Tokio Marine Specialty Insurance Company v. Altom Transport, Inc.

United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Argued January 30, 2024
Decided February 27, 2024
Before
DIANE S. SYKES, Chief Judge
THOMAS L. KIRSCH II, Circuit Judge
DORIS L. PRYOR, Circuit Judge
No. 23-1443
TOKIO MARINE SPECIALTY
INSURANCE COMPANY,
Plaintiff-Appellant,
v.
ALTOM TRANSPORT, INC.,
Defendant-Appellee.
Appeal from the United States District
Court for the Northern District of
Illinois, Eastern Division.
No. 20 C 7006
Charles P. Kocoras,
Judge.
O R D E R
Tokio Marine Specialty Insurance Company sued Altom Transport, Inc., seeking
a declaration that it does not have a duty to defend Altom in three suits based on
injuries arising from Altom’s transportation of a contaminant. On cross-motions for
summary judgment, the district judge agreed with Altom and correctly concluded that
Tokio Marine has a duty to defend because the allegations in the underlying lawsuits
potentially fall within the policy’s coverage for “bodily injury … arising out of
contamination that is caused by transportation.” We thus affirm.
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with F ED. R. APP . P. 32.1

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I. Background
Tokio Marine issued an insurance policy on which Altom is listed as an insured.
The policy was effective from August 3, 2018, to August 3, 2021. The key provision
relevant to this appeal states that Tokio Marine will cover losses “that the insured
becomes legally obligated to pay as a result of a claim for bodily injury … arising out of
contamination that is caused by transportation.” The policy then defines
“[t]ransportation” as beginning “upon loading your goods, products, materials or waste
onto a vehicle” and ending when those items have been “unloaded from a vehicle.”
And it defines “[c]ontamination” broadly to include “[t]he discharge, dispersal, release
or escape of any contaminant into or upon land, or any structure on land.”
In 2019 a driver for Altom transported a truck containing isopentane (a highly
flammable liquid) to New Jersey. After delivering the isopentane, the driver returned to
Indiana and left the truck at a storage facility for cleaning. The owner of the facility
assigned three workers to clean the truck who then discovered about 40 gallons of
isopentane still in the truck’s tank. At the direction of their supervisor, the workers
drained the liquid into the facility’s grated floors and drainage system. When the liquid
reached an adjacent boiler room, it reacted with an open flame and caused “a massive
explosion.” The workers were “still in the work area working on the tankard-trailer
when the explosion took place,” and they received first- and second-degree burns to
their faces and bodies.
The three workers sued Altom and the storage facility in separate but nearly
identical suits in Illinois state court. They allege that Altom was negligent for failing to
disclose to the facility the amount of isopentane that remained inside the tank, for
failing to exercise reasonable care in delivering the truck to the facility, and for leaving
an unsafe amount of highly flammable liquid inside the truck. Altom tendered the suits
to Tokio Marine. The insurer denied coverage, reasoning that the plaintiffs did not
allege bodily injuries “arising out of contamination caused by transportation” as
defined by the policy.
Tokio Marine then filed suit in federal court seeking a declaration that it does not
owe Altom a duty to defend or indemnify in connection with the state-court litigation.
At the pleadings stage, the judge determined that the question of Tokio Marine’s
indemnification duty could not be resolved until the conclusion of the underlying
litigation, so he stayed that part of the case as unripe. The parties then filed
cross-motions for summary judgment on the duty to defend, and the judge found in

