Does My Policy Cover That?

That is the question that every policyholder asks when confronted by an accident, an incident or a lawsuit.  Will my insurance company defend or indemnify me against a claim for damages?

That was the issue in a case decided by the Appellate Court of Illinois, First Judicial District, on August 30, 2023.  The case, Continental Casualty Company v 401 North Wabash Venture, LLC, was a lawsuit by an insurance company brought against its insured seeking a declaration that it had no duty to defend the insured in a lawsuit brought against the insured by the State of Illinois.

The defendant in the case, 401 North Wabash Venture, LLC, is the developer of one the tallest buildings in Chicago.  The building, known as 401 North Wabash (and colloquially as Trump Tower), was built on the banks of the Chicago River.  The developer not only used its location on the Chicago River and its extraordinary views of the Chicago skyline to sell some of the highest-priced condominiums in the city, but it used the river to help operate the building’s heating, ventilation and air conditioning (HVAC) system.  The building’s HVAC system contained a “cooling water intake/discharge system”, which withdrew 19.7 million gallons of water from the river each day, circulated the water through the building’s HVAC system for cooling purposes and then returned the same volume of water back to the river as “heated effluent”.

In 2018, the State of Illinois, acting on behalf of the Illinois Environmental Protection Agency, filed a lawsuit against 401 North Wabash Venture, LLC, alleging that the building was discharging “heated effluent” into the river without a permit in violation of the Illinois Environmental Protection Act (Act) and the regulations promulgated thereunder.  The lawsuit sought an injunction ordering 401 North Wabash Venture, LLC to cease and desist from further violations of the Act, as well as civil penalties.  When 401 North Wabash Venture, LLC filed a claim under its insurance policy with Continental Casualty Company, this lawsuit ensued.


When a court considers whether an insurer has a duty to defend its insured, it looks to the allegations of the underlying complaint and compares them to the language of the insurance policy.  The court cannot consider extrinsic evidence – that is, it cannot consider matters outside of the four corners of the complaint and the four corners of the policy.  In Illinois, this is known as the “eight corners rule”.  In other states, it might be called the “four corners rule”.

In the instant case, Continental Casualty Company denied coverage for the underlying lawsuit on a number of grounds; one of which was that the lawsuit brought against the insured by the State of Illinois did not allege an “occurrence” as that term is defined in the policy.  The trial court agreed with Continental Casualty Company and ruled that it had no duty to defend 401 North Wabash Venture, LLC against the claims of the State of Illinois.  The Appellate Court affirmed the decision of the trial court.


The type of policy at issue in this case was a commercial general liability (CGL) policy.  A CGL policy will generally defend and indemnify an insured against claims of bodily injury or property damage resulting from an occurrence.  All three terms are defined in the policy.

In the instant case, the policy defined the term “occurrence” as:

an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

While the policy did not define the term “accident”, a court will usually give an undefined term its common meaning.  As a result, the Appellate Court said that, in Illinois, an accident is:

an unforeseen occurrence, usually of an untoward or disastrous character or an undesigned sudden or unexpected event of an inflictive or unfortunate character. (Internal quotation marks omitted.) Korte & Luitjohan Contractors, Inc. v. Erie Insurance Exchange, 2022 IL App (5th) 210254, ¶ 21; see also Stoneridge Development Co. v. Essex Insurance Co., 382 Ill. App. 3d 731, 749 (2008) (collecting cases). Moreover, “ ‘[t]he natural and ordinary consequences of an act do not constitute an accident.’ ” State Farm Fire & Casualty Co. v. Watters, 268 Ill. App. 3d 501, 506 (1994) (quoting Aetna Casualty & Surety Co. v. Freyer, 89 Ill. App. 3d 617, 619 (1980)); see also Stoneridge Development Co., 382 Ill. App. 3d at 749-50.


The ultimate question for the Appellate Court to decide was whether there was an occurrence under the policy.  Continental Casualty Company asked the Court to focus on the building’s act of discharging “heated effluent” into the river without a permit, which, undeniably, was an intentional act.  401 North Wabash Venture, LLC asked the Court to focus on the consequence of such discharge, which was the disruption of the habitat of fish and other aquatic wildlife that lived in the river and whether the building either intended or could have anticipated that consequence.

This turned out to be a simple question for the Appellate Court to answer.  The act, as alleged in the complaint, was the discharging of “heated effluent” into the Chicago River without a permit.  While the consequence of the act might have been the denigration of the river’s habitat, the consequence of an act is not the occurrence.  It is the act, itself, which is the occurrence.

The fact remains, however, that the issues revolve around 401 North Wabash’s compliance with statutory and regulatory requirements.

Because the act of discharging “heated effluent” into the river without a permit would have been a violation of the Act, even if there were no negative consequences, and because it was done intentionally by 401 North Wabash Venture, LLC, it was not an “accident”.  For that reason, the Appellate Court said that:

We cannot find that this alleged conduct constitutes an “occurrence” under the terms of the insurance policies.


Whether an insurance policy covers certain claims is not always an easy or straightforward issue to resolve.  The time to find out whether a policy covers a claim is before the claim is filed, not after.  No matter how sophisticated a business owner might be, every prospective policyholder needs the help of experienced professionals to ensure that they are adequately covered.

Contact RMC Group today for help with all your insurance needs at 239-298-8210 or [email protected].