In an entertaining decision authored by Judge Posner, the Seventh Circuit affirmed the district court's denial of coverage based upon the pollution exclusion. Scottsdale Indem. Co. v. Village of Crestwood, 2012 U.S. App. LEXIS 5069 (7th Cir. March 12, 2012).

   In 1985, Crestwood's mayor and other Village officials learned from state environmental authorities that one of the wells was contaminated by perc. Perc is a solvent widely used in dry cleaning and a carcinogen. Perc used by a nearby dry-cleaning establishment leaked into the groundwater tapped by the well. Although the Village officials promised the state they would close the well, use of the well continued until 2007 without disclosure to the Village residents.

   Hundreds of Crestwood residents sued the Village and Village officials. Defendants turned to their insurers, who denied coverage based upon the pollution exclusion. The exclusion barred coverage for damages arising out of "actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time."

   The insurers sued for a declaration that there was no coverage under their policies. The district court, relying upon the pollution exclusion, granted summary judgment to the insurers.

   The Seventh Circuit affirmed. The court agreed that a literal reading of the pollution exclusion would exclude coverage for acts not commonly understood to arise from pollution. For example, suppose a tanker truck filled with perc spilled its liquid cargo, another vehicle skidded on the wet surface of the highway and collided into an abutment, injuring the driver. Perc would be a contaminant under the pollution exclusion and the cause of the injuries. No one would argue, however, that a claim arising from such an accident would be barred by the pollution exclusion. But this was not such a case.

   Here, the Village caused the contamination of its water supply by not sealing the well, even though it did not introduce the contamination into the soil or groundwater. The pollution exclusion would mean little if the insured were required to be the original creator of the pollution in order to be within the exclusion.

   What mattered in a coverage suit was that the underlying suit was premised on a claim that the perc caused injuries for which plaintiffs were seeking damages, and that claim triggered the pollution exclusion.