Housing Auth. Risk Retention v. Chicago Housing

• Decision Date: 28 July 2004
• Docket Number: No. 03-4164.,03-4164.
• Citation: 378 F.3d 596
• Parties: HOUSING AUTHORITY RISK RETENTION GROUP, INC. Plaintiff-Appellee, v. CHICAGO HOUSING AUTHORITY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

378 F.3d 596

HOUSING AUTHORITY RISK RETENTION GROUP, INC. Plaintiff-Appellee, v. CHICAGO HOUSING AUTHORITY, Defendant-Appellant.

No. 03-4164.

United States Court of Appeals, Seventh Circuit.

Argued May 28, 2004.

Decided July 28, 2004.

Appeal from the United States District Court for the Northern District of Illinois, Rebecca R. Pallmeyer, J.

Gerald E. Ziebell, Karbal, Cohen, Economou, Silk & Dunne, Chicago, IL, Alan R. Lyons (argued), Herrick Feinstein, New York, NY, for Plaintiff-Appellee.

F. Thomas Hecht, John P. Buckley (argued), Ungaretti & Harris, Chicago, IL, for Defendant-Appellant.

Before BAUER, RIPPLE, and ROVNER, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

Defending oneself from a large-scale class action lawsuit is a costly task. And so it comes as no surprise that these two parties are before us to determine who should foot the bill for the defense of a 1999 lawsuit filed by approximately 10,000 current or former Chicago Housing Authority (CHA) residents who claimed they have been exposed to and harmed by environmental contaminants while living on CHA's public housing property. The Housing Authority Risk Retention Group, Inc. (HARRG), a risk retention group made up of various housing authority members, asserts that it has neither the duty to defend nor indemnify CHA in the underlying environmental litigation.

HARRG provided commercial general liability coverage to the CHA from June 1, 1987, through July 31, 1998, under separate annual policies. Each of the policies provided, among other coverage, coverage and defense for "bodily injury" claims subject to a limit of $5 million per occurrence per policy year. Bodily injury, included, among other things, sickness, disease, death, mental anguish, and mental injury, and HARRG does not dispute that the class action plaintiffs' allegations of bodily injury and mental anguish fell within this definition. HARRG filed the underlying action against CHA seeking a declaratory judgment that it has no duty to defend or to indemnify CHA with respect to the underlying litigation, because, as HARRG argues, the claims asserted by the plaintiffs in the underlying class action are not covered by the policy.

The district court concluded that the policy language included what amounted to an "absolute pollution exclusion," that is, an exclusion that bars coverage for all claims for pollution, whether or not the contaminants originated on the insured's property, and consequently granted HARRG's motion for judgment on the pleadings. Housing Authority Risk Retention Group, Inc. v. Chicago Housing Authority, No. 02 C 4474, slip op. at 7, 16 (N. D.Ill. Sept. 30, 2003).

CHA objects to the district court's finding and further argues that the district court failed to address potential injury claims arising out of off-site exposure, did not address claims that the CHA improperly sited Altgeld Gardens, and did not address claims arising from "environmental discrimination," and other nontraditional environmental claims. To the contrary, these claims were adequately addressed when the district court concluded that the insurance policies contained an absolute pollution exclusion which applies regardless of the origin of the pollution or the identity of the polluter. Id. slip op. at 7. Furthermore, after considering all of the claims, the district court concluded that the "the type of pollution alleged in the underlying litigation does constitute `traditional environmental contamination,'" to which the absolute pollution exclusion would apply. Id. slip-op. at 11-12.

Because the district court issued a thorough and well-reasoned memorandum opinion and order, we adopt the reasoning of the district court's September 30, 2003 Memorandum Opinion and Order addressing those claims challenged on appeal and AFFIRM the judgment of the district court. A copy of the district court's order is attached.

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

HOUSING AUTHORITY RISK RETENTION GROUP, INC., Plaintiff,

v.

CHICAGO HOUSING AUTHORITY, Defendant.

No. 02 C 4474.

September 30, 2003.

MEMORANDUM OPINION AND ORDER

PALLMEYER, District Judge.

In this action, Plaintiff insurer seeks a declaration that it has no duty to provide a defense to Defendant, the Chicago Housing Authority ("CHA") in a lawsuit filed by current and former tenants against the CHA in state court. Plaintiff Housing Authority Risk Retention Group ("HARRG") provided commercial general liability coverage to the Chicago Housing Authority ("CHA") from 1987 until 1998. On or about October 20, 1999, a large number of current and former tenants of a CHA public housing development known as "Altgeld Gardens" brought an action against CHA seeking damages for alleged bodily injuries resulting from alleged exposure to environmental contamination at or around the development. HARRG filed this action against CHA seeking a declaratory judgment that it has no duty to defend or to indemnify CHA with respect to the underlying litigation on the ground that the claims asserted in that litigation are not covered by the parties' policies.¹ Both parties now move for judgment on the pleadings.

