Liberty Mutual Insurance Co. units must defend and indemnify an Illinois city accused of deteriorating its water system and harming its residents because the pollution exceptions included in its insurance coverage do not apply, an Illinois state appeals court ruled Thursday and thus overturned a judgment of a lower court.
Sycamore, Illinois residents Jennifer Campbell and Jeremy Pennington filed a putative class-action lawsuit against the city, alleging that failure to maintain its centuries-old water mains harmed its residents by providing them with unsafe drinking water and the equipment damaged those who used water in their homes, according to the Illinois Court of Appeals in Elgin’s ruling in the LM Insurance Corp. case. and Liberty Insurance Corp. against The City of Sycamore as well as Jennifer Campbell and Jeremy Pennington.
The units of Liberty Mutual issued two commercial liability policies and two umbrella policies to Sycamore for the period December 1, 2018 to December 1, 2020 which provided property insurance and defense personal injury coverage but no pollution.
Ms Campbell and Mr Pennington filed a putative class action lawsuit in October 2020 alleging damage caused by the city’s “reckless” delay in maintenance because it avoided replacing its centuries-old water mains.
Liberty Mutual denied coverage on the grounds that its policies included pollution exclusions and filed a lawsuit in a state court to find that it had no obligation to defend or compensate the city.
The trial court ruled in favor of the insurers and was overturned by a three-judge appeals court.
Based on court officials, “we believe the key question is whether the iron, lead and bacteria that Sycamore allegedly distributed to its residents constituted ‘traditional pollution’ or ‘pollution damage in the traditional sense,'” states it in the judgment.
The panel concluded that this was not the case. In contrast to “traditional” pollution incidents, “there was no release, discharge, or discharge of a pollutant into the soil that resulted in groundwater contamination.”
“Rather, the complaint alleged that the water was not contaminated until it was already in Sycamore’s water mains,” the ruling reads.
“Although the lawsuit clearly alleges that the plaintiffs were harmed by pollutants, this is not the same as alleging that they were harmed by ‘traditional pollution’,” the lower court’s decision said, relegating the case to further hearing return.
Lawyers working in the case did not respond to requests for comment.