Ground contamination in residential property is not only an
environmental concern, but is also an expensive issue for insurers
in Canada. The contamination often results from a leak in a
residential heating oil tank. When these leaks occur, home owners
invariably make a claim against their home insurance, many of which
policies contain various forms of contamination exclusion clauses.
The issue that commonly arises is the definition of
'contamination' and what is actually excluded. Many
policies attempt to define the term, but in doing so risk adding
ambiguities into the policy.
A contamination exclusion clause was reviewed in Corbould v
BCAA Insurance Corp., 2010 BCSC 1536, when the insured sought
coverage for damage when an above ground residential fuel oil tank
leaked hundreds of litres of oil. The relevant policy provision
We do not insure:
loss or damage caused by
contamination or pollution, or the release, discharge or dispersal
of contaminants or pollutants.
"Pollutants" means any
solid, liquid, airborne, gaseous or thermal irritant or
contaminate, including smoke, vapour, soot, fumes, acid, alkalis,
chemicals and waste. Smoke, within this definition of Pollutants
means, smoke caused from agricultural smudging or industrial
The Court reviewed Canadian
jurisprudence that had interpreted contamination exclusion clauses,
and commented that the leading case on the question of the scope
and application of a clause similar to the one in question arose
out of a commercial general liability policy case: Zurich
Insurance Co. v. 686234 Ontario Ltd.,(2002) 62 OR (3d) 447
Much of the argument in Corbould was regarding
ambiguity in the policy. Despite that several key terms, such as
'contamination', were not defined, the Court found the
policy unambiguous. The Court recognized that the words of the
exclusion clause should not be read hyperliterally to include
things that might be said to be contamination or pollution but
objectively could not have been considered by the parties to be
intended to exclude coverage.
In interpreting the policy, the Court also discussed the
reasonable expectations of the parties, quoting Justice McLachlin
(as she then was):
I turn to the third relevant
principle of construction, the reasonable expectations of the
parties. Without pronouncing on the reach of this doctrine,
it is settled that where the policy is ambiguous, the courts should
consider the reasonable expectations of the parties: Wigle v.
Allstate Insurance Co. of Canada 1984 CanLII 45 (ON CA), (1984), 49
O.R. (2d) 101 (C.A.), leave to appeal to S.C.C. refused,  1
S.C.R. v. The insured's reasonable expectation is, at a
minimum, that the insurance plan will provide coverage for
legitimate claims on an ongoing basis. ...
Ultimately, the Court did not have trouble finding that the oil
spill was 'contamination' as contemplated by the exclusion
While every case is decided on its own facts and merits, the
well-reasoned decision in Courbold gives some
certainty to the interpretation and validity of contamination
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