Canada: Liability Insurer Need Not Pay For Voluntary Delineation And Cleanup

Last Updated: August 24 2012
Article by Dianne Saxe

According to Ontario's Court of Appeal, General Electric Canada (GE) can't make its liability insurer pay for the delineation and cleanup of a former GE property contaminated with trichloroethylene ("TCE"), because it voluntarily complied with a Ministry of the Environment request to do so.

GE unsuccessfully sought a declaration that its insurers had a duty to defend GE in respect of a request by the Ontario Ministry of the Environment ("MOE") to delineate contaminated groundwater near an industrial property once owned by GE.  GE argued that the costs it incurred in response to the MOE were "defence costs"  under its relevant insurance policies. with the respondents.

"[3] The property in issue is located in Toronto ... 224 Wallace Street. GE owned the property from 1903 to 1980... During at least some of this period of time, it used the chemical trichloroethylene ("TCE") as a degreasing agent. ...
[4] On February 11, 2004, the MOE wrote to GE and three other former owners of the property advising that it was reviewing potential TCE contamination of the groundwater ... The February letter requested the assistance and co-operation of GE and the other recipients of the letter asking them to provide any environmental assessments that they had in their possession.
[5] On April 16, 2004, the MOE sent a second letter to GE. This letter requested further information concerning the potential TCE contamination and required GE to take certain action. The letter in part stated:

On February 15, 2004 you received further information in regards to the TTC subsurface investigation in the area of 224 Wallace and south of this property. The data appears to support a TCE plume migrating from/ through the former GE property located at 224 Wallace.

As discussed you will be required to take action in delineating the source area on your former property. The delineation investigations are to determine the current levels and the full vertical and horizontal extent of all contamination within the soil and groundwater which are on site location. The delineation report shall include at minimum the following:


At this time the ministry is willing to enter into an agreement with GE to pursue the required action items voluntarily. If at any time the ministry determines there is unsatisfactory progress a Director's Order will be issued to resolve the matter.

GE claims that by April 2009, responding to the MOE request had resulted in out-of-pocket expenses of $2.1 million for investigation costs, $1.86 million for remedial costs and $750,000 for legal costs.

The court ruled that these were "compliance" costs, not "defence" costs, and therefore did not trigger a duty to defend by the insurance companies:

...the only evidence of a "claim" by the MOE in the April letter is the request, or requirement if you will, that GE take action in delineating the source of the TCE contamination.  GE did not oppose, defend or investigate that request.  GE, as it was invited to do in the letter, voluntarily complied with the request of the MOE.  It cannot be said that it has suffered any defence or investigation costs recoverable under its insurance policies.  As the application judge concluded, the costs incurred were compliance costs – not defence costs.

The moral: alleged polluters with possible insurance claims should not voluntarily investigate or cleanup pollution, or risk losing the benefit of their insurance policies.

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.

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Dianne Saxe
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