Defending oneself from a large-scale class action lawsuit is a costly task. And so it comes as no surprise that these two parties are before us to determine who should foot the bill for the defense of a 1999 lawsuit filed by approximately 10,000 current or former Chicago Housing Authority (CHA) residents who claimed they have been exposed to and harmed by environmental contaminants while living on CHA’s public housing property. The Housing Authority Risk Retention Group, Inc. (HARRG), a risk retention group made up of various housing authority members, asserts that it has neither the duty to defend nor indemnify CHA in the underlying environmental litigation.
HARRG provided commercial general liability coverage to the CHA from June 1, 1987, through July 31, 1998, under separate annual policies. Each of the policies provided, among other coverage, coverage and defense for “bodily injury” claims subject to a limit of $5 million per occurrence per policy year., Bodily injury; included, among other things, sickness, disease, death, mental anguish, and mental injury, and HARRG does not dispute that the class action plaintiffs’ allegations of bodily injury and mental anguish fell within this definition. HARRG filed the underlying action against CHA seeking a declaratory judgment that it has no duty to defend or to indemnify CHA with respect to the underlying litigation, because, as HARRG argues, the claims asserted by the plaintiffs in the underlying class action are not covered by the poliсy.
The district court concluded that the policy language included what amounted to an “absolute pollution exclusion,” that is, an exclusion that bars coverage for all claims for pollution, whether or not the contaminants originated on the insured’s property, and consequently granted HARRG’s motion for judgment on the pleadings. Housing Authority Risk Retention Group, Inc. v. Chicago Housing Authority, No. 02 C 4474, slip op. at 7, 16 (N. D.Ill. Sept. 30, 2003).
CHA objects to the district court’s finding and further argues that the district court failed to address potential injury claims arising out of off-site exposure, did not address claims that the CHA improperly sited Altgeld Gardens, and did not address claims arising from “environmental discrimination,” and other nontraditional environmental claims. To the contrary, these claims were adequately addressed when the district court concluded that the *598 insurance policies contained an absolute pollution exclusion which applies regardless of the origin of the pollution or the identity of the polluter. Id. slip op. at 7. Furthermore, after considering all of the claims, the district court concluded that the “the type of pollution alleged in the underlying litigation does constitute ‘traditional environmental contamination,’ ” to which the absolute pollution exclusion would apply. Id. slip-op. at 11-12.
Because the district court issued a thorough and well-reasoned memorandum opinion and order, we adopt the reasoning of the district court’s September 30, 2003 Memorandum Opinion and Order addressing those claims challenged on appeal and AFFIRM the judgment of the district court. A copy of the district court’s order is attached.
*599 [[Image here]]
*600 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
HOUSING AUTHORITY RISK RETENTION GROUP, INC., Plaintiff,
v.
CHICAGO HOUSING AUTHORITY, Defendant.
No. 02 C 4474.
Sept. 30, 2003.
MEMORANDUM OPINION AND ORDER
In this action, Plaintiff insurer seeks a declaration that it has no duty to provide a defense to Defendant, the Chicago Housing Authority (“CHA”) in a lawsuit filed by current and former tenants against the CHA in state court. Plaintiff Housing Authority Risk Retention Group (“HARRG”) provided commercial general liability coverage to the Chicago Housing Authority (“CHA”) from 1987 until 1998. On or about October 20, 1999, a large number of current and former tenants of a CHA public housing development known as “Altgeld Gardens” brоught an action against CHA seeking damages for alleged bodily injuries resulting from alleged exposure to environmental contamination at or around the development. HARRG filed this action against CHA seeking a declaratory judgment that it has no duty to defend or to indemnify CHA with respect to the underlying litigation on the ground that the claims asserted in that litigation are not covered by the parties’ policies. 1 Both parties now move for judgment on the pleadings.
In a motion for judgment on the pleadings, the court considers the pleadings alone, which consist of the complaint, the answer, and any written instruments attached as exhibits, fed. R. Civ. P. 12(c);
Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend,
FACTUAL BACKGROUND
The Housing Authority Risk Retention Group (“HARRG”) is a risk retention group whose members consist of various housing authorities throughout the United States. (Complaint for Declaratory Judgment (hereinafter “Compl.”) ¶ 2.) The Chicago Housing Authority (“CHA”) is a municipal corporation which administers low-income housing programs in the City of Chicago. (Id. ¶3.) From June 1, 1987 *601 until July 31, 1998, HARRG provided commercial general liability coverage to CHA under separate annual policies on an annual coverage period basis (collectively, “the Policies”). (Id. ¶ 6.) Among other coverage, the Policies provided coverage for “bodily injury” liability subject to a limit of $5 million per occurrence and in the aggregate. (Id. ¶ 7.) Under each of the Policies, CHA was responsible for a self-insured retention of $500,000. (Id. ¶ 8.) Moreover, with the exception of the 1987 policy, each of the Policies excluded “ ‘[bjodily injury’ ... arising out of the actual, alleged or threatened dischargе, dispersal, seepage, migration, release or escape of pollutants [a]t or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured_” 2 (See, e.g., 1988 Policy, Ex. A to Compl., at 17.)
