Defining Traditional Environmental Pollution: The Role of Regulatory Permits in Illinois CGL Policy Exclusions

Introduction

Griffith Foods International Inc. and Sterigenics U.S. (collectively “Griffith”) operated a medical sterilization facility in Willowbrook, Illinois, from 1984 to 2019. Ethylene oxide (EtO) emissions from that facility were later linked to elevated cancer rates in the community. Over 800 plaintiffs sued Griffith and its successor for bodily injuries allegedly caused by those emissions. Griffith tendered its defense to National Union Fire Insurance Company under two consecutive commercial general liability (CGL) policies (September 30, 1983 – September 30, 1985). National Union denied coverage, invoking the standard-form pollution exclusion. The district court rejected that defense refusal, relying on the fact that Griffith’s discharges were permitted by the Illinois Environmental Protection Agency (IEPA). On appeal, the Seventh Circuit weighed the scope of Illinois’s “traditional environmental pollution” exclusion under American States Ins. Co. v. Koloms (1997), confronted conflicting intermediate authorities, and opted to certify a determinative question to the Illinois Supreme Court.

Summary of the Judgment

The Seventh Circuit reaffirmed Illinois’s broad duty to defend: insurers must defend even potentially covered claims.
Griffith’s underlying “Master Complaint” alleged bodily injuries from decades of EtO emissions; no private-nuisance theory was arguably raised.
The policies’ pollution exclusion bars claims “arising out of the discharge… of… toxic chemicals… into the atmosphere,” unless “sudden and accidental.”
Because the Master Complaint alleged intentional or repeated emissions over 35 years, the “sudden and accidental” exception did not apply.
Two conflicting post-Koloms precedents emerged:
- Erie Ins. Exchange v. Imperial Marble (2011): held a permit-authorized release arguably ambiguous and required a duty to defend.
- Scottsdale Indem. v. Village of Crestwood (2012, 7th Cir.): found no coverage for regulated discharges below permitted levels.
Given that tension and the importance of the question, the Seventh Circuit certified the following question to the Illinois Supreme Court:
In light of American States Ins. Co. v. Koloms, what 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?

Analysis

Precedents Cited

American States Ins. Co. v. Koloms, 687 N.E.2d 72 (Ill. 1997): Interpreted the standard CGL pollution exclusion to apply only to “traditional environmental pollution” and avoid absurd results of overbreadth.
Morton Int’l, Inc. v. General Accident Ins. Co., 629 A.2d 831 (N.J. 1993): Traced the insurance industry’s adoption of the pollution exclusion after high-profile disasters.
Erie Ins. Exchange v. Imperial Marble Corp., 957 N.E.2d 1214 (Ill. App. 2011): Found ambiguity as to whether permitted industrial emissions constitute “traditional pollution” and required a defense.
Scottsdale Indemnity Co. v. Village of Crestwood, 673 F.3d 715 (7th Cir. 2012): Held that even permitted discharges below regulatory limits fall within the exclusion when they cause injury.
Outboard Marine Corp. v. Liberty Mutual, 607 N.E.2d 1204 (Ill. 1992): Defined the “sudden and accidental” exception as limited to unintended, unexpected releases.
Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir. 1992): Illustrated the absurdity of overbroad exclusions (e.g., pool chlorine incidents).

Legal Reasoning

The Seventh Circuit’s approach follows the Illinois Supreme Court’s two-step coverage analysis:

Identify whether the Master Complaint’s allegations potentially fall within the policy’s coverage grant (“bodily injury”).
Determine if any exclusion (the pollution exclusion) unambiguously bars coverage.

• Private Nuisance (Personal Injury): Although a CGL policy may cover a private nuisance claim as a “wrongful invasion of occupancy,” the Master Complaint did not allege any substantial invasion of use and enjoyment of property. The emissions were invisible and unknowable, so no nuisance theory arguably arose.

• Pollution Exclusion (Bodily Injury): The standard pollution exclusion precludes coverage for injuries “arising out of… discharge… of toxic chemicals into the atmosphere,” subject to a narrow “sudden and accidental” exception. Willowbrook residents alleged decades of deliberate EtO emissions causing chronic and latent injuries—squarely within “traditional environmental pollution” as defined by Koloms.

• Regulatory Permits: Post-Koloms decisions diverge on whether a permit’s issuance or emission thresholds alter the scope of “traditional pollution.” Imperial Marble deemed the issue ambiguous, while Scottsdale held that regulatory compliance does not negate exclusion.

Potential Impact

Clarifying Coverage: Illinois insurers and insureds await definitive guidance on whether permit-authorized discharges fall outside the pollution exclusion.
Policy Drafting: Carriers may revise or renegotiate pollution exclusions and exceptions depending on the Illinois Supreme Court’s answer.
Environmental Litigation: Insured entities with EPA-permitted emissions will know whether they can look to CGL policies for defense costs and indemnity.
Regulatory Interaction: The decision will define the interplay between environmental permitting regimes and private insurance obligations.

Complex Concepts Simplified

Commercial General Liability (CGL) Policy: A standard insurance form covering third-party claims of bodily injury or property damage.
Duty to Defend: The insurer’s obligation to pay defense costs if a claim potentially falls within coverage.
Pollution Exclusion: A common CGL provision excluding coverage for injuries “arising out of” pollutants released into air, water, or soil.
“Traditional Environmental Pollution”: A judicial construct limiting the exclusion to industrial-scale or long-term toxic releases that generated mass tort exposure.
“Sudden and Accidental” Exception: A carve-out in many pollution exclusions for unexpected or unintended discharges.
Certification of Questions: Under Illinois Supreme Court Rule 20, a federal court may ask the state’s highest court to decide an unsettled point of state law.

Conclusion

The Seventh Circuit’s decision in Griffith Foods v. National Union certifies a pivotal question: Does regulatory authorization of emissions narrow or negate a CGL policy’s pollution exclusion under Illinois law? In reserving this issue for the Illinois Supreme Court, the Seventh Circuit acknowledges conflicting intermediate precedents and the broader implications for insurance coverage in environmental mass torts. The forthcoming decision will shape future defense obligations, influence policy drafting, and clarify the boundary between regulated industrial activities and “traditional environmental pollution” exclusions in commercial liability policies.