDERLYING ACTIONS

As noted above, this case involves two underlying proceedings, one in Wyoming and one in Mena, Arkansas.   The Wyoming action was initiated against Ehlco by the Union Pacific Railroad Company (Union Pacific), and the Arkansas proceedings were initiated against Hines by the USEPA.   Each underlying proceeding involved allegations of contamination and property damage caused by Ehlco-affiliated entities which operated industrial wood-treatment facilities in Wyoming and in Arkansas and which allegedly dispersed hazardous wastes into the environment.¹

[Editor's Note:  Text Omitted pursuant to Supreme Court Rule 23.]

[The following material is nonpublishable under Supreme Court Rule 23.]

A. The Wyoming Action

B. The Mena, Arkansas ProceedingsII. THE DECLARATORY JUDGMENT ACTIONSIII. THE TRIAL COURT'S RULINGSIV. ISSUESV. DISCUSSIONA. Appellate JurisdictionB. Merits-Duty to Defend

[The following material is nonpublishable under Supreme Court Rule 23.]

A. The Wyoming Action

In December 1991, Union Pacific filed the underlying Wyoming lawsuit against Ehlco and J.H. Baxter, seeking to recover a portion of the costs which it had incurred from its investigation and remediation of the contaminated Wyoming site.   That complaint alleged that in 1934, Union Pacific entered into an agreement with the Nebraska Bridge Supply & Lumber Company (Nebraska Bridge), under which Nebraska Bridge took over the operation of Union Pacific's Wyoming lumber treatment site and promised to indemnify Union Pacific and to hold it harmless for property damage arising from the operation of the site.   The complaint also alleged that in 1967, Hines, Ehlco's predecessor, acquired Nebraska Bridge, and continued to operate the Wyoming site under the Nebraska Bridge name until 1972.   In 1972, Nebraska Bridge assigned its right to operate the site under its agreement with Union Pacific to J.H. Baxter.   The complaint further alleged that Hines' contamination of the Wyoming site had damaged the Laramie River, groundwater and wildlife.

The Union Pacific complaint also averred that in October 1981, the state of Wyoming filed suit against Union Pacific and J.H. Baxter for alleged damage caused by contamination at the Wyoming site.   According to the Union Pacific complaint, Union Pacific had expended more than $30,000,000 investigating and remediating the hazardous substances disposed of at the site;  expected to spend even more to complete the remediation process;  and had received no reimbursement from Hines, Ehlco or J.H. Baxter for its expenses.   After incurring various defense costs in the Union Pacific action, Ehlco settled the Union Pacific suit for $1,300,000.

According to certain correspondence between Hines and Wausau attached to Ehlco's answer to Wausau's complaint for declaratory judgment, Hines first notified Wausau of the underlying Union Pacific lawsuit, filed December 11, 1991, by letter dated January 27, 1992.   In that letter, Hines requested Wausau's “position regarding defense and coverage for this matter.”   Wausau responded in late February 1992 that it reserved its rights under all relevant policies and that “[i]t would appear that there will be serious coverage difficulties with regard to this matter * * *.”   On March 9, 1992, Ehlco wrote to Wausau and its other insurers, advising them that Union Pacific had made a settlement demand, and proposing a meeting “to determine whether the insurers are willing to make, or participate in, a response to the demand.”   The March 9 letter also stated that the settlement demand warranted a response by Ehlco and its insurers “in light of the anticipated costs in defending this matter and potential exposure * * *.”   In a letter to Ehlco in early March 1992, Wausau indicated that its policies were not intended to cover Ehlco for the Union Pacific matter.   In that letter, Wausau further requested that Ehlco provide detailed information regarding the Wyoming site and the Union Pacific lawsuit.   Wausau then stated that it “is willing to participate in the defense of EHLCO Liquidating Trust, pursuant to the [enclosed] Non-Waiver Agreement.”   That non-waiver agreement provided that Wausau would participate in Ehlco's defense of the underlying Wyoming matter “if so requested,” and further provided as follows:

“EHLCO * * * and Wausau agreed that neither this agreement nor their respective efforts to investigate, evaluate, cooperate or settle * * * shall in any way prejudice, waive or estop their respective abilities to enforce all rights and obligations against the other, as set forth within said policies, as though no such agreement or conduct had occurred.”

On March 28, 1992 Ehlco forwarded to Wausau certain documents relating to the Wyoming action and stated in a cover letter that “[w]e hope that these enclosures will be helpful to you in protecting our interest” in that action.   On March 26, 1992, Ehlco again wrote Wausau to supply information regarding the underlying Wyoming action, and in that letter stated as follows: “[We] look forward to hearing from you * * * in regards to the defense of this matter.”   In June 1992, Ehlco again wrote Wausau stating that it expected to be fully reimbursed for its defense costs in the Wyoming action.   On June 17, 1992, Ehlco wrote another letter to all of its insurers (including Wausau), advising them that Union Pacific had made a final settlement offer of $1,300,000, and requesting the insurers' prompt approval or rejection of such a settlement.   In that letter, Ehlco also advised the insurers that the settlement was prudent since Ehlco's potential exposure to liability was higher than the offer, and since defense costs alone would exceed the $1,300,000 figure.   At approximately the same time, Wausau agreed to pay up to 9% of Ehlco's defense and settlement obligations in the Union Pacific/Wyoming matter.   In December 1992, Ehlco settled the Union Pacific lawsuit.   Further correspondence between Wausau and Ehlco revealed that in March 1993, Ehlco first sent Wausau the legal bills reflecting the cost of its defense of the Union Pacific lawsuit.   After the filing of this declaratory action in February 1993 by Wausau and after Ehlco filed its motion for judgment on the pleadings regarding coverage for the underlying Wyoming lawsuit, Wausau offered to pay 100% of Ehlco's unreimbursed defense costs, subject to a full reservation of rights to recover part or all of such a defense payment.

B. The Mena, Arkansas Proceedings

The Mena, Arkansas proceedings were initiated by the USEPA against Hines after discovery of environmental contamination at an Ehlco-affiliated industrial plant in Mena, Arkansas.   The Mena, Arkansas wood-treatment plant was originally developed by Nebraska Bridge as a post and pole production plant in the late 1930s.   Nebraska Bridge installed a wood-pressure treating system there in 1955.   After Hines acquired Nebraska Bridge in 1967, it operated the Mena wood-treatment plant under the name of Nebraska Bridge until 1978.   On March 18, 1982, the USEPA sent Hines a letter pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. § 9601 et seq. (West 1991), which notified Hines of its potential liability for the costs incurred by the USEPA in investigating and responding to environmental contamination at the Mena site.   That letter stated in pertinent part that the USEPA was considering spending public funds under CERCLA to investigate and take corrective action regarding releases of hazardous substances at the Mena site and that Hines could be held potentially responsible under CERCLA for costs incurred.   Coincidentally, on the same date noted on the USEPA's letter, but apparently prior to its receipt by Hines, Hines advised Wausau that it had learned that the USEPA and the Arkansas Department of Pollution Control and Ecology intended to commence proceedings against it.

On August 2, 1982 and again on March 8, 1983, Hines wrote to Wausau requesting that it defend Hines against the USEPA's “investigation and proceeding” concerning the Mena site.   Wausau provided no such defense.   On May 16, 1987, the USEPA, Hines and Mid-South Wood Products of Mena, Arkansas, Inc. (Mid-South) (which had evidently acquired the Mena plant from Nebraska Bridge in 1978) executed a consent decree settlement agreement regarding the Mena site, the relevant terms of which are set forth below.   On March 17, 1988, the USEPA filed a federal court action in Arkansas under CERCLA pursuant to its consent decree negotiations with Hines and Mid-South.   The consent decree was lodged with the Arkansas federal court contemporaneously with the filing of that action.   In its federal complaint, the USEPA sought injunctive relief to implement remedial action at the site and sought monetary damages for past and future costs incurred by the USEPA in its investigations, cleanup, responsive actions and enforcement activities at the Mena site.   USEPA complaint alleged that the defendants in that suit including Hines discharged hazardous wastes into the environment at the Mena site which remain in the subsurface soils and groundwater at the site.   The USEPA complaint claimed that it had expended in excess of $1,000,000 investigating the site and sought to hold Hines and Mid-South liable for their respective shares of past and future costs.   Apparently, Hines informed Wausau of its consent decree settlement negotiations with the USEPA prior to the filing of the federal action.   However, the record is unclear as to when Hines or Ehlco ultimately advised Wausau that the federal consent decree action had been filed.

On May 16, 1988, the federal court in Arkansas concluded the federal action by entering the already executed and filed consent decree between the USEPA, Hines and Mid-South pursuant to CERCLA.   Among other things, the consent decree held Hines and its liquidating successor trustee, Ehlco, responsible for future remediation of the site and for reimbursement to the USEPA of monies already spent at the site.   The decree further provided as follows:

“This Consent Decree shall be lodged with the Court for a period of 30 days for public comment pursuant to the provisions of 28 C.F.R. § 50.7 and Section 122(i) of the Superfund Amendments and Reauthorization Act of 1986, Pub.L. No. 99-499, 100 Stat. 1613 (1986).”

The decree further provided that

“the parties agree and the Court finds that settlement of these matters without further litigation is in the public interest and that the entry of this Decree is the most appropriate means of resolving these matters.”

In addition, the consent decree contained stipulated penalties for violations of the decree.   The decree also provided, among other things, that the federal court would maintain jurisdiction

“for the duration of this Consent Decree for the purposes of issuing such further directions as may be necessary or appropriate to construe, implement, modify, enforce, terminate, or reinstate the terms of this Consent Decree * * *.”

II. THE DECLARATORY JUDGMENT ACTIONS

Wausau originally filed its complaint seeking declaratory judgment against Ehlco on February 26, 1993.   As noted, Wausau subsequently amended that complaint, seeking a declaration both with respect to the Wyoming and Mena proceedings that it owed no duty to defend or indemnify Ehlco under its policies.   In support, the third-amended complaint conceded that Wausau had issued certain commercial liability insurance policies to Hines with coverage periods in effect from October 1, 1965 to October 1, 1971, and that it also had issued certain commercial liability policies to Nebraska Bridge with policy periods in effect from October 1, 1968 to October 1, 1969.  (The policy provisions which pertain to the issues on appeal will be set forth as necessary in the discussion below.)   The complaint alleged, among other things, that no coverage was available to Ehlco in that there had been no “occurrence” as defined under the applicable policies;  that coverage was precluded because the pollution had been expected or intended;  that damages incurred did not fall within the policies' general coverage provisions;  that certain exclusions precluded coverage;  that coverage was precluded because Hines had not complied with the policies' timely notice provisions;  and that in any event coverage would be limited by other insurance available to Ehlco and subject to the prescribed policy limits.   In addition to these allegations (which had been incorporated from the second-amended complaint), the third-amended complaint further alleged that no coverage was available to Ehlco because the underlying USEPA proceedings involving the Mena site did not constitute a “suit” as defined by the policies and that only four Wausau policies (of the 15 policies which Ehlco sought to invoke) could be invoked due to the “named insured” and “insured premises” provisions of those policies.   The complaint also alleged a variety of additional policy coverage defenses such as that the underlying environmental matters involved known hazards which did not occur during the relevant policy periods;  that Hines had breached terms of the policies by making voluntary payments in the underlying matters and by failing to cooperate with Wausau;  and that Hines had failed to mitigate its damages in those underlying matters.

As noted, on December 6, 1993, Ehlco filed its counterclaim for declaratory relief with respect to the underlying Mena proceedings.   Wausau moved to dismiss that counterclaim on statute of limitations grounds and on the grounds that Hines' notice to Wausau regarding the Mena contamination had been untimely.   With respect to the late notice issue, Wausau urged that Hines had known at least as early as 1978 that environmental contamination existed at the Mena site, but had not provided Wausau with notice of that contamination until March 18, 1982.   In support, Wausau referred to the findings articulated by the court in the decision of Edward Hines Lumber Co. v. Vulcan Materials Co., 669 F.Supp. 854 (N.D.Ill.1987) (discussed more fully below), a federal court action filed by Hines against its chemical suppliers at Mena in which the court commented on Hines' knowledge of the Mena contamination during the 1970s.

Thereafter, defendant Heath, an excess insurer whose predecessor company, Employers Surplus Lines Insurance Company, had issued a policy to Ehlco, filed a motion to dismiss Ehlco's and Wausau's respective requests for declaratory relief.   As noted, Heath was the only insurance carrier-defendant remaining in this case at the time of the entry of the orders from which this appeal was taken.   In its motion, Heath alleged that neither Wausau nor Ehlco could ever reach Heath's excess policy because Ehlco could not exhaust all of its primary insurance coverage.   In support, Heath urged that Ehlco had settled with certain of its primary carriers for less than their full policy limits.

In its motion with respect to the Wyoming action and cross-motion with respect to the Mena proceedings for judgment on the pleadings, Ehlco urged, inter alia, that Wausau had breached its duty to defend by failing to defend or reimburse Ehlco for its defense costs in the underlying actions, and by failing to file a timely declaratory coverage action.   Ehlco contended that therefore, Wausau should be required to pay for all of Ehlco's defense and settlement costs in both underlying matters under a theory of estoppel.   Ehlco also requested prejudgment interest (see 815 ILCS 205/2 (West 1994)) and costs and attorney fees in the declaratory action based upon Wausau's unreasonable and vexatious refusal to satisfy its coverage obligations.   See 215 ILCS 5/155 (West 1994).

III. THE TRIAL COURT'S RULINGS

On November 7, 1994, the trial court entered its Memorandum Opinion and Order, which addressed pending motions before the court.   With respect to Ehlco's motions for judgment on the pleadings requesting defense and indemnification coverage as to both underlying actions, the trial court concluded that Wausau had a duty to defend Ehlco in both underlying matters and that Wausau had breached that duty, both by failing to either defend Ehlco or reimburse it for its defense costs as they were incurred and by failing to file a timely declaratory judgment action.   The court held that therefore, Ehlco was entitled to obtain reimbursement for its defense costs for both sites, for its $1,300,000 settlement with Union Pacific regarding the Wyoming site, for the USEPA-funded cleanup at Mena, and for prejudgment interest (see the Illinois Interest Act, 815 ILCS 205/2 (West 1994)).   The court also ruled that Wausau's conduct had been unreasonable and vexatious, and ordered Wausau to pay all attorney fees and costs in the declaratory action under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1994)).   The trial court further concluded in its order that Wausau was estopped from asserting late notice as a defense to coverage by reason of Wausau's breach of its duty to defend.   The court also rejected Wausau's argument that a non-waiver agreement between Wausau and Ehlco precluded any estoppel, and that Ehlco's counterclaim was barred by any statute of limitations.   As noted, the trial court also granted Ehlco's motion to strike the new counts and allegations of Wausau's third-amended complaint, apparently on the grounds that the new allegations were conclusory and unsupported by allegations of fact, and because in any event, Wausau was estopped from asserting any of the policy defenses in those new counts because of its breach of its duty to defend.   According to Wausau, as discussed more fully below, the trial court order also effectively struck Wausau's jury demand.   The November 7 order made no disposition of defendant Heath's motion to dismiss.

On December 7, 1994, Wausau filed a bland motion to reconsider the November 7 order without providing any grounds or reasons in support thereof, promising that it would thereafter “file a Memorandum of Law, explaining the legal and factual bases for said Motion.”   Wausau further requested that the trial court permit it to engage in “discovery as to the cause and amount of Ehlco's alleged damages prior to any hearing on Ehlco's damage claims.”

On December 22, 1994, Ehlco filed a motion entitled “Petition For Relief Pursuant to Declaratory Judgment” under section 2-701(c) if the Code of Civil Procedure (735 ILCS 5/2-701(c)), seeking a money judgment for the items awarded in the November 7 declaratory judgment including all defense and settlement costs in both underlying proceedings as well as costs and fees awarded.2  On December 23, 1994, although Wausau had not yet filed any memorandum of law setting forth the grounds for its motion to reconsider, Wausau orally presented that motion to the court.   The court denied the motion, stating as follows:

“I'm looking over your motion.   Your motion doesn't cite any cases.  * * *   You just don't come in and say we're going to file our reasons later.   In your motion, * * * you actually have to state what the reasons are.   I mean, there has to be a mistake of law or a new case that has come down or a mistake that the Court made;  and I don't see that that's in here.   I'm going to deny your motion for reconsideration.”

