Insurer’s Duty to Defend Policy Coverage for Contamination Caused by Landfill
In Greenwich Ins. Co. v. John Sexton Sand & Gravel Corp., the case deals with an insurance coverage dispute regarding the operation of a landfill in Hillside, Illinois. Greenwich Insurance Company and Indian Harbor Insurance Company issued policies to John Sexton Sand & Gravel Corporation, Congress Development Company, Allied Waste Transportation Inc., and Republic Service Inc. Greenwich issue primary policies to Sexton and Congress for the policy period of June 1, 2005, to June 1, 2006, and June 1, 2006, to June 1, 2007. The policy states that Greenwich agrees to pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage. The policies are modified by an absolute pollution exclusion endorsement. The insurance does not apply to pollution. ‘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. The exclusion does not apply to ‘bodily injury’ or ‘property damage’ arising out of heat, smoke or fumes from a ‘hostile fire’ unless that ‘hostile fire’ occurred or originated: (a) At any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste.
Indian Harbor issued the excess and umbrella policies to Sexton and Congress for the policy periods of June 1, 2005 to June 1, 2006, and June 1, 2006 to June 1, 2007. These policies state that Indian Harbor shall have the right and duty to defend any suit against the insured seeking damages covered by the policies, which provide two coverages. Coverage A provides “follow form” excess coverage, which means that, with exceptions not relevant here, the insurer provides coverage on the same terms as the underlying primary policies for loss amounts exceeding the limits of the underlying primary policies. Coverage B provides umbrella coverage for damages not covered by the primary policies. However under coverage B the insurance does not apply to: Bodily Injury, Property Damage, Personal Injury or Advertising Injury arising out of the actual or threatened discharge, dispersal, seepage, migration, release or escape of Pollutants anywhere in the world; any loss, cost or expense arising out of any governmental direction or request that we, the Insured or any other person or organization test for, monitor, clean up, remove, contain, treat, detoxify, neutralize or assess the effects of Pollutants; or any loss, cost or expense, including but not limited to costs of investigation or attorney’s fees, incurred by a governmental unit or any other person or organization to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize Pollutants.“
Indian Harbor also issued a pollution policy to Republic for the period from July 30, 2009, to July 30, 2010. The pollution policy provides that Indian Harbor shall have the right and duty to defend an insured against a claim seeking damage for a loss or remediation expense. The policy also generally provides coverage for loss and related legal expenses resulting from any “pollution condition” on, at, or migrating from any covered location, including the landfill at issue here. A “pollution condition” is defined as including the discharge, release, seepage, migration or escape of pollutants “into or upon land, or structures thereupon, the atmosphere, or any watercourse or body of water including groundwater.” An endorsement to the pollution policy contains a “contamination exclusion,” which states that the policy shall not apply to any loss, remediation expense or related legal expenses based on or “arising from” constituents including “[a]ll airborne contamination resulting in odors” or affecting the “[a]ir,” where such constituents are “on, at, under or migrating from” the landfill.
On December 23, 2009, hundreds of neighbors of the landfill filed a complaint against Congress, as owner of the landfill, Sexton and Allied Transportation, as general partners of Congress, and Allied Industries, as a guarantor of Allied Transportation’s obligations (Amber defendants). In Amber v. Allied Waste Transportation, Inc., No. 09 L 15741 (Amber lawsuit). The neighbors asserted claims for bodily injury and property damage arising from negligence, trespass and nuisance on the part of the Amber defendants. The Amber complaints contain allegations regarding fires at the landfill. The intrusion of air into the landfill’s gas collections system allegedly caused two subsurface fires and one surface fire at the landfill in 2002. Ignition of the waste allegedly generated additional gas at the landfill. Portions of the waste allegedly continued to burn below the surface of the landfill. In 2004 and 2005, high temperature readings caused Congress to conclude there was a subsurface fire at the landfill. In 2006, an Illinois EPA memorandum noted that scans of the landfill cover from January and February showed “classic signs of an underground fire.” The Amber complaint specifically alleges that Congress has been unable to extinguish the fire below the surface of the landfill. In addition, the Amber complaint alleged that underground tremors from explosions at the landfill caused structural damage to the Amber plaintiffs’ properties.
The issue before the court is whether the insurance policy covers the contamination caused by the landfill and therefore the insurer had a duty to defend. In determining whether the allegations in the underlying complaint meet that threshold requirement, both the underlying complaint and the insurance policy must be liberally construed in favor of the insured. “[T]he duty to defend does not require that the complaint allege or use language affirmatively bringing the claims within the scope of the policy. All doubts are resolved in the insured’s favor. In construing an insurance policy, the court must ascertain the intent of the parties to the contract by construing the policy as a whole, with due regard to the risk undertaken, the subject matter that is insured, and the purposes of the entire contract. Where the words in the policy are clear and unambiguous, “a court must afford them their plain, ordinary, and popular meaning.” However, if the words in the policy are susceptible to more than one reasonable interpretation, they will be considered ambiguous and will be strictly construed in favor of the insured and against the insurer who drafted the policy.
In this case, the Amber lawsuit alleges that the neighbors suffered bodily injuries from inhaling and otherwise being exposed to the chemical compounds in the landfill gas, without limitation to contaminants producing odors. The alleged other types of exposure are not specifically limited to airborne contamination or odors. The Amber lawsuit also alleges that Congress, Allied Transportation, and Sexton were liable for trespass and property damage simply by allowing the migration of the landfill gas, including underground, onto neighboring properties. Again, this damage may not be limited to airborne contamination or odors. Thus, liberally construing the complaint and the policy language in favor of the insured, the Amber lawsuit alleges facts that fall within, or potentially within, the coverage of Indian Harbor’s pollution policy.
A primary factor to consider in determining if an occurrence constitutes ‘traditional environmental pollution’ and, thus, is not covered under an absolute pollution exclusion, rests upon whether the injurious ‘hazardous material’ is confined within the insured’s premises or instead escapes into ‘the land, atmosphere, or any watercourse or body of water.’ “In this case, the Amber lawsuit alleges that the flares were part of the landfill operation’s on-site attempt to treat and mitigate the escape of gases. This part of the landfill operation was confined within its premises. Moreover, the explosions are hardly traditional environmental pollution as such. To extend “but for” causation to encompass the alleged explosions here would run contrary to the limitation of the exclusion to traditional environmental pollution adopted by our Supreme Court in Koloms and raise the potential for absurd results. Accordingly, the court concluded that the explosion-related allegations of the Amber lawsuit fall outside the absolute pollution exclusions in plaintiffs’ policies.
The circuit court later relied on the Amber complaint’s general allegation that “underground tremors from explosions in the flares at the Landfill caused many homes owned by the Neighborhood Property Damage Residents to shake, causing structural damage and further reducing the value of their properties.” Resolving all doubt in favor of the insured, we conclude that the general allegation raises the possibility of explosions prior to those in the more specific allegations of the Amber complaint.
Accordingly, the court held that the Amber lawsuit triggered a duty to defend under the policies issued for the period of June 1, 2005, to June 1, 2006, as well as the later primary, excess, and umbrella policies.
Greenwich Ins. Co. v. John Sexton Sand & Gravel Corp., 2013 WL 950755 (Ill. App. 1 Dist.). (This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1)).
