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Monday, April 2, 2012

Insurance Companies Not Responsible for Defending Well Contamination Lawsuits Against Crestwood

In 2009, the Chicago Tribune published a series of stories that the Village of Crestwood knowingly provided its residents with well water that was contaminated with perc (PCE perchloroethylene, also known as tetrachloroethylene), a solvent widely used in dry cleaning.  Shortly after the stories were published, residents sued the Village, alleging that Village officials knew about the contamination since at least 1986, yet continued to pump water from wells and distribute it to residents until 2007.  The Village sent the lawsuits to their insurance companies to defend, but the insurance companies denied coverage based on a policy exemption for personal injury or damages resulting from pollutants (the pollution exemption).  The insurance companies then filed a lawsuit in federal court seek a declaratory judgment that they had no duty either to defend the cases or to indemnify the Village.  The district court ruled in favor of the insurance companies, finding that the lawsuits triggered the pollution exclusion.

On appeal, the Seventh Circuit Court of Appeals affirmed the decision in favor of the insurance companies.  Scottsdale Indemnity, et al. v. Village of Crestwood.  The Court determined that even though the Village did not introduce the contaminant into the water supply, it "caused" the contamination when it discovered that the well was contaminated 25 years ago and yet failed to seal the well.   

Post Authored by Julie Tappendorf, Ancel Glink.


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