Chapter 1 – Liability Coverage Issues – Environmental
Claims
I. Liability Coverage
Issues
-
No standardized
wordings for CGL policies
-
IBC developed
standard CGL policy wordings for its member insurance
companies
-
Always examine the
CGL policy that covers the risk to evaluate coverages
Accident and
Occurrences
-
Occurrence (as per CGL policy)
Include an accident as well as continuous or repeated exposure to substantially the same general conditions; added to expand the scope of coverage.
An event is deemed to be one occurrence whether it was sudden – definite as to time and place, continuous, repeated, and difficult to precisely mark.
Events to be covered under the CGL policy must still be fortuitous.
Include an accident as well as continuous or repeated exposure to substantially the same general conditions; added to expand the scope of coverage.
An event is deemed to be one occurrence whether it was sudden – definite as to time and place, continuous, repeated, and difficult to precisely mark.
Events to be covered under the CGL policy must still be fortuitous.
-
Accident
Not defined in the policy; courts have held that element of suddenness was required in order for a claim to qualify for coverage.
Not defined in the policy; courts have held that element of suddenness was required in order for a claim to qualify for coverage.
-
Fortuitous
Unintended and unexpected from the standpoint of the insured.
Unintended and unexpected from the standpoint of the insured.
-
Forseeability
Case law has been inconsistently applied; coverage would apply when an accident has occurred with an unintended result, even if the result was forseeable or the result of a calculated risk.
The loss adjuster must carefully review the policy to see if coverage applies to the loss presented by the claimant.
Case law has been inconsistently applied; coverage would apply when an accident has occurred with an unintended result, even if the result was forseeable or the result of a calculated risk.
The loss adjuster must carefully review the policy to see if coverage applies to the loss presented by the claimant.
-
Chance
For coverage to apply the event must be fortuitous; unexpected and unintended as per the standpoint of the insured
For coverage to apply the event must be fortuitous; unexpected and unintended as per the standpoint of the insured
-
Intent
If the insured intentionally causes harm, often, coverage will not apply.
If the insured expected or intended the loss to occur then coverage will not apply.
The exception to the rule is in the event where the insured is required to used reasonable force to protect persons or property.
If the insured intentionally causes harm, often, coverage will not apply.
If the insured expected or intended the loss to occur then coverage will not apply.
The exception to the rule is in the event where the insured is required to used reasonable force to protect persons or property.
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Criminality
Insurers have taken the position that it is against public policy to insure a criminal or illegal act and as such these events leading to loss are not covered.
The purpose to exclude such act is to discourage people from harming one another and being protected from the consequences of illegal/criminal actions.
Defense or indemnity costs because of a criminal/intentional act is also not covered; if these expenses were covered it would protect the wrongdoer against civil retribution.
Insurers have taken the position that it is against public policy to insure a criminal or illegal act and as such these events leading to loss are not covered.
The purpose to exclude such act is to discourage people from harming one another and being protected from the consequences of illegal/criminal actions.
Defense or indemnity costs because of a criminal/intentional act is also not covered; if these expenses were covered it would protect the wrongdoer against civil retribution.
Intentional Acts
-
Vicarious liability
with respect to sexual abuse claims are not covered by the
policy.
-
Vicarious liability
has expanded to include employees sexual abuse acts.
-
Insurers argue that
an employee who commits a sexual abuse act against another person during work
hours is not acting within the scope of their employment duties and does not
fall within the insuring agreement.
-
Most insurers have
added wordings to their policy to exclude sexual abuse resulting in damages to
the victims. The perpetrator is solely
accountable for their actions as per the insurance policy. This includes the exclusion for any defenses
under the insuring agreement.
-
Employees having
broad authority, like in the case where a person provides counseling and other
support services to troubled youths, takes advantage of their position and
abuses the child, then this illegal act is not covered by the insurance policy.
The Insured's Defective
Work
-
Coverage under the
CGL policy when it comes to damage resulting from defective products or faulty
workmanship is limited to damage resulting from defective the product or faulty
workmanship and does not extend to the defective product itself or the work
completed.
