Illinois Appellate Court Rejects Insurer Contention That “Broad and General” Pollution Exclusion Barred Mold-Related Claims

Source:, January 28, 2016
By: Alexander J. Bandza, Jenner & Block

Certain jurisdictions interpret the pollution exclusion more expansively than others, but a recent Illinois decision interpreting Texas law suggests that this expansiveness has its limits.  In re Liquidation of Legion Indemnity Company, 2015 IL App (1st) 140452 (Ill. App. Ct. Nov. 10, 2015).  Legion concerned a commercial general liability policy issued by Legion Indemnity Co. (“Legion”) and whether a pollution exclusion in that policy applied to mold-related claims.  The policy included specific exclusions for asbestos and lead contamination as well as a generic “Pollution and Health Hazard” exclusion that excluded, among other things, “contamination of the environment by any pollutant that is introduced at anytime, anywhere, or in any way.”  The trial court held that mold fell within this broad definition and, therefore, the “Pollution and Health Hazard” exclusion barred coverage for mold-related claims.  The First District reversed, stressing that courts must interpret exclusions narrowly and in favor of coverage.  The appellate court noted that the policy did not specifically exclude mold- or fungi-related claims.  The court then rejected that the policy exclusion applied, reasoning that the exclusion and its definitions used such “broad and general language” that “anything—solid, liquid, gas or substance—that would potentially cause injury to a person would be excluded from coverage.”  In the First District’s view, such a reading would render the policy “illusory.”  In reaching its conclusion, the court acknowledged that Legion had later issued several other insurance policies that “unambiguously” excluded mold or fungi from coverage, but it stressed that the existence of such revised policies was not determinative.

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