Court File and Parties

Court File No.: CV-21-00658127-0000 Date: 20241218 Superior Court of Justice - Ontario

Re: FREESEN APARTMENTS LTD., Plaintiff -and- LLOYD’S UNDERWRITERS, THE SOVERIGN GENERAL INSURANCE COMPANY, HUGH WOOD CANADA LTD. and PREMIER CANADA ASSURANCE MANAGERS LTD, Defendants

Before: Jane Dietrich J.

Counsel: R. Steven Baldwin, for the Plaintiff Chester Wydrzynski, Raya Sidhu for the Defendants, Lloyd’s Underwriters, The Sovereign General Insurance Company and Premier Canada Assurance Managers Ltd.

Heard: December 17, 2024

Endorsement

Introduction

[1] The defendants, Lloyd’s Underwriters (“Lloyd’s”), The Sovereign General Insurance Company (“Sovereign”) and Premier Canada Assurance Managers Ltd. (“Premier”) (collectively referred to as the “Insurers”) seek summary judgment pursuant to rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg 194 (the “Rules”). The Insurers seek an order dismissing the claim by the plaintiff, Freesen Apartments Ltd. (“Freesen”), against them.

[2] The underlying claim by Freesen is for coverage of environmental property damage at 133-135 Gamble Avenue in Toronto, Ontario (the “Property”) resulting from an underground storage tank (“Underground Tank”) that was reported on or about October 29, 2019.

[3] The defendant Hugh Wood Canada Ltd. (“Hugh Wood”) takes no position on this motion. Hugh Wood has further agreed to a dismissal of its crossclaims against the Insurers if the Insurers' motion for summary judgment is granted.

Background

[4] The vast majority of the facts are not in dispute.

[5] Hugh Wood, Freesen’s broker, approached Premier about obtaining environmental and pollution insurance for the Property on behalf of Freesen.

[6] Hugh Wood submitted an environmental & pollution liability application and supplemental questionnaire for storage tanks (the “Application” and the “Supplemental Questionnaire” respectively) dated May 19, 2016. The covered location in the application form was listed as 133-135 Gamble Avenue, Toronto, Ontario, which is a multi-family residential apartment building.

[7] On the Supplemental Questionnaire, Freesen indicated: “gas used over 25+ years ago – tank(s) closed”. The Plaintiff checked the “no” box, in response to the question: Do any plans exist to remove or replace any tanks within the next 12 months? Under the section entitled “Tank Schedule”, the plaintiff indicated that information was not available and ‘the tank was installed over 25 years ago’.

[8] The defendants, Lloyd’s and Sovereign issued a policy of insurance for environmental impairment liability (broad form) with policy number EB00423 (the “Policy”). The Policy was originally issued effective in 2016, but the policy period in question in this proceeding was from May 20, 2019 to May 20, 2020.

[9] The Underground Tank at the Property was removed on or about October 29, 2019 and while removing the Underground Tank it was discovered that the Underground Tank had various holes, and the surrounding soils were contaminated by petroleum hydrocarbons.

[10] Freesen was required to delineate and remediate the soil contamination and remove the contaminated soil.

[11] Freesen applied to Lloyd’s and Sovereign for coverage under the Policy to pay and indemnify the costs of the delineation, remediation and removal of contaminated soil (the “Loss”).

[12] Coverage was denied on the basis that there was no coverage for storage tanks at the Property.

[13] On March 3, 2021, Freesen then commenced the underlying action against the Insurers as well as against Hugh Wood.

Issues

[14] Rule 20.04(2)(a) provides: “The court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence”.

[15] The Insurers take the position that there is no genuine issue for trial as against them because the clear wording of the Policy excludes from coverage the Loss claimed by Freesen.

[16] The Insurers admitted during submissions that the Loss fell within the overall coverage provided by the Policy, but the Insurers claim the Loss falls withing two exclusions to coverage:

[17] storage tank exclusions captured in Part III of the Policy; and

[18] exclusions regarding non-compliance with statute under Part II of the Policy.

