Duty To Defend Triggered: Ambiguous Pollution Exclusion Clause

Published date03 August 2022
Subject MatterEnvironment, Insurance, Litigation, Mediation & Arbitration, Environmental Law, Insurance Laws and Products, Trials & Appeals & Compensation, Personal Injury, Clean Air / Pollution
Law FirmClark Wilson LLP
AuthorMr Satinder Sidhu and Imroz S. Ali

A tragic workplace accident, resulting in the death of the insured, laid the background for the Ontario Court of Appeal's (the "ONCA") finding that a pollution exclusion clause was not triggered and the insurer owed the insured a duty to defend.

The Underlying Action

In Hemlow Estate v Co-operators General Insurance Company, 2021 ONCA 908 [Hemlow] the insured, Mr. Hemlow, was a sole proprietor whose business focused on the sampling and analysis of oil and other mechanical lubricants. In 2015, he was subcontracted by Wear-Check to provide oil sampling and analysis at the processing facilities of Rich Products of Canada Limited ("Rich Products").

While providing his services at the Rich Products facility, Mr. Hemlow opened a valve containing pressurized ammonia. The ammonia exposure killed Mr. Hemlow and caused significant property damage to Rich Products. Rich Products subsequently brought a claim against Wear-Check and Mr. Hemlow's estate (the "Estate") for negligence, nuisance, and breach of contract (the "Underlying Action").

During Mr. Hemlow's services at the Rich Products' facility, he maintained a Commercial General Liability policy (the "Policy") with Co-operators General Insurance Company ("Co-operators").

Co-operators denied it had a duty to defend the Estate. It stated Rich Products' claims against the Estate concerned Mr. Hemlow's negligent conduct for allowing ammonia to escape and Co-operators viewed the ammonia as a pollutant that was excluded from coverage through the Policy's "Total Pollution Exclusion".

The "Total Pollution Exclusion" read, in part:

This insurance does not apply to:

1) Pollution Liability

a) "Bodily Injury" or "property damage" or "personal injury" arising out of the actual, alleged, potential or threatened spill discharge, emission, dispersal, seepage, leakage, migration, release or escape of "pollutants".

The "Total Pollution Exclusion" did not define the term "pollutants". Rather, "pollutants" was defined in an unrelated section of the Policy where the term was defined as:

"Pollutants" means any solid, liquid, gaseous or thermal irritant or contaminant including smoke, odours, vapour, soot, fumes, acids, alkalis, chemicals and waste.

Lower Court's Ruling

The Estate brought an application in the Ontario Superior Court seeking a declaration that Co-operators had a duty to defend the Estate. The parties accepted that the Underlying Action fell within the initial grant of coverage for the purposes of the duty to...

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