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INSURERS - Duty to defend

Friday, May 10, 2019 @ 8:34 AM  

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Appeal by the defendant insurers from an order finding they had a duty to defend the respondents in an underlying action and awarding the respondents costs on a full indemnity basis. The underlying action was for damages arising from the migration of pollutants. Between 1998 and 2002, the respondents held a commercial general liability insurance policy with the appellant Intact. The policy included coverage for property damage but limited coverage for property damage liability arising from pollutants. Between 2002 and 2012, the appellant Economical insured the respondents under a similar policy that included a pollution exclusion clause. In 2014, adjacent landowners commenced an action against the respondents alleging their chemical products migrated onto the plaintiffs’ land and caused damage. The chambers judge found the claims in the underlying action fell within the initial grant of coverage. She determined the exclusion clauses were ambiguous because it was unclear whether they ousted coverage for property damage liability arising from pollutants used before the respondents owned the land.

HELD: Appeal allowed. The chambers judge erred in finding the claims against the respondents fell within the initial grant of coverage on the basis that the pleadings in the underlying action alleged liability arising from a previous owner’s conduct. The pleadings contained no such allegation and the policies did not include coverage for liability arising before the policy periods but only for property damage that occurred during the policy periods. The chambers judge further erred in finding the exclusion clauses were ambiguous. The cost award was an error in principle as there was no basis for awarding special or full indemnity costs to the respondents in a duty to defend claim where there was no reprehensible conduct by the appellants.

West Van Holdings Ltd. v. Economical Mutual Insurance Co., [2019] B.C.J. No. 550, British Columbia Court of Appeal, R. Goepel, L.A. Fenlon and G. Dickson JJ.A., April 5, 2019. Digest No. TLD-May62019013