Do Environmental Exclusion Clauses Hold Up?

Earlier this month, the B.C. Court of Appeal rendered its decision in West Van Holdings Ltd. v. Economical Mutual Insurance Company, 2019 BCCA 110 - a case which considered whether insurers can rely on certain exclusion clauses to deny or preclude coverage for environmental contamination and pollution claims.

The two insured entities, West Van Holdings Ltd. and West Van Lions Gate Dry Cleaners Ltd. (collectively, "West Van"), operated a dry cleaning business for more than forty years. In 2014, owners of an adjacent property sued West Van, alleging that petroleum products and dry-cleaning chemicals had migrated onto and contaminated their property as a result of West Van's operations.

West Van's insurers initially refused to defend the claim on the basis that their insurance policies contained exclusion clauses for pollution. The policies included coverage for "property damage" brought about by an "occurrence", but specifically denied coverage for property damage arising from pollutants.

West Van argued that its insurers were legally obligated to defend the claim, and that the scope and application of the exclusion clauses did not preclude coverage. In support of this position, West Van suggested that it was exposed to retroactive liability, as the Environmental Management Act holds current owners and operators responsible for remediation caused by predecessor third parties who had previously owned the site. Since the insurance policies did not expressly exclude this type of retroactive liability, West Van submitted that its insurers were bound to defend the claim.

West Van was successful before the B.C. Supreme Court in December 2017, which found the exclusion clauses to be ambiguous due to their silence on issues of concurrent, contributory, and retroactive liability. Since there was a "mere possibility" that even one of the claims was not "clearly and unambiguously" excluded, the Supreme...