The Duty To Defend Triggered Notwithstanding Environmental And Pollution Exclusion Clauses

In West Van Holdings Ltd. v. Economical Mutual Insurance Co., 2017 BCSC 2397, the insureds, West Van Holdings Ltd. and West Van Lions Gate Cleaners Ltd. (the "Insureds") brought an action against Economical Mutual Insurance Company and Intact Insurance Company (the "Insurers") seeking a declaration that the Insurers had a duty to defend the Insureds.

In 2014, a notice of civil claim was filed in 8549737 Canada Inc. and 8428450 Canada Inc. v. West Van Holdings Ltd. and West Van Lions Gate Cleaners Ltd., S140879 (the "Underlying Action") where the Insureds were sued for damages allegedly due to the migration of contamination from property owned and used by them, to adjacent lands.

In the Underlying Action, the plaintiffs alleged that over time the lands had been used for dry-cleaning and automotive repair businesses. The plaintiffs alleged that dry cleaning chemicals and petroleum products were "used, kept, disposed of, handled, or treated on the 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 property.

The plaintiffs in the Underlying Action pleaded negligence, nuisance, liability under the rule in Ryland's v. Fletcher and asserted a statutory cause of action under the Environmental Management Act (the "Act"). The Insureds filed a response to civil claim alleging that the contamination was caused by acts or omission of previous owners and/or users.

Section 45(1) of the Act deems current owners or operators of a contaminated site as persons who are responsible for remediation, unless they can bring themselves within one of the exceptions delineated under section 46(1). Pursuant to section 47(1) of the Act, a person who is deemed responsible for remediation is absolutely, retroactively and jointly and separately liable to any person or government body for reasonably incurred costs of remediation of the contaminated site, whether incurred on or off the contaminated site.

The issue at the hearing was whether the Insurers owed a duty to defend the claims made against the Insureds in the Underlying Action.

Background

For the years 1998 - 2012, the Insurers provided commercial general liability insurance to the Insureds.

Intact's 1998 -1999 environmental liability clause stipulated that coverage was not available for damage to property arising out of the "actual ... discharge ... release or escape of pollutants", "[a]t or from premises...