(Article from Insurance Law Alert, February 2026)
For more information, please visit the Insurance Law Alert Resource Center.
Holding
In a pair of recent decisions, the Third Circuit—applying Pennsylvania law—and the Illinois Supreme Court both ruled that pollution exclusion clauses in general liability insurance policies precluded coverage for claims alleging harm caused by emissions of ethylene oxide gas (EtO). In each case, the court rejected the policyholder’s argument that the exclusions should be construed not to apply because, according to the policyholder, its emissions of EtO were authorized by government permits. The decisions, addressed further below, are Noetic Specialty Ins. Co. v. B. Braun Med., Inc., 2025 U.S. App. LEXIS 33911 (3d Cir. Dec. 30, 2025) and Griffith Foods Int’l, Inc. v. Nat’l Union Fire Ins. Co., 2026 Ill. LEXIS 3 (Ill. Jan. 23, 2026).
Third Circuit Ruling – Noetic Specialty Ins. Co. v. B. Braun Med., Inc., 2025 U.S. App. LEXIS 33911 (3d Cir. Dec. 30, 2025)
Background
Braun Medical, Inc., a medical device manufacturer, faced lawsuits from Pennsylvanians who alleged that EtO emissions from its manufacturing facility harmed them. B. Braun sought defense coverage from its general liability insurer, Noetic Specialty Insurance Company. Noetic declined coverage and sought a declaratory judgment that it had no duty to defend or indemnify B. Braun.
Noetic argued the policies’ pollution exclusion barred coverage. The pollution exclusion excludes coverage for bodily injury caused by “pollutants,” defined as “any solid, liquid, gaseous, or thermal irritant or contaminant.” B. Braun contended that coverage was not precluded because the exclusion’s “regulatory clearance” exception applied because the company had obtained permits for its operations from the Pennsylvania Department of Environmental Protection and the FDA. The regulatory clearance exception provides that the pollution exclusion does not apply when either the insured’s “Product” or “Work” has been cleared by a regulatory authority “for marketing with a specific indication for medical, diagnostic, or therapeutic use.”
The district court granted Noetic’s motion for judgment on the pleadings, concluding the exclusion unambiguously applied under Pennsylvania law.
Decision
The Third Circuit affirmed. As an initial matter, the court concluded that EtO, described in the underlying complaints as a “powerful cancer-causing gas” that is “dangerous, toxic, carcinogenic and mutagenic,” was at least an “irritant” and thus implicated the pollution exclusion.
Additionally, the court rejected B. Braun’s argument that the “regulatory clearance” exception to the pollution exclusion should apply. The court cited two reasons. First, the term “Product” is defined in the policy as something “designed, developed, manufactured, sold, handled, or distributed by” B. Braun, but EtO, which B. Braun used to sterilize its medical devices, was not its “Product.” Second, the court held that the two regulatory permits B. Braun had cited did not satisfy the exclusion’s “regulatory clearance” exception. The court reasoned that the permits were inapplicable because they did not address EtO emissions.
Illinois Supreme Court Ruling – Griffith Foods Int’l, Inc. v. Nat’l Union Fire Ins. Co., 2026 Ill. LEXIS 3 (Ill. Jan. 23, 2026)
Background
The coverage dispute arose from underlying tort litigation alleging that a medical-equipment sterilization facility’s EtO emissions had harmed nearby residents. Griffith Foods International, Inc., and its corporate successor, Sterigenics U.S., LLC, brought a declaratory judgment action against its insurer, National Union, seeking a ruling that the insurer had a duty to defend under certain commercial general liability policies. The policies included a pollution exclusion barring coverage for “bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water.”
The federal district court held that National Union had a duty to defend, finding that the pollution exclusion did not apply because the EtO was emitted pursuant to a permit issued by the Illinois Environmental Protection Agency.
On appeal, the Seventh Circuit certified the following question to the Illinois Supreme Court: “[W]hat relevance, if any, does a permit or regulation authorizing emissions (generally or at any particular levels) play in assessing the application of a pollution exclusion within a standard-form commercial general liability policy?” National Union argued that the permit was irrelevant because the pollution exclusion at issue did not include an exception for government-authorized pollution. The policyholders contended that the permit created an ambiguity as to whether permitted emissions constitute “pollution” for purposes of the exclusion.
Decision
In answering the certified question, the Illinois Supreme Court ruled that whether the emissions were allowed under a permit was “irrelevant” to the application of the pollution exclusion.
The Illinois Supreme Court reasoned that the discharge of EtO emissions into the atmosphere “fits squarely within [the] plain language” of the pollution exclusion. The court noted that the exclusion says “nothing about permitted or authorized pollution,” and that the permit did not change the character of the EtO emissions as pollution. Quoting the Seventh Circuit’s decision in Scottsdale Indemnity Co. v. Village of Crestwood, 673 F.3d 715 (7th Cir. 2012), the Illinois Supreme Court stated that “[a]ll that counts is that the suits are premised on a claim that the [emissions] caused injuries for which the plaintiffs are seeking damages, and that claim triggers the pollution exclusion.”
Conclusion
Taken together, these two appellate rulings from the Third Circuit and the Illinois Supreme Court suggest a recent trend to read the plain language of pollution exclusion clauses as broadly precluding coverage for any bodily injury “arising out of” the emission of pollutants—even including EtO emissions that were purportedly authorized by government permits. It is worth noting, however, that another recent decision by the Delaware Superior Court, Syngenta Crop Prot. v. Travelers Cas. & Sur. Co., No. N21C-05-143 (Del. Super. Ct. Jan. 30, 2026), espoused a narrower view—holding that the pollution exclusion at issue applied only to “traditional environmental contamination” and not harms allegedly caused by ordinary use of the herbicide paraquat.