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10/17/97 AMERICAN STATES INSURANCE CO. v. HARVEY

October 17, 1997

AMERICAN STATES INSURANCE CO., APPELLANT,
v.
HARVEY KOLOMS, ET AL., APPELLEES.



Appeal from the Circuit Court of Cook County. Hon. John N. Hourihane, Trial Judge. Case Numbers: AC1-95-2057, TR93CH00152.

The Honorable Justice McMORROW. Justice Heiple, dissenting.

The opinion of the court was delivered by: Mcmorrow

The Honorable Justice McMORROW delivered the opinion of the court:

We granted leave to appeal in this case (155 Ill. 2d R. 315) in order to examine the scope of the absolute pollution exclusion provision contained in a commercial general liability (CGL) policy. The dispositive issue for our review is whether that exclusion bars coverage for claims of carbon monoxide poisoning caused by an allegedly defective furnace. For the reasons that follow, we hold it does not.

Background

The facts of this case, as taken from the pleadings, are relatively straightforward. On September 17, 1990, a furnace in a two-story commercial building located in Lincolnshire, Illinois, began to emit carbon monoxide and other noxious fumes. Several employees of one of the building's tenants, Sales Consultants, Inc., inhaled the fumes and became ill. Six of those employees eventually filed suit against the beneficial owners of the property, Harvey and Nina Koloms (hereinafter referred to as Koloms). In the complaints, the employees alleged that Koloms had negligently maintained the furnace and had failed to keep it in good working condition. They also claimed that Koloms had not properly inspected some repair work which had been performed on the furnace. Each employee sought damages as compensation for his or her injuries.

Koloms, in turn, tendered the complaints to American States Insurance Company (ASI), which had insured the building under a standard-form CGL policy. After reviewing the complaints, ASI agreed to defend Koloms subject to a reservation of rights. Specifically, ASI reserved the right to contest coverage on the basis of the absolute pollution exclusion contained in the policy. That exclusion provided in pertinent part:

"This insurance does not apply to:

f.(1) 'Bodily injury' or 'property damage' arising out of actual, alleged or threatened discharge, dispersal, release or escape of pollutants:

(a) At or from premises you own, rent or occupy ***."

The exclusion further defined "pollutants" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."

Shortly thereafter, ASI instituted the present action in the circuit court of Cook County, seeking a declaration that it did not have a duty to defend or indemnify Koloms. The gravamen of ASI's complaint centered upon the meaning of the term "pollutants." ASI alleged that the term was unambiguous and that, in accordance with its plain meaning, the emission of carbon monoxide fumes constituted the "release" of a gaseous "irritant or contaminant." ASI insisted, therefore, that any bodily injuries resulting from such emissions were excluded from coverage.

In response, Koloms denied the material allegations of the complaint and filed two separate affirmative defenses. In one of the affirmative defenses, Koloms alleged that the pollution exclusion did not apply to injuries caused by a leaking furnace, but rather was limited to injuries resulting from industrial, commercial or large scale pollution. They claimed that the CGL policy exclusion was ambiguous to that extent, and that an insured person in their position would not reasonably expect carbon monoxide, a commonly occurring chemical compound, to be considered a pollutant. *fn1

After taking discovery, both parties filed cross-motions for summary judgment, reiterating the contentions raised in the earlier pleadings. The circuit court, ruling in favor of Koloms, found that the "malfunctioning heater clearly was not intended by the Koloms as owners of commercial real estate, to be excluded by the provision." The circuit court granted Koloms' motion for summary judgment, finding both a duty to defend and a duty to indemnify. The circuit court also denied ASI's cross-motion for summary judgment, and ASI appealed.

The appellate court, like the circuit court, concluded that the policy language should be construed in favor of coverage. 281 Ill. App. 3d 725, 217 Ill. Dec. 30, 666 N.E.2d 699 (1996). In reaching this conclusion, the court noted that:

"after consideration of the language of the clause, the wide scope of risks insured by in the policy, the nature of the building and the reasoning of other courts that have interpreted this very clause, we too find that the clause is ambiguous, as it can reasonably be ...


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