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Scottsdale Indemnity Co. v. Village of Crestwood

ELR Citation: 42 ELR 20063
Nos. 11-2385 et al., (7th Cir., 03/12/2012)

The Seventh Circuit held that an insurance company has no duty to defend or indemnify a town in underlying lawsuits alleging that it knowingly supplied contaminated drinking water to its residents. In the mid-1908s, town officials learned that one of its water wells was contaminated with perc. But for reasons of economy, the town continued to use the well as a source of the daily water supply—without disclosure to the town's residents. The residents learned of the contamination in 2007 after a series of articles in a newspaper, spurring the underlying lawsuits. The town sought coverage from its insurer, but the insurance policy contains a pollution exclusion clause. There is no doubt that perc is a contaminant within the meaning of the policies, and the town "dispersed" the contaminated water throughout the town. The exclusion, therefore, applies.