On July 16, 2000, vandals set fire to stocks of cardboard at the Loop Paper Recycling, Inc. (Loop) facility. The fire burned for several days and sent clouds smoke and toxic substances into the surrounding neighborhood. On August 17, 2001, residents of that neighborhood (plaintiffs) filed suit against Loop. They sought damages for medical diagnosis, testing and monitoring to determine the impact of those substances on their collective health.

Loop was insured under a commercial general liability (CGL) policy issued by Connecticut Specialty Insurance Company (Connecticut) at the time of the loss. On January 15, 2001, Loop asked Connecticut to defend again the suit. On May 21, 2001, Connecticut agreed to defend Loop after reserving its rights. On September 28, 2001, Connecticut sought for a declaratory judgment that it didn't have to cover or defend Loop. The circuit court granted the motion, finding that the policy's pollution exclusion applied. Loop appealed.

The appellate court affirmed the circuit court finding that the policy total pollution exclusion barred coverage for the plaintiffs' bodily injuries. As did the lower court, the appellate court ruled that the exclusion's hostile fire exception did not apply. Since Loop was involved in handling, storage, disposal, processing or treatment of waste, both the trial and the appeals courts ruled that the pollution exclusion barred coverage.

The appellate court also concurred with the circuit court finding that the absolute pollution exclusion in Coverage B (Personal and Advertising Injury) barred coverage for damages because of personal injury arising from a fire at Loop's facility. The findings of the circuit court were affirmed on all counts.

Connecticut Specialty Insurance Company, Plaintiff-Appellee, v. Loop Paper Recycling, Inc., Defendant-Appellant (Anjanette Howard, Tamika Jackson, Rodney Jackson, Randy Hayes, Brianna Hayes, Camille Samuels, Jennifer Lee, Justin Lee, and Robert Studway, Individually and on Behalf of All Others Similarly Situated, Defendants). Illinois Appellate Court, Fourth Division. No. 1-03-2988. Filed February 17, 2005. Affirmed. 2005 CCH Personal and Commercial Liability Cases. Paragraph 16,016.