Because the pleading did not allege sufficient facts about how the pollution escaped from the insured’s underground storage tanks, there was a possibility that the claim fell within the exception to the pollution exclusion clause and the insurer had a duty to defend the insured.
Insurance law – Commercial general liability insurance – Umbrella policies – Duty to defend – Pollution exclusions – Third party claims – Additional named insured – Pleadings – Underlying action – Apportionment of defence costs
Aviva Insurance Co. of Canada v. Intact Insurance Co.,  O.J. No. 263, 2017 ONSC 509, Ontario Superior Court of Justice, January 20, 2017, P.J. Cavanagh J.
An umbrella insurer who had been providing a defence to an insured in an underlying action brought a claim against a commercial general liability (“CGL”) insurer seeking a declaration that the CGL insurer had a duty to also defend the insured. The umbrella insurer and the CGL insurer’s policies contained the same pollution exclusion clause. In both policies, the exclusion clause contained an exception in the event of release or escape of pollution that is “sudden and accidental”. The question of whether the CGL insurer owed a duty to defend depended on whether it was possible to determine from the pleading whether or not the exception to this exclusion applied. The Court found it was not possible to know from the allegations in the statement of claim how or when the contaminants escaped onto the plaintiff’s property including, in particular, whether such escape occurred over a brief period of time or over an extended period of time. The Court therefore held that the CGL insurer had not satisfied its onus of having to prove that all of the claims against the insured are excluded from coverage by the pollution exclusion clause. The CGL insurer had a duty to defend. The umbrella and CGL insurer would share equally in the costs of defending the underlying action against the insured.
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