Absolute pollution exclusion in commercial general liability policy precluded coverage for a claim arising from a spill of home heating oil.

[2014] N.S.J. No. 298

2014 NSSC 200

Nova Scotia Supreme Court

K. Coady J.

June 16, 2014

The insured Breton Petroleum Ltd. sought a declaration that Aviva, the respondent insurer, had a duty to defend it in an action brought by the owners of a home who incurred remediation and environmental clean‑up costs relating to a spill of home heating oil. The homeowners alleged that the leak originated from an oil tank installed by the insured. The claim against the insured was based on breach of contract and negligence.

The applicants were underwriters of a policy of an environmental insurance liability issued to the insured. The applicants had been defending the insured against the action and they sought a declaration that Aviva was responsible to fully reimburse them for costs incurred to date. Aviva had issued a policy of commercial general liability insurance to the insured.

Aviva denied coverage on the basis of an absolute pollution exclusion. The applicants' position was that the claim did not involve an allegation that the insured brought a pollutant onto the premises but rather failed to provide suitable equipment and negligently installed and monitored the equipment.

The court concluded that the Aviva policy was unambiguous. The intention of the parties was to bar coverage for claims relating to environmental contamination caused by a pollutant. The court found that a spill of home heating oil was precisely the type of loss both the insurer and insured would have expected the absolute pollution exclusion to apply.