Canada: Ontario Court Of Appeal Clarifies Application Of Pollution Exclusion Clauses In Commercial General Liability Policies

In ING Insurance Company of Canada v. Miracle (Mohawk Imperial Sales and Mohawk Liquidate), 2011 ONCA 321, the Ontario Court of Appeal held that a "Pollution Liability" exclusion clause in a Commercial General Liability (CGL) insurance policy will apply where the insured participated in an activity that posed a known risk of pollution and environmental damage. This decision clarifies – and perhaps extends – its prior reasons in Zurich Insurance Company v. 686234 Ontario Ltd. (2002), 62 O.R. (3d) 447 (C.A.).

The insured party, Andrew Miracle o/a Mohawk Imperial Sales and Mohawk Liquidate (Miracle) was insured under a CGL insurance policy with ING Insurance Company of Canada (ING). Under a "Pollution Liability" exclusion clause, the CGL insurance policy excluded coverage for losses "arising out of the actual, alleged, potential or threatened spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of pollutants" from the lands or premises of Miracle. When gasoline escaped from an underground storage tank on Miracle's property and caused damage to adjacent land owned by Canada, Miracle sought indemnification from ING under the CGL insurance policy. ING applied for a declaration that it had no duty to defend or indemnify Miracle based on the Pollution Exclusion clause, and Miracle failed to respond to the application. Relying on section 132 of the Insurance Act, R.S.O. 1990, c. I.8 (which allows a claimant with an unsatisfied judgment against an insured defendant to recover the amount of the judgment against the defendant's insurer, if coverage exists), Canada and a co-defendant of the insured responded to ING's application.

In Zurich, the owner of an apartment building was sued by its tenants for damages caused by carbon monoxide poisoning caused by a defective furnace. The owner was insured and claimed indemnification from the insurer. The Court held that a "Pollution Liability" exclusion clause virtually identical  to the one in issue in this case did not apply to protect the insurer from having to indemnify the owner. In holding that the parties in Zurich would not reasonably have expected to exclude "carbon monoxide poisoning" from coverage under an exclusion clause dealing with "environmental pollution," the Court relied on the Court's determination that the insured party's regular business activities did not "place it in the category of an active industrial polluter of the natural environment." The Court suggested that "active industrial polluters" would be in the nature of a manufacturer that discharges "effluent, overheated water, spent fuel and the like into the environment" in the normal course of its business.

The application judge in this case, relying on Zurich, dismissed ING's application and relied on the judge's determination that Miracle was not an "active industrial polluter."

The Court of Appeal allowed ING's appeal. Sharpe J.A. (Gillese and Karakatsanis JJ.A. concurring) relied on a "commercially sensible interpretation" of the CGL insurance policy, based on the reasonable expectations of the parties, and indicated that: 

Unlike Zurich, in this case, the insured was engaged in an activity that carries an obvious and well-known risk of pollution and environmental damage: running a gas station. Indeed, the statement of claim is framed as a claim for damage to the natural environment caused by a form of pollution. (para. 22)

Sharpe J.A. held that the Court of Appeal's statement that the insured party in Zurich was not an "active industrial polluter" must be read in the context of that case, and that the phrase should not be read as restrictively as the application judge appeared to read it:   

Liability insurance is purchased to cover risks, not outcomes that are certain or inevitable. There is a general principle of insurance law that only fortuitous or contingent losses are covered by liability policies [citation omitted]. Accepting the argument that the pollution liability exclusion only applies to "active" industrial polluters – those who are already excluded from ordinary liability insurance coverage by virtue of the fortuity principle – would effectively denude the clause of any meaning. In my view, the exclusion clearly extends to activities, such as storing gasoline in the ground for resale at a gas bar, that carry a known risk of pollution and environmental harm. (para. 23, emphasis added)

Sharpe J.A. went on to hold that applying the Pollution Liability exclusion clause to the present circumstances did not nullify the coverage sought by Miracle in the first place: 

I see no merit in the submission that giving effect to the exclusion would effectively nullify the policy in this case. [. . .] [T]he operator of a convenience store and gas bar faces the risk of a wide range of liability claims for bodily injury and damage to property that the CGL will cover. By denying coverage for pollution liability, the court does not deprive the policy of a very significant measure of protection for the myriad other risks that the policy does cover. [. . .] [T]he pollution exclusion in this case is animated by a unique purpose: to preclude coverage for expensive government-mandated environmental cleanup required by legislation that makes polluters strictly liable. (para. 33)

The Court of Appeal's holding in this case clarifies its prior holding in Zurich to the effect that a pollution liability exclusion clause does not only exclude coverage for the activities of "active industrial polluters." It also excludes coverage for activities that carry "a known risk of pollution and environmental harm" engaged in by businesses that are not active industrial polluters, but the application of the exclusion continues to be highly fact-dependent. It also seems clear that if the underlying event giving rise to the claim against the insured is founded on a discharge into the natural environment (Zurich was not – it concerned a discharge into the air in an apartment building, which under the Environmental Protection Act, R.S.O. 1990, c. E.19, is excluded from the definitions of "air" and "natural environment" since it was enclosed in a building), the courts will be more inclined to find that the exclusion applies. 

Daniel Kirby focuses on environmental law, including environmental assessment and approvals; civil litigation; alternate dispute resolution; advice with respect to commercial transactions, corporate disclosure and corporate governance; environmental inspections; investigation; statutory charges; site assessments and audits; contamination; clean-up; remediation; decommissioning and compliance; air emissions and emissions trading; and emergency response assistance. John MacDonald's civil trial practice involves appearances in the Courts of Ontario and New Brunswick. Dave Mollica's practice encompasses a broad range of civil litigation matters in the corporate and commercial areas.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.