5th District Declares Duty To Deliver On Equitable Relief, Future Harm Tenders

he 5th District Appellate Court recently held that an insurer had a duty to defend an insured sued in a complaint seeking declaratory relief, which also sought “other relief,” apparently for future property damage, and further held that the animal pollution alleged in the complaint was not “traditional” pollution within the scope of the pollution exclusion.

The insurer in Country Mutual Insurance Co. v. Bible Pork, 2015 IL App (5th) 140211 (5th Dist. Nov. 20, 2015), was represented by Keith G. Carlson and Gosnell, Borden, Enloe, Sloss & McCullough Ltd. of Lawrenceville. Taylor Law Offices of Effingham and Kilpatrick, Townsend & Stockton LLP of Atlanta represented the insured, Bible Pork.

Hog producer Bible Pork in 2005 sought regulatory approval for a new facility in downstate Clay County. After receiving approval, it opened the facility in 2006. During construction, 21 plaintiffs filed the underlying lawsuit seeking to have the facility declared a public and private nuisance due to odors and noise it would generate and due to a loss of property values. The complaint, as amended, also sought “such other relief as deemed appropriate.”

Bible Pork tendered its defense to Country Mutual, its primary and umbrella liability carrier, which denied coverage. The underlying suit went on for six years, with some counts of the complaint dismissed, and with a verdict returned in favor of Bible Pork in 2009.

In 2008, Country Mutual filed the instant coverage action seeking a declaration that it had no duty to defend or indemnify. On cross-motions for summary judgment, the trial court found in favor of Bible Pork and entered judgment against Country Mutual for more than $2 million, representing defense costs and accrued interest.

Country Mutual took this appeal.

Equitable Relief

In an opinion by Justice Richard P. Goldenhersh, the 5th District affirmed. He first addressed Country Mutual’s argument that coverage was lacking because the underlying complaint, while alleging “other relief,” did not seek recovery of covered “damages.”

In finding that damages were adequately alleged, Goldenhersh relied in part on B.H. Smith Inc. v. Zurich Insurance Co., 285 Ill.App.3d 536 (1996), where the court, interpreting New York law, held that a plaintiff seeking injunctive relief and “other relief” sufficiently alleged damages for coverage purposes. In Goldenhersh’s view, Illinois law was similar.

In further support, he cited Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90 (1992), which he interpreted as holding that coverage for a suit seeking damages existed whether the plaintiff sought compensatory damages or equitable relief.

He also relied on the fact that the plaintiffs’ attorney stated during a hearing in 2006 that some of the plaintiffs might want damages and others equitable relief, which statement Goldenhersh suggested might constitute a form of admissible “extrinsic evidence.”

Occurrence, Pollution Exclusion

Goldenhersh next took up the issue of whether the underlying complaint, as amended, adequately alleged an “occurrence,” defined as an accident, and whether the “expected or intended” exclusion otherwise applied.

Country Mutual contended that the complaint alleged only potential harm in the future, so that any supposed damage could never qualify as an expected event and that the insured’s subjective intent was irrelevant.

Goldenhersh disagreed, relying in significant part on Erie Insurance Exchange v. Imperial Marble Corp., 2011 IL App (3d) 100380. The court in that case rejected the “occurrence” and “expected or intended” defenses as applied to pollution emissions, finding that, because the insured operated pursuant to an emissions permit, it could not have expected or intended injury to the underlying plaintiffs’ property. He further said that the allegations of waste and other contamination from Bible Pork’s hog facility were “remarkably similar to the facts in Erie,” such as to require that Country Mutual provide a defense.

As to the pollution exclusion in Country Mutual’s policy, although not finding it ambiguous, Goldenhersh observed that a similar exclusion in Erie was found ambiguous. He then turned to American States Insurance Co. v. Koloms, 177 Ill.2d 473 (1997), where the Illinois Supreme Court held that an “absolute” pollution exclusion would be construed to apply only to pollution “in the traditional sense.” Goldenhersh held that the alleged pollution by Bible Pork did not qualify as “traditional,” and that the exclusion here therefore was not applicable.

The court thus affirmed summary judgment against Country Mutual, finding it liable for defense costs.

Justice James R. Moore dissented, arguing that, unlike in the cases relied on by the majority, the underlying plaintiffs here had not alleged that they had yet suffered any property damage or bodily injury.

Key Points

• According to this court, a suit seeking “equitable relief in the form of the declaration of a nuisance and also ‘other relief'” sufficiently alleges “damages” covered by a commercial general liability policy.
• According to this court, allegations that an insured facility may cause pollution are sufficient to give rise to coverage for an “occurrence” and also sufficient to avoid the operation of an “expected or intended” exclusion.
• According to this court, allegations of pollution from a hog farming operation do not involve “traditional” pollution such as to trigger a pollution exclusion.