On December 29, 1994, without leave of court, Wausau filed a second motion to reconsider the November 7 order.   On January 31, 1995 and prior to orally presenting that new motion, Wausau superseded it with an amended motion to reconsider the November 7 order and memorandum of law, which, like the second motion, contained extensive discussion, argument and exhibits detailing Wausau's reasons justifying reconsideration.

Finally, on March 21, 1995, the trial court entered a written order stating in part that “[Wausau's] Amended Motion for Reconsideration of this Court's order of November 7, 1994 is denied.”   In addition, that order provided that by reason of its overall holding against Wausau in its November 7 order, the case against Heath was moot.   The trial court accordingly entered judgment in favor of Heath in its March 21 order.   In that order, the trial court included an express written finding that pursuant to Illinois Supreme Court Rule 304(a) (134 Ill.2d R. 304(a)), there was no just reason to delay enforcement or appeal.

Contemporaneously with its entry of its March 21, 1995 written order, the trial court stated in an oral hearing regarding the entry of that order as follows:

“Well, I am certainly not going to entertain another motion to reconsider.   I don't think that I am required to do that and * * * the ruling that I had handed down with regard to the Wausau EHLCO motion [sic ] was in fact a final order regardless of whether or not it contained 304A language.  * * *   I am going to deny the motion * * * to reconsider again.

 * * *

“I think that my decision of November 7 * * * really adjudicated C.E. Heath's liability at that time.   We never mentioned it in the order.   Everybody understood what it was going to be * * *.  * * *   I'm not entering [the order as to Heath] nunc pro tunc.  * * *   I don't think I have the authority to do that.  * * *   I never entered an order concerning C.E. Heath, but we will do it today.  * * *   I think it's quite clear that * * * the primary carrier * * * was found totally liable and I found vexatious action * * * [on Wausau's part].  * * *   I think everybody did understand that my November 7 order did in fact cover all parties including C.E. Heath.”

On April 7, 1995, Wausau filed its notice of appeal from the trial court's orders of February 28, 1994;3  November 7, 1994;  December 23, 1994;  and March 21, 1995.

IV. ISSUES

On appeal, Wausau contends that the trial court erred in granting Ehlco's motions for judgment on the pleadings.   In support, Wausau contends that the trial court erred in holding that Wausau had any duty to defend Ehlco in either underlying proceeding, since according to Wausau, the underlying Wyoming complaint did not allege even a potentially covered cause of action and the underlying Mena proceedings did not involve a “suit” as that term is defined in the policies.   Wausau further contends that Ehlco was fatally late in notifying it of the underlying Wyoming and Mena claims and urges that the trial court was wrong in invoking estoppel to prevent Wausau from arguing that Ehlco had breached the Wausau policies' timely notice provisions.   According to Wausau, these provisions were conditions precedent to coverage which, if argued, would have established that Wausau had no duty to defend or indemnify Ehlco in the first instance in either underlying matter.   Wausau further contends that the trial court should have allowed it the opportunity to engage in further discovery on the conditions precedent issue.   Wausau also urges that it never had a duty to defend because Ehlco never actually requested a defense.

Wausau further contends that the trial court erred in estopping it from asserting its policy defenses because it had a justifiable reason for the delayed filing of its declaratory judgment action;  because the Ehlco-Wausau non-waiver agreement precluded any estoppel;  because Ehlco suffered no prejudice from Wausau's conduct;  because estoppel is not appropriate where it leads to coverage beyond the policy limits or to coverage not otherwise provided under the policies;  and because a conflict of interest precluded Wausau's assumption of Ehlco's defense.   Wausau further contends that the trial court erred in rejecting its jury demand;  erred in granting prejudgment interest and attorney fees in the declaratory action to Ehlco;  and erred in granting Ehlco's motion to strike the new allegations contained in Wausau's third-amended complaint.   Finally, Wausau contends, for the first time on appeal, that the trial court erred in precluding Wausau from pursuing claims for contribution, subrogation and unjust enrichment against Heath.   For the reasons discussed below, we reverse and remand.4

V. DISCUSSION

A. Appellate Jurisdiction

Before reaching Wausau's contentions on appeal, we must first address Ehlco's motion to dismiss this appeal for want of appellate jurisdiction.  Bell Federal Savings & Loan Ass'n v. Bank of Ravenswood, 203 Ill.App.3d 219, 148 Ill.Dec. 559, 560 N.E.2d 1156 (1990).   In its motion to dismiss, Ehlco contends that the trial court's order of November 7, 1994 was final and appealable and that Wausau's first motion to reconsider that order extended Wausau's time for filing its notice of appeal until 30 days past the denial of that motion on December 23, 1994.   Ehlco urges that Wausau's subsequent motions for reconsideration could not extend the jurisdiction of the trial court or resultantly extend Wausau's time for filing its notice of appeal.   Consequently, Ehlco urges that Wausau's April 7, 1995 notice of appeal was not timely so as to vest this court with subject matter jurisdiction.   In urging its position, Ehlco asserts that the November 7 order was final and appealable despite the fact that in entering it, the trial judge explicitly set for a future hearing date the prove-up for the underlying defense costs and the section 155 (215 ILCS 5/155 (West 1994)) attorney fees awarded to Ehlco, and despite the fact that the order made no express disposition as to defendant Heath's motion to dismiss or as to either Wausau's or Ehlco's claims against Heath.   For the reasons which follow, we disagree.

Every final judgment of a circuit court in a civil case is appealable pursuant to Illinois Supreme Court Rule 301 (134 Ill.2d R. 301), and the filing of a notice of appeal vests jurisdiction in the appellate court to hear the appeal of such orders.   See, e.g., F.H. Prince & Co. v. Towers Financial Corp., 266 Ill.App.3d 977, 203 Ill.Dec. 940, 640 N.E.2d 1313 (1994);  In re Application of County Treasurer, 208 Ill.App.3d 561, 153 Ill.Dec. 528, 567 N.E.2d 486 (1990).   The time for filing the notice of appeal is governed by Supreme Court Rule 303(a)(1) (134 Ill.2d R. 303(a)(1)).   That rule provides in relevant part as follows:

“Except as provided * * * below, the notice of appeal must be filed with the clerk of the circuit court within 30 days after the entry of the final judgment appealed from, or, if a timely post-trial motion directed against the judgment is filed, * * * within 30 days after the entry of the order disposing of the last pending post-trial motion.”

A final judgment is defined as “one which fixes absolutely and finally the rights of the parties in the lawsuit;  it is final if it determines the litigation on the merits so that, if affirmed, the only thing remaining is to proceed with the execution of the judgment.”  Nelson v. United Airlines, Inc., 243 Ill.App.3d 795, 799, 184 Ill.Dec. 104, 107, 612 N.E.2d 980, 983 (1993).   See also F.H. Prince, 266 Ill.App.3d 977, 203 Ill.Dec. 940, 640 N.E.2d 1313 (stating that for purposes of Rule 303, an order or judgment is final if it terminates the litigation between the parties on the merits or disposes of the rights of the parties upon all or a definite part of the controversy).

Supreme Court Rule 304(a) (134 Ill.2d R. 304(a)) governs those circumstances in which a judgment involving multiple parties or multiple claims disposes of at least one but less than all of such parties or claims.   Rule 304(a) provides in pertinent part as follows:

“If multiple parties or multiple claims for relief are involved in an action, an appeal may be taken from a final judgment as to one or more but fewer than all of the parties or claims only if the trial court has made an express written finding that there is no just reason for delaying either enforcement or appeal or both.  * * *   In the absence of such a finding, any judgment that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties is not enforceable or appealable and is subject to revision at any time before the entry of a judgment adjudicating all the claims, rights, and liabilities of all the parties.”

We first address Ehlco's contentions that the November 7, 1994 order was final as to defendant Heath despite the fact that it made no mention of Heath.   Ehlco would urge that because that order held Wausau fully responsible for Ehlco's underlying liabilities, it necessarily adjudicated Heath's lack of responsibility.   In support, Ehlco relies upon the decisions of Lynch Imports, Ltd. v. Frey, 200 Ill.App.3d 781, 785, 146 Ill.Dec. 521, 523-24, 558 N.E.2d 484, 486-87 (1990) and Andros v. Hansen Realty Co., 44 Ill.App.3d 635, 3 Ill.Dec. 266, 358 N.E.2d 664 (1976).   In further support, Ehlco also cites to the decision of Bank of Ravenswood v. Domino's Pizza, Inc., 269 Ill.App.3d 714, 207 Ill.Dec. 165, 646 N.E.2d 1252 (1995).   In addition, Ehlco refers to the trial court's written order and colloquy on March 21, 1995, where the court entered judgment in favor of Heath, holding that the case against Heath was moot by virtue of the November 7, 1994 order.   We disagree.

Under Lynch and Andros, an order which does not expressly rule on all claims as to all parties may nevertheless be final and appealable without a Rule 304(a) finding if it effectively and necessarily resolves all claims as to all parties.   See Lynch, 200 Ill.App.3d 781, 785, 146 Ill.Dec. 521, 523-24, 558 N.E.2d 484, 486-87 (summary judgment order favoring plaintiff final and appealable without Rule 304(a) finding despite ostensible pendency of defendant's counterclaim because order “necessarily disposed of the issues raised in counterclaim”);  Andros, 44 Ill.App.3d 635, 3 Ill.Dec. 266, 358 N.E.2d 664 (order dismissing defendant's counterclaim was final and appealable despite failure to expressly grant plaintiff's request for a declaratory judgment, since dismissal of counterclaim determined rights and liabilities of both parties).   Cf. Bank of Ravenswood, 269 Ill.App.3d 714, 207 Ill.Dec. 165, 646 N.E.2d 1252 (involving question of finality for purposes of determining whether section 2-1401 of the Illinois Code of Civil Procedure (735 ILCS 5/2-1401 (West 1994)) applies, not for purposes of appellate jurisdiction;  court held that order which failed to specify name of each party nevertheless was final as to all parties since omission was inadvertent and court's intent was clear from face of order).

Under the facts of Lynch, Andros, and Bank of Ravenswood, it was apparent that the failure by the trial court to enter an order formally disposing of all parties and claims could be attributed to oversight or inadvertence.   In this case, however, it is apparent that the trial court did not forget on November 7 to include defendant Heath in its order of dismissal so as to render the omission of a party to be a wholly inadvertent and ministerial error.   Rather, here, the record supports the conclusion that the failure to name Heath in the November 7 order was deliberate and intentional.   The record reflects that there was a specific request on November 7, apparently on behalf of defendant Heath, to forego the entry of an order with respect to Heath, wherein counsel and the court stated as follows:

“THE COURT:  I don't think there is anything left, is there?

 * * *

“MS. HARTMAN [apparently counsel for Heath]:  We also had a motion to dismiss pending.   However, I think that counsel who ordinarily handles this case wanted to see your ruling before determining whether we needed to pursue that, so that might be one of the remaining matters.

“THE COURT:  All right.”

We also note along those lines that the trial court in its March 21 colloquy, discussed above, rejected the entry of a nunc pro tunc order, presumably on the grounds that the trial court's oversight was not clearly supported from the face of the record.   See Beck v. Stepp, 144 Ill.2d 232, 239, 162 Ill.Dec. 10, 13, 579 N.E.2d 824, 827 (1991) (“Nunc pro tunc orders must be based upon definite and precise evidence in the record.  [Citation.]  The certainty of evidence must be assured without reliance upon the memory of the judge or any other person, and a nunc pro tunc order cannot be based upon ex parte affidavits or testimony [Citation.]”).   Consequently, where the failure to include a party in an order is deliberate, that order should not be considered as being final, even under the holdings of Lynch, Andros and Bank of Ravenswood.

Moreover, even if the trial court's failure to adjudicate all pending claims with respect to all pending parties would have been inadvertent, Ehlco's proposed application of the rule from Lynch and Andros would stretch that rule beyond its intended application.   We are reluctant to apply the reasoning of those cases to cause an appeal to be dismissed, where it was filed late with respect to the date it might have achieved effective finality, even though timely filed with respect to its formal finalization.   In those cases, the rule was applied in defense of appellate jurisdiction, once an appeal was already filed, as a fait accompli.   In those cases, where the appeals were filed before the subject orders were made complete, this court found that it could nevertheless maintain jurisdiction because although those orders were not ostensibly final, they were de facto, final orders.   In contrast, here, Ehlco proposes to use the purported effective finality of the November 7 order as to Health offensively, to defeat appellate jurisdiction.   Ehlco's proposed extension of Andros and Lynch would effectively force parties to guess at their own peril whether an order which is silent as to one or more issues or parties was nevertheless effectively dispositive of such issue or party so as to render the court's order final and appealable without obtaining Rule 304(a) certification.

We further note that even if defendant Heath had in fact been dismissed from this litigation in the November 7, 1994 order, that order was not final and appealable without a Rule 304(a) finding since it expressly reserved the prove-up for the underlying defense costs and the section 155 (215 ILCS 5/155 (West 1994)) attorney fees awarded to Ehlco for a future date.   A request for attorney fees constitutes a “claim” within the meaning of Rule 304(a).   See Marsh v. Evangelical Covenant Church, 138 Ill.2d 458, 465, 150 Ill.Dec. 572, 576-78, 563 N.E.2d 459, 463-65 (1990) (“[A] ‘claim’ is any right, liability or matter raised in an action [including a section 2-611 claim for attorney fees].   If an order does not resolve every right, liability or matter raised, it must contain [a Rule 304(a) finding].   Otherwise, the order is not appealable.”);  F.H. Prince, 266 Ill.App.3d 977, 983-84, 203 Ill.Dec. 940, 944, 640 N.E.2d 1313, 1317 (“A request for attorneys' fees is a claim within the meaning of Supreme Court Rule 304(a).  * * * [A]ny notice of appeal filed before or after the filing of a timely claim for fees is premature under Supreme Court Rule 301 while the claim for fees remains pending;  and the appeal must be dismissed unless the otherwise final order being appealed from satisfies the requirements of Supreme Court Rule 304(a).”).   Prior to the resolution of such a claim, any order entered in the case remains unappealable unless such order contains a finding in compliance with Rule 304(a), that there is no just reason to delay enforcement or appeal.   See First Chicago Gary-Wheaton Bank v. Gaughan, 275 Ill.App.3d 53, 211 Ill.Dec. 553, 655 N.E.2d 936 (1995);  F.H. Prince, 266 Ill.App.3d 977, 203 Ill.Dec. 940, 640 N.E.2d 1313;  Home State Bank/National Ass'n v. Potokar, 249 Ill.App.3d 127, 187 Ill.Dec. 581, 617 N.E.2d 1302 (1993) (order disposing of fewer than all claims which lacks Rule 304(a) finding is subject to revision before the entry of a judgment that adjudicates all claims and liabilities of the parties);  Northern Trust Co. v. Upjohn Co., 213 Ill.App.3d 390, 157 Ill.Dec. 566, 572 N.E.2d 1030 (1991).   Consequently, absent any express written finding that there was no just reason to delay enforcement or appeal under Rule 304(a), the November 7 order remained nonappealable.5  Hence, only the March 21, 1995 order was final and appealable, because it was only then that a Rule 304(a) finding was given.   Therefore, Wausau's notice of appeal, filed within 30 days of that order on April 7, 1995, was timely filed to vest this court with appellate jurisdiction.

Ehlco would urge that the pendency of a claim for attorney fees would not of itself require a Rule 304(a) finding.   In support, Ehlco primarily relies upon the decisions in Servio v. Paul Roberts Auto Sales, Inc., 211 Ill.App.3d 751, 156 Ill.Dec. 186, 570 N.E.2d 662 (1991);  Brotherhood Mutual Insurance Co. v. Roseth, 177 Ill.App.3d 443, 126 Ill.Dec. 669, 532 N.E.2d 354 (1988);  Bank of Ravenswood, 269 Ill.App.3d 714, 207 Ill.Dec. 165, 646 N.E.2d 1252;  and Jones v. Hodges, 2 Ill.App.2d 509, 119 N.E.2d 806 (1954).   In those cases, the courts held that the subject orders were final despite the fact that they did not finally determine amounts owing for attorney fees or costs.   However, those cases are fully distinguishable.