On or about October 20, 1999, several thousand current and former tenants of the Altgeld Gardens development, located at 940 East 132nd Street, Chicago, Illinois, during the period 1975 to the present, 3 brought an action against CHA in the Circuit Court of Cook County captioned Aaron et al. v. Chicago Housing Authority, case number 99 L 11738, seeking damages for alleged injuries resulting from alleged exposure to environmental contamination at or around Altgeld Gardens (hereinafter the “Underlying Litigation”). (Id. ¶¶ 9-10.) Plaintiffs in the Underlying Litigation have filed five amended complaints (the last of which deals only with defendant Commonwealth Edison) alleging negligence, breach of contract, and conspiracy against CHA. (Defendant’s Corrected Answer to Plaintiffs Complaint for Declaratory Judgment (hereinafter “Corrected Ans.”) ¶ 12.) Plaintiffs assert that CHA built the Altgeld Gardens housing development “in an industrialized area, in and around a former sewage waste site,” (Fourth Amended Complaint to Aaron et al. v. Chicago Housing Auth. (hereinafter, “Aaron FAC”), Ex. 5 to Defendant’s Corrected Answer to Plaintiffs Complaint for Declaratory Relief ¶ 7), that CHA “knew that certain contaminants, toxic substances and chemicals, including but not limited to PCBs, PAHs, selenium, arsenic, lead, mercury and pesticides were introduced, released and allowed to remain in the environment in Altgeld Gardens by the surrounding industrial plants, abandoned factories, toxic waste dumps, landfills and a Metropolitan Sanitary District plant, and their agents and employees,” (id. ¶ 24), that CHA “caused and was responsible for introducing, releasing and allowing PCBs and PAHs to remain in the environment in Altgeld Gardens,” (id. ¶ 25), and that CHA failed to “advise, warn or educate the Plaintiffs of the full nature and extent of the presence and existence of the PCB[s] and PAHs[,] the risks associated with such, or the precautions that the Plaintiffs could take.” (Id. ¶ 27.)
The Fourth Amended Complaint asserts four claims: In Count I, Plaintiffs assert that CHA was negligent in introducing PCBs to Altgeld Gardens, in failing to test for and clean up PCBs and PAHs, and in failing to handle PCBs properly; as a re- *602 suit, the Aaron plaintiffs seek damages for bodily injury in excess of $50,000 for each plaintiff, and injunctive relief in the form of relocation of current residents. (Id. ¶ 31.) In Count II, they contend that CHA breached its lease agreement provisions to provide plaintiffs with living space “in decent, safe and sanitary condition” and to keep the development “in a clean and safe condition,” as a result, they and seek to recoup rent. (Id. ¶¶ 70-71, 73.) In Count III, they aver that CHA conspired with the Illinois Environmental Protection Agency and the Department of Housing and Urban Development to conceal the extent of the dangers to the plаintiffs’ health and safety from the contaminants, thereby causing them to suffer bodily injury or to be exposed to increased risk of bodily injury. (Id. ¶ 21926-36.) Count IV, alleging negligence, seeks damages for bodily injury and is substantially similar to Count I. (Id. ¶ 35.)
On a date not specified, CHA requested that HARRG provide a defense and indemnity with respect to the Underlying Litigation, and HARRG responded by letter on March 10, 2000 stating its rights were “expressly reserved” and “making no commitments to provide coverage for the claims presented” pending further investigation of the matter. (Id. ¶ 11; Ex. B to Compl., at 1.) CHA’s defense costs in the Underlying Litigation have exceeded $500,000. (Id.1T 13.) By letter on January 24, 2002, HARRG denied coverage in the Underlying Litigation based on the fact that the $500,000 self-insurеd retention in each policy must be aggregated before the duty of defense and indemnity are triggered and on the pollution exclusion language in each of the Policies. (Compl. ¶¶ 14-15; Ex. D to Compl, at 9.) On a date not specified, CHA advised HARRG that it intends to contest HARRG’s denial of coverage. (Comply 16.) This declaratory judgment action followed.
