Country Mutual Insurance Company v. Bible Pork, Inc.

. Our colleagues in the First District interpreted that phrase to mean the plaintiff
       was, in fact, asking for money damages in addition to injunctive relief. B.H. Smith,

285 Ill. App. 3d at 541

. Country Mutual insists the trial court’s reliance on B.H.
       Smith was incorrect because that case interpreted New York law. We are unconvinced and find
       B.H. Smith to be on point.

                                                    -5-
¶ 20        B.H. Smith declared that the prayer for equitable relief did not preclude the insurer from
       having to defend because even if equitable relief was granted in the underlying lawsuit, the
       trial court still could have awarded money damages. New York law provides “ ‘equity may
       award damages in lieu of the desired equitable remedy.’ ” B.H. Smith,

285 Ill. App. 3d at 541

212 Ill. App. 3d 556, 562

 (quoting Doyle v. Allstate Insurance Co.,

136 N.E.2d 484, 486

 (N.Y.
       1956)). Illinois law is consistent with New York law in that our supreme court has determined
       the term “damages” as used in a comprehensive general liability policy, such as the one in the
       instant case, covers money one must expend to remedy an injury for which he or she is
       responsible, whether such expenditure is compelled by a court of law by way of compensatory
       damages or by a court of equity by way of compliance with a mandatory injunction. Outboard
       Marine Corp. v. Liberty Mutual Insurance Co.,

154 Ill. 2d 90, 116

607 N.E.2d 1204, 1216

       (1992).
¶ 21        In Outboard Marine, both the Environmental Protection Agency (EPA) and the Illinois
       EPA (IEPA) had already brought separate actions against Outboard Marine before the
       insurance dispute arose. Outboard Marine,

154 Ill. 2d at 98

607 N.E.2d at 1208

. The
       underlying action sought equitable relief rather than legal. Outboard Marine,

154 Ill. 2d at 100

607 N.E.2d at 1208

. The issue in that case was whether the insurer’s duty to defend under the
       policies was triggered by suit for equitable relief when the policy language required the
       existence of a suit seeking damages. In analyzing the meaning of its ruling, our supreme court
       later stated, “What we learn from Outboard Marine is that, in the absence of policy language to
       the contrary, the language ‘suit seeking damages’ will be construed to include suits seeking
       either or both compensatory damages and equitable relief.” Central Illinois Light Co. v. Home
       Insurance Co.,

213 Ill. 2d 141, 160

821 N.E.2d 206, 217

 (2004).
¶ 22        Here, the parties contracted for a duty to defend in both policies against lawsuits seeking
       damages. The underlying lawsuit was a suit for damages in that it sought equitable relief in the
       form of the declaration of a nuisance and also “other relief deemed appropriate.” Neither the
       Agriplus policy nor the umbrella policy added exclusionary language. Accordingly, relying on
       Outboard Marine, we agree with the trial court’s analysis and find the duty to defend was
       triggered by the filing of the underlying lawsuit.
¶ 23        Furthermore, plaintiffs’ counsel in the underlying lawsuit, Fred Roth, explained he styled
       the claims as declaratory judgment claims because plaintiffs would decide what remedies they
       preferred after a jury found in plaintiffs’ favor. During an April 5, 2006, hearing, Roth
       specifically stated:
                “I will not disagree that our approach is in some ways piecemeal. ***
                    *** [I]f the jury says it is a nuisance that they are intending to create at this location,
                [Bible Pork] will be on notice. If they go forward and operate that facility, which they
                may or may not do at that point, if they don’t proceed and operate, fine. If they do
                proceed to operate, then the Plaintiffs would say, well, we have established that much,
                that it’s a nuisance. Now we have to decide are we going to try to stop them from
                proceeding or are we simply going to ask for damages resulting from their proceeding,
                and it would be an election of remedies question at that point in time depending upon
                what the facts and circumstances are.”
       During an August 28, 2006, hearing on a motion to dismiss, Roth further stated:
                    “It is not expected, depending on the parties’ reaction to the jury verdict, that this
                will necessarily be the end point of the controversy nor is it required to be the end point

                                                      -6-
                   of the controversy necessarily depending upon what the parties do once this decision is
                   made, but if the decision is made by the jury that this is not a nuisance, I don’t have 21
                   scenarios then. I don’t have 21 requests for damages and injunctive relief because the
                   pendulum sweeps in the other direction in favor of the Defendant.”
       Later in the hearing, Roth noted some of the plaintiffs might seek an injunction while others might
       opt in favor of damages.
¶ 24           We are aware the general rule is that “it is only the allegations in the underlying complaint,
           considered in the context of the relevant policy provisions, which should determine whether an
           insurer owes a duty to defend an action brought against an insured.” Bituminous Casualty
           Corp. v. Fulkerson,

