CONN. SPEC. INS. v. LOOP PAPER RECYCLING

• Decision Date: 17 February 2005
• Docket Number: No. 1-03-2988.,1-03-2988.
• Citation: 356 Ill. App.3d 67,824 N.E.2d 1125,291 Ill.Dec. 875
• Parties: CONNECTICUT SPECIALTY INSURANCE COMPANY, Plaintiff-Appellee, v. LOOP PAPER RECYCLING, INC., Defendant-Appellant (Anjanette Howard, Tamika Jackson, Rodney Jackson, Randy Hayes, Brianna Hayes, Camille Samuels, Jennifer Lee, Justin Lee, and Robert Studway, Individually and On Behalf of All Others Similarly Situated, Defendants.).
• Court: United States Appellate Court of Illinois

824 N.E.2d 1125

356 Ill. App.3d 67

291 Ill.Dec. 875

CONNECTICUT SPECIALTY INSURANCE COMPANY, Plaintiff-Appellee, v. LOOP PAPER RECYCLING, INC., Defendant-Appellant (Anjanette Howard, Tamika Jackson, Rodney Jackson, Randy Hayes, Brianna Hayes, Camille Samuels, Jennifer Lee, Justin Lee, and Robert Studway, Individually and On Behalf of All Others Similarly Situated, Defendants.).

No. 1-03-2988.

Appellate Court of Illinois, First District, Fourth Division.

February 17, 2005.

Leahy, Eisenberg & Fraenkel, Ltd., Chicago (Thomas J. Finn and Shannon F. O'Shea, of counsel), for Appellant.

Williams Montgomery & John, Ltd., Chicago (Mary A. Sliwinski, Alyssa M. Campbell and Lloyd E. Williams, Jr., of counsel), for Appellee.

Justice QUINN delivered the opinion of the court:

Loop Paper Recycling, Inc. (Loop Paper Recycling), appeals from the judgment of the circuit court which found that Connecticut Specialty Insurance Company (Connecticut) owed no duty to defend it in a lawsuit arising out of a fire at its facility in Riverdale, Illinois. Connecticut had issued a general commercial liability policy under which Loop Paper Recycling was a named insured. Specifically, the court determined that (1) the policy's "total pollution exclusion" barred coverage for bodily injury claims because the Riverdale facility was engaged in the handling, storage, disposal, processing or treatment of waste; (2) the underlying complaint did not allege "personal injury" as defined by the policy; and (3) even if the underlying complaint had alleged "personal injury," the policy's "absolute pollution exclusion" barred coverage. On appeal, Loop Paper Recycling argues that the circuit court erred in finding no duty on the part of Connecticut to defend.

BACKGROUND

On or about July 16, 2000, vandals set fire to an unknown amount of cardboard that was located at Loop Paper Recycling's Riverdale facility. The resulting fire burned for several days, sending clouds of smoke and toxic substances into the surrounding neighborhood. On August 17, 2001, residents of that neighborhood (underlying plaintiffs) filed suit against Loop Paper Recycling, asserting claims for strict liability and negligence.

In their complaint, the underlying plaintiffs alleged that "Loop Paper Recycling owns, operates, and manages various paper recycling facilities." One of Loop Paper Recycling's facilities, known as the Suburban Warehouse, was located at 13050 State Street in the City of Riverdale, Cook County, Illinois. Per the underlying plaintiffs' complaint, Loop Paper Recycling's business operations at the Riverdale facility allegedly consisted of "gathering, holding, storing, handling, baling, packaging, shipping and transporting cardboard." According to their complaint, "cardboard commonly utilized and obtained for recycling contains additives, adhesives, bonding material, and/or other fixatives as well as vinyl chloride, urea, melamine, phenol formaldehyde, urethanes, and acrylics and other substances and on information and belief, the cardboard present at the Defendant, Loop Paper [Recycling's] facility did contain such materials."

The underlying plaintiffs alleged that when the cardboard containing these materials was ignited, the resulting smoke released "into the air the fixatives and substances so as to cause highly toxic and hazardous" pollution. Thus, as a direct and proximate result of the fire at Loop Paper Recycling's Riverdale facility, the underlying plaintiffs alleged that they were exposed to the hazardous and toxic substances. They sought damages for "medical diagnosis, testing, and monitoring to determine the impact of the toxic substances that they were exposed to as a result of the aforementioned release."

On January 15, 2001, Loop Paper Recycling tendered its defense in the underlying lawsuit to Connecticut. On May 21, 2001, Connecticut agreed to defend Loop Paper Recycling, but reserved its right to deny coverage.

