Legal Memorandum: Endorsement and Separate Coverage

Issue: Does an endorsement that contains its own ‘insuring agreement’ create separate coverage, apart from the coverage under the original insurance policy?

           In Millers Mut. Ins. Ass’n  v. Graham Oil Co., 282 Ill. App. 3d 129, 132, 668 N.E.2d 223, 226 (1996), the court discussed the issue of whether a pollution exclusion in an insurance policy could operate to deny bodily injury or property damage liability coverage when damages resulted from a gasoline leak. It should be noted that the Graham Oil case has indirect negative history.  In Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510 (Mo. Ct. App. 1999), the court distinguished Miller based on the fact that the matter before it did not involve a gasoline leak.  In Rice v. AAA Aerostar, Inc., 294 Ill. App. 3d 801, 690 N.E.2d 1067 (1998), the court distinguished Miller on that court’s treatment of a notice issue.  The Graham Oil court, in considering this issue, relied on an earlier federal district court case that held:

[a]n insurance contact which contains provisions for coverage as well as exclusions naturally creates inconsistencies of coverage.  To extend the sphere of an exclusion beyond its specific wording denies to the contracting parties the option of sculpting the contract to fit the specific contours of coverage […]

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