An insured that failed to remove sandblasting residue from a rented property was not entitled to coverage under his CGL policy.

This was an unsuccesful petition by the Insured seeking a declaration that its Insurer had a duty to defend proceedings brought by a third party for damages allegedly sustained as a result of the Insured’s operations.  The insured was alleged to have failed to remove sandblasting residue from the property.  The insurer denied coverage on the basis that the allegations fell within the standard CGL pollution exclusion clause.

The case citation is: Dave’s K. & K. Sandblasting (1988) Ltd. (c.o.b. K&K Sandblasting Ltd.) v. Aviva Insurance Co. of Canada [2007] B.C.J. No. 1203. British Columbia Supreme Court. Goepel J. June 4, 2007.

Here is a link to the decision.   This case was originally digested by Shanti Davies and edited by David Pilley.

 

The Insured operated a sandblasting business on property it had leased from the Owner. It was a term of the lease agreement between the Insured and the Owner that the Insured would leave the property in good repair at the end of the lease term. At the end of the lease term environmental testing confirmed that the soil at the property contained concentrations of pollutants, which exceeded the allowable limits. The Owner was required to spend approximately $160,000 to remediate the property, and subsequently commenced an action against the Insured to recover these costs.

The allegations against the Insured in the Owner’s Statement of Claim were essentially that the Insured was in breach of contract and liable in tort by failing to remove the sandblasting residue from the property and by releasing contaminants in excess of regulatory standards. Further, the Owner alleged that the Insured was negligent in contaminating the lands with various pollutants or, alternatively, the Insured’s sandblasting operations contaminated the soil to levels that exceeded regulatory standards.

The Insurer refused to defend the Insured in the underlying action, citing the pollution exclusion in the policy as the basis for this refusal. This exclusion provides that the insurance does not apply to property damage "arising out of the actual, alleged, potential or threatened spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of pollutants" from any premises, site or location which at any time is owned or occupied by the Insured. After reviewing the history of the pollution exclusion, the Court concluded that the allegations against the Insured fell squarely within the exclusion. In particular, the Court noted the allegation by the Owner that the Insured, during the course of its business activities, had spread mounds of used sandblasting residue containing pollutants over the property.

In the result, the Court denied the Insured’s petition, finding that the claims of the Owner were not within the coverage provided by the policy and that the Insurer did not have a duty to defend.

 

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