Illinois Association of Defense Trial Counsel
P.O. Box 7288, Springfield, IL 62791
IDC Quarterly Vol. 10, No. 3 (10.3.6)
FEATURE ARTICLE
Application of the “Absolute” Pollution Exclusion to Indoor
Exposures Under Illinois Law
By: Katherine E. Tammaro
Tressler, Soderstrom, Maloney & Priess, Chicago
I. Introduction
When the 1973 ISO pollution exclusion was introduced, it operated to exclude coverage for “sudden and accidental” or
“temporal” pollution events, which some courts across the country had found to be covered under the ISO 1966 “occurrence”
Comprehensive General Liability (later retitled the “Commercial General Liability”) policy (“CGL”). Thus the moniker
“sudden and accidental” or “qualified” pollution exclusion has come to be associated with this 1973 ISO version. The pollution
exclusion contained in the 1986 form was substantially revised from the 1973 version to be much broader. In fact, in 1984, ISO
had introduced an endorsement which was approved for use in virtually every state and was very similar to the finalized 1986
exclusion. This exclusion came to be known as the “absolute” pollution exclusion. Gibson & McLendon, Commercial Liability
Insurance, Volume I, Section V, V.D.20 (7th Reprint January 1999).
The 1986 ISO “absolute” pollution exclusion provides:
This insurance does not apply to:
f. (1) “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 you own, rent or occupy;
(b) At or from any site or location used by you or for you 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 you or any
person or organization for whom you may be legally responsible; or
(d) At or from any site or location on which you or any contractors or subcontractors working directly or indirectly on
your behalf are performing operations:
(i) If the pollutants are brought on or to the site or location in connection with such operations; or
(ii) If the operations are to test for, monitor, clean up, remove, contain, detoxify, or neutralize the pollutants.
(2) Any loss, cost, or expense arising out of any governmental direction or request that you 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.
ISO Form CG-00-01-11-85. An amendatory endorsement to the 1986 edition of the “absolute” pollution exclusion added what
is known as the “hostile fire exception” to the exclusion (ISO Form CG-00-41). The 1988 revision of the “absolute” pollution
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Illinois Association of Defense Trial Counsel
P.O. Box 7288, Springfield, IL 62791
IDC Quarterly Vol. 10, No. 3 (10.3.6)
exclusion changed the exclusion in a number of ways. Notably, the “hostile fire exception” was added to the body of the
exclusion, and the cleanup cost portion of the exclusion was expanded to be broader.
ISO also introduced what has been referred to as a “total” pollution exclusion endorsement in 1988. Generally, a “total”
pollution exclusion can be characterized as any post - “sudden and accidental” pollution exclusion which does not limit the
exclusion to certain enumerated circumstances, and instead precludes coverage for any and all exposure to pollutants.
The 1988 ISO “total” pollution exclusion endorsement provides:
Exclusion f. under paragraph 2., Exclusions of Section I - Coverage A - Bodily Injury And Property Damage Liability
is replaced by the following:
This insurance does not apply to:
f. Pollution
(1) “Bodily injury” or “property damage” which would have not occurred in whole or part but for the actual, alleged or
threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.
(2) Any loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean
up, remove, contain, treat, detoxify or neutralize or in any way respond to, or assess the effects of “pollutants”; or
(b) Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning
up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the
effects of “pollutants.”
ISO Form CG-21-49.
These exclusionary provisions provide the framework for the numerous decisions from Illinois and around the country,
which have applied them in varying contexts to cases involving indoor exposures. Specific questions often considered are: What
is the nature of the substance at issue? What are the physical circumstances of the exposure? How was the insured involved in
the exposure? What is the nature of the insured’s business? What were the insured’s expectations and/or what would be the
expectations of a reasonable insured?
