UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF INDIANA 

 HAMMOND DIVISION 

OLD REPUBLIC INSURANCE ) 

COMPANY, ) 

 ) 

 Plaintiff, ) 

 ) 

 v. ) CASE NO. 2:15-CV-281-JD 

 ) 

GARY/CHICAGO INTERNATIONAL ) 

AIRPORT AUTHORITY, ) 

 ) 

 Defendant. ) 

OPINION AND ORDER 

 This is an insurance coverage dispute between Plaintiff Old Republic Insurance 

Company (“Old Republic”) and Defendant Gary/Chicago International Airport Authority 

(“Airport Authority”). Old Republic filed a complaint for declaratory relief and 

reimbursement of defense costs against the Airport Authority after the Indiana 

Department of Environmental Management (“IDEM”) initiated an action against the 

Airport Authority in connection with pollution at the Gary/Chicago International Airport 

(“Airport”) [DE 3]. Old Republic asks the Court to declare that, based on the pollution 

exclusion in the sixteen applicable insurance policies issued to the Airport Authority, it 

did not (and does not) have a duty to defend or indemnify the Airport Authority with 

respect to the IDEM action. Id. Thus, Old Republic believes that it should be reimbursed 

for what it paid to date on behalf of the Airport Authority to remedy the matter. Id. 

While the complaint alternatively seeks to limit the time frame of any coverage, this issue 

is not raised in Old Republic’s Motion for Summary Judgment [DE 20]; rather, only the 

pollution exclusion is at issue in the motion, which is fully briefed [DE 21; DE 24; DE 
2 

25; DE 26] and ripe for ruling. For the reasons set forth below, the Court DENIES Old 

Republic’s Motion for Summary Judgment. 

I. Facts 

 Based on the pleadings, there is no dispute that pollution and contamination 

conditions exist at the Airport [DE 3 at 3; DE 15 at 4]. As a result of those conditions, on 

September 8, 2014, IDEM sent a letter to the Airport Authority (who owns and operates 

the Airport) requiring the Airport Authority to investigate and submit a plan to contain or 

remediate the problem (“the IDEM action”) [DE 15 at 4-5, 7]. Specifically, IDEM 

identified the presence of an oily sheen in one area and detected concentrations of 

benzo(a)pyrene, arsenic, and PCBs in another area [DE 15 at 4-5]. Since then, IDEM has 

required the Airport Authority to investigate the presence of fifty-two different 

pollutants/contaminants [DE 25-1, DE 25-2]. 

 On September 9, 2014, the Airport Authority tendered a claim to its insurer, Old 

Republic, concerning the IDEM action [DE 25-3]. Old Republic agreed to defend the 

Airport Authority and hired counsel to assist with respect to the IDEM action, but it did 

so under a full reservation of rights [DE 21-19]. 

 Old Republic issued a total of sixteen insurance policies to the Airport Authority, 

each providing coverage for a year and collectively covering the period from April 25, 

1997 through April 25, 1998 and April 25, 2000 through May 25, 2015 [DE 3 at 9; DE 

21-3 through DE 21-18; DE 24 at 3]. The policies at issue contained the following 

pertinent language: 

We will pay those sums that the insured becomes legally obligated to pay 

as damages because of “bodily injury” or “property damage” . . . 

*** 
3 

[or] “personal injury” or “advertising injury” to which this insurance 

applies. We will have the right and duty to defend any “suit” seeking 

those damages . . . 

*** 

All Coverages included in this policy are subject to the following 

exclusions. 

A. Noise and pollution and other perils. 

1. This policy does not cover claims directly or indirectly 

occasioned by, happening through or in consequence of:- 

. . . 

(b) pollution and contamination of any kind whatsoever1

 . . . 

unless caused by or resulting in a crash fire explosion or collision 

or a recorded in-flight emergency causing abnormal aircraft 

operation. 

2. With respect to any provision in the policy concerning our 

duty to investigate or defend claims, such provision shall 

not apply and we shall not be required to defend: 

 

(a) claims excluded by Paragraph 1; or 

(b) a claim or claims covered by the policy when combined 

with any claims excluded by Paragraph 1 (referred to 

below as “Combined Claims”). 

