Cleanup Denied – Court Affirms Denial of Coverage Based on Voluntary Tank Removal Exclusion

The court found the removal of an underground storage tank by the plaintiff was a “voluntary removal” as contemplated by a pollution exclusion found in the plaintiff’s insurance policy and upheld the insurer’s denial of coverage.

Insurance law – Property insurance – Interpretation of policy – Exclusions – Duties and liabilities of insurer

Fleetway Fuels Inc. v. Liberty Mutual Insurance Co., [2025] O.J. No. 1802, Ontario Superior Court of Justice, April 25, 2025, B. MacNeil J.

The insured operated a trucking business. The property from which the business operated had an underground fuel storage tank (the “Underground Tank”).  The insured purchased a Storage Tank Third-Party Liability Corrective Action and Cleanup Policy (the “Policy”) from the insurer.

The Policy commenced November 20, 2020, and contained a “voluntary tank removal exclusion – absolute” which excluded coverage for a pollution incident discovered during a voluntary removal of an underground storage tank system.

The insured sold the trucking business, and, on February 1, 2021, entered a commercial lease for the property with the buyer of the business (the “Commercial Lease”). A condition of the Commercial Lease was that the insured would remove the Underground Tank at a time acceptable to the buyer and the insured would be responsible for all associated costs.

The Policy was in force at the time the insured entered the Commercial Lease.

On November 4, 2021, during removal of the Underground Tank, suspected hydrocarbons were discovered in the surrounding soil. On the advice of environmental engineers, the insured undertook the removal of impacted groundwater and soil for off-site disposal. The following day, the insured made a claim to the insurer, seeking indemnification under the Policy for the costs associated with the environmental clean-up.

The insurer denied coverage for the environmental clean-up based on the Policy’s voluntary tank removal exclusion.

The insured brought a motion for a determination of what constituted “voluntary removal” for the purposes of the exclusion.

The Ontario Superior Court of Justice held that the insured’s removal of the Underground Tank was a “voluntary removal” and excluded under the Policy.

The court found that the parties did not intend, when entering the insurance contract, for the insured to willingly decommission the tank without the insurer’s knowledge and consent, or that the insurer would pay for the cost of cleanup for the decommissioning.

The court noted the phrase “voluntary removal” captured the insured’s intentional act rejecting the argument that the removal was involuntary because it was a material condition of the Commercial Lease. The buyer could not have compelled the insured to decommission the tank without the lease. The insured freely, willingly, and intentionally entered the lease with the buyer because it was commercially advantageous, and the insured willingly agreed to include the relevant contractual term.

This case was digested by Natasha Cooke and edited by Steven W. Abramson of Harper Grey LLP.  If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].