Analysis

[19] The defendants seek an order dismissing the action because they allege there is no genuine issue for trial.

[20] There is no genuine issue requiring a trial when the court is able to reach a fair and just determination on the merits of the motion. This will be the case where the process (1) allows the court to make necessary findings of fact, (2) allows the court to apply the law to the facts, and (3) is a proportionate, more expeditious, and less expensive means to achieve a just result: Hyrniak v Mauldin, 2014 SCC 7 [2014], 1 S.C.R. 87 at para. 49; Moffitt v. TD Canada Trust, 2023 ONCA 349, 483 D.L.R. (4th) 432, at para. 39.

[21] While the defendants bear the onus on this motion of establishing that there is no genuine issue requiring a trial, the plaintiff has an evidentiary burden and must put its best foot forward with respect to the existence of material issues to be tried – the plaintiff must lead trump or risk losing: see 1061590 Ontario Ltd v. Ontario Jockey Club.

[22] In large part, this dispute in this case centers around the interpretation of the Policy. The parties agreed that in dealing with a contract of insurance as Salah v. Timothy’s Coffee of the World Inc., 2010 ONCA 673 at para 16 stated:

When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. The court construes the contract as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective

[23] As stated in Kelly Panteluk Construction Ltd. v. Lloyd’s Underwriters [Kelly] 2022 SKKB 227 at 17:

Whether the court finds ambiguity in the terms of an insurance policy determines the court’s interpretative approach. In the absence of ambiguity, the court gives effect to the policy's clear language, reading it as a whole. In the presence of ambiguity, the court looks to general rules of contract construction. For example, courts prefer interpretations that are consistent with the reasonable expectations of the parties, so long as such interpretation is supported by the text of the policy. Courts also strive to ensure that similar insurance policies are construed consistently. Where these general rules of construction fail to resolve the ambiguity, courts should construe the policy contra proferentem or put slightly differently, coverage provisions are interpreted broadly and exclusion clauses narrowly.

The Storage Tank Exclusion

[24] Part III section 4 of the Policy provides that insurance does not apply to a loss:

Based upon or arising out of POLLUTION CONDITIONS resulting from an UNDERGROUND STORAGE TANK whose existence is known by a RESPONSIBLE INSURED within the POLICY PERIOD and which is located at COVERED LOCATION(S) unless such UNDERGROUND STORAGE TANK(S) have been approved in writing by PREMIER to be covered by this policy as COVERED LOCATION(S). (emphasis added)

[25] The capitalized words in the quote above are also capitalized in the Policy to refer to terms defined in the Policy. Freesen agrees that absent the wording underlined above, it would have no claim under the Policy.

[26] However, Freesen argues that the wording underlined above captures the Underground Tank and the Loss is therefore covered by the Policy. In essence, Freesen argues that the Insurers ‘approved in writing’ the coverage of the relevant Underground Tank because the Policy was issued after a review of the Application and Supplemental Questionnaire – which contained disclosure regarding the Underground Tank.

[27] The Insurers, however, take issue with Freesen’s interpretation of the Policy. Specifically, the Insurers reference Table 2 on the Declarations Page of the Policy, which under Storage Tank(s) states: N/A.

[28] The Insurers’ position is that the clear wording of the Policy does not approve any underground storage tanks as covered locations under the Policy. The defined term COVERED LOCATION(S) is found at Part IV section 6 of the Policy and means both the Covered Sites listed in table 1 on the Declarations Page, and the Storage Tanks listed on table 2 of the Declarations Page.

[29] As no Storage Tanks were listed on table 2 of the Declarations Page (rather the table read N/A) the Insurers’ position is that the wording of the exclusion in the Policy is clear. With reference to the underlined language above – no storage tank was approved in writing by the Insurers as a covered location (as that term is defined in the Policy).

