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Connecticut Specialty Insurance Co. v. Loop Paper Recycling2/17/2005
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'
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