571 N.E.2d 256, 260

 (1991); see also Atlantic
           Mutual Insurance Co. v. American Academy of Orthopaedic Surgeons,

315 Ill. App. 3d 552, 567

734 N.E.2d 50, 62

 (2000). However, there are exceptions to the general rule. For example,
           an insured may offer extrinsic evidence of facts in addition to those alleged in the complaint in
           order to prove a suit triggers an insurer’s duty to defend. Associated Indemnity Co. v.
           Insurance Co. of North America,

68 Ill. App. 3d 807, 816

386 N.E.2d 529, 536

 (1979).
           Therefore, even assuming arguendo the complaint did not fully apprise Country Mutual that
           the underlying lawsuit claims fell within policy coverage, Country Mutual was obliged to
           defend because it had “knowledge of true but unpleaded facts, which, when taken together
           with the complaint’s allegations, indicate that the claim is within or potentially within the
           policy’s coverage.” Associated Indemnity,

68 Ill. App. 3d at 816

386 N.E.2d at 536

.

¶ 25                               II. Elements Necessary to Trigger a Duty
¶ 26          Country Mutual next contends the additional elements necessary to trigger a duty to defend
          are lacking. Country Mutual specifically takes issue with the trial court’s findings that there
          was an “occurrence” and that the “expected or intended injury” exclusion in the Agriplus
          policy does not apply. We disagree.
¶ 27          The Agriplus policy defines “occurrence” as:
                  “Under SECTION 1, an accident, including continuous or repeated exposure to
                  substantially the same general harmful conditions, which results, during the policy
                  period, in;
                      ‘bodily injury’; or
                      ‘property damage.’ ”
          The umbrella policy states:
                  “Occurrence means an accident, including continuous or repeated exposure to
                  conditions, which results in personal injury or property damage neither expected nor
                  intended from the standpoint of the insured. All such exposure to substantially the same
                  general conditions existing at or emanating from one location or source shall be
                  deemed one occurrence.”
          The Agriplus policy also limits liability in the following manner:
                  “E. Liability, Coverage A and Medical Payments, Coverage B do not apply to the
                  following:
                      1. Expected Or Intended Injury



                                                       -7-
                ‘Bodily injury’ or ‘property damage’ which may reasonably be expected or intended to
                result from the intentional acts of an ‘insured’ even if the resulting ‘bodily injury’ or
                ‘property damage’:
                        a. Is of a different kind, quality or degree than initially expected or intended; or
                        b. Is sustained by a different person, entity, real property or personal property,
                    than initially expected or intended.
                This exclusion applies regardless of whether any ‘insured’ personally participated or
                committed the alleged act and regardless of whether any ‘insured’ subjectively
                intended the ‘bodily injury’ or ‘property damage’ for which a claim is made.”
       The definition of “occurrence” in the umbrella policy also requires that the resulting personal
       injury or property damage be “neither expected nor intended” from the standpoint of the
       insured.
¶ 28       By their terms, the policies apply to property damage or bodily injury only if such damage
       is caused by an “occurrence.” The policies define occurrence as an “accident.” While neither
       policy defines “accident,” in interpreting insurance policies the term “accident” is generally
       defined as “an unforeseen occurrence, usually of an untoward or disastrous character or an
       undesigned, sudden, or unexpected event of an inflictive or unfortunate character.” Westfield
       National Insurance Co. v. Continental Community Bank & Trust Co.,

346 Ill. App. 3d 113, 117

804 N.E.2d 601, 605

 (2003). Country Mutual contends the complaints allege potential
       harm in the future, so that even if there is property damage or bodily injury, it would never be
       an occurrence because it could not qualify as an unforeseen occurrence or untoward or
       unexpected event. Country Mutual also asserts it is irrelevant whether Bible Pork claims it had
       no subjective intent to cause harm or injury, and the exclusion in the Agriplus policy applies
       even if there is an occurrence because the coverage is precluded for any property damage
       which is expected or intended. We disagree.
¶ 29       “The focus of the inquiry in determining whether an occurrence is an accident is whether
       the injury is expected or intended by the insured, not whether the acts were performed
       intentionally.” (Emphases in original.) Lyons v. State Farm Fire & Casualty Co.,