In a motion for judgment on the pleadings, the court considers the pleadings alone, which consist of the complaint, the answer, and any written instruments attached as exhibits. fed. R. Civ. P. 12(c); Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir.1998) (citations omitted). Where the defendant brings the Rule 12(c) motion, the court will grant it if "it appears beyond all doubt that the plaintiff cannot prove any facts that would support his claim for relief." Id. at 452 (citations omitted). Where the plaintiff moves for judgment on the pleadings, "the motion should not be granted unless it appears beyond doubt that the non-moving party cannot prove facts sufficient to support his position." All Am. Ins. Co. v. Broeren Russo Const., Inc., 112 F.Supp.2d 723, 728 (C.D.Ill.2000) (citation omitted). For the reasons stated below, Plaintiff's motion for judgment on the pleadings is granted and Defendant's motion is denied.

FACTUAL BACKGROUND

The Housing Authority Risk Retention Group ("HARRG") is a risk retention group whose members consist of various housing authorities throughout the United States. (Complaint for Declaratory Judgment (hereinafter "Compl.") ¶ 2.) The Chicago Housing Authority ("CHA") is a municipal corporation which administers low-income housing programs in the City of Chicago. (Id. ¶ 3.) From June 1, 1987 until July 31, 1998, HARRG provided commercial general liability coverage to CHA under separate annual policies on an annual coverage period basis (collectively, "the Policies"). (Id. ¶ 6.) Among other coverage, the Policies provided coverage for "bodily injury" liability subject to a limit of $5 million per occurrence and in the aggregate. (Id. ¶ 7.) Under each of the Policies, CHA was responsible for a self-insured retention of $500,000. (Id. ¶ 8.) Moreover, with the exception of the 1987 policy, each of the Policies excluded "`[b]odily injury' ... arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants [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 insured...."² (See, e.g., 1988 Policy, Ex. A to Compl., at 17.)

On or about October 20, 1999, several thousand current and former tenants of the Altgeld Gardens development, located at 940 East 132nd Street, Chicago, Illinois, during the period 1975 to the present,³ brought an action against CHA in the Circuit Court of Cook County captioned Aaron et al. v. Chicago Housing Authority, case number 99 L 11738, seeking damages for alleged injuries resulting from alleged exposure to environmental contamination at or around Altgeld Gardens (hereinafter the "Underlying Litigation"). (Id. ¶¶ 9-10.) Plaintiffs in the Underlying Litigation have filed five amended complaints (the last of which deals only with defendant Commonwealth Edison) alleging negligence, breach of contract, and conspiracy against CHA. (Defendant's Corrected Answer to Plaintiff's Complaint for Declaratory Judgment (hereinafter "Corrected Ans.") ¶ 12.) Plaintiffs assert that CHA built the Altgeld Gardens housing development "in an industrialized area, in and around a former sewage waste site," (Fourth Amended Complaint to Aaron et al. v. Chicago Housing Auth. (hereinafter, "Aaron FAC"), Ex. 5 to Defendant's Corrected Answer to Plaintiff's Complaint for Declaratory Relief ¶ 7), that CHA "knew that certain contaminants, toxic substances and chemicals, including but not limited to PCBs, PAHs, selenium, arsenic, lead, mercury and pesticides were introduced, released and allowed to remain in the environment in Altgeld Gardens by the surrounding industrial plants, abandoned factories, toxic waste dumps, landfills and a Metropolitan Sanitary District plant, and their agents and employees," (id. ¶ 24), that CHA "caused and was responsible for introducing, releasing and allowing PCBs and PAHs to remain in the environment in Altgeld Gardens," (id. ¶ 25), and that CHA failed to "advise, warn or educate the Plaintiffs of the full nature and extent of the presence and existence of the PCB[s] and PAHs[,] the risks associated with such, or the precautions that the Plaintiffs could take." (Id. ¶ 27.)

The Fourth Amended Complaint asserts four claims: In Count I, Plaintiffs assert that CHA was negligent in introducing PCBs to Altgeld Gardens, in failing to test for and clean up PCBs and PAHs, and in failing to handle PCBs properly; as a result the Aaron plaintiffs seek damages for bodily injury in excess of $50,000 for each plaintiff, and injunctive relief in the form of relocation of current residents. (Id. ¶ 31.) In Count II, they contend that CHA breached...