-
Example; in the
course of building a house the contractor did not properly secure one of the
walls and it collapsed onto a neighboring property causing damage. The CGL policy would cover the damage to the
neighbor's property and any injuries sustained by the neighbor, since the
insured was negligent in not securing the wall.
However, the CGL policy will not cover the damage to the wall itself or
any labour cost to re-secure the wall or any injuries sustained to the insured's
employees due to the event.
-
The purpose of not
covering the property the insured is working on is to discourage the insured
from performing his/her work carelessly and then having the insurers redo the
work, which the insured should have done properly in the first
place.
Defending the
Insured
-
Cost of Defense can be so great that it is in the best interest
of the insurer to attempt to negotiate settlement; the plaintiff's (claimant's) attorney has
framed the event, giving rise to his/her client's claim, in such a way that it
triggers the policy to react and forces the insurer to undertake the duty to
defend the insured
-
Duty to Defend is independent of the duty to indemnity; if issues are difficult to resolve, the
insured can force the insurer to defend (by a legal motion) even before the
investigation into the claim has been completed; insurer has a duty to defend
even if the allegations against the insured are proven false
-
Conflict of Interest is when a lawyer handles both the policy
coverage issue and the defense of the claim;
to avoid conflict of interest it is best to have one lawyer deal with the
policy coverage issues and another lawyer deal with the defense against the
claim
-
Allocation of Defense Cost is a possibility where the insured and insurer
may need to share the cost of defending the action and indemnity; the reasons can be that an occurrence that
has existed before the policy was issued but exposure remained (unbeknownst to
the insured) and damages presented themselves during the policy term, and the
policy is a claims-made form; possibility of multiple policies and defense cost
must be allocated amongst the multiple insurers; insurer can propose a reasonable allocation
of costs as coverage may be unclear and insured may accept, however the courts
have held when there is no reasonable way to allocate the cost between the
insurer and insured, it will be the insurer who will pay in full
-
Excess of Limits is when the damages sought by the plaintiff
are greater than the policy limits of insurance; in this case the insurer must
immediately notify the insured in writing; the insured can report the excess to
his/her own umbrella policy; if
uninsured, then the insured may retain a lawyer (at the insured's own expense)
to protect his/her interest for that part of the damages that is in excess of
the policy limits
-
Joint Defense Sharing Agreements
occurs when there are many
insurers involved in one loss and the defense obligation is triggered; the insurers may choose to appoint the same
lawyer to represent the insured; the
multiple insurers will negotiate on the how to share cost of the one lawyer
amongst them; most often a formal
defense-sharing agreement may be put into place in order to outline how tactical
decisions should be made (by majority or committee or by a principal insurer)
and how the cost for defense will be shared
Policy Trigger
Approaches
-
The 2 basic policy
trigger approaches used in CGL and other liability policies are:
i) Occurrence based
ii) Claims-made based
i) Occurrence based
ii) Claims-made based
Occurrence
Wording
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Most popular type of
wording for CGL and liability policies
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Coverage is
triggered when the incident that causes the loss or "occurrence" takes place
during the policy period, the proximate cause of the loss is not specifically
excluded, and the loss takes place within the coverage territory (if
applicable)
-
Limits coverage to
sums that insured becomes legally obligated to pay as compensatory damages
because of "bodily injury" (BI) or "property damage" (PD)
Claims-made
Wording
-
Rare to see these
wordings used for CGL and liability policies
-
Coverage is
triggered when a claim is made against the insured during the policy period; the
date of the incident causing BI or PD does NOT have to fall within the policy
term
-
Example; Concrete
foundation of a house is poured in Dec 2003.
The concrete was not mixed properly and a faulty component is added to
the mix. In Feb 2004 the faulty
component starts to act and in Apr 2004 damages due to the faulty work has come
to light. The company that mixed the
concrete has a claims-made CGL policy effective Jan 1, 2004 and expires Jan 1,
2005. The owner of the home makes a
claim in Apr 2004 against the concrete company for faulty work resulting in
damages, and the concrete company's CGL policy will respond using the current
term's policy since it has claims-made wordings and NOT use the term effective
Jan 1, 2003 and expires Jan 1, 2004.
