Illinois Court Says Insurer Cannot Escape Duty to Defend Hog Odor Lawsuit under “Pollution Exclusion” in Umbrella Policy

In what could broaden an insurer’s duty to defend Illinois livestock producers in odor lawsuits, an Illinois appeals court has rejected an insurer’s denial of coverage to hog confinement operators pursuant to a standard “pollution exclusion” provision in an umbrella liability policy.

In Country Mutual Insurance Company v. Hilltop View, et al., No. 4-13-0124, 2013 Ill. App (4th) 130124, 2013 Ill. App. LEXIS 788 (November 13, 2013), neighbors filed a nuisance and negligence action against the operators of a hog confinement facility and the owners of the surrounding fields upon which the manure was applied. The neighbors alleged that the “foul and obnoxious odors” caused them to suffer loss of enjoyment of their property and harmed their way of life. The operators’ insurer sought a declaratory judgment that it had no duty to defend the operators pursuant to a number of exclusions in the operators’ policies. A trial court summarily ruled that the insurer could not deny coverage based upon a “pollution exclusion” clause in the operators’ umbrella liability policy. The Illinois appellate court affirmed that ruling.

Relying on the Illinois Supreme Court’s decision in American States Insurance Co. v. Koloms, 177 Ill. 2d 473, 687 N.E.2d 72 (Ill. 1997), the court began with the rule that a “pollution exclusion” clause applies only to injuries caused by "traditional environmental pollution." In distinguishing this case from those involving “nonnaturally occurring” chemicals, the court found that odors emanating from hog confinements and the resulting manure application did not constitute “traditional environmental pollution.” In reaching this conclusion, the court relied on the fact that neighbors had “dealt with the smells” created by hog farms since their inception and that these farms were traditionally thought of as a source of food, not pollution. The court did note that while it “might be difficult” not to find “traditional environmental pollution” if, for example, a hog farmer dumped manure into a creek, that was not the issue before it.

The court also rejected the insurer’s argument that characterizing the hog odor as “traditional environmental pollution” was consistent with the Illinois Environmental Protection Act’s alleged treatment of odors as “air pollution.” The court stated that even if such odors now constituted air pollution for purposes of the Act, that finding would have no bearing on whether these odors constituted "traditional environmental pollution." What now constituted an environmental hazard under environmental protection laws, said the court, was far greater than what the Illinois Supreme Court had in mind when it spoke of "traditional environmental pollution."

Finally, in turning the insurer’s own argument against it, the court stated that the Illinois Livestock Management Facilities Act supported a finding that manure application onto farm fields did not constitute “traditional environmental pollution.” In so finding, the court noted that the Act itself stated that the application of livestock waste to the land was an “acceptable, recommended, and established practice in Illinois.”