Courts from Illinois and around the country generally have no problems finding that the “absolute” and “total” pollution
exclusions apply to bar coverage for “bodily injury” and “property damage” under circumstances which involve leaking
underground storage tanks, claims related to leaching from a municipal landfill, or disposal of toxic waste on property, etc. See,
e.g., Kim v. State Farm Fire and Casualty Co., 312 Ill. App. 3d 770, 245 Ill. Dec. 448,728 N.E.2d 530 (1st Dist. 2000)
(“absolute” pollution exclusion bars coverage for claims made by landlord against dry-cleaner lessee when dry-cleaning
machine malfunctioned and released tetrachloroethane or “perc” onto the floor and into the soil underneath the leased premises
resulting in environmental remediation costs); Millers Mutual Insurance Association of Illinois v. Graham Oil Company, 282
Ill. App. 3d 129, 218 Ill. Dec. 60, 668 N.E.2d 223 (2nd Dist. 1996), appeal denied 168 Ill. 2d 598 (1996) (“absolute” pollution
exclusion would apply to bar coverage for “property damage” arising out of an escape of gasoline from the insured’s
underground storage tanks, but does not apply to claims for trespass and nuisance under the “personal injury” portion of the
policy). However, Illinois courts have declined to apply these exclusions to indoor exposures in most circumstances. See,
American States Insurance Co. v. Koloms, 177 Ill. 2d 473, 227 Ill. Dec. 149, 687 N.E.2d 72 (1997). No cases construing Illinois
law have yet considered the application of the “total” pollution exclusion.
In Koloms, a furnace in a two-story commercial building located in Lincolnshire, Illinois, began to emit carbon monoxide and
other noxious fumes. Several employees of one of the building’s tenants inhaled the fumes and became ill. Six of these
employees eventually filed a lawsuit against the Koloms, the beneficial owners of the property. In the complaints, the
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Illinois Association of Defense Trial Counsel
P.O. Box 7288, Springfield, IL 62791
IDC Quarterly Vol. 10, No. 3 (10.3.6)
employees alleged that the Koloms had negligently maintained the furnace and had failed to keep it in good working condition.
They also claimed that the Koloms had not properly inspected some repair work which had been performed on the furnace.
Each employee sought damages as compensation for his or her injuries.
The Illinois Supreme Court found that the “absolute” pollution exclusion did not apply to coverage for the employees’
injuries. See also, Insurance Company of Illinois v. Stringfield, 292 Ill. App. 3d 471, 226 Ill. Dec. 525, 685 N.E.2d 980 (1st
Dist. 1997) (appellate court found that “absolute” pollution exclusion did not apply to bar coverage for personal injuries arising
out of a minor’s ingestion of lead paint chips.) But see, Economy Preferred Insurance Company v. Grandadam, 275 Ill. App. 3d
866, 212 Ill. Dec. 190, 656 N.E.2d 787 (3rd Dist. 1995) (appellate court found that “absolute” pollution exclusion in
homeowners and personal liability insurance policy precluded coverage for alleged damage to a home and injuries to its
occupants caused by mercury being spilled in the home.) (Neither the Illinois Supreme Court in Koloms nor the First District
Appellate Court in Stringfield overruled or distinguished the Grandadam case.)
II. Is the Exclusion Ambiguous?
The Illinois Supreme Court in Koloms, 177 Ill. 2d at 485, 227 Ill. Dec. at 155, 687 N.E.2d at 78, recognized that courts across
the country have reached vastly different conclusions in construing the “absolute” pollution exclusion, even with respect to the
fairly limited context of carbon monoxide poisoning. The Koloms court pinpointed the source of the disagreement to be the fact
that the language of the clause is “quite specific” on its face, and yet a literal interpretation of that language results in an
application of the clause which is “quite broad.” Id. First, the court noted that “those courts wishing to focus exclusively on the
bare language of the exclusion will have no difficulty in concluding that it is also unambiguous.” Koloms, 177 Ill. 2d at 487,
227 Ill. Dec. at 156, 687 N.E.2d at 79. But then, the court observed that “[n]ot all courts, however, find the bare language of the
exclusion dispositive. A number of courts, while acknowledging the lack of any facial ambiguity, have nevertheless questioned
whether the breadth of the language renders application of the exclusion uncertain, if not absurd.” 177 Ill. 2d at 485, 227 Ill.