DISCUSSION
Applicable Legal Standards
In their motions for judgment on the pleadings, the parties dispute a number of issues. As a threshold matter, the parties dispute which law the court should apply. CHA claims the 1987 Policy includes a choice of law provision requiring application of Vermont law, (Reply in Support of Defendant’s Motion for Judgment on the Pleadings (hereinafter “Def.’s Reply Mem.”), at 1-2), while HARRG contends that the choice of law provision appears in “an entirely separate agreement” and that Illinois law governs in this diversity case. (Plaintiffs Reply in Support of Motion for Judgment on the Pleadings (hereinafter “Pl.’s Reply Mem.”), at 5-8). The court need not resolve this dispute, however, for analysis under either Illinois or Vermont law leads to the same outcome, and thus, the court will discuss the laws of both states.
In construing an insurance policy, the court “must ascertain and give effect to the intention of the parties as expressed in their agreement.”
Am. Nat’l Fire Ins. Co. v. Nat’l Union Fire Ins. Co.,
An insurer’s duty to defend is much broader than its duty to indemnify.
Mount Vernon Fire Ins. Co. v. Heaven’s Little Hands Day Care,
Pollution Exclusion
The threshold question for Count I (negligence), Count III (conspiracy), and Count IV (negligence) of the Fourth Amended Complaint in the Underlying Litigation is whether the Policies’ pollution exclusion language bars coverage with respect to claims for bodily injury in the Underlying Litigation. The parties dispute the significance of the term “at or from” within the language “dispersal, seepage, migration, release or escape of pollutants [a]t or from any [CHA] premises, site or location” in the Policies’ pollution exclusion. {See, e.g., Pl.’s Reply Mem., at 3; Defendant’s Response to Plaintiffs Motion for Judgment on the Pleadings (hereinafter “Def.’s Resp. Mem.”), at 5-6.) CHA claims the term “at or from” means the pollution exclusion does not apply to “contaminants which have their origin or source elsewhere and contaminate the premises through the actions of pеrsons other than the CHA.” Thus, CHA contends, those claims relating td contaminants that originated outside of the CHA property should be covered by the Policies. {See Defendant’s Memorandum in Support of Motion for Judgment on the Pleadings (hereinafter “Def.’s Mem.”), at 8). HARRG’ argues, tot he contrary, that the policy language at issue constitutes an “absolute pollution exclusion” which applies regardless of the origin of the pollution or the identity of the polluter. 4 (PL’s Reply Mem., at 2-4.)
The case law supports Plaintiffs interpretation of the policy language as an “ab
*604
solute pollution exclusion.”
See Maska U.S., Inc. v. Kansa Gen. Ins. Co.,
Gregory v. Tennessee Gas Pipeline Company,
Similarly, in
East Quincy Servs. Dist. v. Continental Insurance Company,
a seller of residential property sought a declaration that its liability insurer was required to defend and indemnify it in a suit brought by purchasers of the property which was contaminated by E. coli and other bacteria, possibly from the septic tanks and leachfields of surrounding homes.
Finally, HARRG cites
Legarra v. Federated Mutual Ins. Co.,
Although neither Illinois nor Vermont courts appear to have addressed the question whether the absolute pollution exclusion bars coverage for pollution that originates off the insured’s premises, courts in both states have enforced such an exclusion. In
Maska,
the insured claimed that the insurance policy covered a suit against it for environmental contamination brought by the Vermont Department of Environmental Conservation for contamination due to wastewater discharges observed during a routine inspection.
*606
•The only authority CHA cites to support its position is, in this court’s view, inappo-site. The policy at issue in
Agency of Natural Resources v. United States Fire Insurance Company
did not contain an absolute pollution exclusion; Instead it excluded insurance coverage for the costs of a state-directed clean-up of pollutants.
In the Underlying Litigation, the plaintiffs claim to have been injured by hazardous materials that were “introduced, released and allowed to remain in the environment in Altgeld Gardens by the surrounding industrial plants, abandoned factories, toxic waste dumps, landfills and a Metropolitan Sanitary District plant,” (Aaron FAC ¶ 24), and by PCBs and PAHs that CHA introduced, released, and allowed to remain in the environment of Altgeld Gardens. (Id. ¶ 25.) The clause within each of the Policies excluding “ ‘[bjodily injury’ ... arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants [a]t оr from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured” is identical or nearly identical to so-called “absolute pollution exclusion” as defined by the case law from other courts. The court concludes that, under both Vermont and Illinois law, the absolute pollution exclusion bars coverage for bodily injuries resulting from exposure to pollution, regardless of origin.
