West Van Holdings Ltd. v Economical Mutual Insurance – Exclusions Must Exclude Clearly And Completely

In the recent case of West Van Holdings Ltd. v. Economical Mutual Insurance Company, 2017 BCSC 2397, the BC Supreme Court considered whether two successive insurers could rely on the environmental liability and pollution liability exclusions in their respective commercial general liability policies to deny coverage for a third party contamination claim. In finding that both insurers had a duty to defend the insured entities in the third party lawsuit, the Court reversed a trend established in recent cases, including Precision Plating Ltd v Axa Pacific Insurance Co., to uphold denials of coverage on the application of these exclusions.

Background Facts

In the underlying action, the insured entities, West Van Holdings Ltd. and West Van Lions Gate Dry Cleaners Ltd. (collectively, "West Van"), were alleged to have caused or allowed contaminants to be released from their property, on which they operated an automotive repair shop and dry cleaning business, onto an adjacent property. The owner of the adjacent property sued West Van for the resulting property damage, which it alleged had potentially occurred over a period of forty years.

West Van sought a defence to the underlying action from two of its insurers, Economical Mutual Insurance Company and Intact Insurance Company (collectively, the "Insurers") under various commercial general liability policies issued by the Insurers since 1998. The Insurers denied coverage on the basis of the application of environmental liability or pollution liability exclusions contained in the policies. West Van responded by applying for a judicial declaration that the Insurers were obligated to defend West Van in the lawsuit.

The Relevant Exclusions

The wording of the exclusion clauses for "Environmental Liability" and "Pollution Liability" varied from one policy period to another for both Insurers. The Reasons for Judgement contain an appendix setting out the various applicable wordings between 1998 and 2012. In general, the exclusions removed from coverage any liability arising out of a release of petroleum products and dry cleaning chemicals at, or from any premises, site or location owned by West Van.

The Arguments

West Van argued that the allegations against it, which included claims in negligence, nuisance and statutory claims under the Environmental Management Act (the "EMA"), contemplated multiple sources of liability, some of which were not caught by the exclusions. More specifically, West Van asserted...