In Servio, the judgment in the principal action contemplated the later resolution of a request for attorney fees which had not yet been made.   The fees in question were then requested in a petition filed after that judgment had been entered, and were held to be collateral to the underlying action because they had no direct connection to or effect upon the finality of the principal judgment.   Likewise, in Roseth, the petition for attorney fees in question was filed after the principal action had been decided and was therefore found to be “incidental or collateral” to the principal judgment, having no effect on its finality.   See Roseth, 177 Ill.App.3d at 448, 126 Ill.Dec. at 672, 532 N.E.2d at 357.   The Servio and Roseth courts both noted that Illinois courts have long distinguished between claims for fees brought as part of the principal action and claims made after the principal action has been decided, and that in the latter situation, a Rule 304(a) finding is not required.   Unlike the facts of those cases, here, the unresolved request for attorney fees was made in Ehlco's pleadings, prior to the entry of the November 7 order, and was directly tied to the principal action since the basis for the request for fees was Wausau's alleged breach of its duty to defend.   Hence, unlike in Servio and Roseth, here, the pendency of the fees issue precluded finality for purposes of appealability absent a Rule 304(a) finding.

Ehlco's remaining cases are also distinguishable.   The question of the finality of the subject order in Bank of Ravenswood did not involve an award of attorney fees, but, rather, involved an award of costs.   There, the court determined that the mere fact that the award of costs was not calculated would not preclude finality, since the award itself and its calculation were incidental, collateral, and minor, involving a wholly ministerial arithmetic computation.  (Moreover, as already noted parenthetically above, Bank of Ravenswood did not involve finality for purposes of appeal in the first instance).   Finally, the decision in Jones is distinguishable.   Like Bank of Ravenswood, that case did not involve the issue of whether an order was final for purposes of appeal, but, rather, involved the question of whether the trial court had authority to grant the defendant's motion to discover assets pursuant to an order which had not specified the amount which the plaintiff owed to the defendant.   The Jones court held that although that order did not specify the amount owed, the trial court did not err in granting the defendant's request to conduct an asset discovery, since, unlike here, that amount had already been ascertained under a formula in a contract between the parties.

B. Merits-Duty to Defend

Having established our subject matter jurisdiction over this appeal, we now turn to the merits and Wausau's contention that the trial court erred in granting Ehlco's motions for judgment on the pleadings regarding coverage in the underlying Wyoming and Arkansas actions.   Pursuant to section 2-615(e) of the Code of Civil Procedure (735 ILCS 5/1-101 et seq. (West 1994)), “[a]ny party may seasonably move for judgment on the pleadings.”  (735 ILCS 5/2-615(e) (West 1994)).   See generally Millers Mutual Insurance Ass'n v. Graham Oil Co., 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223 (1996).   In ruling on a motion for judgment on the pleadings, the trial court must examine all of the pleadings on file, taking as true the well-pleaded facts and reasonable inferences to be drawn from the pleadings of the opposing party.   Graham Oil, 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223;  Tim Thompson, Inc. v. Village of Hinsdale, 247 Ill.App.3d 863, 187 Ill.Dec. 506, 617 N.E.2d 1227 (1993).   See also In re Estate of Davis, 225 Ill.App.3d 998, 1000, 168 Ill.Dec. 40, 43, 589 N.E.2d 154, 157 (1992) (“A motion for judgment on the pleadings is based on admissions in an opposing party's pleadings”).   Judgment on the pleadings is proper only if the trial court is able to determine the rights of the parties from the pleadings alone, and only if questions of law, and not of fact, exist after the pleadings have been filed.  Graham Oil, 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223;  Tim Thompson, Inc., 247 Ill.App.3d 863, 187 Ill.Dec. 506, 617 N.E.2d 1227.   See also Estate of Davis, 225 Ill.App.3d 998, 168 Ill.Dec. 40, 589 N.E.2d 154 (exhibits attached to the pleadings are considered part of the pleadings for all purposes where the pleading is founded on such exhibits);  735 ILCS 5/2-606 (West 1994).   On review, the court must determine whether any genuine issue of material fact exists and, if not, whether the prevailing party was indeed entitled to judgment as a matter of law.  Estate of Davis, 225 Ill.App.3d 998, 168 Ill.Dec. 40, 589 N.E.2d 154.

We first address Wausau's contention that the trial court erred holding that Wausau had a duty to defend in either underlying proceeding in the first instance.   After completing that analysis, we will then consider whether any such duty to defend if otherwise present would have been dissipated by the failure of Ehlco to serve timely notice in compliance with the notice provisions of the policies.

In support of its contention that Wausau had no duty to defend in either underlying proceeding in the first instance, Wausau argues that the underlying Wyoming complaint did not allege a potentially covered cause of action and that the underlying Mena proceedings did not involve a “suit” as that term is defined in the policies.   An insurer's duty to defend is broader than its duty to indemnify.  Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992);  Zurich Insurance Co. v. Raymark Industries, Inc., 118 Ill.2d 23, 112 Ill.Dec. 684, 514 N.E.2d 150 (1987);  West Bend Mutual Insurance Co. v. Sundance Homes, Inc., 238 Ill.App.3d 335, 179 Ill.Dec. 494, 606 N.E.2d 326 (1992).   Thus, even if the insurer may not ultimately have a duty to indemnify, if the allegations in the complaint state a cause of action which gives rise to the possibility of recovery under the policy, the insurer's duty to defend is invoked.   Sundance Homes, Inc., 238 Ill.App.3d 335, 179 Ill.Dec. 494, 606 N.E.2d 326;  Western Casualty & Surety Co. v. Adams County, 179 Ill.App.3d 752, 128 Ill.Dec. 621, 534 N.E.2d 1066 (1989).   Any doubt about whether the insurer has such a duty will be resolved in favor of the insured, and the insurer may not refuse to defend unless the allegations clearly show on their face that the claim is beyond policy coverage.  Sundance Homes, Inc., 238 Ill.App.3d 335, 179 Ill.Dec. 494, 606 N.E.2d 326;  Management Support Associates v. Union Indemnity Insurance Co., 129 Ill.App.3d 1089, 85 Ill.Dec. 37, 473 N.E.2d 405 (1984).

To determine whether an insurer's duty to defend has arisen, the court must compare the allegations of the underlying complaint to the policy language.   Outboard Marine, 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204;  Sundance Homes, Inc., 238 Ill.App.3d 335, 179 Ill.Dec. 494, 606 N.E.2d 326.   In making its determination as to whether a duty to defend exists, the court must confine its coverage analysis to the insurance policy and the four corners of the underlying complaint.  Illinois National Insurance Co. v. Universal Underwriters Insurance Co., 261 Ill.App.3d 84, 199 Ill.Dec. 252, 633 N.E.2d 1243 (1994).   When a duty to defend arises, if the insurer fails to either defend the suit under a reservation of rights or file a timely declaratory judgment action seeking a declaration of noncoverage, it will be estopped from alleging in a subsequent coverage action against it that the insured was not covered under the policy or that there were policy defenses.   See generally Murphy v. Urso, 88 Ill.2d 444, 58 Ill.Dec. 828, 430 N.E.2d 1079 (1981);  Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24 (1976);  M/A Com, Inc. v. Perricone, 187 Ill.App.3d 358, 134 Ill.Dec. 945, 543 N.E.2d 228 (1989);  Sims v. Illinois National Casualty Co., 43 Ill.App.2d 184, 193 N.E.2d 123 (1963).

In the instant case, the Wausau policies provide for coverage as follows:

“[Wausau] will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of * * * property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent * * *.”

“Occurrence” is defined in the Wausau policies as

“an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”

“Property damage” is defined in the Wausau policies as “injury to or destruction of tangible property.”   The Wausau policies exclude coverage for property damage to property owned, rented, used, alienated, cared for or controlled by the insured.

Because of the differences in the underlying proceedings with respect to the Wyoming and Mena, Arkansas sites, each underlying proceeding will require a separate duty to defend analysis.   With respect to the underlying Union Pacific lawsuit against Hines in Wyoming, there is little question that the allegations of the complaint give rise to a duty to defend pursuant to the coverage provisions of the policies.   As noted, the underlying Union Pacific suit alleged that Hines had contaminated and damaged the Laramie River, groundwater and wildlife in the region of the Wyoming wood-treatment facility.   These allegations allege at the very least a possibility of coverage under the policies' general grant of coverage.   In addition, they at least potentially escape the application of the stated exclusions.   First, damage to third-party property, rather than to the insured's own property, is apparently alleged.   Second, the allegations of the underlying complaint did not suggest that the damage done was expected or intended by the insured.   Thus, it is readily apparent based upon the allegations of the complaint that the underlying Wyoming action falls at least potentially within the coverage provisions of the applicable Wausau policies.   However, it remains to be determined later in our discussion whether Ehlco is precluded from availing itself of that coverage because of any delay in serving notice to Wausau under the timely notice provisions of the policies.

[The preceding material is nonpublishable under Supreme Court Rule 23.]

 The question concerning Wausau's duty to defend with respect to the USEPA's proceedings against Hines relating to the Mena site requires a more complex analysis.   Wausau would urge that it had no duty to defend in those proceedings since they did not constitute a “suit” as defined by the subject policies and under Illinois law.   We agree.   Our supreme court's decision in Lapham-Hickey Steel Corp. v. Protection Mutual Insurance Co., 166 Ill.2d 520, 211 Ill.Dec. 459, 655 N.E.2d 842 (1995) is directly in point.   In Lapham-Hickey, the relevant coverage provisions required the insurer to defend “suits” against the insured.   In that case, the insured received a letter from the USEPA stating that it was potentially responsible for the costs of an environmental cleanup, and also received a draft consent order and a “no action” letter informing the insured that it probably would not be held responsible for the costs of any cleanup.   None of those written documents led to the filing of any suit against the insured.   The Lapham-Hickey court reasoned that since the subject policy employed the term “suit” in discussing the carrier's duty to defend, no such duty would be invoked absent the filing of a suit against the insured in “actual court proceedings.”  166 Ill.2d at 532, 211 Ill.Dec. at 464, 655 N.E.2d at 847.   On that basis, the Lapham-Hickey court held that no duty to defend was triggered since a “suit” exists in an environmental coverage context only when there has been a proceeding against the insured filed in a court of law.   The Lapham-Hickey court stated that its holding was consistent with the manner in which courts determine whether a duty to defend exists, i.e., by comparing the allegations of the underlying complaint to the relevant policy provisions to see if coverage is even potentially alleged by the pleadings.   Without the filing of a suit in a judicial proceeding, there would be no such complaint, and therefore, no duty to defend would arise.

In the instant case, as in Lapham-Hickey, the Wausau policies state that Wausau

“shall have the right and duty to defend any suit against the insured seeking damages * * * [for] property damage, even if the allegations of the suit are groundless, false or fraudulent * * * .”

As in Lapham-Hickey, here, because no suit was filed with respect to the underlying USEPA proceedings concerning the Mena site prior to 1988, Wausau's duty to defend was not triggered prior to that time.   See also Fruit of the Loom, Inc. v. Travelers Indemnity Co., 284 Ill.App.3d 485, 219 Ill.Dec. 770, 672 N.E.2d 278 (1996) (no duty to defend because no suit was filed in that no judicial proceeding was commenced);  Forest Preserve District of DuPage County v. Pacific Indemnity Co., 279 Ill.App.3d 728, 216 Ill.Dec. 245, 665 N.E.2d 305 (1996).

 Ehlco would urge that Lapham-Hickey should not be applied retroactively to the facts here since that case was decided after this action was filed and after judgment was entered.   However, it is well-settled that Lapham-Hickey is to be given retroactive application.   See Benoy Motor Sales, Inc. v. Universal Underwriters Insurance Co, 287 Ill.App.3d 942, 945-46, 223 Ill.Dec. 229, 231-32, 679 N.E.2d 414, 416-17 (1997) (“Lapham-Hickey 's requirement of a lawsuit to trigger the insurance company's duty to defend is to be applied retroactively.”);  Fruit of the Loom, 284 Ill.App.3d at 496, 219 Ill.Dec. at 778, 672 N.E.2d at 286 (“Lapham-Hickey is to be given retroactive application because the Supreme Court's opinion in Lapham-Hickey did not state that it was prospective, and the opinion on its face applies to the litigants in the Lapham-Hickey case.”);  Forest Preserve, 279 Ill.App.3d 728, 216 Ill.Dec. 245, 665 N.E.2d 305.   See generally Lannom v. Kosco, 158 Ill.2d 535, 199 Ill.Dec. 743, 634 N.E.2d 1097 (1994) (supreme court has power to declare when a decision will apply prospectively only, and in the past has said so expressly when it intended for prospective application alone;  supreme court's decisions apply retroactively to cases pending at time decision is announced).

 In addition, Ehlco apparently contends that by virtue of the filing of the federal consent decree action, Wausau became retroactively responsible for Hines' defense costs incurred in response to the USEPA's administrative proceedings and investigation of the Mena site, dating back to the USEPA's letter to Hines of March 18, 1982.   In support, Ehlco relies upon the decision of Detrex Chemical Industries, Inc. v. Employers Insurance of Wausau, 681 F.Supp. 438 (N.D.Ohio 1987) (federal district court decision, applying Ohio law, stating that even if a “potentially responsible party” (“PRP”) letter does not constitute a suit, once a court action is filed pursuant thereto, the insured becomes entitled to all defense costs retroactively, dating back to the date of the PRP letter).   We disagree.

It would seem that a pro forma lawsuit, which only serves to reduce to judgment by agreement of the parties a settlement to which the parties had already consented in an administrative proceeding, is but an extension or implementation of that administrative proceeding.   Consequently, to invoke coverage for the filing of a lawsuit already consented to in a settlement agreement in the underlying administrative action, where the outcome of that lawsuit is pre-ordained by that agreement, would contravene the thrust of the holding of Lapham-Hickey, which precludes any duty to defend against administrative proceedings.   Once a consent decree is fully agreed upon in the underlying administrative settlement, a suit which is filed pursuant thereto as a mere formality provides nothing to defend upon which to invoke any duty to defend.   Although Lapham-Hickey did not expressly address this issue, we do not believe that in that case the court intended to extend the duty to defend to non-adversarial suits in which the insured had already fully agreed with the liabilities ultimately imposed by the court, which as a mere formality legitimatized the agreement prepared by the parties prior to the filing of the action.

In the instant case, Wausau avers in its brief that the consent decree was entered into and fully executed prior to the filing of the federal action, and that the decree was filed contemporaneously with the federal complaint.   Ehlco does not anywhere controvert these averments.   Moreover, the signature page of the consent decree bears the date of May 16, 1987, which purports to be well in advance of the filing of the federal action in March 1988.⁶  The consent decree, when agreed upon, contemplated the filing of a federal lawsuit in which the consent decree would be filed.   Thus, the entry into the consent decree prior to the filing of the federal suit completely neutralized the anticipated federal action and rendered it non-adversarial in nature.

There is nothing on the face of the decree that is inconsistent with the non-adversarial nature of the federal action in which it was contemporaneously filed.   The provisions of the decree wholly define and predetermine the full nature and extent of the judicial action to be taken pursuant to the filing of the lawsuit and the entry of the decree.   As noted, the consent decree provides in pertinent part as follows:

“This Consent Decree shall be lodged with the Court for a period of 30 days for public comment pursuant to the provisions of 28 C.F.R. § 50.7 and Section 122(i) of the Superfund Amendments and Reauthorization Act of 1986, Pub.L. No. 99-499, 100 Stat 1613 (1986).”

The decree further provided that

“the parties agree and the Court finds that settlement of these matters without further litigation is in the public interest and that the entry of this Decree is the most appropriate means of resolving these matters.”

In addition, the consent decree contained penalties for violations of the decree to which the parties had stipulated.   The decree also provided that the federal court would maintain jurisdiction

“for the duration of this Consent Decree for the purposes of issuing such further directions as may be necessary or appropriate to construe, implement, modify, enforce, terminate, or reinstate the terms of this Consent Decree * * *.”

As is apparent from its face, the consent decree was fully executed prior to the filing of the federal action and was filed simultaneously with it.   Second, the role of the federal court was clearly limited and defined on the face of the consent decree to the future enforcement of the settlement if necessary, and did not call for any concurrent defense of the action by Ehlco.   Third, the decree provided its own stipulated penalties.   Fourth, the stated purpose of the federal action, as disclosed in the decree itself, was to prevent any further litigation, and to permit the statutorily required “public comment” on the terms of the settlement agreement.   Hence, the federal consent decree action was wholly non-adversarial, entered into by prior consent of the parties to implement an agreement negotiated and executed in the underlying prior administrative proceedings.