This is because the claim was presented by the home owner on Apr
2004.
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Retroactive Date contained in claims made policies; cut-off date for an incident to qualify for
coverage; usually precede the policy's inception date and result in not all
claims reported during the policy period are covered; this limits claims made policy to occurrences
that fall within the retroactive period or the policy
period
-
Extended Reporting Period; policy does not "expire" for the purpose of
reporting claims first made against an insured;
the standard period can be extended further with the addition of an
endorsement; this policy extension
allows coverage for occurrences that fall within the policy period but are
presented against the policy after the contract has expired; there is a discovery period which limits this
extension and therefore claims presented outside the discovery period (after the
policy expires) are not covered
-
The three (3)
circumstances that might lead to gaps in coverage are:
i) change in insurer
ii) when an occurrence form is substituted for a claims-made form
iii) when the wording changes from one policy period to the next, even though the insurer remains the same
i) change in insurer
ii) when an occurrence form is substituted for a claims-made form
iii) when the wording changes from one policy period to the next, even though the insurer remains the same
-
Professional
liability wordings or errors & omissions policies adopt claims-made
language; often provides coverage for financial effects of a wrongful act and
not for BI or PD
-
Example; An
accountant undertakes a faulty audit which leads investors to believe the
company is more financially sound than it really is. The investor's confidence in the company is
unwarranted due to the faulty audit. The
company files for bankruptcy after finding out its proper financial position
leading investors to lose money. The
investors present a claim against the accountant's errors & omissions
coverage during the discovery period but after the policy expires for financial
loss due to the accountant's negligence.
-
All CGL policies,
whether they cover BI or PD or financial losses do not cover (exclude) fines,
penalties, and punitive damages
Coverage Trigger
Theories
-
Based on case law
& precedents and can help loss adjuster analyze how and when occurrences
arise and how they relate to coverage under a liability
policy
-
When claims are
covered by multiple policies and overlaying policy limits due to overlap in
policy terms, the claims process can become very complex
-
The four (4) main
coverage triggers developed in Canada and USA, with regards to BI claims,
are:
1)
Manifestation
Theory
-
injury or disease
does not occur until the injury or disease becomes apparent; that is manifests
itself
-
CGL policy provides
coverage when a TP could have or did become aware of the damage or
injury
-
BI Example; John is exposed to asbestos but does not show
symptoms of illness immediately. After 7
years John develops a persistent cough which he seeks medical attention
for. John undergoes a x-ray which shows
his lungs are damaged due to his exposure to asbestos. The policy that is in-force when John became
aware of his disease due to negligence on the part of his company will respond
to the claim, even though the exposure happened 7 years ago. The disease manifested itself (became aware
to John) upon his seeking for medical attention for his persistent
cough
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PD Example; In
winter, road salt contaminates the concrete floor of a parking garage causing
the concrete to deteriorate. During the
winter cars using the roads track road salt into the parking garage on a
continuous basis. After 10 years of this
type of exposure the concrete begins to crumble and break, and a large chunk
falls onto a parked and unoccupied vehicle.
The vehicle has extensive damage.
Even though the proximate cause started 10 years ago, the manifestation
of damages (when the chunk fell on the vehicle) will trigger the policy in-force
the time of the damages manifested itself.
2)
Exposure Theory
-
any policy that was
in place during the time that the claimant was exposed to the harmful conditions
causing injury will respond
-
BI Example; John worked for his company extracting
asbestos leading him to be exposed. John
worked for his company from 1950 to 1965.
John developed a persistent cough in 1992 and found out his lungs were
damaged due to his earlier exposure to asbestos. The policy that were in-force during 1950 to
1965 will be triggered and provide coverage for John's
claim
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PD Example; ; In winter, road salt contaminates the
concrete floor of a parking garage causing the concrete to deteriorate. During the winter cars using the roads track
road salt into the parking garage on a continuous basis. After 10 years of this type of exposure the
concrete begins to crumble and break, and a large chunk falls onto a parked and
unoccupied vehicle. The exposure started
from the first day the first vehicle used the parking garage in winter
conditions and road salt was applied on the roads. The policy that would respond would be the
one that was in-force during the first winter when the parking garage was open
for business.