349 Ill. App. 3d 404, 409

811 N.E.2d 718, 723

 (2004). It is also important to note that “the extension of
       coverage from ‘accident’ to ‘occurrence,’ as in this policy, has generally been considered to
       broaden coverage.” Lyons,

349 Ill. App. 3d at 410

811 N.E.2d at 724

. Finally, we agree with
       the trial court that this case is analogous to Erie Insurance Exchange v. Imperial Marble Corp.,

2011 IL App (3d) 100380

2011 IL App (3d) 100380, ¶ 9

.
¶ 30       In Erie, the insurer sought a declaration it had no duty to defend the insured, a
       manufacturer, against underlying litigation, alleging negligence, trespass, and nuisance against
       the insured for personal injury and property damage resulting from invasions of the underlying
       plaintiffs’ persons and property “ ‘by noxious odors, volatile organic materials (VOMs) and
       hazardous air pollutants (HAPs), including, but not limited to STYRENE and Methyl
       Methacrylate (MMA), air contaminants and other hazardous material’ ” in emissions
       generated by the insured’s business operations. Erie,

2011 IL App (3d) 100380, ¶¶ 16-18

. The underlying complaint also alleged the insured emitted VOMs and HAPs in
       violation of IEPA regulations and released more than the amounts of VOMs and HAPs
       allowed under the permit and knew, or should have known, and was aware of, expected, and
       intended the omissions to occur. On appeal, the insurer argued that because the emissions were
       intentionally discharged, they did not constitute an accident and were not an occurrence under

                                                     -8-
       the policy. The insured responded it had no intent to pollute, as evidenced by its operation
       under an emissions permit. The Erie court noted that the threshold for pleading a duty to
       defend is low, that any doubt should be resolved in favor of the insured, and that the underlying
       complaint did not allege under every count that the insured intentionally discharged pollutants
       and, thus, concluded the underlying complaint alleged an occurrence. Erie,

2011 IL App (3d) 100380, ¶ 19

.
¶ 31       Erie specifically relied on Lyons in also finding the policy’s expected or intended injury
       exclusion did not preclude coverage, explaining as follows:
                “As noted above, the focus is on whether the injury was expected or intended, not
                whether the act that caused the injury was expected or intended. *** Because Imperial
                operated pursuant to an emissions permit, it cannot be considered to have expected or
                intended to injure the underlying plaintiffs’ persons or properties. We find that the
                expected or intended injury exclusion does not apply to preclude coverage.” Erie,

2011 IL App (3d) 100380, ¶¶ 21-23

.
       Relying on Erie, we find the underlying complaint alleges potentially covered bodily injury or
       property damage caused by an “occurrence” which triggered Country Mutual’s duty to defend
       under the insurance policies, and the expected or intended injury exclusion did not apply.
¶ 32       The allegations in the underlying lawsuit against Bible Pork are similar to the allegations
       made in the underlying lawsuit in Erie. The underlying complaint here alleged “excessive,
       annoying and disagreeable noises,” “strong, offensive, foul-smelling and disagreeable odors as
       a result of discharges of chemicals, wastes, manure dust or airborne particles,” “contamination
       of surface waters,” “water contamination and depletion,” and “significant reduction in
       Plaintiffs’ property values.” All the alleged injuries and damages came from Bible Pork’s hog
       facility, which was granted regulatory approval by the Department and forced to comply with
       the requirements of the Act, as well as with numerous other state rules and regulations, prior to
       becoming operational.
¶ 33       We have reviewed the cases cited by Country Mutual in support of its argument that there
       was no occurrence and the expected or intended injury exclusion in the Agriplus policy
       applies. After careful consideration, we find them all distinguishable from the facts here. As
       discussed above, the facts in the instant case are remarkably similar to the facts in Erie. The
       underlying complaint, when construed in the light most favorable to Bible Pork, stated bodily
       injury or property damage due to an occurrence and alleged theories of recovery which fell
       within the terms of the policies so that Country Mutual should have provided a defense.