It is therefore apparent that Ehlco did not require any defense in the federal consent decree action, since that action was filed by agreement of the parties merely to reduce the settlement decree to an enforceable judgment pursuant to the prior agreement of the parties, and since the insured's liability in the lawsuit was a foregone conclusion, fully negotiated by the parties prior to the filing of the action.   We would further surmise that, if anything, the cost of attorney fees actually incurred in the federal consent decree action would at best be nominal, since every detail appears to have been fully orchestrated pursuant to the settlement reached at the administrative level prior to the filing of the implementational consent decree action.⁷

Ehlco would further urge that the decision of our Supreme Court in Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992) precludes our finding that the federal consent decree action here did not constitute a suit or therefore invoke Wausau's duty to defend.   We disagree.   In Outboard Marine, the State of Illinois and the USEPA each filed suit in federal court in 1978 against Outboard Marine Corporation (OMC), the insured, alleging that in the course of its normal business operations it had contaminated waters including Waukegan Harbor and Lake Michigan.   Those suits sought to enjoin OMC from further contaminating those waters and to compel OMC to select and implement a safe and swift method of cleaning them up.   The governmental agencies ultimately moved for voluntary dismissal of those actions, which the federal district court granted without prejudice.   Thereafter, in October 1988, those agencies both filed new federal complaints against OMC, in which they made the same factual allegations as those set forth in their initial complaints, and in which they prayed for response costs and in addition damages under CERCLA.   In April 1989, the federal district court approved of and entered a consent decree which had been negotiated and entered into by OMC, the EPA and the State of Illinois.   Pursuant to that decree, OMC was required to make payments into a trust fund for the costs associated with the cleanup of the contaminated waters.

OMC tendered its defense of the underlying actions to its insurers pursuant to the provisions of certain comprehensive general liability insurance policies, but the insurers refused to defend, alleging that the underlying actions were not covered under the policies.   OMC therefore defended itself and eventually negotiated and entered into the aforementioned consent decree settlement, and then instituted its declaratory judgment action against its carriers.   In its declaratory suit, OMC sought a declaration that its insurance carriers had duties to defend and indemnify it in the underlying actions, and sought reimbursement for its underlying defense costs and liabilities.   The Outboard Marine court held in relevant part as follows:

“Liberty Mutual [one of OMC's primary carriers] initially asserts that the governmental agencies' 1988 complaints are not involved in this appeal and cannot be considered in determining whether the insurers had a duty to defend OMC. However, it is clear from the record that the 1988 complaints were before the trial court when it ruled on OMC's motion for partial summary judgment and are, therefore, part of the record on appeal.   The 1988 complaints are the only complaints which specifically pray for response costs and damages pursuant to section 107 of CERCLA.   Therefore, these 1988 complaints clearly constitute ‘suits seeking damages.’   Accordingly, we hold that, absent an applicable policy exclusion, Liberty Mutual had a duty to defend OMC and we affirm the appellate court in this regard.”  Outboard Marine, 154 Ill.2d at 112, 180 Ill.Dec. at 710, 607 N.E.2d at 1214.  (Emphasis supplied in original).

Ehlco would urge that this language from Outboard Marine regarding the underlying 1988 complaints in that case precludes us from holding that the federal action here was a non-adversarial “suit,” insufficient to invoke Wausau's duty to defend.   In support, Ehlco has supplemented the record here with Liberty Mutual's (a defendant-insurer in Outboard Marine ) brief to our supreme court in the Outboard Marine case, in which Liberty Mutual argued that the consent decree settlement agreement involved in that case was filed simultaneously with the underlying 1988 federal complaints and that therefore, there was nothing for it to defend in the federal action.   Ehlco would appear to argue on the basis of the representations in that brief that since Liberty Mutual was ultimately found to have had a duty to defend in Outboard Marine, the fact that a consent decree may be filed simultaneously with a federal action does not prevent such an action from constituting a “suit” sufficient to trigger a duty to defend.

However, the above-referenced language from the Outboard Marine decision is not susceptible to Ehlco's interpretation.   Despite the statements in Liberty Mutual's brief regarding the timing of the filing of the consent decree settlement in that case, nowhere does the Outboard Marine decision indicate or otherwise rely upon the date of the filing of the consent decree in that case.   Whatever the background facts and arguments consisted of in Outboard Marine (i.e., as presented in the Liberty Mutual brief in that case), the precedential value of that case can only be gleaned from how the court there chose to present the facts and characterize the issues before it.   As is clear from the above-referenced passage, the court in Outboard Marine did not concern itself with the issue of whether the federal consent decree action involved in that case constituted a “suit” as that issue was raised and addressed in the later decision of Lapham-Hickey with respect to an administrative proceeding versus a court proceeding.   Rather, the Outboard Marine court was concerned with the issue of whether “damages” had been sought against OMC in the underlying actions as required by the policies in question in order to invoke Liberty Mutual's duty to defend.   As noted above, the Outboard Marine court distinguished between the 1978 federal actions against OMC which sought solely equitable relief, and the 1988 federal actions which sought monetary damages and thereby invoked Liberty Mutual's duty to defend.   Having distinguished Outboard Marine, as previously discussed, it follows from the decision in Lapham-Hickey that a consent decree settlement memorialized in a federal lawsuit does not give rise to an independent duty to defend, unless, perhaps, it was shown that there was some complication in its implementation that knocked the consent decree action out of its fixed orbit around the settlement agreement, or that the federal lawsuit deviated from the consent decree and took on a life of its own.   Thus, since the USEPA's underlying proceedings against Hines with respect to the Mena, Arkansas site did not constitute a suit, we must conclude that no duty to defend arose which would have obligated Wausau to participate in Hines' defense with respect to that site.   See Lapham-Hickey, 166 Ill.2d 520, 211 Ill.Dec. 459, 655 N.E.2d 842.⁸

Wausau contends with respect to Ehlco's Mena claim that even if Lapham-Hickey would not apply to preclude coverage, coverage would nevertheless be precluded because of Ehlco's late notice.   Wausau also contends that notwithstanding our determination that the Wyoming action falls within the coverage provisions of the policy, Wausau would nevertheless have no duty to defend due to Ehlco's late notice with respect to that action.   Wausau urges that the trial court was in error in estopping it from asserting Ehlco's breach of the timely notice provisions in the subject policies by reason of Wausau's failure to undertake Ehlco's defense, since those provisions are conditions precedent to any coverage and not subject to estoppel.

 The purpose of a notice requirement is to enable the insurer to make a timely and thorough investigation of a claim.   INA Insurance Co. v. City of Chicago, 62 Ill.App.3d 80, 19 Ill.Dec. 519, 379 N.E.2d 34 (1978).   Notice provisions are considered valid conditions precedent to coverage, and should not be considered mere technical requirements for the convenience of the insurer.   See Kerr v. Illinois Central Railroad Co., 283 Ill.App.3d 574, 219 Ill.Dec. 81, 670 N.E.2d 759 (1996) (stating that compliance with notice provision is a condition precedent to coverage and if breached, the insurer will not be liable under the policy);  Industrial Coatings Group, Inc. v. American Motorists Insurance Co., 276 Ill.App.3d 799, 213 Ill.Dec. 317, 658 N.E.2d 1338 (1995) (stating that the requirement of timely notice is a condition precedent of the policy).   See also Millers Mutual Insurance Ass'n v. Graham Oil Co., 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223 (1996);  American Country Insurance Co. v. Cash, 171 Ill.App.3d 9, 120 Ill.Dec. 834, 524 N.E.2d 1016 (1988);  Equity General Insurance Co. v. Patis, 119 Ill.App.3d 232, 74 Ill.Dec. 846, 456 N.E.2d 348 (1983);  INA Insurance Co., 62 Ill.App.3d 80, 19 Ill.Dec. 519, 379 N.E.2d 34;  City of Chicago v. United States Fire Insurance Co., 124 Ill.App.2d 340, 260 N.E.2d 276 (1970).   Whether an insured complied with its contractual duty to notify its carrier of an occurrence is resolved by determining whether a reasonably prudent person would have foreseen a lawsuit and would have either contacted his attorney or his liability carrier.  Graham Oil Co., 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223;  Industrial Coatings Group, 276 Ill.App.3d 799, 213 Ill.Dec. 317, 658 N.E.2d 1338;  Twin City Fire Insurance Co. v. Old World Trading Co., 266 Ill.App.3d 1, 203 Ill.Dec. 264, 639 N.E.2d 584 (1993).   Prejudice to the insurer from late notice of an occurrence is only a factor to be considered in determining whether notice was reasonable.   Graham Oil Co., 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223.   Whether an insured has been given reasonable notice usually is a question for the trier of fact, and becomes a question of law for the court only when the facts are undisputed.   See generally University of Illinois v. Continental Casualty Co., 234 Ill.App.3d 340, 175 Ill.Dec. 324, 599 N.E.2d 1338 (1992).

 As noted, a liability carrier has a duty to defend an action which alleges a claim that potentially comes within the coverage of the policy, even where the facts ultimately show that no coverage is available.   Outboard Marine Corp., 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204;  Zurich Insurance Co., 118 Ill.2d 23, 112 Ill.Dec. 684, 514 N.E.2d 150;  Sundance Homes, Inc., 238 Ill.App.3d 335, 179 Ill.Dec. 494, 606 N.E.2d 326;  Western Casualty & Surety Co., 179 Ill.App.3d 752, 128 Ill.Dec. 621, 534 N.E.2d 1066.   The breach of that duty will estop the carrier from arguing policy defenses to coverage in a later declaratory action brought against it.   Murphy, 88 Ill.2d 444, 58 Ill.Dec. 828, 430 N.E.2d 1079;  Peppers, 64 Ill.2d 187, 355 N.E.2d 24;  M/A Com, 187 Ill.App.3d 358, 134 Ill.Dec. 945, 543 N.E.2d 228;  Sims, 43 Ill.App.2d 184, 193 N.E.2d 123.

 The first question presented here is whether a carrier which has failed to defend or reimburse its insured in an underlying action or to file a timely declaratory judgment action is estopped under the foregoing rule from arguing conditions precedent to coverage such as the requirement of timely notice.   Illinois courts are divided on this issue.   On the one hand, there is a line of cases which support Wausau's position that a carrier is not estopped from asserting that it had no duty to defend or to indemnify due to late notice since the giving of timely notice is a condition precedent to coverage.   See Industrial Coatings Group, 276 Ill.App.3d 799, 213 Ill.Dec. 317, 658 N.E.2d 1338;  M/A Com, Inc. v. Perricone, 187 Ill.App.3d 358, 134 Ill.Dec. 945, 543 N.E.2d 228 (1989);  Del Grosso v. Casualty Insurance Co., 170 Ill.App.3d 1098, 120 Ill.Dec. 860, 524 N.E.2d 1042 (1988);  City of Chicago v. United States Fire Insurance Co., 124 Ill.App.2d 340, 260 N.E.2d 276 (1970);  International Environmental Corp. v. National Union Fire Insurance Co., 860 F.Supp. 511 (N.D.Ill.1994);  and La Salle National Trust, N.A. v. Schaffner, 818 F.Supp. 1161 (N.D.Ill.1993).   See also D. Caswell and M. Warnick, The Illinois Insurer Estoppel Doctrine:  The Consequences of Wrongful Denial of the Duty to Defend, 7 Environmental Claims Journal 5 (Summer 1995) (stating that where an insurer fails to file a declaratory action or defend under a reservation of rights, it need not be estopped from introducing extrinsic evidence of the insured's breach of a condition precedent to coverage such as timely notice as a defense to any coverage in a subsequent coverage action).

On the other hand, there is a line of cases which appear to be aligned with Ehlco's position that due to its alleged failure to defend Hines or to file a timely declaratory action, Wausau is estopped from asserting any policy coverage defenses, including that of late notice.   See La Rotunda v. Royal Globe Insurance Co., 87 Ill.App.3d 446, 42 Ill.Dec. 219, 408 N.E.2d 928 (1980);  McFadyen v. North River Insurance Co., 62 Ill.App.2d 164, 209 N.E.2d 833 (1965);  Maneikis v. St. Paul Insurance Co., 655 F.2d 818 (7th Cir.1981);  Petersen Sand & Gravel, Inc. v. Maryland Casualty Co., 881 F.Supp. 309 (N.D.Ill.1995);  and Attorneys' Title Guaranty Fund, Inc. v. Maryland Casualty Co., No. 90 C 3916, 1991 WL 171339 (N.D.Ill. August 23, 1991).   See also Central Mutual Insurance Co. v. Kammerling, 212 Ill.App.3d 744, 156 Ill.Dec. 826, 571 N.E.2d 806 (1991).   See generally S. Nardoni and J. Vishneski, The Illinois Estoppel Doctrine:  Illinois Courts Make it Costly for Insurers To Breach Their Duty To Defend, 8 Environmental Claims Journal 45 (Autumn 1995) (hereinafter, the title to this article will be referred to by the names of its authors, Nardoni and Vishneski).

Based upon our review of these authorities, we find those cases which support Wausau's view to be more persuasive.   Nardoni and Vishneski have articulated the rationale of Ehlco's line of cases, which would invoke estoppel to preclude the interposition of a late notice defense, as being an extrapolation of the general principal of estopping an insurer who breaches his duty to defend from then seeking to interpose defenses.   In order to preserve that rule, they would make no distinction between late notice defenses and other defenses to coverage.   They further state that to permit an insurer to refuse to defend its insured while conducting an inquiry into facts extrinsic to the underlying complaint regarding late notice would leave the insured unprotected while the insurer decides whether to provide a defense.   In support, the article states that

“[c]reating an exception to the rule for condition precedent-type defenses would destroy the effectiveness of the [estoppel] rule.   It would permit carriers to safely deny their duty to defend, without fear of estoppel, as long as they include a ‘late notice’ * * * condition precedent defense in their denial letter.   This would instruct all insurance company claims representatives to include such defenses in their denial of coverage letters in every case.   The exception would swallow the rule whole.”   Nardoni and Vishneski, The Illinois Estoppel Doctrine, at 56.

The better reasoned cases, however, would challenge these assertions.   The general rationale for the invocation of the estoppel rule is that it prevents an insurer who has breached the duty to defend provision in its policy from relying on other policy defenses in that insurance contract which it has already repudiated.  Murphy, 88 Ill.2d 444, 58 Ill.Dec. 828, 430 N.E.2d 1079;  Peppers, 64 Ill.2d 187, 355 N.E.2d 24;  M/A Com, 187 Ill.App.3d 358, 134 Ill.Dec. 945, 543 N.E.2d 228;  Sims, 43 Ill.App.2d 184, 193 N.E.2d 123.   However, where conditions precedent to coverage are involved, including the requirement to serve timely notice (see Kerr, 283 Ill.App.3d 574, 219 Ill.Dec. 81, 670 N.E.2d 759;  Industrial Coatings, 276 Ill.App.3d 799, 213 Ill.Dec. 317, 658 N.E.2d 1338), the argument is reversed.   First, the insurance contract does not take effect without timely notice.   Second, the party in breach is the policyholder, not the insurer.

Thus, it would be conceptually incoherent to permit estoppel to arise where a duty to defend may well not have been breached because of the prior breach by the insured of a condition precedent regarding the giving of timely notice.   The insured's breach of the timely notice provision, if proven, would preclude the vesting of any right in the insured to a defense and any correlative duty to defend on the part of the insurer.   In that regard, we note that the estoppel rule initially germinated in a context where the allegations of the underlying complaint were sufficient to invoke the possibility that the underlying cause of action, if proven, would fall within the coverage provisions of the policy.  Murphy, 88 Ill.2d 444, 452, 58 Ill.Dec. 828, 832, 430 N.E.2d 1079, 1083 (“The starting point of analysis under either the general rule of estoppel or the exception is the same-the allegations of the complaint”);  Peppers, 64 Ill.2d 187, 193, 355 N.E.2d 24, 28 (“In determining whether the insurer owes a duty to defend * * * it is the general rule that the allegations of the complaint determine the duty”);  Federal Insurance Co. v. Economy Fire & Casualty Co., 189 Ill.App.3d 732, 735, 136 Ill.Dec. 1017, 545 N.E.2d 541 (1989) (“In determining whether an insurer owes a duty to defend the insured, courts look to the four corners of the complaint brought against the insured”).   However, the allegations in the underlying complaint against the policyholder would not ordinarily contain assertions pertaining to the timely notice issue, since the underlying complaint would not, and, under ordinary circumstances, could not, deal with matters pertaining to the insurability of the underlying tort defendant.   Rather, resolution of that issue would require a consideration of matters wholly extrinsic to the underlying complaint.   See D. Caswell and M. Warnick, The Illinois Insurer Estoppel Doctrine:  The Consequences of Wrongful Denial of the Duty to Defend, 7 Environmental Claims Journal 5 (Summer 1995).   Furthermore, where the question is whether the allegations in the underlying tort complaint fall within the coverage provisions of the policy, the facts proving or disproving coverage would ordinarily be revealed and established during the course of the trial of that action.   Not so those matters pertaining to timely notice, since the question of timely notice is irrelevant in the context of the underlying tort litigation.

