Insurance law – Property insurance – Vandalism – Coverage – Interpretation of policy – Exclusions – Imminent peril – Definition – Pleadings – Underlying action
Garden View Restaurant Ltd. v. Portage La Prairie Mutual Insurance Co.,  N.S.J. No. 675, 2014 NSSC 447, Nova Scotia Supreme Court, December 22, 2014, M. Stewart J.
The plaintiff insured brought an application seeking a declaration of coverage and to amend its pleadings to rely upon the doctrine of imminent peril. The insured, Garden View Restaurant Ltd., was the owner of a residential apartment building which was insured under a policy of insurance issued by the Portage La Prairie Mutual Insurance Company. In January 2011, a spill of home heating oil occurred on the property as a result of vandalism and theft of the copper pipe which connected an outdoor above-ground oil tank to the building. The insured retained appropriate contractors to excavate and remove the contaminated soil and to remediate the soil in accordance with provincial requirements. The insured also contacted the insurer, which paid the full amount of $10,000 available under an extension on the policy for the clean-up on premises pollutants. The insurer denied any further coverage under the policy.
The insured brought this application seeking to amend its pleadings to rely upon the doctrine of imminent peril. The insured relied on its expert’s opinion that it was more probable than not that the building would not have been usable for residential purposes until the risk of vapours from the spill were mitigated. The insured argued that this constituted damage to the building and that costs incurred to prevent further damage were recoverable. The court reviewed the applicable law on the doctrine of imminent peril and noted that “the critical question … is not whether or not the insured event has occurred but whether or not the damage occasioned by the insured arose by reason of preventive action taken to avoid the imminent risk covered by the contract”. In addition, evidence showing that damage is inevitable is also required. For the doctrine to be invoked, it must be shown that unless protective steps are taken, damage or reasonably anticipated damage must be inevitable from the insured peril that has begun to operate or has arisen. In this case, the relevant peril was the risk of oil vapours from the contaminated soil entering the building. The court found that there was no evidence of actual oil vapours entering the building prior to excavation of the contaminated soil and that the “vapour peril” never actually arose prior to preventative action being taken. Furthermore, the evidence showed that the insured had initiated remediation to prevent the spread of contamination which the insured would have been obliged to clean-up and not because the risk of oil vapours were an imminent peril and damage inevitable. The court also found the requirement that damage resulting from the insured peril must be inevitable unless protective steps are taken was not satisfied. The insured relied on an expert opinion that if the remediation measures had not been taken, it was more likely than not that oil vapours would have entered the building. The court held that damage that is “more likely than not” is not inevitable. The court also criticized the factual basis of the insured’s expert’s opinion and found that the risk of oil vapours was in fact non-existent. The court concluded that the criteria for the doctrine of imminent peril had not been met.
The court next considered whether there was coverage under the policy and concluded that there was no evidence of any damage to insured property and coverage under the policy was not triggered. The policy provided coverage for the building. It was not intended to cover the land and the only reasonable interpretation of the policy is that the soil underneath the building was not part of the building and was not insured. The policy also contained a pollution exclusion clause under Section C of the policy which stated that the policy did not insure against “cost or expense of any testing, monitoring, evaluating or assessing of an actual, alleged, potential or threatened spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of pollutants”. Damage to the building and appurtenances that occurred during remediation was not covered as it was not done to remediate a loss that was insured.
The court concluded that the doctrine of imminent peril was inapplicable in these circumstances and that the claim was not covered by the policy. The application was therefore dismissed.
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