¶ 34                                      III. Pollution Exclusion
¶ 35       Country Mutual contends that even if its duty to defend was triggered by the bodily injury
       and/or property damage provisions, its failure to defend is excused because the policies’
       pollution exclusions apply. We disagree.
¶ 36       The Agriplus policy contains a pollution exclusion in pertinent part as follows:
               “Pollution
               ‘Bodily injury’ or ‘property damage’ arising out of the actual, alleged, or threatened
               discharge, dispersal, release or escape of ‘pollutants’:
                   a. At or from premises an ‘insured’ owns, rents, or occupies;


                                                   -9-
                    b. At or from any site or location used by or for an ‘insured’ or others in the
               handling, storage, disposal, processing, or treatment of waste;
                    c. Which are at any time transported, handled, stored, treated, disposed of, or
               processed as waste by or for an ‘insured’ or any person or organization for whom an
               ‘insured’ may be legally responsible ***.”
       The umbrella policy also contains the following pollution exclusion:
               “II. EXCLUSIONS
               This policy does not apply:
                                                   ***
                    M. to personal injury or property damage arising out of the actual, alleged or
               threatened discharge, dispersal, release, or escape of pollutants:
                    1. at or from premises the named insured owns, rents, or occupies;
                    2. at or from any site or location used by the named insured or for the named
               insured or others for the handling, storage, disposal, processing, or treatment of waste
               material;
                    3. which are at any time transported, handled, stored, treated, disposed of, or
               processed as waste by the named insured or for the named insured or any person or
               organization for whom the named insured may be legally responsible[.]
                                                   ***
                    Pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant
               including smoke, vapor, soot, fume, acids, alkalis, chemicals, and waste materials.
               Waste materials includes materials which are intended to be or have been recycled,
               reconditioned, or reclaimed.”
¶ 37       The trial court found the pollution exclusions inapplicable because the policies are
       ambiguous with respect to the allegations of “noises,” “odors,” and “smells” alleged in the
       underlying lawsuit. We agree.
¶ 38       We note that a pollution exclusion much the same as the one in the instant case was found
       to be ambiguous in Erie.

275 Ill. App. 3d 866, 870

. In order to
       determine whether a policy exclusion applies, we interpret the exclusion under the normal
       rules of contract interpretation. Founders Insurance Co. v. Munoz,

237 Ill. 2d 424, 432-33

930 N.E.2d 999, 1003-04

 (2010). Any ambiguity is to be construed liberally in favor of the insured,
       and the court will find an ambiguity “where the policy language is susceptible to more than one
       reasonable interpretation” and not merely where the parties disagree as to its meaning.
       Founders Insurance,

237 Ill. 2d at 433

930 N.E.2d at 1004

. The burden is on the insurer to
       prove a limitation or exclusion applies. Addison Insurance Co. v. Fay,

232 Ill. 2d 446, 453-54

905 N.E.2d 747, 752

 (2009). Where an exclusionary clause is relied upon to deny coverage, its
       applicability must be free and clear from doubt. Economy Preferred Insurance Co. v.
       Grandadam,

656 N.E.2d 787, 789

 (1995).
¶ 39       In American States Insurance Co. v. Koloms,

177 Ill. 2d 473

687 N.E.2d 72

 (1997), our
       supreme court addressed insurance policy pollution exclusions. In that case, the insurer sought
       a declaration it had no duty to indemnify the insureds against tenants’ claims for injuries
       arising from carbon monoxide fumes emitted from a building’s faulty furnace. The court
       agreed “with those courts which have restricted the exclusion’s otherwise potentially limitless
       application to only those hazards traditionally associated with environmental pollution.”

                                                  - 10 -
       Koloms,

177 Ill. 2d at 489

687 N.E.2d at 79

. Our supreme court found it improper to extend
       the pollution exclusions beyond the arena of traditional environmental contamination and held
       the exclusion did not apply to accidental release of carbon monoxide due to a faulty furnace.
       Koloms,

177 Ill. 2d at 492-94

687 N.E.2d at 81-82

.
¶ 40       While Country Mutual contends the underlying lawsuit alleged “traditional environmental
       pollution,” we find the underlying lawsuit did not. In support of our finding we rely not only on
       Erie, but also on Country Mutual Insurance Co. v. Hilltop View, LLC,

2013 IL App (4th) 130124

2013 IL App (4th) 130124, ¶ 28

. The facts in Hilltop are nearly identical to the instant case. In Hilltop,
       the insurer filed a complaint against an insured hog farm and the farm’s neighbors, arguing it
       had no duty to defend under its policies against the neighbors’ underlying nuisance and
       negligence lawsuit predicated on alleged odors caused by the operation of the confinement hog
       farm and the land application of manure from the confinement hog farm on property owned by
       the neighbors. The insurer asserted the policies’ pollution exclusion barred coverage and
       defense of the underlying lawsuit. The insureds in Hilltop were covered by an Agriplus policy
       and an umbrella policy similar to the policies in the instant case. The pollution exclusion in an
       umbrella policy stated the policy did not apply:
               “ ‘to personal injury or property damage arising out of the actual, alleged or threatened
               discharge, dispersal, release, or escape of pollutants:
                                                    ***
                       Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant
                   including smoke, vapor, soot, fume, acids, alkalis, chemicals, and waste materials.
                   Waste materials include materials which are intended to be or have been recycled,
                   reconditioned, or reclaimed.’ ” Hilltop,