Any concern that the Illinois estoppel rule will be vitiated by our holding ignores the fact that carriers would only escape the consequences of being estopped from contesting their duty to defend or pay the cost of defense if the court ultimately sustains their condition precedent defense based on late notice, a defense to which they then would have been clearly entitled.   Furthermore, the estoppel rule remains in full force and effect with respect to all other defenses.

The decisions in M/A Com, Inc. v. Perricone, 187 Ill.App.3d 358, 134 Ill.Dec. 945, 543 N.E.2d 228 (1989) and Industrial Coatings Group, Inc. v. American Motorists Insurance Co., 276 Ill.App.3d 799, 213 Ill.Dec. 317, 658 N.E.2d 1338 (1995) are wholly in point.   In M/A Com, the insurer refused to defend the insured on late notice grounds.   Thereafter, the underlying tort plaintiff received a judgment against the insured and brought garnishment proceedings against the insurer, urging that the insurer was estopped from asserting late notice as a defense to payment under its policy because it had breached its duty to defend the insured.   The M/A Com court rejected that argument, stating that the insurer was not estopped from establishing that a breach of the subject policy's timely notice provision precluded any coverage.   In so holding, the M/A Com court stated as follows:

“The case at bar represents a departure from the typical policy coverage case exemplified by Sims [Sims v. Illinois National Casualty Co., 43 Ill.App.2d 184, 193 N.E.2d 123 (1963) ].   This case involves an alleged breach of contract not by the insurer, but rather by the insured.   In our estimation, this difference does not affect the proposition of law to be applied.   The essential proposition of law stated in Sims is that an insurer which has breached its duty under the policy to defend the insured is estopped from later asserting any provision of the policy as a defense.   That proposition is based upon the general principle of contract law that a party which has breached the terms of a contract may not rely on other terms of the same contract.  [Citations.]  By estopping the insurer from raising the affirmative defense [of late notice], the trial court never reached the issue of whether the insured did in fact breach the policy and thereby relieve the insurer of its duty to defend.   The court apparently accepted the plaintiff's position that the insurer is in all cases obligated to either defend under a reservation of rights or seek a declaratory judgment as to the scope of its duty to defend.   The duty to defend, although broad, is not boundless.   The doctrine of estoppel arises only where a duty to defend exists and has been breached by the insurer.   It does not prevent the insurer from raising the issue of whether it did in fact breach a duty to defend its insured.”  M/A Com, 187 Ill.App.3d at 361-62, 134 Ill.Dec. at 948, 543 N.E.2d at 231.

As in M/A Com, in Industrial Coatings, the insurer refused to defend its insured in an underlying USEPA potentially responsible party (PRP) action and failed to file any declaratory judgment action on late notice grounds.   The insured ultimately filed a declaratory judgment action almost three years after it first sent notice to the insurer of the underlying matter.   Thereafter, the insurer filed a motion for summary judgment in which it urged that despite its inaction and refusal to defend, it should not be estopped from asserting its late notice defense as a bar to defense or indemnification coverage.   The trial court granted that motion.   The Industrial Coatings court affirmed, stating that in order for estoppel to apply, the insurer must first be found to have had a duty to defend, and then must be found to have breached that duty.   The Industrial Coatings court cited to M/A Com in support of its conclusion that if an insurer could show that the insured breached its duty to provide timely notice, it would be relieved of its duty to defend and estoppel would not apply.   Accord Del Grosso v. Casualty Insurance Co., 170 Ill.App.3d 1098, 120 Ill.Dec. 860, 524 N.E.2d 1042 (1988) (holding that an insurer should not be estopped from raising the late notice issue although it had neither defended the insured in the underlying lawsuit nor filed a declaratory judgment action.).

 Based upon the rationale and holdings in M/A Com and Industrial Coatings, here, Wausau should have been given the opportunity to establish that its insured breached a condition precedent to coverage.⁹  As noted by the court in M/A Com, the duty to defend is not boundless.   Just as an insurer that breaches the terms of its policy should not be permitted to rely on other terms of the same policy to deny coverage, an insured that breaches a condition precedent to policy coverage should not be permitted to invoke the coverage provisions of that same policy.   See also United States Fire Insurance Co., 124 Ill.App.2d 340, 260 N.E.2d 276;   International Environmental Corp., 860 F.Supp. 511;  Schaffner, 818 F.Supp. 1161.¹⁰  Hence, the trial court erred in precluding Wausau from arguing whether the insured had breached the notice provisions of the applicable policies with respect to the underlying Wyoming action and, for that matter, with respect to the Mena action as well.¹¹

[Editor's Note:  Text Omitted pursuant to Supreme Court Rule 23.]

[The following material is nonpublishable under Supreme Court Rule 23.]

[The following material is nonpublishable under Supreme Court Rule 23.]

Given our conclusion that Wausau was entitled to argue timely notice, we must now reach the question of whether in fact the notice given in the underlying Wyoming and Mena actions was unreasonable as a matter of law.   Wausau would urge that it was, and that consequently, it is not estopped from asserting the unreasonableness of the notice as a complete defense and bar to its coverage obligations.   We disagree with this categorical assertion.   The notice provisions of the subject Wausau policies provide in pertinent part as follows:

“In the event of an occurrence, written notice * * * [thereof] shall be given by or for the insured to the Company or any of its authorized agents as soon as practicable [after knowledge of the same is had by the officer in charge of the insurance department of the named insured] [or after the named insured's insurance manager or other person designated by the named insured for that purpose has actual knowledge of the occurrence]

 * * *

If a claim is made or suit is brought against the insured, the insured shall immediately forward to the Company every demand, notice, summons, or other process received by him or his representative.”12

“Occurrence” is defined by the policies as

“an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”

With respect to timely notice, the following coverage provision is also relevant:

“No action shall lie against the Company, unless as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy.”

Under the foregoing provisions, the insured was required to give Wausau notice of an occurrence as soon as practicable after the insured's insurance manager had knowledge thereof, and was required to immediately forward to the carrier every demand, notice, summons or other process related to any claim or suit brought against the insured.

Whether an insured complied with the notice provisions of a policy such as those set forth above is resolved by determining whether a reasonably prudent person would have foreseen a lawsuit and would have either contacted his attorney or his liability carrier.  Graham Oil Co., 282 Ill.App.3d 129, 140-41, 218 Ill.Dec. 60, 68, 668 N.E.2d 223, 231, quoting Twin City Fire Insurance Co. v. Old World Trading Co., 266 Ill.App.3d 1, 7, 203 Ill.Dec. 264, 268, 639 N.E.2d 584, 588 (1993) (“The test for reasonableness of the notice given is ‘whether any reasonably prudent person could foresee a lawsuit upon receipt of the first notice that would involve the insurer's policy and would either contact his attorney or his liability carrier.’ ”);  Industrial Coatings Group, 276 Ill.App.3d 799, 807, 213 Ill.Dec. 317, 322, 658 N.E.2d 1338, 1343 (“The duty to give notice of an alleged ‘occurrence’ arises when the insured knows or should know that a claim or lawsuit might ensue.”).   In addition, whether an insurer has been given reasonable notice usually is a question of fact for the trier of fact, and becomes a question of law for the court only when the facts are undisputed.   See University of Illinois v. Continental Casualty Co., 234 Ill.App.3d 340, 175 Ill.Dec. 324, 599 N.E.2d 1338 (1992).

In the instant case, as noted, Hines notified Wausau in January 1992 of the underlying Wyoming action filed by Union Pacific in December 1991.   Also as noted, with respect to the Mena site, on March 18, 1982, the USEPA sent Hines a “potentially responsible party” letter which indicated that Hines might be held liable for the costs of investigating and cleaning up that site, and Hines contacted Wausau regarding the USEPA's intentions with respect to the Mena site on that same date.   Although these notifications would appear on their face to be timely, Wausau contends that Hines was aware of environmental contamination at both sites during the early 1970s, but provided no notice to Wausau until 1982 regarding the Mena site and until 1992 regarding the Wyoming site.   In support, Wausau refers to the decision of Edward Hines Lumber Co. v. Vulcan Materials Co., 669 F.Supp. 854 (N.D.Ill.1987), a federal court action originally filed by Hines in December 1984 against its chemical suppliers at Mena wherein Hines sought reimbursement for costs associated with property damage caused at its Mena property.

The decision of Vulcan Materials involved a determination as to when a three-year statute of limitations began to run so as to time bar Hines' cause of action against its chemical suppliers.   In its decision, the Vulcan Materials court stated that Hines filed that action seeking reimbursement for expenses which it may incur if forced to pay for a clean-up of the Mena site.   In making its statute of limitations determination, the Vulcan Materials court found that during the early part of the 1970s, Hines management had ongoing concerns with the toxicity of their industrial waste and had been approached on numerous occasions by the Arkansas Department of Pollution Control regarding the environmental damage being done by Hines' wood-treatment plant.   The court in its findings also noted that during that same period, Hines seriously contemplated constructing a waste treatment plant and cleaning up the environment to abate pollution already in existence.

The Vulcan Materials court also enumerated several instances of Hines' conduct which the court found indicated that Hines knew of serious pollution problems during the 1970s.   For example, the court discussed Hines' 1976 release of water from one of its industrial holding ponds into a stream adjoining the Mena site which resulted in the death of fish for several miles downstream.   The court further found that Hines sold the Mena plant in 1978 at a considerable discount with a liability protection clause favoring the purchaser in the sales agreement due to the pollution at the site.   According to the court, these events justified the beginning of the running of the statute of limitations long before 1981, since they indicated that Hines was aware of the damages caused by the chemicals in question and of the causal connection between the injury and the product's use during the 1970s.

In citing the Vulcan Materials decision, Wausau would contend that first, Hines cannot deny that it knew of occurrences at the Mena site during the 1970s by virtue of the fact that Hines filed that lawsuit and in light of Hines' arguments therein.   Second, Wausau urges that by virtue of the factual findings of the court in Vulcan Materials, Ehlco is collaterally estopped from denying that its insurance manager knew during the 1970s that an occurrence had taken place at the Mena site.   Third, Wausau apparently argues that based upon those same findings concerning pollution at the Mena wood-treatment site, Ehlco cannot deny that it had concurrent knowledge of an occurrence at the Wyoming wood-treatment site, based upon the alleged similarity of operations at the two sites.

We first reject Wausau's contention that the Vulcan Materials lawsuit filed by Hines and the contentions raised by Hines in that suit constitute evidentiary proof that Hines knew of an occurrence with respect to either site which it failed to report to Wausau in a timely fashion during the early 1970s.   Here, the parties did not file the pleadings from the Vulcan Materials suit as part of the record on appeal.   Hence, the facts of the Vulcan Materials suit are only available to this court through the factual findings of the trial judge in Vulcan Materials, which as evidence would suffer from the infirmity of rank hearsay.

Wausau, however, contends that under the doctrine of collateral estoppel, the findings of the court in Vulcan Materials would collaterally estop Ehlco from denying that Hines (with whom Ehlco is in privity) knew of an occurrence at the Mena site during the 1970s but failed to timely notify Wausau thereof.   The doctrine of collateral estoppel applies to controlling facts or questions material to the determination of both causes.  Cirro Wrecking Co. v. Roppolo, 153 Ill.2d 6, 178 Ill.Dec. 750, 605 N.E.2d 544 (1992);  Anderson v. Financial Matters, Inc., 285 Ill.App.3d 123, 220 Ill.Dec. 249, 672 N.E.2d 1261 (1996).   Collateral estoppel precludes a party from relitigating factual issues in a subsequent judicial proceeding where (1) the issue in the prior action is identical to the issue presented in the current action;  (2) there was a final judgment on the merits in the previous action;  and (3) the party against whom estoppel is asserted was a party (or was in privity with a party) to the previous action.   See generally Illinois State Chamber of Commerce v. Pollution Control Board, 78 Ill.2d 1, 34 Ill.Dec. 334, 398 N.E.2d 9 (1979);  Progressive Land Developers, Inc. v. Exchange National Bank of Chicago, 266 Ill.App.3d 934, 204 Ill.Dec. 384, 641 N.E.2d 608 (1994).   See also Kessinger v. Grefco, Inc., 173 Ill.2d 447, 220 Ill.Dec. 137, 672 N.E.2d 1149 (1996) (collateral estoppel does not require identity among all parties in the second action to those in the first action;  only the party (or his privy) in the second action against whom estoppel is being argued must have been a party to the first action).   Cf. Herzog v. Lexington Township, 167 Ill.2d 288, 212 Ill.Dec. 581, 657 N.E.2d 926 (1995) (supreme court has cautioned against unrestrained application of non-mutual offensive collateral estoppel, and has encouraged application only where not fundamentally unfair to defendant, even though threshold requirements for collateral estoppel are otherwise satisfied).

However, the findings in Vulcan Materials do not conclusively indicate that a reasonably prudent insured in Hines' position would have foreseen a lawsuit and would have either contacted his attorney or his liability carrier.   See Graham Oil Co., 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223;  Industrial Coatings Group, 276 Ill.App.3d 799, 213 Ill.Dec. 317, 658 N.E.2d 1338;  Twin City Fire, 266 Ill.App.3d 1, 203 Ill.Dec. 264, 639 N.E.2d 584.   Argument can be made that a reasonable insured merely would have foreseen a need to clean up the industrial by-products about which it was concerned without necessarily anticipating future litigation.   While there is an indication that under the findings of the court in Vulcan Materials that Hines may have been alerted to potential action by the Arkansas Department of Pollution Control, those findings are not conclusive.   Given the law that the question of the reasonableness of notice is one of fact in the first instance, we do not think we should answer this question, but, rather, that the trial court should.  University of Illinois, 234 Ill.App.3d 340, 175 Ill.Dec. 324, 599 N.E.2d 1338 (whether an insured has been given reasonable notice usually is a question for the trier of fact, and becomes a question of law for the court only when the facts are undisputed).13  We note, however, that this issue with respect to Mena is academic only since, as discussed above, Wausau was under no obligation to defend the underlying Mena proceedings under the substantive ruling of Lapham-Hickey.

As to the Wyoming site, Wausau urges that any alleged knowledge by Hines' insurance personnel of an occurrence at the Mena site would be attributable to Hines with respect to the Wyoming site as well.   We disagree.   Even if an inference of untimely notice could be drawn from the findings of the court in Vulcan Materials with respect to the Mena site, it would not necessarily carry over to the Wyoming site.   The findings in Vulcan Materials pertained only to the Mena site and did not purport to make any determination as to Hines' awareness of potential liability with regard to the Wyoming site.   To make any determination regarding the Wyoming site would require extrinsic evidence to establish an inference of a corresponding state of awareness between Mena and Wyoming.   Such a determination would at best require a weighing of facts inappropriate to a judgment on the pleadings.   See generally Graham Oil, 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223 (genuine issues of material fact preclude judgment on the pleadings);  Tim Thompson, Inc., 247 Ill.App.3d 863, 187 Ill.Dec. 506, 617 N.E.2d 1227.   Moreover, since the findings of the Vulcan Materials court with respect to Mena did not have independent evidentiary utility but were simply a product of the collateral estoppel doctrine, they would not be indicative of any awareness by Hines in another context even though the circumstances may otherwise have been similar.   See Kessinger v. Grefco, Inc., 173 Ill.2d 447, 467, 220 Ill.Dec. 137, 146, 672 N.E.2d 1149, 1158 (1996) (“application of the doctrine of collateral estoppel must be narrowly tailored to fit the precise facts and issues that were clearly determined in the prior judgment.”)   Thus, an issue of fact exists as to whether the notice was timely with respect to the Wyoming site and, for that matter, although not essential to our determination with respect to the Mena site, to the Mena site as well.   See Graham Oil, 282 Ill.App.3d 129, 218 Ill.Dec. 60, 668 N.E.2d 223;  Tim Thompson, Inc., 247 Ill.App.3d 863, 187 Ill.Dec. 506, 617 N.E.2d 1227.14

Wausau next contends that Hines never requested a defense in the underlying Wyoming action and that therefore, Wausau had no duty to defend therein.   We disagree.   As noted, in January 1992 and thereafter, Hines wrote to Wausau asking for Wausau's “position regarding defense and coverage for this matter.”   In addition, in March 1992, Hines wrote and stated “[we] look forward to hearing from you * * * in regards to the defense of this matter.”   Later that same month, Hines wrote to Wausau enclosing certain documents relating to the Wyoming action, stating, “[w]e hope that these enclosures will be helpful to you in protecting our interest.”   As noted, in letters to Hines in February and March, Wausau advised Hines that it reserved its rights under all relevant policies and that “[i]t would appear that there will be serious coverage difficulties with regard to this matter * * *.”   Wausau further advised Hines that its policies were not intended to provide coverage for the Union Pacific matter.

