When Is A Pollutant Not A Pollutant: Total Pollution Exclusions In Commercial General Liability Policies

• Published date: 15 August 2022
• Subject Matter: Environment, Litigation, Mediation & Arbitration, Environmental Law, Trials & Appeals & Compensation, Professional Negligence, Clean Air / Pollution, Waste Management
• Law Firm: WeirFoulds LLP
• Author: Mr John Buhlman

On June 2, 2022, the SCC dismissed an application for leave to appeal from the Ontario Court of Appeal's decision in Hemlow Estate v. Co-operators General Insurance Company, 2021 ONCA 908. Mr. Hemlow carried on business as a mechanical contractor. He applied for and received a Commercial General Liability ("CGL") insurance policy with Co-operators. Like many CGL policies, the policy issued to Mr. Hemlow contained what is called a "Total Pollution Exclusion":

This insurance does not apply to:

• Pollution Liability
  1. "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".

"Pollutants" was defined elsewhere in the policy as:

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

This is indeed very broad wording that potentially covers any discharge, no matter the cause. However, in the Hemlow Estate case, the Court of Appeal narrowed the scope of the Total Pollution Exclusion by looking to the nature of the claim and what was the actual cause of the discharge.

Mr. Hemlow was hired to sample and analyze the mechanical and refrigeration systems at a client site. While doing his work, Mr. Hemlow opened a valve to a pipe containing pressurized ammonia. Mr. Hemlow was killed by the exposure to ammonia and the ammonia caused significant damage to the client's property.

The client sued Mr. Hemlow and others for negligence, nuisance and breach of contract. Co-operators refused to defend the claim against Mr. Hemlow's estate on the basis there was no coverage for the claim, relying on the Total Pollution Exclusion.

The Hemlow estate brought an application for a declaration that Co-operators has a duty to defend the action brought by the client. The application judge agreed Co-operators had a duty to defend finding that the word "Pollution" (as opposed to "Pollutants") was ambiguous because it was left undefined in the policy and could be interpreted as including only environmental pollution. In other words, the exclusion is worded "to protect the insurer from liability for environmental pollution and the improper disposal of contamination of hazardous waste."

The Court of Appeal dismissed the appeal. The Court cited Nichols v. American Home Assurance Co., [1990] 1 S.C.R. 801 for the proposition...