3)
Continuous or Triple Trigger
Theory
-
There are three (3)
events that will trigger coverage
a)
During the exposure
to the offending product. Example with
John and exposure to asbestos will start from his first exposure to
asbestos.
b)
During the latency
period when the disease is progressing.
Example with John and asbestos, even though John was not experiencing the
persistent cough, the disease was developing and this would be considered during
the latency period.
c)
When the injury
becomes manifested. Example with John
and asbestos; As the disease is
progressing continuously from first exposure, all the policies in effect over
this period will be activated.
4)
Injury In-Fact Theory
-
Holds that a policy
will respond if the damage actually occurred during the policy period, whether
or not anyone was or could have been aware of it and regardless of when the
negligent act or omission to act took place
-
All the policies
that were in-force during the period an injury occurs would be triggered; but not the policies when the claimant was
only exposed to harmful conditions
-
BI Example; Injury occurs as a person first inhales or
ingests asbestos. Injury or damage not
detected at the time of the injury will not affect the application of this
coverage theory
-
This theory tries to
pin-point the time when the injury started to occur, even though the claimant
was unaware of it, and also add the continuous progression of the injury until
it finally came to light
-
Privest Properties v. Foundation Co. of
Canada (1991); the BC Supreme
Court said there was no uniformity of opinion on coverage trigger theories but
the trend was to adopt the injury in-fact theory for BI claims and manifestation
theory for PD claims
Claims Reporting Conditions in the CGL
Policy
-
The insured must
abide by the claims reporting condition, "Duties in the Event of Occurrence,
Claim or Action", to avoid breach of contract
Duties in the Event of Occurrence, Claim or
Action
-
An insured must
undertake the following to avoid breach of contract:
·
Prompt notification
of an "occurrence" which may result in a claim
·
Prompt notice of
action against the insured; example if the insured receives a statement of claim
(SOC), s/he must immediately notify the insurer
·
Provide insurer with
documentation
·
Provide
authorization for the insurer to obtain records and other
information
·
Cooperate with the
insurer in the investigation, settlement or defense of the claim or
"action"
·
Assist the insurer
to enforce its rights against a responsible party (subrogation
opportunities)
·
The insured is not
to assume any obligation towards the claimant; example not make any voluntary
payment or incur any expense (except for immediate first aid) without insurer's
prior consent
Additional CGL Insuring
Agreements
-
Additional coverages
which are standard under this for are:
·
Personal injury
·
Voluntary Medical
Payments
·
Tenant's Legal Liability
-
Additional coverages
that are purchased by endorsement, and not standard under this form
is:
-
Non-Owned Automobile policy;
covers liability imposed by law upon an insured arising from the use or
operation of any automobile that is NOT owned or licensed by the insured but
used in the course of the insured's business
Personal Injury
Liability
-
Personal injury; means
injury to character, reputation, and position in the community of the claimant
caused by libel or slander of the insured
-
Defamatory acts and
words on the part of the insured are covered
-
Examples are false
arrest, detention or confinement against one's will
-
Liability policies
exclude the insured's intentional acts; when the insured knows s/he is making a
false statement or wrongfully arresting a person; example - Alex is detained by
security for shoplifting, however, the security guard didn't have proof or
reasonable cause but did it anyway because of the way Alex was dressed -
Coverage will not apply
-
Coverage will be
extended if the insured intentionally takes an action because s/he was acting on
information believed to be true; example - Alex was detained by security for
shoplifting, because security officers were given information that a person
matching Alex's description had shoplifted before and had CCTV footage of the
same person doing it again just minutes prior to Alex's arrest. Based on the information security had, they
took an action that was reasonable, and if it was a false arrest, then coverage
would apply
-
Libel; damaging statement(s) are published; example
- Jennifer posts on her face book profile that Mark is a thief because he stole
her laptop. Jennifer saw Mark using her
laptop earlier that day and believed that he stole it. Jennifer later discovered the laptop was with
another friend and forgot that she had given permission to this other friend to
use it; this type of slander is covered
by the policy
-
Slander; damaging statements/words are spoken; the