In addition to the clear indication from the above-referenced correspondence that Ehlco requested a defense, during the pendency of this declaratory action litigation, Wausau has repeatedly acknowledged Ehlco's tender of defense.   For example, at page 7 of its response to Ehlco's motion for judgment on the pleadings regarding the Union Pacific lawsuit in Wyoming, Wausau stated that Ehlco “tendered defense” to Wausau.   Similarly, at footnote one on page 6 of its response to Ehlco's motion to strike Wausau's discovery requests, Wausau stated that it had accepted Hines' “tender of defense” pursuant to its non-waiver agreement.   Wausau made similar remarks during oral argument before the trial court on August 2, 1994 (R 41, 66).   In light of the foregoing, the fact that Hines tendered its defense of the Union Pacific action to Wausau is sufficiently established.

Wausau next contends that Ehlco is precluded from raising an estoppel defense in Wausau's declaratory judgment action because of its non-waiver agreement with Wausau.   As noted, Wausau presented Ehlco with a non-waiver agreement after Ehlco had repeatedly requested that Wausau comply with its duty to defend.   The non-waiver agreement between Wausau and Ehlco provided that Wausau would participate in Ehlco's defense pursuant to, among other things, the following terms:

“EHLCO * * * and Wausau agree that neither this agreement nor their respective efforts to investigate, evaluate, cooperate or settle * * * shall in any way prejudice, waive or estop their respective abilities to enforce all rights and obligations against the other, as set forth within said policies, as though no such agreement or conduct had occurred.”

Wausau would urge that this clause prevents it from being estopped from asserting policy defenses even if it breached its duty to defend.   We disagree.

We first note that the non-waiver agreement by its own terms simply provides that neither the agreement itself nor the parties' “respective efforts to investigate, evaluate, cooperate or settle * * * shall in any way prejudice, waive or estop” the enforcement of their mutual rights and obligations.   The agreement does not, however, provide that Wausau's breach of its duty to defend (or its breach of its other contractual or common law duties) would not independently create an estoppel.   In point of fact, as the trial court observed, rather than insulate Wausau from failing to defend, it is apparent from the face of the non-waiver agreement that it preserves Ehlco's right to assert an estoppel defense for Wausau's breach of its policy obligations.

As further noted by the trial court, this non-waiver agreement is, at best, a reservation of rights, and affords Wausau no greater protection than an insurer would have where it fails to assume the defense under a properly drafted reservation of rights.   See generally American States Insurance Co. v. National Cycle, Inc., 260 Ill.App.3d 299, 306, 197 Ill.Dec. 833, 838, 631 N.E.2d 1292, 1297 (1994) (“In the absence of a nonwaiver agreement, commonly referred to as a ‘reservation of rights,’ an insurer waives all questions of policy coverage when it assumes an insured's defense”);  B. Ostrager & T. Newman, Handbook on Insurance Coverage Disputes, § 2.04 at 51 (7th ed. 1994) (“A non-waiver agreement is, in essence, a reservation of rights to which the insured has assented * * * [and] affords an insurer no greater protection than a properly drafted reservation of rights”).   Accord Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24 (1976) (clearly suggesting that nonwaiver agreement and reservation of rights serve same function);  Aetna Insurance Co. v. Janson, 60 Ill.App.3d 957, 18 Ill.Dec. 143, 377 N.E.2d 296 (1978) (giving equal treatment to nonwaiver agreement and reservation of rights).   See also Richard H. Long, The Law of Liability Insurance, § 5.19 at 5-136 (1993) (nonwaiver agreements may be waived or the insurer subject to estoppel if it acts inconsistently with purpose of nonwaiver clause).   Like a reservation of rights, although a non-waiver will permit the insurer to assume the defense without waiving its policy defenses, it will not permit an insurer to breach its duty to defend and avoid an estoppel as a matter of law.   See generally American States Insurance Co., 260 Ill.App.3d 299, 306, 197 Ill.Dec. 833, 838-39, 631 N.E.2d 1292, 1297-98;  Long, § 5.19 at 5-136;  Ostrager & Newman, § 2.04 at 51.

Wausau next would urge with respect to the Wyoming action 15 that the trial court erred in estopping it since, Wausau contends, Ehlco failed to meet its alleged burden of pleading and proving that it was prejudiced by Wausau's failure to defend, and because Ehlco was not in fact prejudiced since it had its own attorney conducting its defense.   We first note that we disagree with the conclusion that because it hired its own attorney, Ehlco did not incur prejudice from Wausau's failure to defend.   By employing its own defense counsel, Ehlco was prejudiced at least insofar as it was required to pay for its own defense throughout the course of the underlying Wyoming action until the time that it entered into its settlement with Union Pacific.  Murphy v. Urso, 88 Ill.2d 444, 58 Ill.Dec. 828, 430 N.E.2d 1079 (1981);  Insurance Co. of the State of Pennsylvania v. Protective Insurance Co., 227 Ill.App.3d 360, 169 Ill.Dec. 630, 592 N.E.2d 117 (1992) (when a duty to defend has been invoked, reimbursement for defense costs should be provided as they are incurred).

Moreover, even if there would have been no prejudice, under the majority rule in Illinois, it would not have been a prerequisite to the invocation of estoppel.   See Aetna Casualty & Surety Co. v. Prestige Casualty Co., 195 Ill.App.3d 660, 142 Ill.Dec. 689, 553 N.E.2d 39 (1990);  Casualty Insurance Co. v. Northbrook Property & Casualty Insurance Co., 150 Ill.App.3d 472, 103 Ill.Dec. 495, 501 N.E.2d 812 (1986);  Aetna Casualty & Surety Co. v. Coronet Insurance Co., 44 Ill.App.3d 744, 748-49, 3 Ill.Dec. 371, 374, 358 N.E.2d 914, 917 (1976).   The rationale for dispensing with the requirement of prejudice is articulated in Coronet Insurance Co., 44 Ill.App.3d 744, 3 Ill.Dec. 371, 358 N.E.2d 914.   There, Coronet (the defendant-insurer) urged that since its insured was defended by another insurer (Aetna), he was not prejudiced by its refusal to undertake his defense.   Therefore, Coronet urged that it should not be estopped subsequently from asserting coverage defenses.   In rejecting that contention, the court declared as follows:

“Thus the argument that since [the insured] was in fact defended by his own insurer, Aetna, he was not prejudiced by Coronet's refusal to defend.   Although the argument has superficial appeal, we reject the argument.   Estoppel arises as a direct result of the insurer's breach of contract.  (Sims v. Illinois National Casualty Co., 43 Ill.App.2d 184, 193 N.E.2d 123;  [additional citation] ).  * * * The contract becomes no less breached because of the fortuitous existence of another insurer who is willing to meet its own obligations.   The thrust of Illinois law places a burden upon the primary insurer rather than the insured or any other party to fulfill its duty to defend and to take any action necessary to preserve its exclusionary defenses.  * * * [T]o hold that Coronet is not estopped would, in effect, shift that burden to Aetna and would require us to find that * * * Coronet's duty to defend is no broader than its duty to pay.   Since Coronet's refusal to defend is no less unjustified because Aetna defended [the insured], Coronet is estopped from raising any exclusionary coverage defenses.”  Coronet Insurance Co., 44 Ill.App.3d at 748-49, 3 Ill.Dec. at 374, 358 N.E.2d at 917.

Wausau cites to the decisions in J.A. Jones Construction Co. v. Hartford Fire Insurance Co., 269 Ill.App.3d 148, 206 Ill.Dec. 728, 645 N.E.2d 980 (1995) and Sportmart, Inc. v. Daisy Manufacturing Co., 268 Ill.App.3d 974, 206 Ill.Dec. 355, 645 N.E.2d 360 (1994), which applied a prejudice analysis in determining whether estoppel should be invoked.   However, those cases are readily distinguishable, since unlike the facts in this case, no prejudice was shown because in each of them a declaratory judgment action was apparently filed during the pendency of the underlying cause of action.   As shall be discussed more fully below, the prompt filing of a declaratory judgment action may well preclude the invocation of estoppel against a carrier, so long as the action is filed while the underlying action against the insured is still pending.   See Protective Insurance Co., 227 Ill.App.3d 360, 169 Ill.Dec. 630, 592 N.E.2d 117.   The focus in Sportmart, Inc. and J.A. Jones, was not upon the timeliness of the declaratory judgment action but upon the fact that in each of those cases the declaratory judgment action was filed by the insured rather than the insurer.   The courts in each case held that the insurer was nonetheless protected in its right to subsequently assert policy defenses since “it was ‘the fact of the declaratory judgment that [was] of legal import, and not the identity of the party initiating the proceeding.’ ”   Sportmart, 268 Ill.App.3d at 979-80, 206 Ill.Dec. at 359, 645 N.E.2d at 364, quoting Village of Melrose Park v. Nautilus Insurance Co., 214 Ill.App.3d 864, 158 Ill.Dec. 404, 574 N.E.2d 198 (1991).   Those cases did not purport, however, to dispense with the requirement that the declaratory action should be filed while the underlying action against the insured was still pending.   Consequently, where, as here, no declaratory action was filed while the underlying proceeding was alive, and as no defense was otherwise provided, the rationale articulated in Coronet and its progeny will prevail.

Wausau would further urge that it should not have been estopped from arguing defenses to coverage because it was justified in delaying the filing of its declaratory judgment action.   Wausau contends that its delay was justified because it was in the process of negotiating a settlement with its insured during the period in question and had promptly reserved its rights in the interim.   We disagree.   Wausau has not cited to any authority which would extend its time for filing a declaratory action because of the pendency of settlement negotiations.   The mere fact that negotiations are undertaken between a carrier and its insured should not protect the carrier from invocation of estoppel if those negotiations are unsuccessful.   The pendency of such negotiations with the insured is in no way inconsistent with the filing of a declaratory action or with undertaking a defense under a reservation of rights.

Consequently, the pendency of negotiations does not justify Wausau's failure to file a timely declaratory action or to immediately undertake or fund the defense.16  Where a duty to defend is concerned, a declaratory judgment action must be filed promptly after the defense is tendered before trial or settlement of the underlying action, especially where, as here, the carrier decides not to defend or to fund the defense.   See Protective Insurance Co., 227 Ill.App.3d 360, 365, 169 Ill.Dec. 630, 634, 592 N.E.2d 117, 121 (“If an insurer is uncertain as to its duty to defend, it must either seek a declaratory judgment as to its obligations and rights prior to trial or settlement of the underlying action or defend under a reservation of rights, or both.”).   Accord Kammerling, 212 Ill.App.3d 744, 156 Ill.Dec. 826, 571 N.E.2d 806.   It is precisely because the underlying action is imminent and ongoing that the declaratory action must be filed promptly to resolve the insured's right to a defense therein.

In the instant case, although Hines notified Wausau of the December 1991 Union Pacific lawsuit in Wyoming beginning in January 1992 and repeatedly thereafter, Wausau did not file its declaratory action until February 26, 1993, more than a year later, and, as noted, after the termination of the underlying litigation.   While Wausau and Ehlco entered into a non-waiver agreement which as discussed earlier is tantamount to a reservation of rights, the facts are clear that Wausau in fact never undertook Ehlco's defense of the Wyoming action.   The execution of a reservation of rights letter will not prevent an estoppel where the insurer after reserving its rights then refuses to undertake the defense.   See generally Allied American Insurance Co. v. Ayala, 247 Ill.App.3d 538, 186 Ill.Dec. 717, 616 N.E.2d 1349 (1993) (to avoid an estoppel, carrier must defend under reservation of rights or file a timely declaratory judgment action);  Royal Insurance Co. v. Process Design Associates, Inc., 221 Ill.App.3d 966, 164 Ill.Dec. 290, 582 N.E.2d 1234 (1991).17

Wausau next contends that it should not have been estopped from arguing policy defenses to coverage since it could not have assumed Hines' defense in either underlying action due to a conflict of interest.   We disagree.   A conflict of interest exists if the interests of the insurance carrier would be furthered while conducting the insured's defense in the underlying lawsuit by providing a less than vigorous defense to the allegations against the insured therein.   See Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24 (1976);  Mobil Oil Corp. v. Maryland Casualty Co., 288 Ill.App.3d 743, 224 Ill.Dec. 237, 681 N.E.2d 552 (1997);  Nandorf, Inc. v. CNA Insurance Cos., 134 Ill.App.3d 134, 88 Ill.Dec. 968, 479 N.E.2d 988 (1985).   When such a conflict arises, the insured is entitled to retain independent counsel, to be paid for by the insurer.  Peppers, 64 Ill.2d 187, 355 N.E.2d 24;  Mobil Oil Corp., 288 Ill.App.3d 743, 224 Ill.Dec. 237, 681 N.E.2d 552 (1997);  Nandorf, 134 Ill.App.3d 134, 88 Ill.Dec. 968, 479 N.E.2d 988.   In the instant case, even if a conflict of interest existed (and strong argument can be made that there was in fact no such conflict), Wausau's failure to fund the defense presented by Ehlco's independent counsel as defense costs were incurred justified the trial court in estopping Wausau from asserting its policy coverage defenses.   See Murphy, 88 Ill.2d 444, 58 Ill.Dec. 828, 430 N.E.2d 1079.   See also Protective Insurance Co., 227 Ill.App.3d 360, 169 Ill.Dec. 630, 592 N.E.2d 117, stating that

“[i]n cases where a conflict of interest exists between the insurer and the insured, the insurer's obligation to defend is not negated.   Although the insurer would not be permitted to participate in the defense because of the conflict, it must fulfill its obligation to provide a defense by reimbursing the insured for the cost of independent counsel.  [Citation.]  By the use of the term ‘reimbursement’ one does not mean that the insurer can withhold payment until the underlying action is over.   Reimbursement for defense costs should be provided as they are incurred.  [Citation.]  Therefore, we see no reason to allow an insurer, whose obligation to provide a defense is clear, to avoid the application of estoppel simply because it later claims a conflict of interest existed.”  227 Ill.App.3d at 368-69, 169 Ill.Dec. at 636, 592 N.E.2d at 123.

In the instant case, despite Hines' repeated requests for assistance with its defense, Wausau failed to make any reimbursement as costs were incurred, and later offered to pay only 9% of such costs.   This conduct justified the trial court in estopping Wausau from arguing its policy defenses.

Wausau contends that it ultimately offered to pay 100% of Hines' defense costs in the underlying Wyoming action.   Consequently, Wausau urges that this offer negated any breach of its duty to defend.   We disagree.   As noted, that offer came after this declaratory action had been filed, after Ehlco had filed its motion for judgment on the pleadings regarding the Wyoming site, and five days before Wausau was to file its response to that motion.   As previously discussed, a carrier whose duty to defend is invoked must reimburse its insured for the cost of its defense as those expenses are incurred, and may not wait until the underlying matter is resolved before complying with its duty to defend.  Murphy, 88 Ill.2d 444, 58 Ill.Dec. 828, 430 N.E.2d 1079;  Protective Insurance Co., 227 Ill.App.3d 360, 169 Ill.Dec. 630, 592 N.E.2d 117.   Wausau would further urge that its offer to pay 9% of Ehlco's defense costs prior to the filing of this action negated any breach of its duty to defend.   However, that amount, if paid would have been insufficient to prevent a breach of Wausau's duty to defend.   See Zurich Insurance Co. v. Raymark Industries, Inc., 118 Ill.2d 23, 112 Ill.Dec. 684, 514 N.E.2d 150 (1987) (each carrier with a duty to defend is jointly and severally liable for the entire defense;  therefore, carrier's request for pro-rata apportionment of defense costs properly denied);  LaSalle National Trust, N.A. v. Schaffner, 818 F.Supp. 1161 (N.D.Ill.1993).

