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Tuesday, March 5, 2013

No Insurance for Crestwood in Water Contamination Cases

The Illinois Attorney General filed suit against the Village of Crestwood seeking an injunction and fines for failure to comply with certain laws and regulations relating to the Village's water supply. The Village was accused of knowingly and routinely mixing cheap, polluted water from a groundwater well into the municipal tap water supply to save money.  The well had been contaminated with PCE and other chemicals from a nearby dry cleaning industry. In 1985, the IEPA ordered the Village to stop using the water.  In addition, in 1988, a firm hired by the Village to test the water confirmed contamination.  Nevertheless, according to the court, the Village continued to use the well to provide up to 20% of the community's tap water for over 20 years. 
The Village's insurers refused to cover the Village's defense of the individual and class action lawsuits that were brought against the Village relating to its water supply, relying on the pollution exclusion clauses in the Village's policies.  The Village sued the insurance companies, and the circuit court ruled against the Village, finding that the claims fell within the pollution exclusions. 
The appellate court affirmed.  Village of Crestwood et al. v. Ironshore Specialty Insurance Company et al., 2012 IL App (1st) 120112.  The court analyzed the pollution exclusions in the various insurance policies, finding that they all excluded coverage for claims arising out of the discharge of a pollutant. The court rejected the Village's argument that it was not the "actual polluter" and coverage should not, therefore, be denied.  The court disagreed, finding that the Village's knowing contamination of its water supply with chemical-laden groundwater fell within the definition of a pollutant under the insurance exclusion clauses. The court also rejected the Village's argument that it was merely a negligent distributor of groundwater contaminated by another entity, finding that the Village caused the contamination by introducing the contaminated water into the clean water system.  Thus, the Village's insurance carriers will not be responsible for defending the Village in the various lawsuits relating to the use of contaminated water.
Post Authored by Julie Tappendorf, Ancel Glink


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