words are made permanent in some form and results in the victim to suffer
through their title or goods, by the spread of malicious lies;
example - Sarah sends a text to her friend that states Alex is a thief because she is missing her laptop. The friend forwards the text to other friends and finally the text is posted on the internet for it to be seen globally. It is later discovered that Sarah forgot her laptop at the library. This is covered under a liability policy under personal injury
example - Sarah sends a text to her friend that states Alex is a thief because she is missing her laptop. The friend forwards the text to other friends and finally the text is posted on the internet for it to be seen globally. It is later discovered that Sarah forgot her laptop at the library. This is covered under a liability policy under personal injury
-
Slander / Libel can
cause injury to a person's reputation by:
·
causing the person
to be hated and elicit negative opinions from the public
·
causing others to
avoid the victim
·
subjecting the
victim to ridicule
·
implicating the
victim in a criminal activity
·
damaging the
business of the victim
·
suggesting immoral
behavior on the part of the victim
-
The purpose of
slander or libel lawsuits brought by the victim are:
·
reinstate victim's
reputation
·
compensate victim
for damages
·
deter others from
such acts
-
The heads of damages
that are specific to libel and/or slander include:
·
General damages
(pain and suffering)
·
Aggravated damages
(awarded if the court finds that the defendant acted with malice or
spite)
·
Punitive damages
(awarded when the court feels that the punishment is warranted for truly
outrages and offensive conduct; excluded under an insurance
policies)
-
Hill v. Church of Scientology of
Toronto; the plaintiff must
demonstrate to the court that libel and slander occurred but is not required to
submit proof of damages, because damages are presumed
-
The cap on general
damages imposed by the Supreme Court of Canada in the Trilogy cases does NOT
apply to defamation action; hence the $372,000 cap (2010) for pain &
suffering is NOT applicable in libel/slander cases and therefore the damages
claim can often exceed policy limits
-
Actions that can be
undertaken to mitigate damages due to libel/slander are:
·
If libel was
published in good faith
·
If libel didn't
involve a criminal charge
·
If the facts, which
the statement was based, were mistaken or misunderstood
·
If a retraction was
published within 3 days of the receipt of notice or broad cast within a
reasonable amount of time
·
The length of time a
victim suffers damages is correspondingly shortened by the speed of the
apology
-
Defenses available
to defend against a claim of libel or slander are:
·
Statement was proven
to be true
·
Statement was a fair
comment on a situation where the facts of the circumstances are
correct
·
The statement by the
person alleged to have committed libel/slander was expressing their opinion or
inference and not declaring a statement of fact
·
If the statement was
provided by a plaintiff and consent was implied, then the publisher of the info
will be immune to liability
·
The defense of
privilege exists when:
i) Executive officer is performing in their official duties
Example; Statement was provided by a person discharging a public or private duty who believed that the statement was true
ii) Qualified circumstances when there is private or public interest in transmitting the info
Example; An employer would be protected for making a negative comment about an employee's performance to a prospective employer as long as they were made in good faith
i) Executive officer is performing in their official duties
Example; Statement was provided by a person discharging a public or private duty who believed that the statement was true
ii) Qualified circumstances when there is private or public interest in transmitting the info
Example; An employer would be protected for making a negative comment about an employee's performance to a prospective employer as long as they were made in good faith
Medical Payments
-
The most common
medical expenses covered under the CGL medical payments insuring agreement
are:
·
Immediate first
aid
·
Necessary medical
surgery
·
Necessary ambulance
and hospital services
·
Necessary
professional nursing
·
Necessary X-rays and
dental services
·
Funeral services
incurred by TP accidentally injured on the premises or because of an insured's
operations
-
Neither negligence
nor any other legal obligation on the part of the insured to the injured party
must be proven
-
Expenses must be
incurred and reported to insurer within one (1) year of the date of the
accident
-
Injured party must
submit to any reasonable medical examination by a doctor chosen by the
insurer
-
Medical payments
coverage excludes:
·
The
insured
·
Anyone hired by the