2013 IL App (4th) 130124, ¶ 38

.
       Based upon the allegations made in the complaint, the Hilltop court found the neighbors did
       not appear to be claiming the insureds were polluting the environment in the traditional sense
       of the word. Hilltop,

2013 IL App (4th) 130124, ¶ 38

.
¶ 41       The alleged source of injury in the instant case is virtually identical to Hilltop. Both cases
       claim pollution caused by a hog facility. The insureds in Hilltop operated a large hog-farming
       operation, which was characterized as “larger than traditional hog farms.” Hilltop,

2011 IL App (3d) 100380, ¶ 22

. The alleged pollutants are the same in both cases,
       along with the same alleged injuries, including the underlying plaintiffs’ ability to use and
       enjoy their property and alleged damage to their quality of life. We agree with Hilltop that the
       claims made by the plaintiffs in the underlying lawsuit are not pollution claims in the
       traditional sense of the word. We also agree with Erie that the exclusion is ambiguous because
       “[w]hen the allegations in the underlying complaint are compared to the relevant provisions in
       the insurance polic[ies], it is unclear whether permitted emissions constitute traditional
       environmental pollution that is excluded.” Erie,

285 Ill. App. 3d 536, 540

. Accordingly, the policies’ pollution exclusions do not apply.

¶ 42 CONCLUSION
¶ 43 We find the allegations in the underlying complaint in the underlying lawsuit constituted a
claim for damages and set forth the elements necessary to trigger a duty to defend. We further

- 11 -
find that the pollution exclusions do not apply to abrogate Country Mutual’s duty to defend.
Accordingly, the judgment of the circuit court of Clay County is affirmed.

¶ 44 Affirmed.

¶ 45 JUSTICE MOORE, dissenting.
¶ 46 I respectfully dissent. As the majority correctly establishes, in order to determine if a claim
is potentially covered under an insurance policy, thus triggering a duty to defend, the court
must compare the allegations in the complaint to the policy language. See supra ¶ 16. Here
both of the insurance policies at issue provide for coverage of claims made against an
“insured” for damages because of “bodily injury” or “property damage” caused by an
“occurrence.” Both policies define “occurrence” as “an accident” which results in bodily
injury or property damages. The underlying complaint alleges that the insured had filed a
“Notice of Intent to Construct” a facility that would house approximately 16,606 hogs. The
complaint alleges that “there is a danger of real and immediate injury which will occur” if the
facility were to become operational, in that “there will be strong, offensive, repugnant,
foul-smelling and disagreeable odors as a result of discharges and emissions of chemical gases,
wastes, manure dust, and airborne particles.” The complaint alleges that the insured’s hog farm
“when completed will be a public nuisance to [the] [p]laintiffs,” and “when completed will be
a private nuisance to [the] [p]laintiffs.” There are no allegations anywhere in the underlying
complaint that the underlying plaintiffs have yet suffered any property damage or bodily
injury, and I would accordingly find no potential coverage under the policy.
¶ 47 The majority cites no case law to support a finding that a request for a prospective
declaration of nuisance for a not-yet-operational business facility could be considered an
occurrence which has resulted in property damage or bodily injury despite the fact that neither
type of injury has been alleged in the complaint. In all of the cases cited by the majority, the
underlying complaint alleged some type of covered injury caused by an occurrence. In B.H.
Smith, Inc. v. Zurich Insurance Co.,

676 N.E.2d 221, 223

 (1996), the
       underlying complaint alleged that the underlying plaintiff suffered a trademark infringement
       injury due to advertising conducted by the insured, which was clearly a covered claim under
       the policy. The issue in that case was whether the claim could be considered one for damages
       when the underlying complaint contained a prayer for equitable relief (id. at 541,

), an issue that does not speak to the more fundamental problem facing this court in
       comparing the complaint and the policies at issue in this case, where no covered injury is
       alleged.
¶ 48        Similarly, in Erie Insurance Exchange v. Imperial Marble Corp.,

2011 IL App (3d) 100380