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Altom’s favor. He first explained that Tokio Marine did not dispute that isopentane was
a “contaminant” as that term is defined in its policy, or that draining the isopentane
from the truck qualified as “contamination.” He then determined that the injuries
alleged in the underlying state-court actions “potentially occurred while [the plaintiffs]
were still draining the isopentane from the tankard-trailer and therefore arose out of
contamination.” And because the plaintiffs may still have been draining the liquid—i.e.,
“unloading” it—from the truck when the explosion occurred, the judge reasoned the
“transportation” of the contaminant had not yet ended. The judge concluded that,
liberally construed, the allegations in the underlying state-court complaints at least
potentially fall within the policy’s coverage. He therefore granted Altom’s motion for
summary judgment and denied Tokio Marine’s.
Tokio Marine asked the judge to enter a partial final judgment in favor of Altom
on the duty-to-defend claim. See F ED. R. C IV. P. 54(b). In response the judge vacated his
previous stay of the duty-to-indemnify claim, dismissed that claim without prejudice
for lack of ripeness, denied Tokio Marine’s motion as moot, and entered judgment in
favor of Altom.
This appeal followed. We initially questioned whether the judgment was
appealable and remanded it to the district court “to enter a judgment that fully and
completely implements its decisions.” On remand the judge issued an amended
judgment complying with that order.
II. Discussion
We review de novo a ruling on cross-motions for summary judgment, Blow v.
Bijora, Inc., 855 F.3d 793, 797 (7th Cir. 2017), and the construction of an insurance policy,
Lexington Ins. Co. v. RLI Ins. Co., 949 F.3d 1015, 1021 (7th Cir. 2020).
The parties do not dispute that Illinois law governs this policy and that in Illinois
an insurer’s duty to defend is broader than its duty to indemnify. See United Fire & Cas.
Co. v. Prate Roofing & Installations, LLC, 7 F.4th 573, 579 (7th Cir. 2021) (“It is difficult to
overstate the breadth of an insurer’s duty to defend.” (quotation marks omitted)). To
determine whether an insured owes a duty to defend, we compare the allegations in the
underlying complaint to the relevant provisions of the insurance policy. Id. at 579–80. If
those allegations even potentially fall within the policy’s coverage, the duty to defend is
triggered. Id. at 580. We construe policies and complaints liberally “in favor of imposing

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a duty to defend,” id., and we resolve ambiguities “in favor of the insured,” Am. Bankers
Ins. Co. of Fla. v. Shockley, 3 F.4th 322, 328 (7th Cir. 2021).
At the outset, the parties debate the significance of Tokio Marine’s first argument
that the purpose of the policy, which bears the word “Environmental” in its title and
subtitle, is to cover only injuries arising from pollution. In Tokio Marine’s view, this
pollution-based purpose negates a duty to defend claims about “injuries suffered in a
cleaning-facility explosion.” Altom counters that because Tokio Marine did not raise
this argument in the district court, it is waived on appeal. It is true that in the district
court Tokio Marine did not—as it does here—cite other portions of the policy that
support its point. But where the issue is “a matter of interpreting the contract, which
must be read as a whole,” we are not required to overlook relevant provisions. St. Paul
Fire & Marine Ins. Co. v. Schilli Transp. Servs. Inc., 672 F.3d 451, 460 (7th Cir. 2012).
Indeed, the exercise of contract interpretation is to determine the intent of the parties by
looking first to the ordinary meaning of the contract language in its entirety.
See Shockley, 3 F.4th at 327.
Nonetheless, Tokio Marine does not persuade us that the policy is restricted to
pollution-based injuries. First, a policy’s title and subtitle do not end the inquiry about a
contract’s meaning; the meaning is influenced by all the terms. NewSpin Sports, LLC v.
Arrow Elecs., Inc., 910 F.3d 293, 303–04 (7th Cir. 2018); see also Lexington Ins. Co., 949 F.3d
at 1023 (“We determine the character of a contract from its substantive effects, not
from the labels that parties prefer to place on its provisions.” (quoting Learning Curve
Int’l, Inc. v. Seyfarth Shaw, LLP, 911 N.E.2d 1073, 1079 (Ill. App. Ct. 2009))). Second, none
of the provisions Tokio Marine highlights (and indeed, no provision in the policy)
mentions “pollutant” or “pollution”; the policy uses the terms “contaminant” and
“contamination.” Third, Tokio Marine does not dispute that the isopentane meets the
policy’s definition of “contaminant,” and the definition of “contamination” appears to
include draining the isopentane.
Tokio Marine next argues that the underlying suits do not allege bodily injury
“arising out of contamination” because the complaints allege that the injuries were
caused by an explosion—not by exposure to isopentane. But nothing in the policy
conditions coverage on exposure to or physical contact with a contaminant; rather, the
policy covers bodily injuries “arising out of contamination.” And Illinois courts have
routinely held that “arising out of” is a “broad and vague phrase which must be
liberally construed in favor of the insured.” Shockley, 3 F.4th at 330 (internal quotation
marks omitted). A “but for” causal connection will suffice: The injuries need only have

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“flow[ed] from” the contamination. Zurich Am. Ins. Co. v. Ocwen Fin. Corp., 990 F.3d
1073, 1079 (7th Cir. 2021). Moreover, the policy broadly defines “contamination” as
“[t]he discharge, dispersal, release or escape of any contaminant into or upon land, or
any structure on land.” That definition arguably covers draining the isopentane from
the truck into the drainage system at the storage facility. Because the explosion would
not have occurred but for that draining, the underlying tort injuries “aris[e] out of
contamination.”
Tokio Marine also contends that draining the isopentane is not “contamination,”
but as far as we can tell, it never pressed that argument in the district court. As
mentioned above, the judge noted that it was “undisputed that the draining of the
isopentane from the tankard-trailer … falls within the Policy’s definition of
‘contamination.’” In any event, Tokio Marine does not develop the argument on appeal,
so we need not consider it. See M.G. Skinner & Assocs. Ins. Agency, Inc. v. Norman-Spencer
Agency, Inc., 845 F.3d 313, 321 (7th Cir. 2017) (“Perfunctory and undeveloped arguments
are waived … .”).
Tokio Marine urges alternatively that even if draining is contamination, it still
need not defend because Altom is not alleged to have drained the tanks. But the
absence of that allegation is irrelevant. Coverage occurs if Altom “becomes legally
obligated to pay as a result of a claim for bodily injury … arising out of contamination
that is caused by transportation.” If, as the injured plaintiffs allege, Altom negligently
transported the truck and failed to warn the facility owner about the excess
contaminant in the tank, then it may become legally obligated to pay the underlying
plaintiffs for the bodily injuries arising out of the release of that contaminant.
Tokio Marine’s final argument is also unavailing. It contends that the underlying
suits do not allege that “transportation” caused the contamination because in Tokio
Marine’s view, transportation had ended by the time Altom relinquished the tanker for
cleaning. Tokio Marine cites the provision stating that “transportation” starts when
“loading your goods, products, materials or waste onto a vehicle” and ends when those
items have been “unloaded.” It then urges us to use the “complete operations doctrine”
to interpret the term “unloaded.”
That doctrine does not help Tokio Marine. Illinois courts use the “complete
operations doctrine” to interpret loading and unloading clauses in auto insurance
policies. See Estes Co. of Bettendorf v. Emps. Mut. Cas. Co., 402 N.E.2d 613, 615–16 (Ill.
1980). Under this approach, unloading is complete when “subsequent to removal of the

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material from the vehicle, the deliverer has finished his handling of it, and the material
has been placed in the hands of the receiver at the designated reception point.” Id. at
614. But as Altom observes, neither our court nor any Illinois court has used this
doctrine to interpret loading and unloading clauses in contamination-coverage
policies—only automobile policies. And whether, as Tokio Marine urges, this policy’s
transportation provision is analogous enough to an automobile policy to invoke the
doctrine is a question of indemnification.
We therefore take the “loading or unloading” clause here at face value and
construe any ambiguity in Altom’s favor. See Shockley, 3 F.4th at 328. In doing so, we
observe that the clause can reasonably be read to mean that “transportation” is ongoing
any time a contaminant is in the truck. By its terms, “transportation” ends when
“goods, products, materials or waste” have been “unloaded” from the vehicle. And the
tort plaintiffs allege that at the time of the explosion, they were “working on the
tankard-trailer.” This can be reasonably understood to mean that they were still
unloading the isopentane (arguably a “good” or “waste”), 40 gallons of which were in
the truck when they began their work. The allegations, thus, at least potentially fall
within the “transportation” coverage, and Tokio Marine has a duty to defend.
AFFIRMED

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