Clearing up the pollution of the duty to defend analysis

Insurance law – Property insurance – Exclusions – Pollution – Duty to defend – Practice – Breach of contract vs. negligence – Leave to appeal

Hemlow Estate v. Co-Operators General Insurance Co., [2021] O.J. No. 7078, 2021 ONCA 908, Ontario Court of Appeal, December 20, 2021, J.C. MacPherson, J.M. Simmons and I.V.B. Nordheimer JJ.A.

The estate of the deceased insured applied for a declaration that the insurer had a duty to defend the estate against a claim of negligence, nuisance, and breach of contract arising from the deceased insured’s actions which led to pressurized ammonia being released from a pipe and causing damage to a third party’s property.  Incidentally, this event also led to the deceased’s death.  The insurer had declined to defend the estate on the basis of the policy’s Total Pollution Exclusion.  The application judge found the Exclusion to be ambiguous as it did not make clear that it was not limited to environmental claims but also included claims arising from any emission of any of the enumerated substances.  On appeal, the Court held that the issue of the interpretation of the Total Pollution Exclusion was not the true issue.  Rather, the insurer had a duty to defend because the claim was pled as a claim of negligence, nuisance, and breach of contract causing property damage.  There was nothing in the statement of claim that involved or asserted a claim arising out of pollution.  The Court further noted that the historical purpose of the pollution exclusion was to mitigate coverage for the cost of government-mandated environmental cleanup.

This case was digested by Dionne H. Liu, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Dionne H. Liu at [email protected].

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