## Facts

- A public school district operated five high schools and bought two “all-risk” property insurance policies covering April 1, 1981 through March 31, 1986.
- The policies insured against “all risks of physical loss or damage” to the district’s real and personal property.
- In 1983, the district hired an architectural firm to inspect for “friable” asbestos (material that can be crumbled by hand).
- The inspector found friable asbestos-containing building materials in three schools and reported that ordinary activities (e.g., sweeping and dusting) were making asbestos fibers airborne again.
- The inspector advised that the Illinois Asbestos Abatement Act required removal of asbestos materials posing a significant health hazard in schools.
- The district undertook asbestos removal and restoration work, incurring more than $2.6 million in costs between June 1984 and July 1986, and substantially more thereafter.
- The district submitted a claim under the policies; the insurer denied coverage.
- The district filed a declaratory judgment action seeking a finding that asbestos-related damage and abatement costs were covered “physical loss or damage.”
- The trial court granted summary judgment for the insurer, and the district appealed.

## Issues

1. Whether friable asbestos and resulting asbestos fiber contamination in school buildings constitute “physical loss or damage” under an all-risk property policy.
2. Whether coverage may be triggered by asbestos becoming friable and contaminating property during the policy period rather than only at the time of original installation.
3. Whether abatement undertaken to comply with the Illinois Asbestos Abatement Act is a covered response to physical damage or an uncovered economic/regulatory expense.

## Decision

- The appellate court reversed the grant of summary judgment for the insurer and remanded.
- The court held that asbestos fiber contamination of a building and its contents may constitute “physical loss or damage” within the meaning of the policies.
- The district’s evidence at least created a genuine issue of material fact as to whether covered physical loss or damage occurred during the policy period, making summary judgment for the insurer improper.
- The court rejected the insurer’s argument that any covered loss, if any, necessarily occurred only when asbestos was installed.

## Legal Principles

- Under Illinois law, asbestos fiber contamination can be a physical injury to tangible property, not merely an intangible diminution in value.
- For all-risk property coverage, the relevant harm is the presence of hazardous asbestos contamination during the policy term; installation timing alone does not defeat coverage where contamination occurs in the covered period.
- Remediation costs may fall within covered loss where they are reasonably connected to correcting a hazardous physical condition of insured property, even if work is undertaken in response to statutory requirements.
- Summary judgment is improper where the record supports a triable question whether asbestos contamination during the policy period caused covered “physical loss or damage.”

## Conclusion

The appellate court held that friable asbestos and resulting fiber contamination can constitute covered “physical loss or damage” under all-risk property policies and reversed summary judgment for the insurer because the district’s evidence created at least a factual dispute that covered damage occurred during the policy period.


Board of Education of Township High School District No. 211 v. International Insurance Co., 720 N.E.2d 622 (Ill. App. Ct. 1999)