Indemnity Insurance Co. of North America v. Westfield Insurance Co., No. 21-1775 (7th Cir. 2023)Annotate this Case
Sandstone operated large-scale swine farms in Scott County. Its owner also owned Red Oak. In 2007-2008, Westfield insured Sandstone. After 2008, Indemnity insured Sandstone. Star provided insurance to Red Oak. Sandstone was named as an additional insured under Star’s policy in 2009. In 2010, neighbors brought private nuisance claims against Sandstone in Illinois state court (“Marsh action”). Sandstone notified the three insurance companies. Each agreed to defend Sandstone, subject to a reservation of rights. Indemnity, citing a coverage exclusion for claims involving ”pollutants,” sought a declaratory judgment that it had no duty to defend. Sandstone withdrew its tender of defense to Indemnity, which dismissed its suit without prejudice. Star and Westfield split the defense of the Marsh action. An Illinois appellate court held that odor claims involving a hog facility are not “traditional environmental pollution” and are not excluded under insurance policy pollution exclusions, which foreclosed Indemnity’s earlier argument. Sandstone notified Indemnity, which filed another federal declaratory judgment action. In the Marsh action, a jury returned a verdict in favor of Sandstone. Westfield and then sought reimbursement of their defense costs.
Reversing the district court, the Seventh Circuit ruled in favor of Indemnity. Its insurance is "excess" and Star had a duty to defend, so Indemnity’s “other insurance” provision relieves it of any duty to defend Sandstone. Indemnity is not estopped from asserting that defense because it promptly responded to Sandstone’s tender of defense.