The policy provided for three types of coverage: (1) "Coverage A" for bodily injury and property damage liability; (2) "Coverage B" for personal and advertising injury liability; and (3) "Coverage C" for medical payment claims. Under Coverage A, the policy stated, in relevant part:

"[Bodily Injury and Property Damage]

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies. We will have the right and duty to defend the insured against any `suit' seeking those damages. However, we will have no duty to defend the insured against any `suit' seeking damages for `bodily injury' or `property damage' to which this insurance does not apply.

* * *

b. This insurance applies to `bodily injury' and `property damage' only if:

A. The `bodily injury' or `property damage' is caused by an `occurrence' that takes place in the `coverage territory'; and

B. The `bodily injury' or `property damage' occurs during the policy period."

Within Coverage A, the policy contained a "total pollution exclusion," which stated that the insurance did not apply to the following:

"[Total Pollution Exclusion to Coverage A]

f. Pollution

(1) `Bodily injury' or `property damage' which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time. This exclusion does not apply to `bodily injury' or `property damage' arising out of heat, smoke or fumes from a hostile fire unless that hostile fire occurred or originated:

(a) At any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste; or (b) At any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations to test for, monitor, clean-up, remove, contain, treat, detoxify, neutralize or in any way respond to, or assess the effects of, pollutants.

* * *

As used in this exclusion, a hostile fire means one which becomes uncontrollable or breaks out from where it was intended to be.

* * *

Pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste includes material to be recycled, reconditioned or reclaimed."

Coverage B stated, in pertinent part:

"[Personal and Advertising Injury]

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of `personal injury' or `advertising injury' to which this insurance applies.

b. We will have the right and duty to defend the insured against any `suit' seeking those damages. However, we will have no duty to defend the insured against any `suit' seeking damages for `personal injury' or `advertising injury' to which this insurance does not apply."

Coverage B contained an "absolute pollution exclusion," which stated:

"[Absolute Pollution Exclusion to Coverage B]

2. Exclusions

This insurance does not apply to:

a. `Personal injury' or `advertising injury;'

* * *

(5) Arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.

* * *

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."

On September 28, 2001, Connecticut filed a complaint for declaratory judgment, arguing that, under the terms of the policy, it owed no duty to defend or provide coverage to Loop Paper Recycling in the lawsuit filed by the underlying plaintiffs. The circuit court granted Connecticut's motion for summary judgment, finding that while the underlying plaintiffs sufficiently alleged that they suffered "bodily injury" as defined in the policy, there was no coverage under the policy's "total pollution exclusion." The court also found that the underlying plaintiffs failed to allege "personal injury" and that, even if they did, the "absolute pollution exclusion" barred coverage. Loop Paper Recycling filed a timely notice of appeal.

ANALYSIS

Summary judgment is appropriate when the pleadings, depositions, admissions, and affidavits on file reveal that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Chatham Corp. v. Dann Insurance, 351 Ill.App.3d 353, 358, 285 Ill.Dec. 663, 812 N.E.2d 483, 488 (2004). When ruling on a motion for summary judgment, we must construe all evidence in the light most favorable to the nonmoving party. See Sears, Roebuck & Co. v. Acceptance Insurance Co., 342 Ill.App.3d 167, 171, 275 Ill.Dec. 965, 793 N.E.2d 736 (2003). We review a trial court's grant of summary judgment de novo. Sears, 342 Ill.App.3d at 171,

275 Ill.Dec. 965,

793 N.E.2d 736.

The duty of an insurer to defend its insured is much broader than its duty to indemnify. Sears, 342 Ill.App.3d at 171, 275 Ill.Dec. 965, 793 N.E.2d 736. When determining whether an insurer has a duty to defend its insured, the court must compare the allegations contained in the underlying complaint to the relevant provisions of the insurance policy. American States Insurance Co. v. Koloms, 177 Ill.2d 473, 479, 227 Ill.Dec. 149, 687 N.E.2d 72 (1997).

In determining whether an insurer owes a duty to defend an action brought against its insured, the court must consider only the allegations in the underlying complaint and the relevant policy provisions. Lexmark International, Inc. v. Transportation Insurance Co., 327 Ill.App.3d 128, 136, 260 Ill.Dec. 658, 761 N.E.2d 1214 (2001), quoting Bituminous Casualty Corp. v. Fulkerson, 212 Ill.App.3d 556, 562, 156 Ill.Dec. 669, 571 N.E.2d 256 (1991). "[W]here summary judgment is sought in the context of a declaratory...