[30] I agree with the Insurers. Just because the Underground Tank was disclosed on the Application and the Supplementary Questionnaire does not mean that it was approved in writing by the Policy. The Supplementary Questionnaire notes on the face of the document that the Insurers may not be able to cover the storage tanks at the location.

[31] Rather the words of the Policy are what must be examined. Here the words of the Policy are clear – no underground storage tanks were included as covered locations – accordingly there is no applicable exception to the storage tank exclusion in the Policy. In other words, the underlined exception in paragraph 24 above does not capture the Underground Tank as it was not approved in writing by Premier as a Covered Location – the broad exclusion in Part III section 4 of the Policy applies and the Loss is excluded from coverage.

[32] Accordingly, I would grant the Insurer’s motion for summary judgment based on the unambiguous wording of the storage tank exclusion claim in Part III section 4 of the Policy.

Non-Compliance with Statute Exclusion

[33] The Insurers also argue that under Part II section 2 of the Policy, the Loss is excluded from coverage. The applicable language of that exclusion reads:

Based upon or arising out of any RESPONSIBLE INSURED’s knowing, willful or deliberate noncompliance with any statute, regulation, ordinance, administrative complaint, notice of violation, notice letter, executive order, or instruction of any governmental agency or body. Including the RESPONSIBLE INSURED’s failure to comply within a reasonable time frame with any statute or regulation, ordinance, administrative complaint, notice of violation, notice letter, executive order, or instruction of any government agent, governmental agency or body...

[34] The Insurers take the position that Freesen knew in June of 2007 from publicly available information posted on the Technical Standards & Safety Authority’s (TSSA’s) website, an excerpt of which was provided to Freesen by Hugh Wood, that underground storage tanks that were no longer being used “must be removed by a qualified TSSA registered Petroleum Equipment Mechanic 2”.

[35] It is not clear to me, based on the evidence before me that the information from the TSSA’s website provides clear notice that the Underground Tank was required to be removed. One could read the excerpted material to provide that if an unused underground storage tank was going to be removed it must be done by a qualified person (rather than a requirement it must be removed). There is also no evidence that there was any willful or deliberate non-compliance. There was no ‘order’, ‘notice’ any similar instrument issued to Freesen that required removal of the Underground Tank by a specific date.

[36] Accordingly, I do not agree with the Insurers, based on the evidence before me, that the non-compliance with statute exclusion in Part II section 2 of the Policy applies and I would not grant summary judgment on this basis.

Disposition

[37] For the reasons set out above, I grant the defendant’s motion for summary judgment based on the language of the exclusion relating to storage tanks in Part III section 4 of the Policy.

[38] At the hearing, the parties both provided cost outlines to the Court. I note that the plaintiff’s bill of costs was substantially less than that of the Insurers. However, the plaintiff’s bill of costs only covered the summary judgment motion, where the Insurers' bill of costs covered the proceedings to date.

[39] Fixing costs is a discretionary decision under s. 131 of the Courts of Justice Act, R.S.O. 1990, c C.43. In exercising my discretion, I may consider the result in the proceeding, any offer to settle or to contribute made in writing, and the factors listed in Rule 57.01. These factors include but are not limited to: (i) the result in the proceeding; (ii) the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer; (iii) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed; (iv) the amount claimed and the amount recovered in the proceeding; (v) the complexity of the proceeding; (vi) the importance of the issues; and (vii) the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding. Rule 57.01(1)(f) provides that the court may also consider “any other matter relevant to the question of costs.”

[40] In exercising my discretion to fix costs, I must consider what is fair and reasonable for the unsuccessful party to pay in this proceeding and balance the compensation of the successful party with the goal of fostering access to justice: Boucher v Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.) at paras. 26 and 37.

[41] For these reasons, I fix the costs of the motion at $17,500 inclusive of disbursements and Harmonized Sales Tax and order the plaintiff to pay that amount to the defendant within 30 days of the date of this order.

Jane Dietrich J. Date: December 18, 2024