[DE 21-3 through DE 21-18 (emphasis added)]. While the policies define certain terms, 

the policies do not define the terms “pollution” or “contamination.” Id. 

                                                            

1

 The first two policies stated “pollution and contamination of any kind whatsoever,” while the other 

fourteen policies stated “pollution or contamination of any kind whatsoever.” [DE 21-3 through DE 21-18]. 

Neither party contends that the changed language affects the outcome of this case, and so for clarity’s sake 

the Court refers to the conjunctive form of the policy language, or otherwise refers simply to the “pollution 

exclusion.” 
4 

II. Standard of Review 

On summary judgment, the burden is on the moving party to demonstrate that 

there “is no genuine dispute as to any material fact and the movant is entitled to judgment 

as a matter of law.” Fed. R. Civ. P. 56(a). That means that the Court must construe all 

facts in the light most favorable to the nonmoving party, making every legitimate 

inference and resolving every doubt in its favor. Srail v. Village of Lisle, Ill., 588 F.3d 

940, 943 (7th Cir. 2009). A “material” fact is one identified by the substantive law as 

affecting the outcome of the suit. Anderson v Liberty Lobby, Inc., 477 U.S. 242, 248 

(1986). A “genuine issue” exists with respect to any such material fact, and summary 

judgment is therefore inappropriate, when “the evidence is such that a reasonable jury 

could return a verdict for the non-moving party.” Id. On the other hand, where a factual 

record taken as a whole could not lead a rational trier of fact to find for the non-moving 

party, there is no genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio 

Corp., 475 U.S. 574, 587 (1986) (citing Bank of Ariz. v. Cities Servs. Co., 391 U.S. 253, 

289 (1968)). Summary judgment is not a tool to decide legitimately contested issues, and 

it may not be granted unless no reasonable jury could decide in favor of the nonmoving 

party. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 

Sitting in diversity,2

 the Court will rely on the substantive law of Indiana and 

attempt to predict how the Indiana Supreme Court would decide the issues presented 

                                                            

2

 The pleadings establish that the Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332 [DE 3 

at 2-3; DE 15 at 3], and the case presents an actual controversy within the Court’s authority pursuant to 28 

U.S.C. § 2201. The parties do not raise a choice of law issue (and in fact rely on Indiana law in their 

briefs), and therefore, the Court applies federal procedural law and Indiana’s substantive law. Erie R.R. Co. 

v. Tompkins, 304 U.S. 64, 78 (1938); Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339, 

345 (7th Cir. 2010) (applying the law of the forum state because no party raised a choice of law issue) 

(citing Casio, Inc. v. S.M. & R. Co., 755 F.2d 528, 531 (7th Cir. 1985)). Contract interpretation, including 

a question of whether a contract is ambiguous, is a substantive issue, Bourke v. Dun & Bradstreet Corp., 

159 F.3d 1032, 1036 (7th Cir. 1998); thus, Indiana state law applies to the issue presented in this case. 
5 

here. See Lodholtz v. York Risk Servs. Grp., Inc., 778 F.3d 635, 639 (7th Cir. 2015);

Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999) (“Where 

the state supreme court has not ruled on an issue, decisions of the state appellate courts 

control, unless there are persuasive indications that the state supreme court would decide 

the issue differently.”). 

III. Discussion 

In Indiana, insurance policies are governed by the same rules of construction as 

other contracts. Bradshaw v. Chandler, 916 N.E.2d 163, 166 (Ind. 2009). The Indiana 

Supreme Court has indicated how insurance policies are to be interpreted, as follows:

Interpretation of an insurance policy presents a question of law that is 

particularly suitable for summary judgment. It is well settled that where 

there is ambiguity, insurance policies are to be construed strictly 

against the insurer and the policy language is viewed from the 

standpoint of the insured. This is especially true where the language in 

question purports to exclude coverage. Insurers are free to limit the 

coverage of their policies, but such limitations must be clearly 

expressed to be enforceable. Where provisions limiting coverage are 

not clearly and plainly expressed, the policy will be construed most 

favorably to the insured, to further the policy’s basic purpose of 

indemnity. Where ambiguity exists not because of extrinsic facts but by 

reason of the language used, the ambiguous terms will be construed in 

favor of the insured for purposes of summary judgment. 

State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 848 (Ind. 2012) (internal 

citations and quotations omitted). Ambiguity exists when a policy is susceptible to two 

or more reasonable interpretations. Everett Cash Mut. Ins. Co. v. Taylor, 926 N.E.2d 

1008, 1012-13 (Ind. 2010) (citing Beam v. Wausau Ins. Co., 765 N.E.2d 524, 528 (Ind. 

2002)). The fact that the parties disagree over the meaning of the contract does not, in 

and of itself, establish an ambiguity. Id. (citing Meridian Mut. Ins. Co. v. Cox, 541 

N.E.2d 959, 961 (Ind. Ct. App. 1989)). On the other hand, if insurance policy language is 
6 

clear and unambiguous, it should be given its plain and ordinary meaning. Reuille v. E.E. 

Brandenberger Constr., Inc., 888 N.E. 2d 770, 771 (Ind. 2008) (quoting Cabanaw v. 

Cabanaw, 648 N.E.2d 694, 697 (Ind. Ct. App. 1995)). Moreover, the duty to defend is 

broader than an insurance company’s coverage liability or its duty to indemnify. Seymour 

Mfg. Co., Inc. v. Commercial Union Ins. Co., 665 N.E.2d 891, 892 (Ind. 1996). 

Based on the fact that Old Republic’s insurance policies explicitly exclude 

coverage for “pollution and contamination of any kind whatsoever,” Old Republic 

contends that it does not have a duty to defend or indemnify the Airport Authority in 

relation to the IDEM action. The Airport Authority disagrees and believes that Old 

Republic owes coverage because the language of the pollution exclusion is ambiguous, so 

the exclusion cannot be enforced to negate Old Republic’s duties under the insurance 

policy. 

 As recently noted in St. Paul Fire & Marine Ins. Co. v. City of Kokomo, No. 

1:13-CV-01573-JMS, 2015 WL 3907455 (S.D. Ind. June 25, 2015) (Magnus-Stinson, J.), 

reconsideration denied sub nom., 2015 WL 7573227 (S.D. Ind. Nov. 25, 2015), Indiana 

utilizes a unique approach to determine the applicability of a pollution exclusion in an 

insurance policy dispute. See St. Paul Fire & Marine Ins. Co., 2015 WL 3907455 at *5 

(citing Flexdar, Inc., 964 N.E.2d at 851). Unlike Indiana, in analyzing whether a policy 

excludes coverage for losses resulting from “pollutants,”3

 some jurisdictions employ a 

“literal” view of the absolute pollution exclusion and deem it unambiguous where a 

substance is acting in any manner as an “irritant or contaminant,” while other 

                                                            

3

 The policies analyzed were different than the policy at issue here because they defined the term 

“pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke vapor, soot, 

fumes, acids, alkalis, chemicals, and waste” (hereinafter referred to as the “absolute pollution exclusion”).
7 

jurisdictions employ a more “situational” approach and uphold the absolute pollution 

exclusion only in cases where the facts reveal “traditional environmental contamination.” 

See Flexdar, Inc., 964 N.E.2d at 850-51 (citing cases). Either of these approaches might 

support the outcome Old Republic seeks here. 

However, Indiana applies basic contract principles and has consistently held that 

“the insurer can (and should) specify what falls within its pollution exclusion.” Flexdar, 

Inc., 964 N.E.2d at 851; see Seymour Mfg. Co. v. Commercial Union Ins. Co., 665 

N.E.2d 891 (Ind. 1996) (finding that the insurer had a duty to defend a solid waste 

disposer against an action by the EPA to clean up hazardous materials that leaked from 

containers, despite an exclusion for damage caused by enumerated pollutants without 

exception); American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996) (involving 

environmental contamination caused by the leakage of gasoline from a gas station’s 

underground storage tanks, and finding that the absolute pollution exclusion’s language 

was ambiguous, because if read literally it would negate virtually all coverage, including 

a situation where a visitor slipped on a grease spill); see also Freidline v. Shelby Ins. Co., 

774 N.E.2d 37 (Ind. 2002) (rejecting the insurer’s attempt to distinguish Kiger and 

Seymour on the basis that they involved traditional environmental cleanup for businesses 

regularly handling toxic substances, and finding that, because carpet glue fumes were not 

specifically identified in the absolute pollution exclusion, the exclusion was ambiguous 

and did not bar coverage for bodily injury caused to workers in the office building). 