insured to do work
·
Tenants
·
Employee of the
insured
·
Anyone participating
in any type of athletics
·
A person who
qualifies for coverage under the provincial worker's compensation
plan
Tenant's Legal
Liability
-
Coverage applies for
damage caused by fire, smoke, explosion or sprinkler leakage to rented premises
if it occurs during the policy period
-
If not for this
extension in coverage, this type of loss would not be covered since the premises
is occupied by the insured
-
In order to properly
evaluate the claim a copy of the lease agreement is needed by the loss
adjuster
-
Insured's
improvements and betterments to the premises is excluded from coverage as it
would be covered under insured's property policy
II. Environmental
Claims
-
Oil spills and other
environmental claims happen frequently
-
Examples
are:
·
Oil spills from
residential heating oil storage tanks
·
Methane found in the
basement of a home
·
Gasoline
contaminates the drinking water
·
Release of toxic
fumes or substances from dumping or escape of toxic wastes
-
All of the above may
result in either BI or PD or both
-
Long tail between
exposure and discovery; Example - A
dairy farmer notices his cows are producing less milk and decided to have the
water on his property tested. The
laboratory results showed signs of tire-by products contamination in the
water. A tire manufacturer that was
located nearby has been out of business for a number of years and due to
negligent disposal of tire-by products the contaminants reached the water supply
of the neighboring farmer. The
contamination took a number of years before the by-products contaminated the
water. In the time the tire manufacturer
was open, there were multiple policies enforce, and some had umbrella
endorsements added on that may respond to this type of loss. The loss adjuster had to determine which
policies were enforce and see if a claims made form or occurrence basis forms
were the wording of the multiple policies.
The loss adjuster hired an expert to determine when the contamination
actually occurred and for how long.
-
When more than one
policy is enforce and is involved over the "pollution period", then the multiple
insurers of these policies may be asked to share in the cost of defense or
indemnification
Coverage Analysis for Environmental
Claims
-
Analysis must be
made as to whether an "accident" has occurred or whether any damage as defined
by the policy has occurred
-
Issues of
forseeability and fortuity must be properly investigated
-
The onus of proving
that a policy exists rests with the insured
-
Once the insured
proves the policy exists the onus shifts to the insurer to establish the
existence of policy limits and/or exclusions
-
When the policy is
not available then other sources to find out where a copy can be found
are:
·
Retired employees of
insurer; if the loss adjuster can find such a person
·
Insured to find some
sort of proof that a policy exists; examples - payment of premium, memos
advising of insurance contract was enforce
·
Broker may have a
copy available in archives
-
Liability policies
do NOT cover measures to prevent the possibility of a claim; these are the
expenses of the insured in order to operate a business
-
If insured bears
expenses to prevent a loss and tries to claim the expense against the insurer,
then the insurer can challenge the claim by taking a position that the "damage"
has not yet occurred and therefore does NOT qualify for
coverage
-
There are unique
case laws that "damage" is not completely defined; Privest Properties v. Foundation Company of
Canada et al (1991); The original renovation was conducted by the Foundation
Company and involved the application of asbestos fireproofing material. A second renovation many years later was
scheduled and the government ordered the asbestos removed prior to new
renovations can begin. The court ruled
that "property damage" was the cause for the new renovations not taking place
and that the property was impaired. Once
the property was free from asbestos the property would be ready for
renovation
-
Sunset Clause; for reinsurance contract; limits coverage to
losses reported within a prescribed period of time; used to limit the
reinsurer's exposure to "long-tail" liability exposures, especially for
environmental claims
Pollution
Exclusions
-
Most liability
policies contain a pollution exclusion
-
Older policy forms
had exceptions to pollution exclusion and provided limited coverage for certain
events
-
New policy forms
have a comprehensive exclusion for pollution, and allow the insured's to buy
back limited pollution coverage
-
Pollutants; defined in the CGL policy as - "means any
solid, liquid or gaseous, or thermal irritant or contaminant including smoke,
odour, vapour, soot, fumes acids, alkalis, chemicals and waste. Waste includes materials to be recycled,
reconditioned or reclaimed."
-
Most policies
exclude seepage and leakage of pollution exclusion and therefore, in order for
the occurrence to be covered the loss must be sudden and
accidental
-
Since "sudden" is
not defined in the policy it is interpreted differently by courts
Example; Murphy Oil v. Continental (1981) - contamination of a neighbors well from a leaking gasoline pipe was found to have taken place over a long period of time. The court for this case found that the pipe could not "spring a leak" in any manner other than suddenly. One moment the pipe was working and the next moment it "suddenly" wasn't working and starts to leak. The court ruled the loss was covered under the interpretation of "sudden and accidental".
Example; B.P Canada v. Comco (1990) - Ontario court went against the Murphy Oil case and decided that the resulting contamination due to a leak of a gasoline storage tank was not sudden and occurred over several years. The court ruled that coverage did NOT apply and denied the claim.
Example; Murphy Oil v. Continental (1981) - contamination of a neighbors well from a leaking gasoline pipe was found to have taken place over a long period of time. The court for this case found that the pipe could not "spring a leak" in any manner other than suddenly. One moment the pipe was working and the next moment it "suddenly" wasn't working and starts to leak. The court ruled the loss was covered under the interpretation of "sudden and accidental".
Example; B.P Canada v. Comco (1990) - Ontario court went against the Murphy Oil case and decided that the resulting contamination due to a leak of a gasoline storage tank was not sudden and occurred over several years. The court ruled that coverage did NOT apply and denied the claim.
Property Under the Control of the
Insured
-
Common exclusion
under most CGL policies are property owned, occupied or rented by the
insured
-
Example; A neighbor's water supply has been
contaminated and back tracked to the insured's industrial site. The Ministry of the Environment (M.O.E) may
give orders that the insured's site must be cleaned and any pollutants
removed. The argument presented by the
insurer to deny the cleanup costs for the insured site is that the soil is
occupied by the insured and property occupied by the insured is specifically
excluded by the policy.
-
Any personal
property the insured owns or is in the care, custody and control, and is damaged
due to pollutants would also be excluded by the standard CGL
policy
Causation: What Links the Pollution to the
Insured?
-
Identifying the
contaminant; contaminants are all around
us and are found in the:
·
Air we
breathe
·
Food we
eat
·
Water we
drink
·
Ground we walk
upon
-
Contaminants, like
dioxin, that clearly come from pulp and paper bleaching process and pollute
rivers and lakes are easy to trace back
-
There are
contaminants that can be traced back to a variety of sources, like manmade, or
natural forming, or in combination of the two, and the exact source from which
the pollutants have originated must be clearly established in order to proceed
with a successful investigation and determine if coverages are enforce or the
loss is excluded
Experts in Environmental
Losses
-
Avoid drawing
conclusions based on assumptions
-
Experts may use
different techniques like migration patterns or be able to identify the source
of the contaminant is not from the insured or is partly the insured's and partly
from another source, which will affect how coverage will
apply
-
For coverage to
apply a positive identification of the source and cause of the pollution is
necessary
-
Experts that have
credibility in their field of study make the best experts and the loss adjuster
should seek such person(s) or teams to properly investigate a pollution
claim
-
The type of experts
that could be used for environmental claims to help identify, find the source of
pollutants and recommend cleanup are:
·
Hydrogeologists
·
Geochemists
·
Soil
engineers
-
The type of experts
that may be required to prove or disprove the effects of pollutants on animals,
plants, and humans are:
·
Toxicologists
·
Epidemiologists
·
Biologists
·
Veterinarians
·
Medical
doctors
-
The loss adjuster
must manage the use of experts by:
·
Recommending the
appropriate experts
·
Arrange and
coordinate the assignment
·
Set up a budget and
practice cost containment measures
·
Monitor the expert's
activities
·
Receive and read
reports and recommendations
·
Analyze and
coordinate findings
·
Assess the impact on
liability and the amount of damages
Investigating an Environmental
Claim
-
The two (2) factors
which demand a prompt action for an environmental claim are:
i) Prompt cleanup operation is needed to avoid further contamination
ii) Prompt action is needed for business to continue
i) Prompt cleanup operation is needed to avoid further contamination
ii) Prompt action is needed for business to continue
-
Many TP
environmental claims allege nuisance.