Dec. at 155, 687 N.E.2d at 78.
The court found that a purely literal interpretation of the disputed language, without regard to the facts alleged in the
underlying complaints, fails to adequately resolve the issue presented to this Court. Like many courts, we are troubled by
what we perceive to be an over breadth in the language of the exclusion, as well as the manifestation of an ambiguity
which results when the exclusion is applied to cases which have nothing to do with “pollution” in the conventional, or
ordinary, sense of the word.
Id. See also, Stringfield, 292 Ill. App. 3d at 476, 685 N.E.2d at 985. (“We therefore conclude that the words in the policy here
are susceptible to more than one reasonable interpretation; thus, they are ambiguous and will be construed in favor of the
insured.”)
III. What is a Pollutant?
The standard “absolute” and “total” pollution exclusion defines “pollutant” as: “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 Seventh Circuit case of Pipefitters Welfare Education Fund v. Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir. 1992)
(applying Missouri and Illinois law), is perhaps the most cited case in support for the proposition that this definition of
“pollutants” is overreaching. Although the Seventh Circuit ultimately determined that the substance at issue in that case,
polychlorinated biphenyls (“PCBs”) that were discharged onto a third party’s land did constitute a pollutant, the court further
observed that the terms “irritant” and “contaminant” could be virtually boundless when viewed in isolation for there is virtually
no substance or chemical in existence that would not irritate or damage some person or property:
Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope and lead to
some absurd results. To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries
suffered by one who slips and falls on the spilled contents of a bottle of Drano, and for bodily injuries caused by an
allergic reaction to chlorine in a public pool. Although Drano and chlorine are both irritants or contaminants that cause,
under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as
pollution.
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IDC Quarterly Vol. 10, No. 3 (10.3.6)
Pipefitters, 976 F.2d at 1043 (citations omitted). Although Pipefitters was not decided in the indoor exposure context, it is
commonly relied upon for the proposition that certain substances emitted indoors are not “pollutants.”
In accordance with this position, Illinois courts have found that “irritants” and “contaminants” released indoors do not
constitute “pollutants” under the policies. An Illinois appellate court in Stringfield, 292 Ill. App. 3d at 475, 226 Ill. Dec. at 538,
685 N.E.2d at 983, concluded that:
The plain, ordinary and popular meaning of ‘pollutant’ leads to the conclusion that a reasonable interpretation is that it
does not include the lead that is contained in lead-based paint, nor does it include the lead-based paint that was present on
the premises. A common understanding of a pollutant is a substance that ‘pollutes’ or renders impure a previously
unpolluted object, as when chemical wastes leach into a clean water supply. Here, the lead did not pollute the paint; it was
purposely incorporated into the paint from the start. The paint was intentionally applied to the premises.
But see Grandadam, supra (the parties agreed that mercury was a pollutant). The Koloms case contained no discussion of
whether or not carbon monoxide, the substance at issue in that case, constituted a “pollutant.” However, courts around the
country have generally found carbon monoxide to be a “pollutant” under the policy’s definition of “pollutant.” See, e.g.,
Longaberger v. United States Fidelity & Guaranty Co., 201 F.3d 441 (6th Cir. 1999) (Ohio law) (“absolute” pollution exclusion
barred coverage for exposure to carbon monoxide fumes released from a defective furnace on residential property);
Assicurazioni Generali, S.p.A. v. Neil, 160 F.3d 997 (4th Cir. 1998) (Maryland law) (“absolute” pollution exclusion applies to
injuries caused by carbon monoxide poisoning).
IV. Was There a Discharge,
Dispersal, Release or Escape?
Some courts have declined to apply the “absolute” pollution exclusion to incidents that “involve injuries resulting from
everyday activities gone slightly, but not surprisingly, awry.” Pipefitters, 976 F.2d at 1044. The Pipefitters court opined that
“[t]here is nothing unusual about paint peeling off a wall, asbestos particles escaping during installation, or paint drifting off the
mark during a spray painting job.” Id.
