Canada: Delineating The Risk: Pollution-Exclusion Clauses In Canada

Last Updated: July 4 2019
Article by Heather Gray, Kyle Magee and Mark Mandelker

In finding that the clause unambiguously excluded coverage for environmental claims, the Court of Appeal set aside a lower court's ruling and held that the insurers did not have a duty to defend in the circumstances.

Environmental remediation can be very expensive. As a result, it is not uncommon for commercial general liability policies to exclude coverage for environmental liabilities. These exclusion clauses are typically broadly drafted in an attempt to capture a wide range of environmental risks. The British Columbia Court of Appeal was recently asked to enforce a broadly-worded, pollution-exclusion clause. In finding that the clause unambiguously excluded coverage for environmental claims, the Court of Appeal set aside a lower court's ruling and held that the insurers did not have a duty to defend in the circumstances.

The Facts

West Van Holdings Ltd. and a related company (together, "West Van") owned a property in West Vancouver. Various businesses had operated on the property over the years, including a dry-cleaner and an auto repair business. In 2014, an adjacent land owner started an action against West Van, alleging that dry-cleaning chemicals and petroleum products had escaped from West Van's property and contaminated the soil and groundwater of the neighbouring land.

At different points in time both Intact and Economical had insured West Van under commercial general liability ("CGL") policies. Each policy covered West Van for property damage occurring during the applicable policy period. However, while the language differed somewhat between the policies, each contained a clause that excluded claims for property damage "arising out of" the discharge, release, escape, etc., of pollutants.

Given the allegations in the claim, Intact and Economical refused to fund West Van's defence on the basis that any liability for the claims against West Van would be excluded from coverage and thus did not trigger the duty to defend. On the other hand, West Van argued that the exclusion clauses were not unlimited in scope, and so long as there was a "mere possibility" that a claim might succeed that was within coverage the insurers had a duty to defend the action.

West Van commenced a proceeding and moved for a declaration that Intact and Economical had a duty to defend it. After reviewing the policies, the court found that the exclusion clauses were ambiguous in that, among other things, it was not clear whether the policies ousted coverage for losses arising from pollutants used prior to West Van's ownership and use of the land. The court noted that the insurer could have more clearly expressed its intention in the policy if it wished to exclude coverage. As a result, the court held that the insurers had a duty to defend West Van against the environmental claims being advanced against it. The insurers appealed.

The Appeal

The British Columbia Court of Appeal set aside the lower court's decision.

The Court of Appeal noted that the Plaintiff had alleged four causes of action: statutory liability under B.C.'s Environmental Management Act ("EMA"), negligence, nuisance, and strict liability.

Under the EMA, and similar environmental-protection legislation in other Canadian provinces, a person can be liable for contamination caused by a predecessor third party. West Van argued that the CGL policies did not clearly exclude this type of liability. The Court of Appeal disagreed. First, the Court noted that the claim did not reference contamination arising from a predecessor third party's ownership or use of the land. As there was no allegation that a third party predecessor owner or operator contaminated the lands, there was no possibility that West Van could be liable for such loss and no duty to defend arose in the absence of such an allegation. Second, even if there was such an allegation, the Court noted that CGL policies, which are occurrence-based policies, are generally not intended to cover property damage arising prior to the policy coming into effect. Absent explicit language providing coverage for historical contamination, a CGL policy would not be interpreted as covering a claim arising from an event occurring long before the policy came into force.

The Court also held that the pollution-exclusion clauses applied to oust coverage for the other causes of action. The claim against West Van alleged that contaminants had "been used, kept, disposed of, handled or treated on the Adjacent Lands in a manner that caused or allowed the Contaminants to be discharged or deposited into, or to escape and enter the soils and groundwater of the Adjacent Lands and Lands." 1 West Van argued that the exclusion clauses did not explicitly exclude claims arising from the "migration of pollutants". However, the Court highlighted the fact that the policies excluded all claims "arising out of" the escape of pollutants and found this was broader than the allegations in the claim and clearly and unambiguously excluded those claims from coverage.

In short, the Court of Appeal found that the claims advanced against West Van either did not fall under the initial grant of coverage or were clearly excluded by the pollution-exclusion clauses. As a result, the insurers did not owe a duty to defend.


Statutory causes of action, such as the one advanced in West Van, can expose owners of land that is the source of contamination to significant liability. For example, in the Ontario decision of Huang v. Fraser Hillary's Limited, the defendant dry-cleaning business was found liable in nuisance and pursuant to section 99 of Ontario's Environmental Protection Act 2 for contaminating the Plaintiff's property and ordered to pay over $1.8 million in damages. Liability was imposed under the EPA even though the spills occurred years before the relevant sections in the EPA came into force. An appeal to the Court of Appeal was dismissed and application for leave to the Supreme Court of Canada was recently denied. While issues of insurance coverage were not raised in Huang, it is clear that remediation costs can be very significant and, in some cases, can exceed the value of the property.

In light of the potential exposure, an insurer must take care if it wishes to exclude environmental or pollution claims from its policies. Fortunately, the West Van decision indicates that Canadian courts will enforce clearly worded and broadly drafted exclusions. In this regard, the decision provides some useful guidance to insurers as to how the court will interpret a phrase like "arising out of".

Finally, while West Van is good news for insurers who have intended to exclude environmental liability from their CGL policies, both West Van and Huang emphasize the importance of carefully evaluating potential environmental risks at the underwriting stage and then ensuring the policy language clearly and unambiguously delineates the scope of the risk the insurer is willing to accept.


[1] Emphasis added.

[2] R.S.O. 1990, c. E. 19 [the "EPA"].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions