ING Insurance Company of Canada v. Miracle o/a Mohawk Imperial Sales and Mohawk Liquidate et al.

[Indexed as: ING Insurance Co. of Canada v. Miracle]

105 O.R. (3d) 241

2011 ONCA 321

Court of Appeal for Ontario,

Sharpe, Gillese and Karakatsanis JJ.A.

April 26, 2011

Insurance -- Liability insurance -- Exclusions -- Insured operating gas bar -- Plaintiff alleging that gasoline from underground storage tank on insured's property migrated onto plaintiff's adjacent lands -- Plaintiff bringing action against insured based on strict liability, nuisance and negligence -- Plaintiff insured under commercial general liability insurance policy which contained pollution exclusion clause -- Application judge erring in finding that exclusion clause did not apply as insured was not "active industrial polluter" and as claim was based on insured's alleged negligence -- Pollution exclusion not limited to situations where insured engaged in activity that necessarily results in pollution and extending to activities that carry known risk of pollution and environmental harm.

The insured operated a convenience store and gas bar. Gasoline from an underground storage tank on his property allegedly migrated onto adjacent lands owned by Canada. Canada sued him for damages, alleging strict liability, nuisance and negligence. The plaintiff was insured under a commercial general liability insurance policy which 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 insured's lands or premises. The insurer sought a declaration that it had no duty to defend or indemnify the insured on the ground that Canada's claim was excluded from coverage. The application judge dismissed the application on the ground that, as the insured was not an "active industrial polluter" and as the claim was based on the insured's alleged negligence, the pollution exclusion clause did not apply. The insurer appealed.

Held, the appeal should be allowed.

The reach of the pollution exclusion clause is not restricted to situations where the insured is engaged in an activity that necessarily results in pollution. There is a general principle of insurance law that only fortuitous or contingent losses are covered by liability policies. Accepting the argument that the exclusion applies only 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. 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. The damages claimed in this case were for harm to the environment: the loss of property value due to contamination of the soil; the cost of investigating, testing and monitoring the contamination caused by the migration of a hazardous product from the insured's lands; and the cost of rectifying the contamination and remediating the plaintiff's property. The claim as pleaded fell squarely and unambiguously within the language of the exclusion clause. Giving effect to the exclusion would not effectively nullify the policy.

APPEAL by the insurer from the order of Pollak J., [2010] O.J. No. 3778, 2010 ONSC 4056 dismissing its application for a declaration that it had no duty to defend or indemnify the insured.

Cases referred to

Consolidated Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133, 112 D.L.R. (3d) 49, 32 N.R. 488, [1980] I.L.R. Â1-1176 at 595, 1 A.C.W.S. (2d) 169; [page242] Courbold v. BCAA Insurance Corp., [2010] B.C.J. No. 2125, 2010 BCSC 1536, 90 C.C.L.I. (4th) 257, 13 B.C.L.R. (5th) 168, [2011] I.L.R. I- 5069; Ontario v. Kansa General Insurance Co. (1994), 1994 626 (ON CA), 17 O.R. (3d) 38, [1994] O.J. No. 177, 111 D.L.R. (4th) 757, 69 O.A.C. 208, 21 C.C.L.I. (2d) 262, 13 C.E.L.R. (N.S.) 59, [1994] I.L.R. Â1-3031 at 2719, 45 A.C.W.S. (3d) 744 (C.A.) [Leave to appeal to S.C.C. refused [1994] S.C.C.A. No. 123]; Pier Mac Petroleum Installation Ltd. v. Axa Pacific Insurance Co., 1997 4252 (BC SC), [1997] B.C.J. No. 1611, 41 B.C.L.R. (3d) 326, 47 C.C.L.I. (2d) 229, 72 A.C.W.S. (3d) 746 (S.C.); Uniroyal Chemical Ltd. v. Kansa General Insurance Co., 1996 7941 (ON CA), [1996] O.J. No. 644, 89 O.A.C. 311, 33 C.C.L.I. (2d) 165, [1996] I.L.R. 1-3285, 61 A.C.W.S. (3d) 364 (C.A.); Weston Ornamental Iron Works Ltd. v. Continental Insurance Co., [1981] O.J. No. 78, [1981] I.L.R. Â1-1430 at 477, 9 A.C.W.S. (2d) 410 (C.A.); Zurich Insurance Co. v. 686234 Ontario Ltd. (2002), 2002 33365 (ON CA), 62 O.R. (3d) 447, [2002] O.J. No. 4496, 222 D.L.R. (4th) 655, 166 O.A.C. 233, 43 C.C.L.I. (3d) 174, [2003] I.L.R. I-4137, 118 A.C.W.S. (3d) 719 (C.A.) [Leave to appeal to S.C.C. refused [2003] S.C.C.A. No. 33], consd

Other cases referred to

Crescent Oil Co. v. Federated Mutual Insurance Co., 888 P.2d 869, 20 Kan. App. 2d 428 (1995); Federated Mutual Insurance Co. v. Abston Petroleum, Inc., 967 So.2d 705 (Ala. S.C. 2007); Harrison v. R.R. Morrison & Son, Inc., 862 So.2d 1065 (La. App. Ct. 2003); Hay Bay Genetics Inc. v. MacGregor Concrete Products (Beachburg) Ltd., 2003 90091 (ON SC), [2003] O.J. No. 2049, 6 C.C.L.I. (4th) 218, 29 C.L.R. (3d) 60 (S.C.J.); Kimber Petroleum Corp. v. Travelers Indemnity Co., 689 A.2d 747, 298 N.J. Super. 286 (1996); Liberty Mutual Insurance Co. v. Hollinger Inc., 2004 10995 (ON CA), [2004] O.J. No. 481, 183 O.A.C. 146, 10 C.C.L.I. (4th) 200, [2004] I.L.R. I-4271, 48 M.V.R. (4th) 20, 236 D.L.R. (4th) 635, 128 A.C.W.S. (3d) 1182 (C.A.); Millers Mutual Insurance Assn. of Illinois v. Graham Oil Co., 668 N.E.2d 223, 282 Ill. App.3d 129 (1996); Montana Petroleum Tank Compensation Board v. Crumleys, Inc., 2008 MT 2, 341 Mont. 33, 174 P.3d 948 (S.C. 2008); Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., 1993 150 (SCC), [1993] 1 S.C.R. 252, [1993] S.C.J. No. 10, 99 D.L.R. (4th) 741, 147 N.R. 44, [1993] 2 W.W.R. 433, J.E. 93-230, 83 Man. R. (2d) 81, 13 C.C.L.I. (2d) 161, 6 C.L.R. (2d) 161, [1993] I.L.R. Â1-2914 at 2206, 37 A.C.W.S. (3d) 1267; Rylands v. Fletcher (1868), L.R. 3 H.L. 330, [1861-1873] All E.R. Rep. 1 (H.L.); Truitt Oil & Gas Co. v. Ranger Insurance Co., 498 S.E.2d 572, 231 Ga. App. 89 (1998); Union Mutual Fire Insurance Co. v. Hatch, 835 F. Supp. 59 (ND N.H. 1993); Wagner v. Erie Insurance Co., 801 A.2d 1226, 2002 PA Super 166 (2002); West Bend Mutual Insurance Co. v. United States Fidelity and Guaranty, 598 F.3d 918 (7th Cir. 2010); Whittier Properties v. Alaska National Insurance, 185 P.3d 84 (Alaska S.C. 2008)

Statutes referred to

Canadian Environmental Protection Act, 1999, S.C. 1999, c. 33 [as am.] Environmental Protection Act, R.S.O. 1990, c. E.19 [as am.], s. 14(1) Insurance Act, R.S.O. 1990, c. I.8, s. 132

Michael Burgar, for appellant ING. Victoria Yankou, for respondent Attorney General of Canada. Richard L. Wright, for respondent Stan Fergusson Fuels Ltd. [page243]

The judgment of the court was delivered by

[1] SHARPE J.A.: -- This appeal involves the interpretation of a pollution liability exclusion clause in a Commercial General Liability ("CGL") insurance policy issued by the appellant ING Insurance Company of Canada ("ING"). The insured, Andrew Miracle, o/a Mohawk Imperial Sales and Mohawk Liquidate ("Miracle"), operates a convenience store and gas bar. The statement of claim alleges that gasoline escaped from an underground storage tank on Miracle's property and migrated onto adjacent lands owned by Canada, the plaintiff. The claim, which alleges strict liability, nuisance and negligence, is for $1,850,000 in damages to cover the loss in value of the plaintiff's property, the costs of conducting an environmental assessment and the costs of remediating the property.

[2] The "Pollution Liability" exclusion clause in the CGL policy issued by ING excludes 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.

[3] ING sought a declaration that it had no duty to defend or indemnify Miracle on the ground that the plaintiff's claim was excluded from coverage. The application judge dismissed the application on the ground that, as Miracle was not an "active industrial polluter" and as the claim was based on Miracle's alleged negligence, the pollution exclusion clause did not apply.

[4] For the following reasons, I would allow the appeal and grant ING a declaration that the claims asserted in the action are excluded by the pollution liability clause.

Facts

Miracle's business and the insurance policy

[5] Andrew Miracle owned two businesses on Highway #2 within Tyendenaga Mohawk Territory near Desoronto and Shannonville, Ontario. In 2001, ING issued Mr. Miracle a CGL policy to insure his first business location, which included a donut shop, convenience store, jewellery store, gift shop, apartments and a full-service gas bar. In 2002, Miracle opened a 24-hour self- service gas bar at a second location. That business was added to the CGL policy. The policy provides broad coverage for bodily injury and property damage, but the exclusion clause provides that the insurance did not apply to: [page244]

2. Pollution Liability

a. "Bodily injury" or "property damage" or "personal injury" or "advertising liability" arising out of the actual, alleged, potential or threatened spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of pollutants: . . . . .

(2) At, or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any Insured; . . . . .

(5) At or from any premises, site or location on which any Insured or any contractors or subcontractors working directly or indirectly on any Insured's behalf are performing operations:

(a) if the pollutants are brought on to the premises, site or location in connection with such operations by such Insured, contractor, or subcontractor; or

(b) if the operations are to test for, monitor, clean up, remove, contain, treat, detoxify, decontaminate, stabilize, remediate or neutralize, or in any way respond to, or assess the effect of the pollutants.

b. Any fines or penalties assessed against or imposed upon any Insured arising out of the actual, alleged, potential or threatened spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of pollutants.

c. Any loss, cost or expense arising out of any request, demand or order that any Insured or others test for, monitor, clean up, remove, contain, treat, detoxify, decontaminate, stabilize, remediate or neutralize or in any way respond to, or assess the effect of pollutants unless such loss, cost or expense is consequent upon "bodily injury" or "property damage" covered by this policy.

d. "Pollutants" means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapour, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

[6] Miracle is defending the action but did not respond to ING's application for a declaration that the claim, as pleaded, is excluded from coverage under the pollution liability exclusion clause in the CGL. However, Canada and the respondent Stan Fergusson Fuels Ltd., a co-defendant, oppose the application as interested parties. They rely on s. 132 of the Insurance Act, R.S.O. 1990, c. I.8, which enables a claimant with an unsatisfied judgment against an insured defendant to recover the amount of the judgment against the defendant's insurer.

The statement of claim

[7] In 2003, gasoline was discovered on the property owned by Canada adjacent to the 24-hour gas bar. The respondent [page245] Attorney General of Canada brought an action claiming $1,850,000 in damages against the following parties: Miracle, as the owner and occupier of the lands on which the "petroleum hydrocarbon fuels handling facilities" were installed; Kevin Trudeau, the party that installed those facilities; and various parties, including Stan Fergusson Fuels Ltd., that supplied petroleum hydrocarbon fuels to Miracle. The statement of claim alleges that petroleum hydrocarbon fuels "escaped" from Miracle's facilities "into the environment, across the land and catch basins lying under or adjacent to" the plaintiff's property. It is alleged that as a result of that escape, the plaintiff's property "suffered damage including overburden, subsurface and groundwater contamination". The plaintiff Canada pleads that it has incurred "costs and expenses in investigating, testing and monitoring the source and extent of the contamination and has incurred and will continue to incur losses and damages for rectifying that contamination and remediating [the] property".

[8] The statement of claim asserts several causes of action against the defendants:

-- strict liability for bringing the petroleum hydrocarbon fuels onto the land occupied by the plaintiff and permitting the fuels to escape into the environment;

-- nuisance; and

-- negligence for, inter alia, causing or permitting inadequate petroleum hydrocarbon fuels handling facilities, contrary to required standards, laws and regulations; failing to conduct reasonable ongoing inspections; failing to maintain facilities in a safe operating condition; failing to take reasonable steps to stop the escape; failing to report the escape of fuels into the environment; and failing to take further steps following the escape to prevent further damage to the environment.

[9] The statement of claim specifically pleads and relies upon environmental protection statutes, including the Environmental Protection Act, R.S.O. 1990, c. E.19 and the Canadian Environmental Protection Act, 1999, S.C. 1999, c. 33.

The reasons of the application judge

[10] In dismissing ING's application for a declaration that it had no duty to defend or indemnify Miracle, the application judge relied on the decision of this court in Zurich Insurance Co. v. 686234 Ontario Ltd. (2002), 2002 33365 (ON CA), 62 O.R. (3d) 447, [2002] O.J. No. 4496 (C.A.) (leave to appeal dismissed [2003] S.C.C.A. No. 33). [page246] In particular, she relied on the finding in Zurich [at para. 38] that nothing in the insured's regular business activities "place[d] it in the category of an active industrial polluter of the natural environment", and that the alleged "pollution" was "a result of the negligence alleged in the underlying claims". The application judge found that, like the insured in Zurich, Miracle did not fall into the category of an "industrial polluter". Rather, the plaintiff alleged that the gas leak occurred as a result of Miracle's negligence. Since a reasonable insured would expect the exclusion to apply to industrial pollution and not to a gas leak, the plaintiff's claim was held not to fall within the pollution exclusion.

Waiver and costs

[11] The application judge rejected the respondents' argument that ING had waived its right to rely on the exclusion clause and, on that account, reduced the costs awarded to the respondents. No appeal is taken in relation to the issue of waiver, but the respondent Canada seeks leave to cross-appeal the application judge's costs order.

Issue

[12] Did the application judge err in holding that the pollution exclusion clause did not apply to exclude coverage for the claim as pleaded?

Analysis

[13] The principles guiding the interpretation of insurance policies were set out by the Supreme Court of Canada in Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., 1993 150 (SCC), [1993] 1 S.C.R. 252, [1993] S.C.J. No. 10, at p. 269 S.C.R.:

In each ease, the courts must interpret the provisions of the particular policy at issue in light of general principles of interpretation of insurance policies, including, but not limited to: (1) the contra proferentum rule; (2) the principle that coverage provisions should be construed broadly and exclusion clauses narrowly; and (3) the desirability, at least where the policy is ambiguous, of giving effect to the reasonable expectations of the parties.

[14] The reasonable expectations of the insured and insurer will support a commercially sensible interpretation of the policy. Estey J. described this approach in Consolidated Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133, at pp. 901-902 S.C.R.: [page247]

Even apart from the doctrine of contra proferentum . . . the normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entering into the contract. . . . [A]n interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation of the policy which promotes a sensible commercial result.

[15] In Consolidated Bathurst, a paper manufacturer was required to shut down due to wear and tear in its machinery. The insurer denied coverage, arguing that damage due to "corrosion" was specifically excluded under the policy. In finding against the insurer, Estey J. held, at p. 903 S.C.R., that the insurer's interpretation "would necessarily result in a substantial nullification of coverage", as it provided no coverage for what was very well the most likely source of the manufacturer's loss.

[16] The appellant ING argues that both a literal and common sense understanding of the word "pollution", as well as the parties' reasonable expectations, demonstrate that the pollution exclusion applies to exclude all losses resulting from "pollution" of the natural environment by the gasoline leaked from Miracle's premises. In contrast, the respondents argue that applying the literal meaning of the pollution exclusion in the context of Miracle's gas-bar business would bring about an unrealistic result and substantially nullify Miracle's coverage. The respondents' argument is essentially twofold: either the exclusion is ambiguous in the context of this case and should be construed against ING as the drafter, or the exclusion is unambiguous but nevertheless should not be strictly enforced as it would virtually nullify the coverage sought by Miracle in the first place.

Is the pollution exclusion ambiguous in the context of this case?

[17] Given its centrality in the application judge's decision, the starting point for interpreting the pollution exclusion is this court's decision in Zurich. That case involved claims brought by the residents of an apartment building who had suffered carbon monoxide poisoning caused by the malfunctioning of the building's furnace. The residents sued the building's owner, alleging negligent failure to maintain, repair and keep the furnace in proper working order. The owner was insured under a CGL policy containing a pollution exclusion clause virtually identical to the clause at issue on this appeal. As in this case, the insurer sought a declaration that the claim was excluded and that the insurer was under no duty to defend or indemnify the insured.

[18] Borins J.A. held that the pollution exclusion clause was ambiguous and did not apply to the claim. He conducted an [page248] extensive review of American authorities applying the pollution exclusion clause to claims arising from carbon monoxide poisoning. Some American courts adopted a strictly literal interpretation and held that the pollution exclusion clause applied. Borins J.A. concluded that those cases rested on a "hyperliteral" approach. He instead found a second line of American authority that looked to the purpose and common sense meaning of the pollution exclusion to be more persuasive. At para. 37, he wrote that "in construing contracts of insurance, dictionary literalism is often a poor substitute for connotative contextual construction". He then concluded, at para. 39, that although carbon monoxide is a "pollutant" within the ordinary meaning of the exclusion, the exclusion's historical context revealed that its purpose was "to bar coverage for damages arising from environmental pollution, and not the circumstances of this case in which a faulty furnace resulted in a leak of carbon monoxide". Thus, Borins J.A. held that the exclusion was ambiguous and should be interpreted in favour of the insured.

[19] In discussing the purpose of the exclusion and the reasonable expectations of the insured, Borins J.A. distinguished the situation of a building owner with a defective furnace from that of a party involved in pollution- creating activity, at para. 38:

There is nothing in this case to suggest that the respondent's regular business activities place it in the category of an active industrial polluter of the natural environment. Put simply, the respondent did not discharge or release carbon monoxide from its furnace as a manufacturer discharges effluent, overheated water, spent fuel and the like into the natural environment. It was discharged or released as a result of the negligence alleged in the underlying claims, which remains to be proved. As I have pointed out, the history of the exclusion demonstrates that it would produce an unfair and unintended result to conclude, in the context of a CGL policy, that defective machinery maintenance constitutes "pollution", even when it gives rise to carbon monoxide poisoning. In this regard, it is necessary to understand that the exclusion focuses on the act of pollution, rather than the resulting personal injury or property damage.

[20] The respondents argue that the effect of Zurich is to restrict the reach of the pollution exclusion to those who can be described as "active industrial polluters" and to prevent its application in any case where personal injury or property damage is alleged to have been caused by the insured's negligence: see, e.g., Hay Bay Genetics Inc. v. MacGregor Concrete Products (Beachburg) Ltd., 2003 90091 (ON SC), [2003] O.J. No. 2049, 29 C.L.R. (3d) 60 (S.C.J.).

[21] I disagree with that submission. Zurich must be read in the context of the specific issue the court was addressing. Borins J.A. rejected what he quite appropriately described as a "hyperliteral" argument that the claim was excluded because it arose [page249] from the "escape" of "gas". The court refused to accept the insurer's strictly literal interpretation of the clause in favour of one that determined the meaning and reach of the exclusion, given its historical purpose and a common sense assessment of the insured's business activity. The exclusion's ordinary meaning in those circumstances was found to be ambiguous and contrary to the insured's reasonable expectations.

[22] 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. While the respondent Canada now attempts to characterize its claim as if it primarily, if not exclusively, sounds in negligence, that ignores the fact that the statement of claim asserts the causes of action commonly associated with pollution-based claims for environmental damage: strict liability (presumably on the basis of Rylands v. Fletcher (1868), L.R. 3 H.L. 330, [1861-1873] All E.R. Rep. 1 (H.L.)) and nuisance as well as negligence. The negligence claim is based in part upon alleged breaches of both provincial and federal environmental legislation and regulation. The damages claimed are for harm to the environment: the loss of property value due to contamination of the soil, the cost of investigating, testing and monitoring the contamination caused by the migration of a hazardous product from the lands of the insured and the cost of rectifying the contamination and remediating the plaintiff's property. Such a claim fits entirely within the historical purpose of the pollution exclusion, which was "to preclude coverage for the cost of government-mandated environmental cleanup under existing and emerging legislation making polluters responsible for damage to the natural environment": See Zurich, at para. 13.

[23] I do not accept the argument that the phrase "active industrial polluter of the natural environment" used in Zurich should be read as restricting the reach of the pollution exclusion clause to situations where the insured is engaged in an activity that necessarily results in pollution. 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: Liberty Mutual Insurance Co. v. Hollinger Inc., 2004 10995 (ON CA), [2004] O.J. No. 481, 236 D.L.R. (4th) 635 (C.A.), at paras. 16-17. 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 [page250] 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.

[24] Therefore, the claim as pleaded falls squarely and unambiguously within the language of the exclusion clause as a claim "arising out of the actual, alleged or threatened spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of pollutants". Indeed, it would take a "hyperliteral" reading of the language of Zurich, detached from the facts and issue considered in that case, to conclude otherwise.

[25] I find support for my interpretation of the pollution exclusion in both Canadian and American case law. Ontario v. Kansa General Insurance Co. (1994), 1994 626 (ON CA), 17 O.R. (3d) 38, [1994] O.J. No. 177 (C.A.), leave to appeal dismissed [1994] S.C.C.A. No. 123, involved a claim against the Crown for negligently failing to properly monitor a third party's storage and handling of hazardous materials. Writing for the court, Labrosse J.A. held, at p. 41 O.R., that the motion judge had erred by holding "that the exclusion clause for claims arising out of the discharge of pollutants applied only to exclude coverage to an insured who actively engaged in polluting activities". Referring to s. 14(1) of the Environmental Protection Act (a provision pleaded in the statement of claim in this case), Labrosse J.A. held, at p. 44 O.R., that "the passive polluter who permits pollution to take place is just as much a polluter as the active polluter who discharges or causes the discharge of pollution". I do not read the brief endorsement of this court in Uniroyal Chemical Ltd. v. Kansa General Insurance Co., 1996 7941 (ON CA), [1996] O.J. No. 644, 89 O.A.C. 311 (C.A.) as having overruled Labrosse J.A.'s judgment.

[26] Pier Mac Petroleum Installation Ltd. v. Axa Pacific Insurance Co., 1997 4252 (BC SC), [1997] B.C.J. No. 1611, 41 B.C.L.R. (3d) 326 (S.C.) involved the interpretation of a CGL policy issued to a contractor who had built a gas bar. The gas-bar operator sued the contractor for losses resulting from the leakage of petroleum products allegedly caused by the negligent construction of the underground storage tank and pipes. The contractor's insurance policy excluded coverage for "the actual, alleged or threatened discharge, dispersal, release or escape of pollutants". The court held that the claim against the contractor for damages due to gasoline leakage was clearly excluded under the pollution exclusion.

[27] In Corbould v. BCAA Insurance Corp., 2010 BCSC 1536, [2010] B.C.J. No. 2125, 13 B.C.L.R. (5th) 168 (S.C.), the court held that a claim for [page251] damages resulting from a spill of approximately 950 litres of heating oil from a tank on the insured's property was excluded. The insured's "all risks" policy excluded coverage for "loss or damage caused by contamination or pollution, or the release, discharge or dispersal of contaminants or pollutants". Sigurdson J. considered Zurich at some length but concluded, at para. 84, that the claim was excluded from coverage:

I understand that the words of the exclusion should not be read hyperliterally to include things that might be said to be contamination or pollution but objectively could not be considered by the parties to be intended to exclude coverage. I do not consider interpreting contamination or pollution to include a large spill of fuel oil that directly damaged the plaintiff's land and house to be a hyperliteral interpretation of the clause.

[28] A majority of courts in the U.S. have held that claims against gas stations for damages caused by leaking gasoline are unambiguously excluded from the standard "absolute" pollution exclusion, which is virtually identical to the exclusion in this case: see, e.g., Federated Mutual Insurance Co. v. Abston Petroleum, Inc., 967 So.2d 705 (Ala. S.C. 2007); Whittier Properties v. Alaska National Insurance, 185 P.3d 84 (Alaska S.C. 2008); Truitt Oil & Gas Co. v. Ranger Ins. Co., 498 S.E.2d 572, 231 Ga. App. 89 (1998); Millers Mutual Insurance Assn. of Illinois v. Graham Oil Co., 668 N.E.2d 223, 282 Ill. App.3d 129 (1996); West Bend Mutual Insurance Co. v. United States Fidelity and Guaranty, 598 F.3d 918 (7th Cir. 2010); Crescent Oil Co. v. Federated Mutual Insurance Co., 888 P.2d 869, 20 Kan. App. 2d 428 (1995); Kimber Petroleum Corp. v. Travelers Indemnity Co., 689 A.2d 747, 298 N.J. Super 286 (1996); Harrison v. R.R. Morrison & Son, Inc., 862 So.2d 1065 (La. App. Ct. 2003); Montana Petroleum Tank Compensation Board v. Crumleys, Inc., 174 P.3d 948, 341 Mont. 33 (S.C. 2008); Union Mutual Fire Insurance Co. v. Hatch, 835 F. Supp. 59 (ND N.H. 1993); Wagner v. Erie Insurance Co., 801 A.2d 1226, 2002 PA Super 166 (2002).

[29] The respondents point to discussions between Miracle and ING representatives which they argue reveal that neither party contemplated that the pollution exclusion would apply to Miracle. Even if there were ambiguity making this evidence admissible, these discussions took place following the gas leak in 2003 and are therefore unhelpful with respect to the parties' reasonable expectations at the time the policy was signed.

[30] I therefore conclude that the pollution liability exclusion, as applied to the circumstances in this case, is neither ambiguous nor contrary to the parties' reasonable expectations. [page252]

Does the pollution exclusion virtually nullify the coverage sought by Miracle?

[31] The respondents argue that giving effect to the pollution exclusion clause in this case would virtually nullify the coverage sought by Miracle in the first place. They cite the following passage from Weston Ornamental Iron Works Ltd. v. Continental Insurance Co., [1981] O.J. No. 78, [1981] I.L.R. Â1-1460 at 477 (C.A.), at para. 16:

The exclusion clause should not be interpreted in a way which is repugnant to or inconsistent with the main purpose of the insurance coverage but so as to give effect to it. Thus, even if the exemption clause were found to be clear and unambiguous it should not be enforced by the courts when the result would be to defeat the main object of the contract or virtually nullify the coverage sought for protection from anticipated risks. (Emphasis added)

[32] In Weston Ornamental, the insured Weston was engaged in the business of metal working, including the repair of heavy machinery. While one of Weston's employees was out at a city dump using a welding torch to repair a bulldozer, a fire broke out and destroyed the city's bulldozer. The city sued Weston for the loss. Although Weston's insurance policy included coverage for [at para. 8] "all sums which [Weston] shall become legally obligated to pay . . . because of injury to or destruction of property", the insurer denied coverage on the basis of a clause excluding coverage for [at para. 9] "destruction or loss of use of . . . any personal property or any fixtures as a result of any work performed thereon". At paras. 16-18, the court held that, given the constant risk of fire due to the welding torches used in Weston's repair business, it would be anomalous to exclude fire loss from coverage. In entering the CGL policy, the parties could not have intended to "practically render nugatory the 'away from shop' liability coverage for the most obviously inherent risk" of Weston's business.

[33] I see no merit in the submission that giving effect to the exclusion would effectively nullify the policy in this case. Unlike the machine repair business in Weston Ornamental, the 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. Further, unlike the work performance exclusion clause in Weston Ornamental, the pollution exclusion in this case is animated by a unique purpose: to preclude coverage for expensive [page253] government-mandated environmental cleanup required by legislation that makes polluters strictly liable. This purpose forms an important part of the exclusion's application to each case.

[34] Therefore, I find no reason in this case to disregard the clear and unambiguous language of the pollution exclusion clause. The claim against Miracle falls squarely within the exclusion. ING is therefore not required to defend or indemnify Miracle against the claim brought by Canada.

Conclusion

[35] For these reasons, I would allow the appeal, set aside the judgment and in its place grant a judgment declaring that the appellant is under no obligation to defend or indemnify the insured for this claim. The cross-appeal as to costs should therefore be dismissed. I would award the appellant costs in the amount agreed to by the parties, namely, $15,000 for the appeal and $22,000 for the application, both amounts inclusive of disbursements and applicable taxes.

Appeal allowed.