• Illinois Court Finds No Coverage for Village Based on Policies’ Absolute Pollution Exclusions
  • March 8, 2013
  • Law Firm: Troutman Sanders LLP - Atlanta Office
  • On February 22, 2013, the First District for the Illinois Court of Appeals affirmed summary judgment to insurers that issued excess public entity general liability insurance to the Village of Crestwood, Illinois. The Court found that the insurers had no duty to defend or indemnify the Village against claims alleging that the Village had mixed polluted water into the municipal tap water because the “underlying claims fell within absolute pollution exclusion clauses.”

    The Village sought coverage for at least twenty-five (25) individual and class action lawsuits. The underlying actions alleged that the Village knowingly mixed polluted water with clean water to reduce the Village’s costs, and the underlying plaintiffs sought relief based on theories of negligence, fraud, failure to warn, willful and wanton misconduct and breach of contract. 

    The insurers denied coverage for the Village’s claims based on the insurance policies’ absolute pollution exclusions. The exclusions differed in wording but, generally, barred coverage for “‘bodily injury or property damage’ which would not have occurred in whole or part but for the actual alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.” “Pollutants” was defined as “any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste.”

    On appeal, the Village argued that summary judgment was not appropriate because the Village did not engage in “traditional environmental pollution.” According to the Village, the pollution exclusions only apply to “active polluters” or an entity being required to pay clean-up costs in response to an environmental law. The Court rejected that argument. Citing to American States Insurance Co. v. Koloms, 1187 N.E.2d 72 (1997) and its progeny, the Court explained that mixing drinking water with chemical-laden groundwater and subsequently distributing the contaminated combination was a textbook example of traditional environmental pollution. The Court further explained that traditional environmental pollution can occur in a variety of contexts, such as chemicals being discharged from a dry cleaning machine or a child spilling a container of mercury in a home.