Throughout the country, injured claimants and insured defendants have conjured up the history of the “sudden and
accidental” pollution exclusion, and have attempted to expand the reported historical purpose of the 1973 exclusion to the
current form of the “absolute” and “total” pollution exclusions, in an attempt to show that these current exclusions were
intended to apply in industrial pollution only, and that the terms “discharge,” “dispersal,” “release,” and “escape” are
environmental terms of art. In Illinois, the state supreme court has adopted this approach in Koloms, 177 Ill. 2nd at 489-494,
227 Ill. Dec. at 156-159, 687 N.E.2d at 79-82, exploring the history of the pollution exclusions and concluding:
Given the historical background of the absolute pollution exclusion and the drafters’ continued use of environmental terms
of art, we hold that the exclusion only applies to those injuries caused by traditional environmental pollution. The
accidental release of carbon monoxide in this case, due to a broken furnace, does not constitute the type of environmental
pollution contemplated by the clause.
The Koloms court did not agree that the changes made from the “sudden and accidental” pollution exclusion to the
“absolute” pollution exclusions, most notably, (i) the lack of the exception for the “sudden and accidental” release of pollution,
and (ii) the elimination of the requirement that the pollution be discharged “into or upon land, the atmosphere or any
watercourse or body of water,” operated to expand the “absolute” pollution exclusion beyond the context of traditional
environmental contamination. Id. at 494, 227 Ill. Dec. at 159, 687 N.E.2d at 82. But see, Grandadam, 275 Ill. App. 3d at 872873, 212 Ill. Dec. at 194, 656 N.E.2d at 791, where the court observed:
In the case before us a container of mercury was brought into a house and spilled. In such a situation we have no doubt
about the applicability of the pollution exclusion clause. However, we might view this case differently if mercury was
released from a broken household thermostat or thermometer. It is possible that in such a situation mercury would not be
considered a pollutant. However, under the peculiar facts of this case, we find that the pollution exclusion applies and the
[insurer] does not have a duty to defend in the underlying suit.
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Illinois Association of Defense Trial Counsel
P.O. Box 7288, Springfield, IL 62791
IDC Quarterly Vol. 10, No. 3 (10.3.6)
V. Products Claims
An insured manufacturer may be concerned about two distinct types of potential products liability exposure involving
pollution that may trigger a claim for “bodily injury” or “property damage.” The first is when the insured is the manufacturer of
a product which itself may be considered a “pollutant,” such as asbestos, lead-based paint, pesticides or chemicals used for
sealants of floors or carpet cleaners. The second is when the insured is the manufacturer of a machine that may malfunction and
cause the release of “pollutants” such as a furnace, industrial oven, carpet cleaner or Zamboni.
A close reading of the “absolute” pollution exclusion indicates that there is no explicit exception to the exclusion for
products liability and completed operations claims. However, a review of each subsection of the exclusionary wording reveals
that these types of exposures do not generally fit into this provision. For example, where a product which has been sold and
shipped from the manufacturer then malfunctions to emit toxic fumes (where the insured is the manufacturer) resulting in
“bodily injury” or “property damage” to a third party, the emission cannot qualify a discharge (a) at or from premises owned by
the insured; (b) at or from any site used by the insured for storage or disposal; (c) during transport of waste; (d) at or from any
site where the insured is performing operations. If, however, the government requires the insured (not the owner of the facility
where the emission took place, or the user or operator of the product) to clean up the emission of pollutants from the product,
then the claim may be excluded by the “absolute” pollution exclusion.
The “total” pollution exclusion, when added to a policy by endorsement, or originally incorporated into a policy, completely
precludes any pollution liability, including products liability and completed operations claims, since it is not limited to the
enumerated scenarios listed in the “absolute” pollution exclusion.