The Seventh Circuit has similarly recognized the Indiana Supreme Court’s 

approach with respect to the specificity required in order for pollution exclusions to be 

enforced. See Visteon Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 777 F.3d 415, 
8 

417 (7th Cir. 2015) (“Visteon wanted Indiana law to apply because Indiana does not 

enforce standard pollution-exclusion clauses, and . . . Indiana requires that for such a 

clause to be enforceable the policy must ‘specify what falls within its pollution 

exclusion.’”) (citing Flexdar, Inc., 964 N.E.2d at 851); see also W. Bend Mut. Ins. Co. v. 

U.S. Fid. & Guar. Co., 598 F.3d 918, 923 (7th Cir. 2010) (holding that although the 

definition of “pollutants” at issue was identical to the definition at issue in Kiger, because 

the pollution exclusion itself “clearly includes motor fuels” and the definition of the term 

“motor fuels” then “explicitly applies to gasoline,” the plain language of the policy 

excluded coverage for damage arising from the gasoline leak at issue); contra Scottsdale 

Indem. Co. v. Vill. of Crestwood, 673 F.3d 715, 717 (7th Cir. 2012) (noting that the 

Supreme Court of Illinois has interpreted the pollution exclusion to be limited to harms 

arising from “traditional environmental pollution,” as opposed to tort cases involving 

sudden occurrences which happen to be precipitated by a contaminant as discussed in 

Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1044 (7th 

Cir. 1992)). 

Moreover, the Indiana Court of Appeals has also repeatedly and consistently 

applied the Indiana Supreme Court’s precedent to find similar absolute pollution 

exclusion language ambiguous. See State Auto. Ins. Co. v. DMY Realty Co., LLP, 977 

N.E.2d 411, 422 (Ind. Ct. App. 2012) (“Flexdar is precisely on point on this issue, and 

consequently we conclude that the pollution exclusions and endorsements . . . are 

ambiguous” and do not bar coverage for environmental contamination investigation and 

clean-up); Indiana Farm Bureau Ins. Co. v. Harleysville Ins. Co., 965 N.E.2d 62 (Ind. Ct. 

App. 2012) (“Because the language of the pollution exclusion at issue here is identical to 
9 

that at issue in Kiger, so is our holding. [The insurer] is not entitled to summary judgment 

on the basis that the pollution exclusion applies to gasoline leaks.”); Travelers Indem. Co. 

v. Summit Corp. of Am., 715 N.E.2d 926, 935 (Ind. Ct. App. 1999) (“We follow the lead 

of our supreme court and conclude that the pollution exclusion in the policies here is 

ambiguous and is construed against [the insurer] to not exclude coverage for the 

environmental claims made against [the insured],” a business that manufactured and 

finished metal parts resulting in the release of chemicals into the environment). 

Ultimately, the Indiana Supreme Court reasons that its approach “avoid[s] both 

the sometimes untenable results [of eliminating practically all coverage] produced by the 

literal approach and the constant judicial substance-by-substance analysis necessitated by 

the situational approach.” Flexdar, Inc., 964 N.E.2d at 850. Consistent with its own 

precedent, the Indiana Supreme Court reasoned in Flexdar, Inc. that whether the TCE 

contamination involved in the case would “ordinarily be characterized as pollution” is 

beside the point; rather, the question is whether the language of the policy is “sufficiently 

unambiguous to identify TCE as a pollutant.” Id. at 851 (emphasis in original). Because 

the insurer’s failure to be more specific rendered the exclusion ambiguous, the Court 

determined that the policy necessitated construction in favor of coverage. Id. at 851-52. 

