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A BC court has upheld the pollution exclusion in a home insurance policy.

The issue was the scope of the “pollution exclusion” clause in a policy of home insurance issued by the defendant, BCAA Insurance Corporation, to the plaintiff, Brian Corbould. Corbould sought a declaration of coverage for property damage that occurred when an above-ground storage tank for home-heating fuel oil leaked  into the soil around his cottage.“The policy stated:

[]               The “all risks” property coverage in the comprehensive insurance policy that BCAA issued to Mr. Corbould provides, in the section of the policy dealing with property coverage, at Section 1.7:

Perils Insured
You are insured against ALL RISKS OF DIRECT PHYSICAL LOSS OR DAMAGE subject to the exclusions and conditions in this policy.

[]               The insurer says that although the loss would otherwise be covered under the Policy, coverage for it is excluded by Section 1.8 of the Policy, which contains a list of exclusions.  In its relevant parts it provides an exclusion that the insurer says is clear and unambiguous:

We do not insure:

8) loss or damage caused by contamination or pollution, or the release, discharge or dispersal of contaminants or pollutants.

[]               The term “pollutants” as it appears in Section 1.8 is defined in Section 5 of the Policy as

“Pollutants” means any solid, liquid, airborne, gaseous or thermal irritant or contaminate, including smoke, vapour, soot, fumes, acid, alkalis, chemicals and waste. Smoke, within this definition of Pollutants means, smoke caused from agricultural smudging or industrial operations.”

The terms and phrases “contamination,” “pollution,” “release, discharge or dispersal,” and “contaminants” were not defined in the Policy.

Corbould argued that:

[]           The plaintiff says that, properly interpreted, the Policy provides coverage for the loss that has occurred.  The plaintiff says that he is a non-commercial, residential home owner who is not in the business of generating contaminants and was operating a heating system as he had advised his insurer.  The plaintiff says that in the circumstances the pollution exclusion, properly interpreted, does not apply to the loss in question.  The plaintiff says the key issue is that the plaintiff was not involved in business activities that could lead to the pollution of the environment.

[]           The plaintiff says that the so-called pollution exclusion clause does not exclude liability for the unintended results of the normal operation of the heating system.  Moreover, the plaintiff says that to interpret pollutants to include something that occurred during the intended and normal use of the insured’s dwelling heating system fails the common sense test for determining what is “pollution”.

[]           The plaintiff also argues that the particular language of the pollution exclusion is, applying proper principles to the construction of insurance policies, not sufficient to bar the plaintiff’s claim for indemnity.

[]           In the alternative, the plaintiff argues that coverage for this type of loss would be within the reasonable expectations of the parties at the time the contract of insurance was made, and even if the exclusion clause is clear and unambiguous, it should not apply.”

Justice Sigurdson disagreed. He held that the pollution exclusion was clear, and definitely applied to an oil spill. Bottom line: those who use oil for heating need to buy specific insurance against spills.

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