No Illinois court has yet addressed the issue of whether products claims of the types described would be excluded by the
“absolute” and “total” pollution exclusions; however, other courts from around the country have. The distinction in applying
these two types of pollution exclusions was recognized by the Third Circuit in Reliance Insurance Co. v. Moessner, 121 F.3d
895 (3rd Cir. 1997) (finding that the “total” pollution exclusion unambiguously applies to bar coverage for products liability
claims but remanding for a determination as to whether the insured had reasonable expectations as to coverage).
In Moessner, the insured, Vapor Energy Service and Engineering Corporation (“VE”) manufactured and sold a direct-fired
steam generator (vaporator) to Faddis Concrete Products, the claimant’s employer. The claimant alleged that the vaporator
malfunctioned, emitted carbon monoxide, and caused the claimant “bodily injury.” The claimant filed a lawsuit against the
insured-manufacturer, and was substituted for the insured in the coverage action when the insured went bankrupt.
At issue was a renewal policy issued by Reliance to the insured-manufacturer which, for the first time, contained a “total”
pollution exclusion. The previous policy issued by Reliance contained an “absolute” pollution exclusion. The court observed
that the “absolute” pollution exclusion in the previous policy which precluded coverage for pollution exposure in “certain
enumerated circumstances” would not have barred coverage for claims similar to the underlying claims, and the court noted that
the insurer did not deny that there would have been coverage under the previous policy for the claim. Moessner, 121 F.3d at
899.
The claimant argued that the renewal policy was “ambiguous as a whole” because the structure of the policy implied that
coverage under the products-completed operations clause was separate from the coverage provided under Coverage A of the
policy, and that the “total” pollution exclusion did not apply to the products-completed operations clause. The court disagreed
with this position, finding that coverage under the products-completed operations hazard was afforded by “bodily injury” and
“property damage” coverage under Coverage A, to which the total pollution exclusion applies. Moessner, 121 F.3d at 903 n. 6.
See also, Bituminous Casualty Co. v. St. Clair Lime Co., 69 F.3d 547 (Table), 1995 WL 632292 at **5 (10th Cir. 1995)
(finding that earlier version of the pollution exclusion was limited to work in progress, but that the “total” pollution exclusion
could be applied to the products liability or completed operations hazards); Park-Ohio Industries, Inc. v. Home Indemnity Co.,
975 F.2d 1215, 1223 (6th Cir. 1992) (rejecting insured’s argument that liability asserted on the basis of “selling and
manufacturing a defective product” is not precluded from coverage by a “total” pollution exclusion).
VI. Contractors - Is Your Work Complete?
As with a product claim, the “absolute” pollution exclusion should only apply to pollution claims for completed operations in
limited circumstances, per the enumerated
subsections of the exclusion. However, per subsection f.1.d. of the exclusion, which excludes coverage for pollutants which are
discharged, dispersed, released or escaped:
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Illinois Association of Defense Trial Counsel
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IDC Quarterly Vol. 10, No. 3 (10.3.6)
(d) At or from any site or location on which you or any contractors or subcontractors working directly or indirectly on
your behalf are performing operations:
(i) If the pollutants are brought on or to the site or location in connection with such operations; or
(ii) If the operations are to test for, monitor, clean up, remove, contain, detoxify, or neutralize the pollutants,
The exclusion precludes coverage for exposures caused by work in progress or when the insured is “performing operations.”
The “total” pollution exclusion excludes coverage for pollution incidents arising from both work in progress and completed
operations. See e.g., Bituminous Casualty Co. v. St. Clair Lime Co., 69 F.3d 547 (Table), 1995 WL 632292 at **5 (10th Cir.
1995) (finding that earlier version of the pollution exclusion was limited to work in progress, but that the “total” pollution
exclusion could be applied to the products liability or completed operations hazards).
No Illinois court has yet addressed the issue of whether completed operations claims would be excluded by the “absolute”
and “total” pollution exclusions; however, other courts from around the country have faced this situation. A decision will often
turn on whether the court determines the operations at issue to be “complete” or not.