Old Republic argues that this case is distinguishable from the precedent set by the 

Indiana Supreme Court that the absolute pollution exclusion ambiguously attempts to 

negate coverage for the release or discharge of “pollutants” or “contaminants.” Old 

Republic argues that unlike the absolute pollution exclusion at issue in those cases, its 

insurance policies clearly exclude coverage for any and all “pollution” and 

“contamination”—which indisputably exist on the Airport’s property [DE 21; DE 26]. In 
10 

addition, Old Republic notes that its policies do not contain a self-limiting definition of 

the term “pollutants” which lack the specificity deemed necessary to eliminate coverage 

for particular contaminants; rather, its policies expressly exclude coverage for claims 

resulting from pollution and/or contamination “of any kind whatsoever.” 

No Indiana case has held that all pollution exclusions are unenforceable or has 

analyzed the exact pollution exclusion at issue here. However, it appears that the Indiana 

Supreme Court would likely disagree with Old Republic’s position, which would (by 

analogy) essentially allow insurers to exclude coverage for damages caused by “any kind 

of pollutant whatsoever.” This seems to be precisely what Kiger and subsequent Indiana 

judicial determinations sought to avoid. 

The undersigned recognizes that Kiger and its progeny analyzed whether the 

absolute pollution exclusion sufficiently identified particular substances as “pollutants” 

so as to negate insurance coverage, whereas the exclusion at issue here denies coverage 

for “pollution” and “contamination.” However, the rationale taken from Indiana’s 

precedent is that in order for any pollution exclusion to be enforceable, Indiana requires 

the policy to specify what falls within the pollution exclusion—which Old Republic’s 

pollution exclusion fails to do. See Flexdar, Inc., 964 N.E.2d at 851; Visteon Corp., 777 

F.3d at 417. In other words, Old Republic’s pollution exclusion does not explicitly 

indicate what constitutes “pollution” or “contamination” so that an ordinary policyholder 

of average intelligence would know to a certainty that Old Republic would not be 

responsible for damages arising out of the oily sheen, benzo(a)pyrene, arsenic, and PCBs 

discovered at the Airport. See Flexdar Inc, 964 N.E.2d at 851-52. In fact, Old Republic’s 

pollution exclusion is even broader than the pollution exclusion clauses repeatedly 
11 

rejected by the Indiana courts, and not one of the fifty-two different 

pollutants/contaminants that the Airport is required to test for are identified as being 

excluded from coverage. As noted in Flexdar, Inc., whether any of the substances found 

at the Airport would “ordinarily be characterized as pollution” is beside the point. 964 

N.E.2d at 851 (emphasis in original). The question is whether the language of the policy 

is sufficiently unambiguous to identify the presence of the substances as pollution. See 

id.; see also St. Paul Fire & Marine Ins. Co., 2015 WL 3907455 at *11 (holding that the 

general incorporation of state and federal environmental laws is insufficient to comply 

with Indiana’s stringent standard that an insurance policy “specify what falls within its 

pollution exclusion.”) (quoting Flexdar Inc., 964 N.E.2d at 851-52). 

Because the Court believes that the Indiana Supreme Court would determine that 

Old Republic’s failure to be more specific (by its use of the broad terms “pollution” and 

“contamination” without more) renders its pollution exclusion ambiguous, the Court 

construes the insurance policy to further the policy’s basic purpose of coverage. See 

Bradshaw, 916 N.E.2d at 166 (noting that the Indiana Supreme Court enforces limits on 

coverage where the policy unambiguously favors the insurer’s interpretation, and that 

strict construction against the insurer derives from the disparity in bargaining power 

characteristic of parties to insurance contracts). 

IV. Conclusion 

 Based on the foregoing, the Court DENIES Old Republic’s Motion for Summary 

Judgment [DE 20] concerning whether Old Republic has a duty to defend and/or 

indemnify the Airport Authority with respect to the IDEM action and whether it is 

entitled to reimbursement of the costs paid in connection with the IDEM action. Old 
12 

Republic is ORDERED to file a status report on or before August 19, 2016 indicating its 

intent to seek a declaration with respect to the period of coverage, as initially alleged in 

its complaint [DE 3]. 

 SO ORDERED. 

 ENTERED: July 25, 2016 

 /s/ JON E. DEGUILIO 

 Judge 

 United States District Court