7th Circuit Punts on Applicability of Policies’ Pollution Exclusion

By Don R. Sampen, published, Chicago Daily Law Bulletin, May 6, 2025

The 7th U.S. Circuit Court of Appeals recently certified to the Illinois Supreme Court the issue of whether the emission of hazardous gaseous materials into the atmosphere in levels permitted by the Illinois Environmental Protection Agency constituted “traditional environmental pollution” for purposes of potentially applying an insurance policy’s pollution exclusion.

The case is Griffith Foods International Inc. v. National Union Fire Insurance Co. of Pittsburgh, 2025 U.S. App. Lexis 8527 (7th Cir., April 11). One insured, Griffith, was represented by Perkins Coie LLP of Seattle, and the other insured, Sterigenics U.S. LLC, was represented by Latham & Watkins LLP of Chicago. Gibson, Dunn & Crutcher LLP of Washington, D.C., represented the insurer, National Union.

Some 800 people filed individual lawsuits claiming cancer and other injuries resulting from the emission ethylene oxide from a facility in Willowbrook owned first by Griffith Foods and then by Sterigenics. Ethylene oxide was a chemical used in medical supply sterilization for many years.

The Willowbrook facility used and emitted the chemical pursuant to a permit issued by the Illinois Environmental Protection Agency since 1984. In 2018, the U.S. Department of Health and Human Services released a report showing that Willowbrook residents were experiencing disproportionate rates of cancer. Thereafter, in 2019, the IEPA imposed a specific limit on the plant’s emissions of the chemical, following which the plant shut down.

The state court consolidated the 800-plus claims for pretrial purposes, resulting in the plaintiffs producing a single “Master Complaint.” That complaint encompassed some 35 years of injuries taking place between 1984 and 2019. The National Union commercial general liability policies issued to Griffith provided coverage for just two years, from 1983 to 1985.

Griffith thus tendered to National Union, which refused to defend relying on the policies’ pollution exclusion. That exclusion barred coverage for bodily injury arising out of the discharge of fumes, chemicals and other waste materials into the atmosphere, with the exception of waste materials whose release was sudden and accidental.

Both Griffith and Sterigenics then filed separate suits in federal court seeking a declaration that National Union had a duty to defend them against the state court tort litigation. Upon cross-motions for judgment on the pleadings, the district court found the exclusion inapplicable, and National Union brought this appeal.

Personal injury

In an opinion by Judge Michael Y. Scudder Jr., the 7th Circuit found the applicability of the pollution exclusion unclear under Illinois law and certified the issue to the Illinois Supreme Court.

As a preliminary matter, Scudder addressed whether the policies’ “personal injury” coverage had any bearing on potential coverage. The policies defined personal injury as among other things, as an invasion of the right of privacy. Griffith and Sterigenics contended that a private nuisance claim fell within that definition.

Even if it did, wrote Scudder, the Master Complaint contained no allegations that the chemical emissions affected the way the plaintiffs enjoyed their property. This was so particularly in light of the description of the emissions as odorless and ‘unknowingly” inhaled.

Pollution Exclusion

He then took up the question of bodily injury and the pollution exclusion. Griffith and Sterigenics sought to avoid the issue by arguing that, by the exclusion’s own terms, “sudden and accidental” emissions were excepted. Scudder, however, observed that the Master Complaint repeatedly alleged that the emissions were “intentional” and therefore not accidental.

Citing American States Insurance Co. v. Koloms, 177 Ill. 2d 473 (1997), Griffith and Sterigenics further argued that the exclusion should not apply because ethylene oxide did not constitute “traditional environmental pollution.” In Koloms, the Illinois Supreme Court, taking into account how some courts had given an overly broad interpretation to the pollution exclusion, purported to interpret the true meaning of the exclusion by limiting its application to “traditional environmental pollution.”

Scudder reasoned that, if Koloms were the only relevant authority on point, the chemical emissions here fell well within the kind of environmental disasters that gave rise to the pollution exclusion in the first place, and that the exclusion therefore would apply.

Griffith and Sterigenics, however, asked the court to consider one further authority: Erie Insurance Exchange v. Imperial Marble Corp., 2011 IL App (3d) 100380. In that case, the Illinois Appellate Court held that hazardous materials emitted pursuant to an IEPA permit gave rise to an ambiguity as to whether the emission could be regarded as “traditional environmental pollution.” In light of the ambiguity, the court found the insurer had a duty to defend.

Such a holding, Scudder wrote, could be read to suggest that legally authorized emissions may not constitute the type of traditional environmental pollution that Koloms envisioned. He acknowledged that, while the Illinois Supreme Court had not addressed the issue, the appellate court’s determination could be used as a guide for what the Supreme Court would decide. Nonetheless, he regarded the issue as having significant importance both for Illinois insurance law and the broader insurance industry.

In addition, the stakes were particularly high for the parties involved in this litigation — between $150 million in defense costs and zero. Scudder therefore concluded that the most prudent course was to certify the issue to the Illinois Supreme Court. The issue certified was: “[W]hat relevance, if any, does a permit or regulation authorizing emissions … play in assessing the application of a pollution exclusion within a standard-form commercial general liability policy?” The opinion concluded with formulation of the certified issue.

Key Points

• Whether regulatory authorization for the emission of a pollutant renders the pollutant a nontraditional form of pollution — such as to avoid exclusion under a standard-form pollution exclusion — is an issue that has yet to be decided in Illinois.
  
• Depending on the importance of an issue, the 7th Circuit may certify an issue to the Illinois Supreme Court notwithstanding state appellate court guidance on the matter.