In Technical Coating Applicators, Inc. v. United States Fidelity and Guaranty Co., 157 F.3d 843 (11th Cir. 1998) (Florida
law), the insured was employed by a school district to repair the roof of a school. As part of the repair processes, the insured
applied polyurethane foam and several layers of elastomeric protective coatings to the roof of the school. Several months after
the insured completed the repair work, school employees and students began reporting respiratory problems, and filed suit
against the insured, alleging that the insured negligently performed the repairs and that exposure to the vapors from the
materials used caused the problems.
On appeal, the insured roofer raised the argument that the “absolute” pollution exclusion applies only if the discharge of
pollutants occurs while the insured is performing operations, and not if the discharge occurs after the operations are complete.
The Eleventh Circuit declined to consider this argument that had not been addressed at the district court level, and remanded for
further hearing. Technical Coating, 157 F.3d at 846. However, it appears from this factual scenario that the issue of when the
discharge of pollutants took place presents a question of fact.
In Employers Casualty Co. v. St. Paul Fire and Marine Insurance Co., 44 Cal.App.4th 545, 557 (1996), the California
appellate court determined that the discharge of pollutants at issue took place when the insured and its subcontractors were
performing operations at the site. The insured was the general contractor of a commercial office building project. Metal decks of
the building were constructed, which were then sprayed with a Monokote fireproof coating. The claimant was exposed to sulfur
dioxide fumes during the construction. Thus, the court found that subparagraph 1.d. of the exclusion was satisfied, and that what
was at issue was not a “completed operation.” Id.
Moreover, the court further found that the pollutants were brought on to the site in connection with the insured’s operations,
satisfying subparagraph 1.d.(i) of the “absolute” pollution exclusion at issue. Id. See also, Cook v. Evanson, 83 Wash.App. 149,
920 P.2d 1223 (1996) (“. . .the exclusion specifically applies to injuries at the insured’s work site if the injuring pollutants are at
the site in connection with the insured’s operations. It is difficult to imagine why an insured would take pollutants to a work site
if it did not use them in its business operations.”)
VII. Personal Injury Coverage
Indoor exposure claims are typically based on “bodily injury” due to exposure to “pollutants” within the confines of a home,
a workplace or another business establishment. These types of exposures generally do not involve claims for “property damage”
or “personal injury.” Coverage for “personal injury” exposures are typically addressed under Coverage B of the CGL policy and
not many cases have addressed the issue of whether indoor exposure claims fall under “personal injury” coverage and outside
the reach of the pollution exclusions. “Personal injury” is defined in post-1986 policies as:
[An] injury, other than “bodily injury,” arising out of one or more of the following offenses:
a. False arrest, detention or imprisonment;
b. Malicious prosecution;
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IDC Quarterly Vol. 10, No. 3 (10.3.6)
c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or
premises that a person occupies by or on behalf of its owner, landlord or lessor;
d. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or
organization’s goods, products or services; or
e. Oral or written publication of material that violates a person’s right to privacy.
The phrase “… by or on behalf of its owner, landlord or lessor” in subparagraph b. of the “personal injury” definition was a
revision to the definition to limit the definition to actions by these parties, and is not present in the earlier versions of the
definition.
Courts across the country are split on the applicability of the “absolute” and “total” pollution exclusions contained in
Coverage A to “personal injury” in Coverage B. However, the Illinois courts have found coverage under the “personal injury”
provision in Coverage B for various environmental claims. Compare Lakeside Non-Ferrous Metals, Inc. v. Hanover Insurance
Co., 172 F.3d 702 (9th Cir. 1999) (“absolute” pollution exclusion bars coverage; nuisance and trespass claims in the underlying
complaint are rooted in pollution-based property damage, and the insured may not recast the claim under the personal injury
provision), with Millers Mutual Insurance Association of Illinois v. Graham Oil Company, 282 Ill. App. 3d 129, 218 Ill. Dec.
