2011 IL App (3d) 100380
Ill. App. Ct.2011Background
- Erie Insurance Exchange filed a declaratory judgment action seeking a duty to defend/indemnify Imperial Marble in a class-action suit for emissions-related injuries and property damage.
- Imperial Marble answered with estoppel as an affirmative defense and counterclaims for defense/indemnification and for breach of contract due to denial of coverage; the trial court granted Erie summary judgment on Imperial’s counterclaims and entered Erie’s favor on the declaratory action, which Imperial challenged on appeal.
- Emissions from Imperial’s Somonauk facility include styrene and MMA, spread via odor and air contaminants, and are authorized by IEPA permits under federal Clean Air Act requirements; the permit contains a shield clause.
- Imperial procured the policy through Somonauk Insurance Agency; Somonauk handled binding, reminders, renewals, notices, risk communication, and claim handling; Erie’s district sales manager Wiley and Porter interacted with Imperial without disclosing the pollution exclusion.
- The CGL policy covers damages from an occurrence during the policy period; exclusions include: (i) expected or intended injury and (ii) pollution; underlying complaint alleged ongoing odors and pollutants within the policy period, raising questions about coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether emissions constitute an occurrence under the policy. | Erie contends emissions were not an occurrence as they were allegedly harmful pollution. | Imperial argues emissions were covered as an ordinary incident of its operations and within permit limits. | Emissions can be an occurrence; continuous exposure falls within the policy’s definition of occurrence. |
| Whether pollution/expected-or-intended-injury exclusions preclude coverage. | Erie argues pollution exclusion or intended injury excludes coverage. | Imperial argues permit-authorized emissions are not traditional pollution and not intended injury. | Exclusions are ambiguous; pollution exclusion does not plainly preclude coverage, and the expected-intended exclusion does not apply. |
| Whether Erie owed Imperial a defense (duty to defend) given the underlying complaint. | Erie asserts no duty to defend due to exclusions. | Imperial argues the complaint alleges potentially covered occurrences. | Because ambiguity favors Imperial and occurrence is potentially covered, Erie owed a defense. |
Key Cases Cited
- Lyons v. State Farm Fire & Casualty Co., 349 Ill.App.3d 404 (4th Dist. 2004) (focus on whether injury is expected or intended, not the act itself)
- United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill.2d 64 (Ill. 1991) (duty to defend is triggered by potentially covered allegations)
- American Economy Insurance Co. v. Holabird & Root, 382 Ill.App.3d 1017 (3d Dist. 2008) (duty to defend via underlying complaint with policy considerations)
- Clarendon America Insurance Co. v. B.G.K. Security Services, Inc., 387 Ill.App.3d 697 (3d Dist. 2008) (liberal construction in favor of insured on duty to defend)
- Koloms v. American States Insurance Co., 177 Ill.2d 473 (200?) (pollution exclusion ambiguity; broad application limited)
- Connecticut Specialty Insurance Co. v. Loop Paper Recycling, Inc., 356 Ill.App.3d 67 (1st Dist. 2005) (pollution exclusion interpretation in emissions context)
- DeSaga v. West Bend Mutual Insurance Co., 391 Ill.App.3d 1062 (5th Dist. 2009) (summary-judgment standard; policy interpretation de novo)
- Whiting v. Prestige Casualty Co., 238 Ill.App.3d 376 (2d Dist. 1992) (duty to defend; inclusion of potentially covered theories)