Contract, Property, Liability, Damages, Torts, Air pollution
The British Columbia Supreme Court considered a coverage suit arising from a leak out of a home heating fuel, aboveground storage tank into the soil surrounding the vacation home of the plaintiff. The plaintiff’s insurer denied coverage relying on the pollution exclusion, which excluded loss or damage caused by contamination or pollution, or the release, discharge or dispersal of contaminants or pollutants. Unlike recent Ontario decisions, this case concerned a claim for coverage under a first party property policy, and is the first case from a common law province to consider the application of an absolute pollution exclusion to an “all risks” residential insurance policy. The plaintiff relied on cases considering the application of the pollution exclusion in commercial general liability policies. In particular, the plaintiff relied on Zurich Insurance Co. vs. 686234 Ontario Ltd. (2002), where the Ontario Court of Appeal found that the pollution exclusion was intended to apply to active industrial pollution and did not apply to a leak of carbon monoxide from a home furnace. In that case, the court stated that the carbon monoxide was not released like a manufacturer discharges effluent, but was discharged or released as a result of negligence alleged in the underlying claims. The Court of Appeal concluded that the absolute pollution exclusion in the commercial general liability policy was not intended to exclude coverage for a leak resulting from a faulty home furnace. However, the Supreme Court concluded that the substantial oil leak onto the plaintiff’s property was caused by pollution and amounted to a release, discharge or dispersal of contaminants. The court stated that there was no ambiguity in the language of the exclusion and that applying the exclusion to deny coverage for the loss was consistent with the reasonable expectations of the parties. The court reasoned that if the exclusion did not cover a fuel spill or a leak of the tank onto the insured’s property, what might it cover? Further, it found that the application of the clause did not render the policy worthless since it would continue to cover other perils such as fire, wind damage, theft and vandalism. In reaching his decision, the judge read the insurance contract as a whole, and found that even on a narrow reading of the exclusion clause, its plain and ordinary meaning would be that an oil leak of this size would be considered property damage caused by "contamination or pollution" or would be a "release, discharge or dispersal" of contaminants or pollution on the property, even though the terms are not defined in the policy.