The British Columbia Court of Appeal recently issued a decision that overturned the ruling of the Supreme Court of B.C. on the responsibility of two insurance companies to pay for environmental clean-up under their general liability coverage.
The case deals with West Van Holdings Ltd. (“West Van”) and West Van Lions Gate Cleaners Ltd. (“Lions Gate”) claiming their general liability insurance requires their insurers to defend them for any claims against them and cover any damages arising out of contaminants alleged to have migrated from property owned and used by them, to adjacent lands.
The B.C. Court of Appeal is the highest court in the province. It hears appeals from the B.C. Supreme Court, from the Provincial Court on some criminal matters, and reviews and appeals from some administrative boards and tribunals.
The B.C. Court of Appeal ruling means that the two insurance companies do not have to defend a Vancouver area dry cleaner or its holding company against a lawsuit filed by its neighbours alleging soil contamination.
The B.C. Court of Appeal noted that the “policies do not include coverage for liability arising before the policy periods”, as one justification for overturning the Supreme Court of B.C.’s original ruling.
In December 2017, the Supreme Court of B.C. had issued a decision which required two insurance companies to defend a pollution lawsuit against the owner of a dry cleaning business. The dry cleaner was being sued for allegedly contaminating neighbouring properties.
The two insurance companies argued that they were not responsible for paying for the environmental damages because pollution was excluded from both of their applicable general liability policies. The Supreme Court of B.C. dismissed their argument and stated, in short, that the pollution exclusion must “clearly and unambiguously” exclude coverage. Moreover, the Court stated that the pollution exclusion must apply to “all of the claims made against the insured” in order to free the carriers of their duty to defend.
In its ruling, the Supreme Court of B.C. viewed the construction of the pollution exclusion and more specifically the words “…premises owned, rented or occupied by an Insured…” as ambiguous with respect to coverage for remediation costs arising from pollutants that may have been used before the insured owned and/or operated on the premises. Further, the Court noted that the pollution exclusion lacked clarity on whether the exclusion extends to “concurrent liability, contributory liability or retroactive liability” attaching to the insured by statute.