Vermont Policy Filing Requirement
CHA contends that, even if the exclusionary language bars coverage, the court cannot rule on HARRG’s motion for judgment on the pleadings because a key piece of evidence is necessarily missing from the pleadings: whether HARRG properly filed the Policies with, and obtained approval from, the Vermont Department of Banking and Insurance (“VDBI”). (Def.’s Resp. Mem., at 12-14.) Vermont law provides that “[n]o basic insurance policy, certificate or annuity contract form ... shall be delivered, or issued for delivery in this state, unless the form has been filed with and approved by the commissioner” of the VDBI. Vt. Stat. Ann. tit. 8, § 3541(a). CHA contends that Vermont courts will void a pollution exclusion from a policy that has not been properly filed with the VDBI. Because HARRG has not and, indeed, “cannot in a Rule 12(c) motion, dem *607 onstrate that the policies at issue were filed and approved by the commissioner of VDBI,” CHA contends, thе court must deny HARRG’s motion for judgment on the pleadings. (Def.’s Resp. Mem., at 13.)
The
Maska
court addressed a similar argument. Plaintiff there urged that the exclusions in the insurer’s policies were invalid because the insurer had not timely filed its policy forms with VDBI.
See Maska,
As the court in
Maska
pointed out, however, the
Glens Falls
court did not discuss whether failure to file with the VDBI automatically nullified a disputed policy exclusion.
See
HARRG objects that section 3541, in any event, is not applicable to HARRG because it is a risk retention group and therefore “exempt from any state law, rule, regulation, or order,” including filing policy forms with state insurance commissioners. (Pl.’s Reply Mem., at 11.) Even if section 3541 does apply to HARRG, it contends, CHA has provided no evidence that HARRG’s policies were not filed in accordance with the statute. (Id. at lOll.) Nevertheless, the court will grant leave to CHA to amend its pleadings within ten days if it can in good faith assert that HARRG is both subject to the Vermont insurance statutes and has not timely filed the Policies with the VDBI. If CHA does so, the court expects the parties to brief the issue of whether failure to file the policies with VDBI voids them, or simply renders certain provisions-for example, the pollution exclusion-unenforceable. 6
*608 Contract and Lease Claims
In Count II of the Underlying Litigation, the plaintiffs alleged that CHA breached contracted and lease obligations to the plaintiffs. HARRG argues that it has no duty to defend CHA from these claims because they do not meet the definitions of “bodily injury” or “occurrence,” as set forth in the policies. (Memorandum of Points and Authorities in Support of Plaintiffs Motion for Judgment on the Pleadings (hereinafter “Pl.’s Mem.”), at 13.) According to the Policies, “ ‘Bodily Injury’ means bodily injury, sickness or disease, mental anguish or mental injury, sustained by a person, including death resulting from any of these at any time,”
7
(See, e.g.,
1988 Policy, at 6), while “ ‘Occurrence’ means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which causes ‘bodily injury’ or ‘property damage.’ ”
8
(See, e.g.,
1988 Policy, at 10.) HARRG cites
Travelers Ins. Cos. v. P.C. Quote, Inc.,
in which the plaintiff, a general liability insurer won a declaration that it had no duty to defend the insured in a breach of contract action brought by an unpaid supplied. The
P.C. Quote
court addressed the question whether the breach of contract involved an “occurrence,” defined in the policy as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”
CHA points out that the complaints in the Underlying Litigation make no mention of whether CHA intentionally breached its leases with the plaintiffs. (See Aaron FAC ¶ 70.) Although CHA is correct that the portion of the complaint in the Underlying Litigation does not specifically claim an “intentional” breach of contract on CHA’s part, the claim is clearly premised on intentional conduct by CHA:
Despite ... CHA’s knowledge of the danger and risk and the potential for severe and permanent injury ... CHA ... willfully and fraudulently concealed from the Plaintiffs ... the nature of the conduct of ... CHA, the dangers and risks related to the presence of and exposure to the PCBs and PAHs, and the causative relationship between CHA’s acts and omissions and the damages suffered by the Plaintiffs.
(Id. ¶ 74.) It thus does not appear that plaintiffs in the Underlying Litigation have brought a breach of contact claim based on an “accidental” concealment of dangerous conditions as required by the Policies’ definition of “occurrence.”
*609 CHA also contends that HARRG is not entitled to judgment on the pleadings because it made no reference to the breach of contract claim in its complaint. (Def.’s Resp. Mem., at 14.) The court notes, however, that HARRG did mention that the plaintiffs in the Underlying Litigation had brought three causes of action in their Third Amended Complaint-negligence, breach of contract, and conspiracy, (Comply 12), and CHA admitted as much. (Corrected Ans. ¶ 12.) HARRG also noted that, in its January 24, 2002 letter, it “denied a duty to defend CHA on a number of bases ” (Comply 14) (emphasis added) and “denied a duty of defense and indemnity ... by virtue of, among other grounds, the pollution exclusions.” (Compl. ¶ 15 (emphasis added).) Finally, HARRG prayed that this court declare it was under no duty or obligatiоn to defend or indemnify CHA with respect to the Underlying Litigation “on the grounds that the claims asserted in the Underlying Litigation are not covered by the HARRG Policies.” HARRG thus did not limit its complaint solely to claims relating to bodily injury, but presumptively included all claims relating to the underlying litigation in its complaint.
HARRG’s Remaining Defenses
The court need not reach HARRG’s remaining defenses. CHA contends that HARRG erred in its January 24, 2002 letter when it stated that the fact that the $500,000 self-insured retention in each Policy must be aggregated before the duty of defense and indemnity are triggered. {See Pl.’s Mem., at 11-13.) HARRG has also argued that all of the claims against CHA for contaminants that originated elsewhere were dismissed with prejudice by the presiding judge on December 27, 2000. {See Pl.’s Resр. Mem., at 2-6; Ex. A to Pl.’s Resp. Mem.) CHA contends that HARRG’s argument was based on the First Amended Complaint in the Underlying Litigation, and that the claims involving contaminants originating off-site appear in the Fourth Amended Complaint. {See Def.’s Reply Mem., at 4-5.) Although it is not clear from the record to which version of the complaint the December 27 order applied, the court need not resolve this issue, either, because it has concluded that the negligence and conspiracy claims against CHA in the Underlying Litigation are barred by the absolute pollution exclusion and that the breach of contract claim falls outside the scope of the policy.
Assuming they are valid, the Policies preclude coverage of all claims in the Underlying Litigation.
CONCLUSION
Because the negligence and conspiracy claims against CHA in the Underlying Litigation involve claims for bodily injury, they are barred by the absolute pollution exclusion clauses of the Policies between the parties. The breach of contract claim alleges intentional acts on the part of CHA and thus is not an “occurrence” covered by the policy. For these reasons, the court grants HARRG’s motion for judgment on the pleadings (Doc. 17-1), denies CHA’s motion for judgment on the pleadings (Doc. 16-1), and grants CHA leave, within ten days, to submit an amended answer alleging that the Policies have not been validly filed, if it so chooses.
ENTER:
Dated: September 30, 2003
REBECCA R. PALLMEYER
United States District Judge
Notes
. In its сorrected answer, CHA asserted as affirmative defenses that HARRG's claims are barred by the doctrine of waiver, the equitable doctrine of laches, and the equitable doctrine of estoppel. (Defendant's Corrected Answer to Plaintiff's Complaint for Declaratory Judgment.) CHA did not raise these defenses in its own motion for judgment on the pleadings or in its response to HARRG’s motion, however, and the court deems these defenses waived.
. The 1987 policy contained substantially similar language, specifically excluding "[l]iability arising out of the actual, alleged or threatened discharge, dispersal, release or escape of Pollutants [a]t or from premises ownеd, leased to or occupied by the Authority.” (1987 Policy, Ex. A to Compl., at 7.)
. The Fourth Amended Complaint in the Underlying Litigation does not indicate the significance of the year 1975 to the litigation.
. The “absolute pollution exclusion” was inserted into standard form comprehensive general liability policies beginning in 1985.
Hatco Corp. v.
W.R.
Grace & Co.-Conn.,
. Similarly, the remaining cases CHA cites that do not involve traditional environmental pollution are also inapposite. (See Def.’s Resp. Mem., at 9-11.)
. Defendant also points out that the plaintiffs in Count III of the underlying litigation allege that the “conspiracy” began on November 2, 1998, after CHA had cancelled its HARRG policies. (Aaron FAC ¶ 21936.) If CHA аmends its pleading pursuant to this opinion, the court expects the parties to brief this contention, as well.
. The 1987 policy contained substantially similar language, " 'Bodily Injury' means bodily injury including mental distress, sickness or disease, and death resulting therefrom, and also includes care and loss of services by any person or persons.” (1987 Policy, at 4.)
. The 1987 policy contained substantially similar language, " 'Occurrence' ... means an accident or event which ... results in Bodily Injury ... neither expected nor intended from the standpoint of the Insured and ... all injuries or damages arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one Occurrence.” (1987 Policy, at 4.)