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PROPERTY INSURANCE - Business policies - Risks or perils

Thursday, July 08, 2021 @ 6:29 AM  

Lexis Advance® Quicklaw®
Appeal by the insurers from a decision that found the respondent’s remediation costs were covered under the parties’ insurance policy. The respondent discovered hydrocarbon contamination on its bus depot property that had been discharged from an underground pipe after a valve inadvertently opened. It incurred significant costs in cleaning up the contaminated soil and sought indemnity from the appellants. The parties’ insurance policy included coverage for the cost of decontaminating property in certain circumstances. The appellants denied coverage on the basis the contamination was not a sudden and accidental occurrence. The application judge found the policy was ambiguous. He found it was the reasonable expectation of the parties that the policy covered against the risk of diesel fuel contamination such as what had occurred.

HELD: Appeal dismissed. The reason for the use of both “sudden” and “accidental” in the decontamination coverage was to include the element of abruptness and to ensure the exclusion of intentional acts. The ordinary meaning of “sudden and accidental” was abrupt, unexpected and unintentional. There was no temporal element to the phrase, as argued by the appellants. There was no ambiguity in the language of the decontamination clause and its application to the causal events leading to the diesel fuel discharges. The application judge erred in finding ambiguity in the policy but ultimately reached the correct coverage decision.

Zurich Insurance Co. v. Halifax (Regional Municipality), [2021] N.S.J. No. 240, Nova Scotia Court of Appeal, M.J. Wood C.J.N.S., P. Bryson and A.S. Derrick JJ.A., June 3, 2021. Digest No. TLD-July52021008