60, 668 N.E.2d 223 (1996), appeal denied 168 Ill. 2d 598 (1996) (“personal injury” is broad enough to include trespassory
actions involving environmental contamination, and the “absolute” pollution exclusion does not apply to bar coverage), and
Pipefitters Welfare Education Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1042 (7th Cir. 1992) (finding coverage for
“personal injury” when the “absolute” pollution exclusion at issue applies only to “property damage,” but finding coverage
barred under a pollution exclusion which expressly denies coverage for “bodily injury, property damage, or personal injury
arising out of the actual, alleged or threatened discharge … of pollutants.”)
Relying on the Illinois appellate court decision of Graham Oil, supra, it seems unlikely that an Illinois court would apply an
“absolute” pollution exclusion to bar coverage for indoor claims when the underlying complaint contains allegations of trespass
or nuisance. The court in Graham Oil considered both the earlier version of the “personal injury” definition, and the later
definition which included the “by or on behalf of its owner, landlord or lessor” limitation. However, the Graham Oil court’s
analysis failed to take into account the impact of this revision on the “personal injury” definition, and there is no evidence in the
opinion that the insurer raised this distinction in its arguments. However, even in the Pipefitters situation, where the pollution
exclusion at issue expressly applied to the personal injury coverage as well as to “bodily injury” and “property damage,” the
Illinois courts may follow Koloms and not apply the exclusion to bar “personal injury” resulting from indoor exposures.
The “by or on the behalf of” revision may have a major effect on the applicability of the “personal injury” provision to any
pollution claim, including indoor exposures. The Colorado Court of Appeals considered the applicability of the “absolute”
pollution exclusion to indoor exposure when the “personal injury” was potentially implicated. TerraMatrix, Inc. v. U.S. Fire
Insurance Co., 939 P.2d 483 (Colo.App. 1997). In TerraMatrix, the insured owned a blueline printing machine housed in leased
office space. During its operation, the printing machine emitted ammonia gas which allegedly caused bodily injury to another
tenant of the building. The insured argued that because the underlying complaint filed by the tenant-claimant included claims
based on trespass and nuisance, such claims constituted “wrongful entry” and “invasion of the right of private occupancy” under
the “personal injury” coverage of the policy. TerraMatrix, 939 P.2d at 489. The “personal injury” provision contained in the
policy at issue was identical to that cited above. The Colorado court found that it was undisputed that the emission of ammonia
from the machine in the building was not done by or on behalf of the owner, landlord or lessor of the property. Id. Thus, there
was no coverage under the “personal injury” portion of the policy.
The “total” pollution exclusion is often added to CGL policies by endorsement, and is often not limited to “bodily injury”
and “property damage.” Accordingly, if a court finds the substance at issue to be a “pollutant” under the policy, and if that court
finds a “release,” then the “total” pollution exclusion will apply to bar coverage for environmental claims deemed to be
“personal injury.”
VIII. Reasonable Expectations
Under the “reasonable expectations” doctrine, policy language is construed in accordance with the objectively reasonable
expectations of the insured. Thus, under this doctrine, the court may give effect to the reasonable expectations of the insured,
even if doing so negates the language of the policy provision at issue. In applying the “reasonable expectations” doctrine, the
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test of a policy provision is what a reasonable person in the position of the insured would have understood the provision to
mean. This is not a test of a lay person’s understanding of the provision, but rather the understanding of an objective person in
the same business and with the same experience as the insured. Ostrager & Newman, Handbook on Insurance Coverage
Disputes §1.3[b] (10th ed. 1999).
According to Ostrager, courts in 39 jurisdictions have recognized the “reasonable expectations doctrine, while the courts in
Florida, Idaho, Ohio, South Carolina, Utah and Washington have rejected the doctrine because it conflicts with the traditional
principle that unambiguous policy language must be given effect. The courts of South Dakota, the Virgin Islands and Wyoming
have rejected the “reasonableness expectations” doctrine when the policy provision at issue is unambiguous, but have not yet
ruled on the application of the doctrine when a policy provision is found to be ambiguous. Ostrager §1.03[b].