Wausau next contends that even if it was proper to estop it from arguing its coverage defenses, Ehlco still bore the burden of proving that the property damage in question resulted from an “occurrence” that was neither expected nor intended in order to invoke the coverage provisions of the subject Wausau policies.   Wausau further urges that only four of the policies issued to Hines or Nebraska Bridge potentially apply to the subject claims and that any recovery allowed, even under the application of an estoppel theory, should not exceed the aggregate policy limits of those four policies.   In addition, Wausau contends that the trial court erred in granting judgment on the pleadings in favor of Ehlco before Ehlco established that the underlying Wyoming settlement and defense costs were reasonable.   We reject each of these contentions.

With respect to Wausau's contention that Ehlco bears the burden of proving that the property damage in question resulted from an “occurrence” that was neither expected nor intended in order to invoke the coverage provisions of the subject Wausau policies, we note that the allegations in the underlying Union Pacific complaint are far from clear in establishing that Ehlco expected or intended the environmental damage alleged.   The relevant inquiry is not whether the insured intended or expected the event resulting in the damage but whether it intended or expected the damage resulting from the event.   See International Minerals & Chemical Corp. v. Liberty Mutual Insurance Co., 168 Ill.App.3d 361, 119 Ill.Dec. 96, 522 N.E.2d 758 (1988).   As noted, the Union Pacific complaint merely alleged that Hines acquired Nebraska Bridge in 1967;  that the Wyoming site generated hazardous materials between 1934 and 1972;  and that in 1981, Union Pacific was sued by the State of Wyoming regarding the cleanup of the Wyoming site, and spent money investigating and remediating that site without reimbursement from any other party.

These allegations do not compel any conclusion that Hines was aware of an occurrence under the Wausau policies while it operated the Wyoming site between 1967 and 1972, which would appear to have been the latest dates during which it procured any insurance for that site from Wausau.   The reference in the underlying complaint to the 1981 suit against Union Pacific would have no bearing on the state of Hines' awareness or expectations regarding the damages that resulted from the operation of the Wyoming site.   Moreover, that time frame would have been long after the procurement of the policies at issue here.   Thus, the decision of Charles H. Eichelkraut & Sons, Inc. v. Bituminous Casualty Corp., 166 Ill.App.3d 550, 117 Ill.Dec. 13, 519 N.E.2d 1180 (1988), upon which Wausau relies, is fully distinguishable.   In that case, the court found no duty to defend where the underlying complaint showed that the insured was aware of the damage to the structure at the time it acquired the policies in question.   As discussed in this case, no such knowledge is established by the underlying Wyoming complaint.   Consequently, the general rule applies that where the allegations of the underlying complaint may come within the terms of the policy, a duty to defend will be triggered.   Outboard Marine Corp., 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204;  Zurich Insurance Co., 118 Ill.2d 23, 112 Ill.Dec. 684, 514 N.E.2d 150;  Sundance Homes, Inc., 238 Ill.App.3d 335, 179 Ill.Dec. 494, 606 N.E.2d 326;  Western Casualty & Surety Co., 179 Ill.App.3d 752, 128 Ill.Dec. 621, 534 N.E.2d 1066.   Moreover, even if there was an inference to be drawn from the allegations in the Union Pacific complaint that Hines or Ehlco expected or intended the damages upon which their claim is based, the law is clear that any doubt about whether a duty to defend has arisen must be resolved in favor of the insured.  Outboard Marine, 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204;  Sundance Homes, Inc., 238 Ill.App.3d 335, 179 Ill.Dec. 494, 606 N.E.2d 326;  Management Support Associates, 129 Ill.App.3d 1089, 85 Ill.Dec. 37, 473 N.E.2d 405.

With respect to Wausau's contention that only four of its policies should apply, we note that since we have held that Wausau has no responsibility for Ehlco's underlying Mena liabilities, Wausau's ultimate liability in this case, should a duty to defend be found to exist, will most likely not exceed the $2,000,000 limits of those four policies.   However, even if those policy limits are insufficient to cover Ehlco's underlying Wyoming liabilities, the trial court's finding that Wausau's breach of its duty to defend was vexatious and unreasonable renders Wausau liable beyond its policy limits.   See generally Conway v. Country Casualty Insurance Co., 92 Ill.2d 388, 65 Ill.Dec. 934, 442 N.E.2d 245 (1982) (award against carrier in excess of policy limits permissible if bad-faith finding is made against insured for its refusal to defend);  Emerson v. American Bankers Insurance Co., 223 Ill.App.3d 929, 936, 166 Ill.Dec. 293, 299, 585 N.E.2d 1315, 1321 (1992) (stating that finding of vexatious and unreasonable conduct on the part of an insurer is the “semantic equivalent” of a finding of bad faith when characterizing an insurer's wrongful refusal to defend).

With respect to Wausau's contention regarding the reasonableness of the underlying Wyoming settlement and defense costs, Wausau would urge that Ehlco bore the burden of proving such reasonableness before judgment on the pleadings could be entered.   However, while Ehlco may well have had such a burden of proof (see United States Gypsum Co. v. Admiral Insurance Co., 268 Ill.App.3d 598, 205 Ill.Dec. 619, 643 N.E.2d 1226 (1994)), Wausau failed to raise Ehlco's alleged failure to meet its burden of proving reasonableness before the trial court, much less to object to the reasonableness of the Wyoming settlement.   Consequently, Wausau has waived this argument.   See Haudrich v. Howmedica, Inc., 169 Ill.2d 525, 215 Ill.Dec. 108, 662 N.E.2d 1248 (1996) (issues not raised in the trial court may not be raised for the first time on appeal);  Daniels v. Anderson, 162 Ill.2d 47, 58, 204 Ill.Dec. 666, 671, 642 N.E.2d 128, 133 (1994), quoting Kravis v. Smith Marine, Inc., 60 Ill.2d 141, 147, 324 N.E.2d 417, 420 (1975) (“ ‘theory upon which a case is tried in the lower court cannot be changed on review, and * * * an issue not presented to * * * the trial court cannot be raised for the first time on review.’ ”).   See also, Illinois Supreme Court Rule 341(e)(7) (134 Ill.2d R. 341(e)(7));  In re Marriage of Winton, 216 Ill.App.3d 1084, 159 Ill.Dec. 933, 576 N.E.2d 856 (where party cited to only one case which was inapposite in support of its argument, the court held that the argument was waived under Rule 341(e)(7)).   Moreover, we note that with respect to the underlying defense costs in the Wyoming action, even without the invocation of waiver, not only did Wausau fail to challenge the reasonableness of those costs and to raise Ehlco's failure to establish such reasonableness, but in point of fact, Wausau was prepared, albeit belatedly, to pay 100% of those costs.

Wausau next contends that the trial court erred in awarding Ehlco section 155 attorney fees and costs (215 ILCS 5/155 (West 1994)) which Ehlco incurred in the declaratory judgment action.   In support, Wausau urges that it was justified in its decision not to defend and to delay the filing of its declaratory judgment action since it was relying on its policy defenses and had bona fide disputes as to the availability of coverage.   We disagree.   It is well-settled that it is in the trial court's discretion to award attorney fees against an insurance carrier pursuant to section 155 of the Insurance Code where the carrier's conduct has been “vexatious and unreasonable.”   See Songer v. State Farm Fire & Casualty Co., 106 Ill.App.3d 141, 62 Ill.Dec. 150, 435 N.E.2d 948 (1982) (award of attorney fees in declaratory judgment action is matter within discretion of trial court).   A judgment granting such an award will not be reversed absent an abuse of discretion.   See Keller v. State Farm Insurance Co., 180 Ill.App.3d 539, 129 Ill.Dec. 510, 536 N.E.2d 194 (1989) (abuse of discretion standard applies to review of award of attorney fees under section 155);  Wahls v. Aetna Life Insurance Co., 122 Ill.App.3d 309, 77 Ill.Dec. 843, 461 N.E.2d 466 (1983).

Here, the record does not support a finding that the trial court abused its discretion in awarding section 155 fees and costs against Wausau in the Wyoming action.   The trial court made its “vexatious and unreasonable” determination based upon its review of the pleadings, which reflected that Wausau had neither defended nor reimbursed Hines nor Ehlco or filed a timely declaratory judgment action.   The pleadings also established that Wausau attempted to pay only 9% of Ehlco's defense costs despite its joint and several liability therefor.   Zurich Insurance Co. v. Raymark Industries, Inc., 118 Ill.2d 23, 112 Ill.Dec. 684, 514 N.E.2d 150 (1987).   In addition, the pleadings established that only after Wausau feared that it would be estopped from asserting coverage defenses did it offer to pay 100% of those defense costs subject to a full reservation of rights.  (As noted, this offer came after the declaratory judgment action had already been filed and over a year after the underlying actions had been settled.)   In view of the foregoing, we cannot say that the trial court abused its discretion in awarding Ehlco fees and costs in the declaratory judgment action.   We note, however, that on remand Ehlco would only be entitled to fees and costs if it prevails on its Wyoming site claim and that the trial court must reassess its award of fees and costs in the declaratory judgment action with respect to Mena in light of our holding that Wausau had no duty to defend or indemnify Ehlco in the underlying Mena proceedings.

Wausau would urge that the decisions in Morris v. Auto-Owners Insurance Co., 239 Ill.App.3d 500, 180 Ill.Dec. 222, 606 N.E.2d 1299 (1993);  Green v. International Insurance Co., 238 Ill.App.3d 929, 179 Ill.Dec. 111, 605 N.E.2d 1125 (1992);  and Brotherhood Mutual Insurance Co. v. Roseth, 177 Ill.App.3d 443, 126 Ill.Dec. 669, 532 N.E.2d 354 (1988), establish that an award of fees and costs is not appropriate where a bona fide coverage dispute exists, unless the carrier's position pursuant thereto was entirely without merit.   However, those decisions are fully distinguishable.  Morris involved a carrier who refused to pay an insured's coverage claim which arose from fire damage to a bowling alley, on the grounds that, among other reasons, the insured had engaged in arson, insurance fraud, and misrepresentation.   The Morris court reversed an award of section 155 attorney fees because, unlike here, the totality of the circumstances strongly suggested that the carrier was correct in its reasons for refusing to pay the claim.   Moreover, Morris did not involve a duty to defend (or breach thereof) in the first instance.   In Roseth, the court affirmed the trial court's rejection of a request for an award of section 155 attorney fees, since unlike here, no breach of any duty to defend was at issue and since no attempt to show vexatiousness had been made.   Finally, unlike here, in Green, the issue was whether the carrier unjustifiably delayed in paying the insured's claim by delaying its appraisal of the loss.   The Green court held that an issue of fact existed as to whether the appraiser was acting as the carrier's agent in delaying its appraisal, and reversed and remanded for a resolution of that issue in the trial court.

Wausau also contends that the trial court erred in granting pre-judgment interest to Ehlco on all of Ehlco's underlying settlement and defense costs.   Wausau would urge that the award of prejudgment interest was error since, it alleges, the dollar amounts owed by Ehlco are in dispute, and are not therefore readily calculable, and since the policy does not set a specific date on which payment is due.   We disagree with respect to the Wyoming claim.18

Prejudgment interest is authorized by section 2 of the Interest Act (815 ILCS 205/2 (West 1994)), which provides in pertinent part as follows:

“Creditors shall be allowed to receive at the rate of five (5) per centum per annum for all moneys after they become due on any * * * instrument of writing * * * and on money withheld by an unreasonable and vexatious delay of payment.”

The decision to award statutory interest is within the sound discretion of the trial court, and will not be reversed unless against the manifest weight of the evidence.  Krantz v. Chessick, 282 Ill.App.3d 322, 217 Ill.Dec. 892, 668 N.E.2d 77 (1996).   See also Bank of Chicago v. Park National Bank, 277 Ill.App.3d 167, 213 Ill.Dec. 762, 660 N.E.2d 19 (1996) (holding that interest may be awarded on money payable when a claimed right and the amount due still require legal ascertainment, notwithstanding the fact that the parties could reasonably differ as to their liability).   An award of prejudgment interest is permissible if the sum due is liquidated or subject to easy calculation.   Couch v. State Farm Insurance Co., 279 Ill.App.3d 1050, 216 Ill.Dec. 856, 666 N.E.2d 24 (1996).

The case of Central National Chicago Corp. v. Lumbermens Mutual Casualty Co., 45 Ill.App.3d 401, 3 Ill.Dec. 938, 359 N.E.2d 797 (1977) is in point.   In Central National, the insured was in the business of providing financing to manufacturers by purchasing their accounts receivable.   The insurer issued a policy to the insured which provided coverage for losses resulting from the acceptance or purchase of forged or counterfeited business securities or documents.   The insured sustained a loss when it purchased certain fraudulent securities and made a claim on its policy, which the insurer denied on the grounds that the loss was not sustained during the policy period.   The insured sued the insurer, and the trial court found that the loss had occurred during the policy period, but denied the insured's request for prejudgment interest.

In reversing the trial court's denial of the insured's request for prejudgment interest, the Central National court stated that although there may have been a legitimate dispute as to the carrier's liability, the amount due under its insurance policy was ascertainable as the insured's loss from the purchase of the fraudulent accounts receivable.   In so holding, the Central National court stated as follows:

“An insurance policy is considered an ‘instrument of writing’ within the meaning of [the statute], and it has long been held that interest may be recovered from the time money becomes due under a policy.  [Citations.]  * * * ‘For interest to attach, prior to judgment, absent an agreement, the amount must be fixed, or determinable, and due, in the sense that a debtor-creditor relationship has come into being.  [Citation].  If the amount is determinable, interest can be awarded on money payable even when the claimed right and the amount due require legal ascertainment [citation], and the fact that the parties could reasonably differ as to their liability is not a consideration so far as the statute is concerned.  [Citation.]’  (Emphasis Added.)”  45 Ill.App.3d at 409, 3 Ill.Dec. at 943-44, 359 N.E.2d at 802-03, quoting Martin v. Orvis Bros. & Co., 25 Ill.App.3d 238, 251, 323 N.E.2d 73, 83 (1974).

The Central National court also noted that the insurance policy at issue there did not specify a date upon which the payment of a claim thereunder was due to be paid.   In the absence of such policy language, the court held that the time from which interest was to be computed depended upon the terms of the policy and the circumstances of the particular case, and remanded the question concerning the date from which the insurer should pay interest on the amount due under its policy to the trial court for its determination.

Here, as in Central National, we are dealing with money due under a written instrument pursuant to which, as noted, interest is available under the Interest Act.   Moreover, as previously discussed with respect to section 155 attorney fees, there also may be a basis for predicating an award of prejudgment interest upon the trial court's finding of “unreasonable and vexatious delay.”   See 815 ILCS 205/2 (West 1994).   Although Wausau vigorously disputed its liability, the amount due under its policy was ascertainable, and, in point of fact, was fixed, as the amount of the underlying settlement with Union Pacific and as the amount of attorney fees incurred in defense of the underlying Union Pacific lawsuit as those defense costs were incurred.   On that basis, we cannot say that it was against the manifest weight of the evidence for the trial court in its discretion to award prejudgment interest to Ehlco in this case.   See also Conway v. Country Casualty Insurance Co., 92 Ill.2d 388, 65 Ill.Dec. 934, 442 N.E.2d 245 (1982) (permitting assessment of interest on defense costs against insurer which breached duty to defend);  Ervin v. Sears, Roebuck & Co., 127 Ill.App.3d 982, 82 Ill.Dec. 709, 469 N.E.2d 243 (1984) (carrier assessed interest on defense costs, calculated from dates on which costs and attorney fees were incurred).

