ABSOLUTE POLLUTION EXCLUSION -
IS IT REALLY ABSOLUTE?

By: Stephen R. Ayres
Cheely, Q'Flaherty & Ayres
19 South LaSalle Street, Suite 1203
Chicago, IL 60603
(888) 327-5629
sayres@lawchicago.net

We were recently hired by a medium-sized Downers Grove business which had
been named in several lawsuits related to pollution and to the Lockformer situationnearby
homeowners and the EPA claiming that their wells had been contaminated by
pollution migrating from my client's facility. My client had been told by its insurer that
the loss was not covered by virtue of an "absolute pollution exclusion" contained in its
business liability policy. The client was in the unenviable position of potentially shelling
out $350 per hour to have its own attorneys defend these lawsuits.
The policy did, in fact, contain an "absolute pollution exclusion" which provided:

POLLUTION EXCLUSION

It is agreed that that exclusion relating to the
discharge, dispersal, release or escape of smoke, vapors,
soot, fumes, acids, alkalis, toxic chemicals, liquids or gases,
waste materials or other irritants, contaminants or pollutants
is replaced by the following:

(1) to bodily injury or property damage arising out of the
actual, alleged or threatened discharge, dispersal,
release or escape of pollutants:

a) at or from premises owned, rented or occupied by
the Named Insured;

b) at or from any site or location used by or for the
Named Insured or others for the handling, storage,
disposal, processing or treatment of waste;

c) which are at any time transported, handled,
stored, treated, disposed of, or processed as
waste by or for the Named Insured or any person
or organization for whom the Named Insured may
be legally responsible; or

d) at or from any site or location on which the Named
Insured or any contractors or subcontractors
working directly or indirectly on behalf of the
Named Insured are performing operations:

i. if the pollutants are brought on or to the site
or location in connection with such
operations; orii. if the operations are to test for, monitor,
clean up, remove, contain, treat, detoxify or
neutralize the pollutants.

(2) to any loss, cost or expense arising out of any
governmental direction or request that the Named
Insured test for, monitor, clean up, remove, contain, treat,
detoxify or neutralize pollutants.
"Pollutants" means any solid, liquid, gaseous or thermal
irritant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste. "Waste" includes
materials to be recycled, reconditioned or reclaimed.

The insurer had denied coverage based on this seemingly airtight pollution
exclusion, which purports to completely exclude bodily injury or property damage to the
neighbor's property ariSing out of the migration of pollutants form my client's business,
through the groundwater, into their wells. A careful reading of the policy, however,
showed that there was a separate coverage section for "Advertising Injury and Personal
Injury," and that the policy defined "personal injury" as "wrongful entry or eviction or
other invasion of the right of private occupancy .... "

This "Advertising and Personal Injury" coverage, which was separate and apart
from the "Bodily Injury and Property Damage" section of the policy, did not contain the
"Absolute Pollution Exclusion" on which the insurer had relied. This omission allowed
us to take advantage of a general coverage rule, that ambiguous exclusions must be
strictly construed against the insurer. Moreover, Illinois law is unique in that it clearly
spells out that the contamination of other landowner's property constitutes "Personal
Injury," and that a pollution exclusion contained in the "Bodily Injury and Property
Damage" section of the policy does not apply to restrict the separate "Personal Injury"
coverage. See, Pipefitters Welfare Educational Fund v. Westchester Fire Insurance,
976 F3d 1037 (ih Cir. 1993); Millers Mutual Insurance Association of Illinois, 282 III App
3d 129 (2nd Dist. 1996).
The End Result: we were able to persuade the insurer to defend the lawsuits
against my client, saving him thousands of dollars in legal fees.
Whatever the nature of your business, if you suffer a loss or a claim is made
against you, we are in the business of saving you money by forcing your insurers to pay
for what they have agreed to insure. You paid the premiums; let us help you in
obtaining the benefits of your insurance policies to the extent possible.