Illinois is one of the 39 states which apply the “reasonable expectations” doctrine, and an Illinois appellate court utilized this
doctrine in Stringfield, 292 Ill. App. 3rd at 477, 226 Ill. Dec. at 530, 685 N.E.2d at 985, in concluding that the “absolute”
pollution exclusion was ambiguous, and that the underlying suit involving exposure to lead paint chips did not arise from a
discharge, dispersal, release or escape of a “pollutant.” The Stringfield court explained: “Our decision is not based solely upon
the ‘reasonable expectations’ doctrine, but also on a reasonable interpretation of the plain, ordinary and popular meanings of the
terms in the policy.” Id.
IX. Conclusion
Throughout the country, there is no consensus among the courts as to whether the “absolute” or “total” pollution exclusions
apply to bar coverage for indoor exposure claims. However, the courts in Illinois have determined that (1) in general, substances
released indoors are not “pollutants” as that term is defined; (2) a release of substances indoors is not a “discharge, dispersal,
release or escape” under the policy; (3) a release of substances indoors is not traditional environmental contamination; and (4)
in general, an insured’s “reasonable expectations” would not be that indoor exposures would be excluded by the “absolute” or
“total” pollution exclusions.
The Koloms and Stringfield courts found that the “absolute” pollution exclusion did not apply to bar coverage to the indoor
exposures at issue in those cases. There still may be instances of indoor exposures where the exclusion will apply. If a release
akin to what may be considered a more traditional environmental release takes place indoors, the “absolute” pollution exclusion
may apply. For example, under the facts presented in Kim v. State Farm Fire and Casualty Co., 312 Ill. App. 3d 770, 245 Ill.
Dec. 448, 728 N.E.2d 530 (1st Dist. 2000), the appellate court found that the “absolute” pollution exclusion applied to bar
coverage for cleanup claims arising from the release of perc from a dry-cleaning machine. If an individual had been exposed to
the perc while still inside the dry cleaning building, the “absolute” pollution exclusion should apply to bar coverage. No Illinois
court has been faced with these specific facts, but a court should find this scenario similar enough to a traditional environmental
release to preclude coverage.
Although the Illinois courts have found that the “absolute” pollution exclusion does not apply to bar or limit coverage for
injuries arising from most indoor exposures, they have done so by ignoring the plain language of the policy. In his dissent in the
Koloms case, Justice Heiple simply stated:
This case turns on the interpretation of an exclusion clause in a policy of insurance. The facts are simple. The plaintiffs
allege injury from carbon monoxide fumes escaping from a malfunctioning furnace. The insurance company denied
coverage on the basis of policy language which excluded coverage for injury from the escape of pollutants. The language
further defined pollutants as any gaseous irritant or contaminant including fumes.
Choosing to override the clear language of the insurance contract, however, the majority purports to divine the unstated
intent of the parties. With this analysis, coverage is found to be provided. What we have here is not a case of contract
construction. It is, rather a case of contract reconstruction. As such, it is thimblerigging pure and simple. It also indicates
the depths to which a court will go to achieve a desired result. If any principle can be derived from this ruling, it is that
words have no meaning.
Koloms, 177 Ill. 2nd at 494-495, 687 N.E.2d at 82.
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Illinois Association of Defense Trial Counsel
P.O. Box 7288, Springfield, IL 62791
IDC Quarterly Vol. 10, No. 3 (10.3.6)
ABOUT THE AUTHOR:
Katherine E. Tammaro is a partner in the Chicago firm of Tressler, Soderstrom, Maloney & Priess. Ms. Tammaro regularly
represents insurance companies in complex coverage matters throughout the country, including environmental, advertising injury and
personal injury, product liability, and construction defect cases. Ms. Tammaro has over seven years of experience in this field. She has
written several articles and has lectured on general insurance coverage issues. She is a graduate of the University of Notre Dame and
Georgetown University Law Center. Ms. Tammaro gratefully acknowledges the assistance of Daneen Fitzpatrick in preparing this
article.
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