(Article from Insurance Law Alert, May 2025)
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The Illinois Supreme Court will address whether a pollution exclusion in a general liability policy bars coverage for environmental contamination claims where the industrial emissions at issue were allowed under a regulatory permit. Griffith Foods International Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA, No. 24-1217 (Ill. Apr. 17, 2025).
The coverage dispute centers on whether or not National Union has a duty to defend hundreds of bodily injury lawsuits against a medical supply sterilization plant based on its alleged emission of toxic chemicals into the surrounding air for decades. An Illinois district court held that a pollution exclusion did not apply because the policyholder’s emissions were in accordance with a permit issued by the Illinois Environmental Protection Agency. In so ruling, the district court relied on Erie Insurance Exchange v. Imperial Marble Corp., 957 N.E.2d 1214 (Ill. App. Ct. 2011), in which an Illinois appellate court ruled that a pollution exclusion was ambiguous as to whether it applied to emissions authorized by a regulatory permit.
On appeal, the Seventh Circuit highlighted uncertainty as to application of Imperial Marble. In particular, the Seventh Circuit emphasized that under Illinois Supreme Court precedent, a pollution exclusion squarely applies to bar coverage for “traditional environmental pollution,” as alleged in the present case. See American States Insurance Co. v. Koloms, 687 N.E.2d 72 (Ill. 1997). Further, a Seventh Circuit decision seems to reject the reasoning adopted by the Imperial Marble court. In Scottsdale Indemnity Co. v. Village of Crestwood, 673 F.3d 715 (7th Cir. 2012), the Seventh Circuit rejected a policyholder’s assertion that the pollution exclusion does not apply to perchloroethylene-contaminated drinking water because the amount of perchloroethylene in the town’s water supply was below the maximum level permitted by environmental regulations.
Given the importance of this legal issue and the uncertainty created by Imperial Marble, the Seventh Circuit certified the following question to the Illinois Supreme Court:
In light of the Illinois Supreme Court’s decision in American States v. Koloms, 687 N.E.2d 72 (1997), and mindful of Erie Insurance Exchange v. Imperial Marble Corp., 957 N.E.2d 1214 (2011), what relevance, if any, does a permit or regulation authorizing emissions (generally or at particular levels) play in assessing the application of a pollution exclusion within a standard-form commercial general liability policy?
Last month, the Illinois Supreme Court agreed to answer the question. We will keep you posted on further developments in this matter.