Organic Compound Maker Denied Coverage Based on Pollution Exclusion

Pekin Ins. Co. v. Pharmasyn, Inc. (Ill. Ct. App. Oct. 19, 2011)

An Illinois appellate court ruled last week that a policyaEUR(TM)s pollution exclusion barred coverage to an insured organic compound maker for several personal injury lawsuits filed by individuals who either worked for or in the same building as the insured.

Several individuals filed suit against the insured, alleging that they were each occupants of a commercial building in which the insured, a producer of organic compounds, was located. The underlying complaint alleged that the plaintiffs were injured when the insured negligently allowed aEURoedangerous and toxic substances, including, but not limited to, isocyanate chemicalsaEUR? to be released aEURoefrom open containers at the property, creating toxic fumes and seepage of hazardous material into the common areas, the environment, and into the premises occupied by the Plaintiffs.aEUR?

The insured tendered its defense and indemnity to its commercial general liability insurer, which agreed to defend pursuant to a reservation of rights. The insurer maintained, however, that coverage was excluded because the claims alleged aEURoebodily injuryaEUR? caused by pollution.

In the ensuing declaratory judgment action, the lower court agreed with the insureraEUR(TM)s position that the pollution exclusion barred coverage for the claims. The appellate court affirmed, finding that the policyaEUR(TM)s exclusion for injuries resulting from the dispersion of a pollutant aEURoe[a]t or from any premises, site or location which is or was at any time owned or occupied by or rented or loaned to, any insuredaEUR? applied. The court held that the policy language aEURoeat or from the premisesaEUR? was not ambiguous and that the exclusion was sufficiently broad to bar coverage for pollution aEURoeataEUR? the location of the insuredaEUR(TM)s business or pollution leaking aEURoefromaEUR? the location of the insuredaEUR(TM)s business. As a result, the court held that the insurer was not obligated to defend or indemnify the insured against the underlying personal injury actions.

For a copy of the decision, click here Carrie Appler and Rick Cohen

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