August 6, 2024
Many commercial insurance policies, and homeowners policies, contain forms of pollution exclusions. They vary from policy to policy, but because they are written by insurers, they attempt to severely or absolutely limit the situations in which insurers must indemnify property owners or occupiers for spills.
As with any insurance provision, they are subject to interpretation. One of the principles of interpretation is that they must make commercial sense.
Exclusions in particular are read narrowly in favour of extending coverage.
THE ISSUE
How far does this go?
THE CASE
In Construction Distribution & Supply Company Inc. v. Continental Casualty Company (CNA Insurance), the Ontario Court of Appeal looks at a very specific fact situation and makes a narrow ruling, but it illustrates some general principles:
- It all depends on the wording of the exclusion.
- Exclusions will be strictly interpreted in favour of the insured.
- It must be considered in context.
- Ask “what is the purpose of the policy?
- What are the insured’s reasonable expectations?
- The result must make commercial sense.
- If the insured’s business normally involves a pollution risk (such as a gas station), an exclusion likely applies.
- Simply storing a chemical which might become a pollutant as part of a business activity will not necessarily be excluded.
- As long as there is a “mere possibility” of coverage, the insurer must defend the claim.
If you are faced with an insurance policy issue other than pollution, a similar approach applies. However, it is complex and subtle, and, commercial liability policies are not all the same, so results may vary.
Legal advice is recommended. Have you tried reading an insurance policy lately?
HOW WEILERS LLP CAN HELP YOU
Weilers LLP has existed for over 75 years. During that time, we have represented insurers, insureds, and claimants against insureds.
Our counsel, Brian Babcock, has taught insurance law at the Bora Laskin Faculty of Law at Lakehead University.
At one time, the bulk of our insurance-related work was for insurance companies. Now, we mainly advise and act for insureds, but we bring our knowledge of how insurers think and act to our work for you.
We can advise you if you have a question about your policy. If you find yourself in a dispute with your insurer, we can represent you in negotiations or a lawsuit. If you are sued, and your insurer denies coverage, we can act both to defend the claim and, if we agree that it is worthwhile, to seek coverage.
If you need advice about insurance law, Weilers LLP may be the right lawyers for you.