Seventh Circuit Certifies Key Question to Illinois Supreme Court in Ethylene Oxide Emissions Dispute
A significant insurance dispute involving ethylene oxide (EtO) emissions has prompted the US Court of Appeals for the Seventh Circuit to certify a crucial question to the Illinois Supreme Court. The question centers on whether emissions authorized by a regulatory permit fall within the scope of a pollution exclusion in a standard-form Commercial General Liability (CGL) insurance policy.
The dispute stems from ongoing tort litigation in Illinois concerning alleged injuries caused by EtO emissions from a sterilization plant operated by Griffith Foods International Inc. and later Sterigenics US in Willowbrook, Illinois. The plant emitted EtO over 35 years, with Griffith obtaining a construction and operating permit from the Illinois Environmental Protection Agency (IEPA) in 1984. Although the permit didn’t specify emission limits, it acknowledged anticipated EtO emissions.
In 2018, a federal public health report linked the emissions to high cancer rates in Willowbrook, leading to over 800 individuals filing lawsuits in Illinois state court. These suits were consolidated, resulting in a Fourth Amended Master Complaint alleging continuous EtO exposure causing cancer and other diseases.
The insurance dispute involves two CGL policies issued by National Union Fire Insurance Company of Pittsburgh, PA, to Griffith Foods, covering 1983 to 1985. The policies included a standard-form pollution exclusion that bars coverage for bodily injury or property damage resulting from the discharge of toxic chemicals, unless the discharge is “sudden and accidental.”
In 2021, Griffith and Sterigenics sought declarations that National Union had a duty to defend them in the underlying litigation. The insurer denied coverage, citing the pollution exclusion. The US District Court for the Northern District of Illinois ruled in favor of the policyholders, referencing Erie Insurance Exchange v. Imperial Marble Corp., which suggested that emissions authorized by a regulatory permit could create ambiguity regarding traditional environmental pollution.
The Seventh Circuit reviewed whether the exclusion applies to the bodily injury claims but refrained from making a definitive ruling. Instead, they certified a question to the Illinois Supreme Court: “In light of the Illinois Supreme Court’s decision in American States Insurance Co. v. Koloms (1997) and mindful of Erie Insurance Exchange v. Imperial Marble Corp. (2011), what relevance, if any, does a permit or regulation authorizing emissions play in assessing the application of a pollution exclusion within a standard-form commercial general liability policy?”
The court’s decision is significant, with potentially $150 million in defense costs at stake. The resolution could impact numerous future coverage disputes involving industrial policyholders, as federal environmental law requires permits for substantial emissions. The Illinois Supreme Court’s guidance is likely to shape the interpretation of one of the most litigated clauses in general liability insurance.
The Seventh Circuit also declined to address National Union’s argument that its duty to defend should have been limited to claims alleging injuries during the two-year policy periods, as this argument was not properly preserved in the district court proceedings.
Until the Illinois Supreme Court answers the certified question, insurers and policyholders face continued uncertainty regarding how Illinois law treats pollution exclusions when emissions are made under the authority of a state-issued permit.
