Do Pollution Exclusion Clauses Work?

Will pollution exclusion clauses stand up in commercial general liability insurance policies? The Ontario Court of Appeal says yes, when they are directed at activities likely to cause traditional soil and water pollution. See ING Insurance Company of Canada v. Miracle (Mohawk Imperial Sales and Mohawk Liquidate, 2011 ONCA 321.

Andrew Miracle ran two gas bars on a First Nations reserve. One of the underground storage tanks allegedly leaked, contaminating nearby federal Crown property. The Attorney General of Canada sued several parties, including the gas bar, for $1,850,000 in damages for the loss in value of its property, the cost of investigation and the cost of remediating the property.

Miracle had purchased a commercial general liability insurance policy from ING, which contained a standard pollution exclusion clause. ING sought a declaration that it was not required to defend the action, because of the pollution exclusion. The federal Crown and one of the other defendants opposed the application, on the basis of a 2002 decision, Zurich Insurance Co. v. 686234 Ontario Ltd. 2002 CanLII 33365 (ON C.A.).

In...