This dispute arises from mass tort litigation involving over 800 plaintiffs who alleged that Griffith Foods International and later Sterigenics U.S. caused cancer and other serious illnesses in the Willowbrook, Illinois community through 35 years of ethylene oxide emissions from a sterilization plant. Griffith and Sterigenics sought defense and indemnity from National Union Fire Insurance Company under two commercial general liability policies issued in 1983 and 1984. National Union denied coverage, relying on the standard pollution exclusion clause which bars coverage for bodily injury arising from the discharge of pollutants unless the discharge was sudden and accidental. The district court ruled in favor of the insureds, determining that the pollution exclusion did not apply because the emissions were authorized by a permit issued by the Illinois Environmental Protection Agency. National Union appealed, challenging the scope of the duty to defend and the application of the pollution exclusion.
The Seventh Circuit began by addressing National Union's argument that the district court erred in its duty to defend ruling by failing to account for the mismatch between the 35-year period of alleged injuries and the two-year policy period. The court held that National Union waived this argument by failing to clearly articulate it in the district court proceedings, noting that a footnote in a brief was insufficient to preserve the issue. Turning to the core coverage question, the court analyzed the standard pollution exclusion under Illinois law, guided by the Illinois Supreme Court's decision in American States Insurance Co. v. Koloms. In Koloms, the state supreme court interpreted the exclusion to apply only to traditional environmental pollution, such as industrial emissions, while excluding commonplace hazards like carbon monoxide from a residential furnace. The Seventh Circuit noted that its own reading of Koloms suggested the pollution exclusion should apply to the ethylene oxide emissions, which were gradual, repeated, and caused significant public health harm. However, the court identified a conflict in Illinois law. An intermediate appellate court decision, Erie Insurance Exchange v. Imperial Marble Corp., suggested that emissions authorized by a regulatory permit might not constitute traditional environmental pollution, effectively rendering the exclusion inapplicable. This conflicted with the Seventh Circuit's own prior decision in Scottsdale Indemnity Co. v. Village of Crestwood, which held that permitted levels of contamination did not preclude the application of the pollution exclusion. Citing the principle that federal courts should certify questions of state law when there is genuine uncertainty and no controlling precedent from the state's highest court, the Seventh Circuit concluded that the Illinois Supreme Court must resolve whether a regulatory permit authorizing emissions affects the application of the pollution exclusion. The court certified the question to determine if permitted emissions are excluded from coverage under the Koloms framework.
The decision reverses the district court's ruling that National Union had a duty to defend and remands the case to the district court. The parties must now await the Illinois Supreme Court's interpretation of whether regulatory permits immunize industrial emissions from the pollution exclusion. This certification process will pause the federal litigation and potentially determine whether the insureds face over $150 million in defense costs or are covered by their insurance policies. The outcome will likely impact the broader Illinois insurance market and how commercial general liability policies are interpreted regarding permitted environmental discharges.
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