United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, UNITED STATES DISTRICT JUDGE.
September 2014, a catastrophic fire occurred at a warehouse
in Connecticut in which Richards Building Supply I, LLC
leased space. The fire started in a part of the warehouse
occupied by another company but burned out of control and
destroyed the part of the building that Richards occupied.
Richards suffered losses relating to its own property stored
at the site. And in January 2016, Richards received a
"potentially responsible party" (PRP) letter from
the U.S. Environmental Protection Agency. The letter stated
that the EPA had determined that there had been a release of
hazardous substances at the warehouse site and that there was
a threat of additional releases and that Richards was
"potentially liable" under federal law "for
the cleanup of the Site." Dkt. No. 1-5 at 1, 2. The
letter stated that unless Richards or some other PRP(s)
committed to performing or financing the cleanup, EPA would
do it and would seek to recover its costs from Richards and
other PRPs. Id. at 2.
asked its liability insurer, North River Insurance Co., to
provide a defense and indemnification in connection with it
characterized as the "action" brought by the EPA.
In its complaint, Richards alleges that North River "has
denied coverage for the fire loss clean up and more
particularly the EPA PRP Letter and has failed to defend
[Richards] or file a declaratory judgment action [seeking a
judgment of non-coverage]." Dkt. 1, ¶ 9. Richards
has sued for damages for breach of contract due to North
River's failure to reimburse and defend the company, and
for a declaratory judgment regarding coverage under the
insurance policy. Richards also seeks damages for vexatious
River has moved for partial summary judgment. It seeks a
determination, among other things, that "Richards'
claims in connection with the PRP letter are barred by the
[insurance] policy's pollution exclusion."
Def.'s Mem. in Support of Mot. for Partial Summ. J. at 1.
insurance policy says that North River will pay sums that
Richards "becomes legally obligated to pay as damages
because of 'bodily injury' or 'property
damage' to which this insurance applies" and that
North River "will have the right and duty to defend
[Richards] against any 'suit' seeking those
damages." Dkt. 1-3, p. 66. The exclusion on which North
River relies in its motion says that the insurance does not
"Bodily injury" or "property damage"
arising out of the actual, alleged or threatened discharge,
dispersal, seepage, migration, release or escape of
(a) At or from any premises, site or location which is or was
at any time owned or occupied by, or rented or loaned to, any
insured. However, this subparagraph does not apply to:
(i) "Bodily injury" if sustained within a building
and caused by smoke, fumes, vapor or soot produced by or
originating from equipment that is used to heat, cool or
dehumidify the building, or equipment that is used to heat
water for personal use, by the building's occupants or
(ii) "Bodily injury" or "property
damages" for which you may be held liable, if you are a
contractor . . .;
(iii) "Bodily injury" or "property
damages" arising out of heat, smoke or fumes from a
. . .
loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory
requirement that any insured or others test for, monitor,
clean up, remove, contain, treat, detoxify or neutralize, or
in any way respond to, or ...