It did not take the Seventh Circuit Court of Appeals very long to react to the Illinois Supreme Court’s January 23, 2026 pollution exclusion ruling as reported in our January 29, 2026 Environmental Law Monitor Blog.

On March 13, the Seventh Circuit ruled that an AIG unit has no duty to cover $150 million in legal costs for Sterigenics and its former parent company following input from the Illinois Supreme Court on how to apply a pollution exclusion to EtO clams in the relevant policy.

The Seventh Circuit concluded that the Illinois Supreme Court’s answer to a question certified by Seventh Circuit makes clear that state environmental permits do not affect the application of the policy’s pollution exclusion to the contaminant at issue in the underlying litigation. Consequently, a three-judge panel of the Seventh Circuit reversed a prior losing insurers’ decision handed down by U.S. District Court for the Northern District of Illinois.

“The Illinois Supreme Court answered our certified question in unequivocal terms: ‘a permit or regulation authorizing emissions (generally or at any particular levels) has no relevance in assessing the application of a pollution exclusion within a standard-form commercial general liability policy,'” the Seventh Circuit panel said in the 5-page opinion. “That resolves this case. We now know that the pollution exclusion applies.”

The ruling relieves the AIG unit of a district court’s finding that it had to cover $150 million in defense costs by sterilization company Sterigenics and its former parent company, Griffith Foods, in nearly 1,000 lawsuits over 35 years’ worth of ethylene oxide emissions.

Weighing the insurer’s appeal of that finding last year, the panel ruled it would first need state justices’ input on whether its analysis of a standard pollution exclusion in the insurer’s commercial general liability policy should change in light of a permit from the Illinois Environmental Agency authorizing ethylene oxide emissions.

As previously reported, the Illinois Supreme Court unanimously answered that question in the negative in January 2026, rejecting arguments by Sterigenics and Griffith Foods that an IEPA’s permit meant the agency no longer considered those emissions to be pollutants and thus rendered the pollution exclusion inapplicable.

In its March 13 ruling, the panel proved unpersuaded by the companies’ contention that the Illinois Supreme Court’s answer did not disturb their win.

Specifically, the Seventh Circuit rejected the companies’ arguments that an intermediate appellate court’s 2011 finding created ambiguity prior to the high court’s answer such that the pollution exclusion was inapplicable at the time they tendered their defense in the underlying litigation.

In the 2011 decision at issue, Erie Insurance Exchange v. Imperial Marble Corp., a state appeals court found it was “arguably ambiguous” whether industrial emission of pollutants at levels allowed under a regulatory permit constituted traditional environmental pollution under a pollution exclusion.

However, the Seventh Circuit’s decision to certify a question to the Illinois Supreme Court on the issue “should not be read as a declaration that Imperial Marble somehow controlled in the meantime.”

“And even on the view that Imperial Marble revealed at least some degree of ambiguity in Illinois law, the Illinois Supreme Court reached the opposite conclusion,” the opinion reasoned. “We see not an ounce of uncertainty or equivocation in its holding that ‘the discharge of EtO emissions into the atmosphere at issue in this case fits squarely within’ the ‘plain language’ of the pollution exclusion.”

The Seventh Circuit’s decision directed the U.S. District Court for the Northern District of Illinois to reverse its entry of judgment for the insured companies and instead enter judgment for the AIG unit in both cases. It remains to be seen how courts outside of the Seventh Circuit’s jurisdiction will interpret the court’s reasoning or if the decision will remain limited to Illinois law and other similarly-based jurisdictions.