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Authorized emissions, denied coverage: A landmark ruling in Griffith Foods

2/27/26

By: Ryne Sack and Jonathan Schwartz

In a seminal decision, the Illinois Supreme Court held that a permit or regulation authorizing certain emissions has no bearing on the application of a liability insurance policy’s pollution exclusion to litigation based on such allegedly authorized emissions.

In Griffith Foods v. National Union Fire Insurance Company, Griffith brought an action in Illinois federal court against its insurer, seeking declarations that the insurer had a duty to defend in connection with an underlying mass tort case. The underlying tort case resulted from a medical-equipment sterilization facility that had emitted ethylene oxide (EtO), causing nearby residents to experience a range of illnesses, including cancer. Griffith held two commercial general liability policies, which were subject to a pollution exclusion that barred coverage for bodily injury arising out of the emission of pollutants. The insurer disclaimed coverage based on the exclusion.

Griffith argued that the pollution exclusion was inapplicable because the policyholders had emitted the EtO pursuant to a permit issued by the Illinois Environmental Protection Agency (IEPA). The federal district court agreed with Griffith that the insurer had a duty to defend, deeming the pollution exclusion inapplicable. The insurer appealed to the Seventh Circuit. On review, the Seventh Circuit first considered American States Insurance Co. v. Koloms, 177 Ill. 2d 473 (1997), which limited pollution exclusions to injury caused by traditional environmental pollution. The Seventh Circuit next considered Erie Insurance Exchange v. Imperial Marble Corp., 2011 IL App (3d) 100380, where the Appellate Court had deemed a pollution exclusion ambiguous where the underlying action was based on injures caused by emissions authorized under a permit issued by the IEPA. Finally, the Seventh Circuit considered its own decision in Scottsdale Indemnity Co. v. Village of Crestwood, 673 F.3d 715 (7th Cir. 2012), where it had held that a pollution exclusion applied to contaminated drinking water even though the amount of pollutant was less than the maximum level allowed by environmental regulation.

To resolve conflicts between state and federal courts as respects the application of the pollution exclusion, the Seventh Circuit certified the following question to the Illinois Supreme Court in light of Koloms and Imperial Marble, “… what relevance, if any, does a permit or regulation authorizing emissions (generally or at any particular levels) play in assessing the application of a pollution exclusion within a standard-form commercial general liability policy?”  After considering a host of precedent, the Illinois Supreme Court explained that a pollution exclusion may apply to authorized or permissible emissions for the following reasons:  (1) the plain language of the exclusion applies to EtO emissions, (2) EtO emissions “fit squarely within” the meaning of “traditional environmental pollution,” (3) the exclusion “says nothing” about whether pollution is permitted or authorized, (4) an IEPA permit does not “change the character or substance of the EtO emissions as pollution,” (5) declining to apply the exclusion to emissions permitted by the IEPA would undermine the exclusion’s fundamental purpose of limiting the insurance industry’s exposure to costly environmental litigation, and (6) there already exists specialty pollution liability coverage for policyholders who face the risk of environmental litigation.

In sum, the Illinois Supreme Court’s decision in Griffith Foods reinforces the purpose of the standard pollution exclusion by not allowing pollution permitted by a state to undermine the reason it was initially created. While the Illinois Supreme Court had already limited the scope of the exclusion to traditional environmental pollution, it was unwilling to further limit the exclusion’s scope. Curiously, while the Seventh Circuit is notorious for considering market-based factors in determining the nature and scope of insurance coverage, the Illinois Supreme Court found solace in that businesses with environmental liability risk may avail themselves of specialty coverage for pollution-related litigation and are not stuck with CGL policies with pollution exclusions that may not meet their needs.

For more information, please contact Ryne Sack at ryne.sack@fmglaw.com, Jonathan Schwartz at jonathan.schwartz@fmglaw.com or your local FMG attorney.

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