However, as in Central National, since the policy does not specify a date upon which the payment thereunder was to be paid, this matter must be remanded to the trial court on this issue to be computed by the trial court from “the terms of the policy and the circumstances of the particular case.”  Central National, 45 Ill.App.3d at 409, 3 Ill.Dec. at 944, 359 N.E.2d at 803.   See also Di Leo v. United States Fidelity & Guaranty Co., 50 Ill.App.2d 183, 193, 200 N.E.2d 405, 410 (1964) (“the time from which interest is computed largely depends on the terms of the policy and the circumstances of the particular case.   Interest may be allowed from the date of the loss, or after the lapse of a reasonable time for paying the amount due, or the date the insurance was payable, or the time that payment was refused after the amount became due.”).   We also note that the trial court will have to re-calculate its interest award irrespective of our treatment of this issue due to our holding above that Wausau was not responsible for any of Ehlco's underlying Mena liabilities.

Wausau also contends that the trial court erred in precluding it from pursuing contribution, subrogation, and unjust enrichment claims against Heath.   However, because Wausau failed to raise any of those claims below, they are waived on appeal.  Haudrich v. Howmedica, Inc., 169 Ill.2d 525, 215 Ill.Dec. 108, 662 N.E.2d 1248 (1996);  Lemke v. Kenilworth Insurance Co., 109 Ill.2d 350, 94 Ill.Dec. 66, 487 N.E.2d 943 (1985);  Morgan v. CUNA Mutual Insurance Society, 242 Ill.App.3d 1027, 183 Ill.Dec. 259, 611 N.E.2d 112 (1993).

Lastly, Wausau contends that the trial court erred in granting Ehlco's motion to strike its jury demand.   We disagree.   We first note this allegation of error is moot by virtue of the manner in which this case was resolved, i.e., by the grant of a motion for judgment on the pleadings, which by definition precludes a jury's consideration.   See Johnson v. Town of Evanston, 39 Ill.App.3d 419, 350 N.E.2d 70 (1976) (where court can determine relative rights of the parties in the subject matter solely from the pleadings, a motion for judgment on the pleadings is proper procedure).   Moreover, as noted by our Supreme Court in Zurich Insurance Co. v. Raymark Industries, Inc., 118 Ill.2d 23, 57-58, 112 Ill.Dec. 684, 699-700, 514 N.E.2d 150, 165-66 (1987), where as here only a declaration of rights under a contract is sought in a declaratory judgment action, there is no right to trial by jury.

[The preceding material is nonpublishable under Supreme Court Rule 23.]

For the foregoing reasons, the judgment of the Circuit Court of Cook County is reversed and remanded for proceedings in accordance herewith.

Reversed and remanded.

FOOTNOTES

1.   This opinion is only an excerpt of a far more lengthy decision.   In order to comply with appellate court page limitations specified by revised Supreme Court Rule 23 (Official Reports Advance Sheet No. 15 (July 20, 1994), R. 23, eff. July 1, 1994), we have omitted from publication a substantial portion of our statement of facts and our discussion involving more than 18 separate issues.   Consequently, the published discussion portion of this decision only addresses the following two issues:  (1) the question of Wausau's duty to defend in the underlying Mena, Arkansas proceedings under the recent decision of our supreme court in Lapham-Hickey Steel Corp. v. Protection Mutual Insurance Co., 166 Ill.2d 520, 211 Ill.Dec. 459, 655 N.E.2d 842 (1995);  and (2) whether Wausau is precluded from interposing a defense predicated upon the delayed notification of claims by its insured.The unpublished portion of this memorandum decision addresses, among other things, the subject matter jurisdiction of this court on appeal in light of the contention that the judgment at the trial level lacked finality;  whether the allegations of the underlying Union Pacific complaint in Wyoming were sufficient to invoke a duty to defend;  whether the facts support the contention that the carrier was served with late notice;  the impact of a non-waiver agreement upon the rule that a breach of a duty to defend will estop the carrier from invoking defenses to coverage;  the impact of the filing of a declaratory judgment action upon the foregoing estoppel rule, including the question as to when the declaratory judgment action must be filed to preclude invocation of the estoppel rule;  whether prejudice is required to invoke estoppel;  when the invocation of estoppel can, if at all, permit recovery in excess of policy limits;  the sufficiency of Ehlco's tender of its defense;  as well as numerous other more incidental matters.Because of these omissions, there may be gaps in the continuity of the aforementioned published excerpts.   However, a full, unabridged text of this decision is on file with the clerk of this court under Docket No. 95-1337.

FN2.  Specifically, with respect to the Wyoming site, Ehlco sought $415,000 for the defense of the Union Pacific lawsuit and $750,000 for the settlement of that lawsuit.   With respect to the Mena site, Ehlco sought $369,783.90 for attorney fees incurred pursuant to the USEPA's proceedings and $8,443,659.93, apparently for cleanup-related expenses at the Mena site.   In addition, Ehlco sought $2,758,692 in prejudgment interest through February 2, 1995 and $412,880.92 in declaratory judgment action fees through August 31, 1994..  FN2.  Specifically, with respect to the Wyoming site, Ehlco sought $415,000 for the defense of the Union Pacific lawsuit and $750,000 for the settlement of that lawsuit.   With respect to the Mena site, Ehlco sought $369,783.90 for attorney fees incurred pursuant to the USEPA's proceedings and $8,443,659.93, apparently for cleanup-related expenses at the Mena site.   In addition, Ehlco sought $2,758,692 in prejudgment interest through February 2, 1995 and $412,880.92 in declaratory judgment action fees through August 31, 1994.

FN3.  The February 28, 1994 order stayed all discovery..  FN3.  The February 28, 1994 order stayed all discovery.

FN4.  In addition, on appeal Wausau contends that the trial court erred in entering judgment on the pleadings with respect to the Mena site without first permitting Wausau to file an answer to Ehlco's Mena counterclaim;  erred in denying Wausau's motion to dismiss Ehlco's Mena counterclaim on statute of limitations grounds;  and erred in denying Wausau the opportunity to conduct discovery regarding its duty to defend in the underlying Mena proceedings.   However, based upon our disposition of the coverage issue with respect to the underlying Mena proceedings (discussed more fully below), we need not address these contentions in our decision..  FN4.  In addition, on appeal Wausau contends that the trial court erred in entering judgment on the pleadings with respect to the Mena site without first permitting Wausau to file an answer to Ehlco's Mena counterclaim;  erred in denying Wausau's motion to dismiss Ehlco's Mena counterclaim on statute of limitations grounds;  and erred in denying Wausau the opportunity to conduct discovery regarding its duty to defend in the underlying Mena proceedings.   However, based upon our disposition of the coverage issue with respect to the underlying Mena proceedings (discussed more fully below), we need not address these contentions in our decision.

FN5.  The fact that Ehlco filed a section 2-701(c) (735 ILCS 5/2-701(c) (West 1994)) motion seeking a money judgment for all of the relief granted in the trial court's November 7 declaratory judgment further substantiates the lack of finality of the November 7 order for purposes of appeal..  FN5.  The fact that Ehlco filed a section 2-701(c) (735 ILCS 5/2-701(c) (West 1994)) motion seeking a money judgment for all of the relief granted in the trial court's November 7 declaratory judgment further substantiates the lack of finality of the November 7 order for purposes of appeal.

6.   The parties did not refer to these dates, but no one contravenes the assertion by Wausau that the execution of the consent decree preceded the filing of the federal action and that the consent decree was filed contemporaneously with that action.

7.   Ehlco also apparently contends that Wausau is estopped from denying that a suit was filed in the underlying Mena proceedings and from denying that therefore, no duty to defend was invoked since, according to Ehlco, Wausau made statements in its pleadings to the contrary.   In support, Ehlco refers to Wausau's third-amended complaint, wherein Wausau stated that the USEPA filed suit against Hines in 1988 in Arkansas.   However, this statement cannot reasonably be construed as an admission by Wausau that the USEPA administrative proceedings invoked Wausau's duty to defend, nor, for that matter, as an admission that the 1988 federal consent decree action invoked Wausau's duty to defend.

8.   Since we conclude that Wausau's duty to defend was not invoked by the underlying USEPA administrative proceedings or the federal consent decree action against Ehlco, we need not address Ehlco's contention that under the aforementioned Detrex decision, the filing of the federal action entitled them to defense costs both for the defense of that action and retroactively, for the defense of the USEPA administrative proceedings leading up to that action.   Under the holding in Detrex, the question as to whether an insured would be entitled to such a retroactive payment of defense costs would not arise unless the insurer's duty to defend has been invoked in the first instance.

9.   We note at this juncture that the same reasoning with respect to conditions precedent and timely notice also applies to Wausau's interposition of the “suit” defense under Lapham-Hickey.   Consequently, we agree with Wausau's contention that the trial court erred in striking its allegations regarding the suit issue from Wausau's third amended complaint.   As noted, in its November 7, 1994 order, the trial court granted Ehlco's motion to strike all of the new counts in that complaint, including the suit issue, apparently because the court had found that Wausau had breached its duty to defend, and was therefore estopped from arguing any policy defenses.   The trial court also stated in striking those claims that it agreed with the arguments in Ehlco's motion to strike, which as noted alleged that Wausau's new claims were unsupported by allegations of fact.   However, the trial court's estoppel of Wausau to argue the suit issue was erroneous since, as with the timely notice issue, no duty to defend is triggered in the first instance unless a suit has been filed against the insured.   See generally Lapham-Hickey Steel Corp. v. Protection Mutual Insurance Co., 166 Ill.2d 520, 211 Ill.Dec. 459, 655 N.E.2d 842 (1995);  Fruit of the Loom, Inc. v. Travelers Indemnity Co., 284 Ill.App.3d 485, 219 Ill.Dec. 770, 672 N.E.2d 278 (1996).   Moreover, the suit defense alleged in the third-amended complaint stated sufficient facts to withstand a motion to strike.   As noted, in its complaint, Wausau specifically set forth the facts regarding the 1982 USEPA letter informing Hines that it was potentially responsible for the Mena cleanup, and further specified that in 1988, the USEPA filed its consent decree action in federal court in Arkansas.   Wausau then alleged that under these facts, it had no duty to defend because no suit had been filed as defined by its policies.   Wausau could not have provided more complete allegations on this issue.

10.   Ehlco would urge in particular that the decision in Central Mutual Insurance Co. v. Kammerling, 212 Ill.App.3d 744, 156 Ill.Dec. 826, 571 N.E.2d 806 (1991) supports its position that Wausau must be estopped from arguing the late notice issue.   We disagree, as that case is distinguishable.   In Kammerling, the insurer received the insured's tender of defense and notified the insured that it was reserving its rights due among other reasons to the late notice of the loss.   The insurer indicated that it would proceed with a declaratory judgment action against its insured and explicitly recognized its obligation to provide a defense until that declaratory action had been resolved.   The carrier further indicated that it would file an additional appearance on behalf of the insured in the underlying matter (the insured was being represented by another carrier).   However, the carrier did not file its declaratory judgment action until several months had passed, and in the interim, never filed an appearance for the insured or participated in any way in the underlying defense.On appeal, the Kammerling court held that the insurer was estopped from asserting a late notice defense due to “[t]he peculiar facts of this case” (Kammerling, 212 Ill.App.3d at 749, 156 Ill.Dec. at 829, 571 N.E.2d at 809), insofar as the insurer acknowledged its duty to defend under a reservation of rights and in fact indicated that it would file a declaratory judgment action and honor its defense obligations until the resolution of that action.   Unlike in Kammerling, here, Wausau did not acknowledge its duty to defend, nor did it represent that it would file a declaratory judgment action or, for that matter, file an appearance on behalf of its insured and otherwise participate in the underlying defense.

11.   Wausau also contends that the cooperation, mitigation and voluntary payments clauses in its policies are conditions precedent to coverage which it should not have been estopped from arguing and which should have precluded judgment on the pleadings.   We disagree.   We first note that in making this argument in its brief, Wausau provides no factual basis for asserting that Ehlco failed to cooperate with Wausau, to mitigate the underlying claims made against it, or that Ehlco voluntarily made any payments which it was not legally required to make.   In addition, Wausau has not cited to any cases which support its proposition that those clauses are conditions precedent to coverage.   The one case which Wausau did cite in support of this argument, Waste Management, Inc. v. International Surplus Lines Insurance Co., 144 Ill.2d 178, 161 Ill.Dec. 774, 579 N.E.2d 322 (1991), is inapposite.   That decision merely states with respect to the cooperation clause that under its auspices, an insured must disclose to its insurer the contents of communications which the insured had with defense counsel representing them on a claim for which their insurer had the ultimate duty to satisfy.   Because in making this argument Wausau has failed to apply its legal conclusions to the facts of this case and has merely cited to one irrelevant decision in support of this argument, it is waived.   See, e.g., Illinois Supreme Court Rule 341(e)(7) (134 Ill.2d R. 341(e)(7));  In re Marriage of Winton, 216 Ill.App.3d 1084, 159 Ill.Dec. 933, 576 N.E.2d 856 (1991) (where party cited to only one case which was inapposite in support of its argument, the court held that the argument was waived under Rule 341(e)(7)).

FN12.  The bracketed notice terminology was added by endorsement to the applicable Wausau policies..  FN12.  The bracketed notice terminology was added by endorsement to the applicable Wausau policies.

FN13.  Moreover, arguably, the findings in Vulcan Materials would only give rise to the possibility of an administrative proceeding.   Consequently, given the decision in Lapham-Hickey, discussed above, the question could be raised whether the duty to serve notice would be triggered by the imminency of an administrative proceeding rather than by a lawsuit..  FN13.  Moreover, arguably, the findings in Vulcan Materials would only give rise to the possibility of an administrative proceeding.   Consequently, given the decision in Lapham-Hickey, discussed above, the question could be raised whether the duty to serve notice would be triggered by the imminency of an administrative proceeding rather than by a lawsuit.

FN14.  We also note that Ehlco urges that late notice cannot be established from the findings in Vulcan Materials since those findings do not establish that knowledge of an occurrence was had by Hines' insurance manager, where Wausau's policies provide that notice of an occurrence must be given “after knowledge of the same is had by the officer in charge of the insurance department of the named insured.”   However, we find this portion of Ehlco's position a difficult one to maintain, since Wausau may well show on remand that Hines' highest-ranking officers knew of an occurrence under the policies..  FN14.  We also note that Ehlco urges that late notice cannot be established from the findings in Vulcan Materials since those findings do not establish that knowledge of an occurrence was had by Hines' insurance manager, where Wausau's policies provide that notice of an occurrence must be given “after knowledge of the same is had by the officer in charge of the insurance department of the named insured.”   However, we find this portion of Ehlco's position a difficult one to maintain, since Wausau may well show on remand that Hines' highest-ranking officers knew of an occurrence under the policies.

FN15.  We need not consider this issue with respect to the Mena proceedings since as noted, under Lapham-Hickey, Wausau had no duty to defend Ehlco in those underlying proceedings..  FN15.  We need not consider this issue with respect to the Mena proceedings since as noted, under Lapham-Hickey, Wausau had no duty to defend Ehlco in those underlying proceedings.

FN16.  Despite Wausau's contention that Ehlco never argued that Wausau's declaratory action had been untimely filed, the record is replete with evidence to the contrary.   Ehlco's representations to the trial court repeatedly entailed claims that Wausau's delays had been unwarranted and justified an estoppel..  FN16.  Despite Wausau's contention that Ehlco never argued that Wausau's declaratory action had been untimely filed, the record is replete with evidence to the contrary.   Ehlco's representations to the trial court repeatedly entailed claims that Wausau's delays had been unwarranted and justified an estoppel.

FN17.  While there is some dispute as to when during the pendency of the underlying litigation a declaratory action must be filed (see, e.g., Nardoni and Vishneski at pp. 57-58), we need not resolve this question since as noted, here, the declaratory judgment action was not filed until after the termination of the underlying Wyoming action..  FN17.  While there is some dispute as to when during the pendency of the underlying litigation a declaratory action must be filed (see, e.g., Nardoni and Vishneski at pp. 57-58), we need not resolve this question since as noted, here, the declaratory judgment action was not filed until after the termination of the underlying Wyoming action.

FN18.  Since we have already held that Wausau is not liable for the payment of principal with respect to Mena, obviously, the pre-judgment interest issue with respect to Mena would become moot..  FN18.  Since we have already held that Wausau is not liable for the payment of principal with respect to Mena, obviously, the pre-judgment interest issue with respect to Mena would become moot.

Justice GORDON delivered the opinion of the court: