Trump Tower Chicago Can't Pass Pollution Fines Onto Insurers

You don't have to live in Manhattan to have the daily experience of walking under a giant "TRUMP" sign; the former president had slapped his name on a number of skyscrapers throughout North America. In the spirit of Chicago being the Second City, the second Trump Tower came after the 1983 original in New York (in 2009). Sitting prominently on the north branch of the Chicago River in the upscale River North neighborhood, it houses both residential condos and a luxury hotel. Whatever your personal opinion on Trump's politics, hotels, or businesses, you might still agree that this building is an iconic part of the modern Chicago skyline.

What you might not know is the longstanding tango between Trump Tower Chicago and the state environmental agency. Recently, the Tower was faced with hefty fines and tried to pass them onto their property insurance companies. It all came down to interpretation of a surprisingly mighty little word in their contract. Let's look at how this case can teach us a thing or two about reading your insurance policy carefully.

History of the Chicago River and Trump Tower

If you're from Chicago, you might know that the locals have an interesting history of dumping things into the Chicago River. Throughout the 19^th century, the booming city's residents were dumping refuse into the river, which flowed directly into Lake Michigan – the city's source of drinking water. After the 1900 engineering marvel of reversing the Chicago River to flow instead to Mississippi River, the Second City thought it had solved its water and sanitation problems. But it wasn't just the people of St. Louis who were mad about being bombarded with Chi Town sewage; the fish started suffering noticeably. Water pollution was still rampant, no matter what direction it went in.

With the 1970s came the birth of the Environmental Protection Agency (EPA) and laws like the Clean Water Act (CWA). Basically, because there's just too much work to go around for one federal agency to oversee all environmental regulation, the EPA permits or requires state versions of itself (such as the Illinois EPA) to regulate environmentally-related activity within their respective states.

The Chicago Trump Tower uses Chicago River water for its HVAC system. In this process, cool water from the river is run through the Tower's cooling towers or heat exchangers and absorbs their heat, cooling them off. Then, this river water, which is now much warmer than when it started, is pumped back into the river. Since this process elevates the temperature of the river water, it can negatively impact aquatic life.

Un-permitted and Impermissible

Throughout the past decade, Trump Tower was pulling in almost 20 million gallons a day from the river and releasing the same volume back into the river in the form of "heated effluent." When buildings take in that much water, federal law gets concerned. The EPA requires that certain measures be followed for practices that could potentially have a significant impact on local ecosystems. Trump Tower previously had such a permit, but it expired in 2017, and the building did not renew the permit while it continued its practices of discharge.

In 2018, Lisa Madigan, who was at the time the Attorney General of Illinois, brought suit on behalf of the state's people against the Tower for dumping heated refuse into the river without a permit. This was not the first time the Tower had gone through this legal dance with Attorney General Madigan. She'd lodged the same complaint to the state pollution control board in 2012, a matter that was settled when the Tower finally got a permit and paid fines. The Tower was then ordered to comply with environmental laws in the future, but failed to do so again a few years later. The next time, in 2018, Madigan went straight to the courts.

Three's a Crowd

Not wanting to tango with the prosecution alone, Trump Towers soon called in a third party. When were faced with significant fines from the state — $10,000 for each day it was in violation of the law — they tried to get them covered by their building's insurance policy. And when their insurers didn't want anything to do with it, the Tower took them to court.

The Tower was insured by four different companies (ACE, Illinois Union, QBE, and Continental) from 2008to 2020. All of the insurance policies covered "property damage" caused by an "occurrence" during the period of coverage. "Property damage" was defined as "physical injury to tangible property, including all resulting loss of use of that property" or the "loss of use of tangible property that is not physically injured." All of the policies also included some sort of "pollution exclusion" which more or less stated that the insurance policy would not cover any damage, expense, or liability related to pollution, however it was caused.

Court Doesn't Take the Bait

Both of these terms and conditions of Trump Towers' insurance policies seem like they would do some legwork in getting the insurance companies off the hook for the building's environmental misdeeds. But as it turns out, neither of them needed to come into play at all, because there was another important word that did all the work: "occurrence." Surprisingly, this seemingly innocent term of the insurance policy contracts was the linchpin of the litigation. Each policy defined "occurrence" as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions [empashis added]."

You might think that "accident" wouldn't cover something intentional. On that line of reasoning, the insurers argued that since the Tower was clearly intentionally running and dumping the river water, it couldn't be an accident. But Trump tower responded that their actions were not intentional in the sense that they did not intend to cause harm to the aquatic life.

The court found this fishy. They weren't buying the "we didn't mean any harm argument." After all, it's not too different than driving without insurance coverage and trying to convince the cop that pulls you over that you just hadn't gotten around to it yet because you are a good driver and weren't out to hurt anybody. In the Tower's case, they were getting sued over not having a permit; they weren't getting sued over harming fish. And since they intentionally were operating without a permit, the court ruled that it was not an "accident," meaning that there was no "occurrence" for purposes of insurance coverage.

As a result, the insurance companies are off the hook for covering the Tower's fines — which again, are no small sum (at least if you're not a billionaire). Considering that the fines are 10 grand a day, the total could be up to $12 million. For now, it looks like Trump Tower is on the hook for their aquatic antics.

Related Resources

• Different Types of Commercial Insurance (FindLaw's Learn About the Law)
• Skies Darken for the EPA's Authority (FindLaw's Federal Courts blog)
• Small Business Law (FindLaw's Learn About the Law)