Nuisance is a difficult tort to defend against
because:
·
Negligence does not
need to be proven by the claimant to succeed
·
Claimant only has to
prove that there right to enjoy his/her land has been interfered with
·
Claimant has to show
the interference came from the land owned or occupied by the
defendant
-
Because a pollutant
is discovered on a TP property does not make the insured liable, the plaintiff
must prove that the contaminant came from the insured's
property
-
Defenses to nuisance
claims are:
·
Reasonableness of interference.
Example - Damages to a parking garage due to road salt wouldn't qualify
for nuisance claim because the owner of the garage should accept that without
road salt, cars could not operate safely in the winter
season
·
Sensitivity of Claimant.
Example - Interference with the plaintiff's electronic radar equipment,
due to its highly sensitive nature and need for lots of electrical power, does
not qualify for nuisance claim because the defendant, a nearby welding business,
also uses electrical power to operate his/her own business and generates heat
that distort the plaintiff's equipment
·
Statutory Authority. Example - The local municipality passed a law
that prevents residents to recover for losses due to sewer lines or water
services provided; the benefits of these
facilities serve the greater public and the losses of the few would cause an
increase in cost for the use of these necessary facilities
-
Permissible
discharges are the allowance by the government for certain industries to have
permission to release pollutants into the environment and this discharge is
regulated through a licensing program
-
Example; pulp and
paper mills operations have license through the M.O.E to discharge waste water
up to 200 parts per billion (ppb) containing dioxin. As long as the pulp and paper mills stay
within this limit they can use their license as a defense for any claim made by
a TP for an environmental claim
-
1988 the Federal
Government passed the Canadian Environmental Protection Act (CEPA) which imposes
on each province and territory that absolute liability will be applicable on all
polluters
-
Absolute liability
under CEPA may impose liability on any of the following
parties:
·
Occupant of that
party
·
Previous
owner
·
Previous
occupant
·
Person(s) having
control of the property from where the contamination
originates
-
CEPA does not rely
on a finding of negligence because responsibility for pollution is
absolute
-
Brownfields are:
·
Contaminated or
potentially contaminated urban industrial or commercial sites
·
Legislation has
softened absolute liability and polluter-pay principles in the interest of
development aimed at rejuvenating the economy
-
Assessing
environmental exposures is one of the adjuster's role and needs to be done to
recommend reserves. The loss adjuster
should do this by:
·
Estimate the entire
loss and cost to cleanup
·
Estimate the
insured's liability and making the appropriate adjustments for other defendants
involved
·
Consideration of the
allocation theory; example - how many years was the insured exposed and to what
amount per year?
·
Identification of
insurance policies available for each coverage year; taking into consideration
any policy limits and exclusions
·
Identification of
policies the current insurer is named in
·
Defense costs for
the insured
·
Consideration of
defense sharing agreement, if other insurers are involved
·
Estimated costs of
defending coverage issues
-
There are great
costs to defending environmental claims and the cost to contest coverage
issues
-
Most insurers may
find it more prudent to settle with the insured or a TP than continue litigation
and run the chance of being exposed to punitive or aggravated
damages
Residential Oil
Spills
-
Most HOFs typically
have coverage due to direct damage of the insured's property as a result from
residential fuel oil spill but generally exclude pollution liability to other
TPs PD and BI
-
The TP pollution
liability can be purchased back by the addition of an endorsement to the
policy
-
Expert's advice
needed by a loss adjuster for a residential oil spill claim
are:
·
To control,
stabilize and clean up of a spill with respect to covered
property
·
To provide evidence
for subrogation opportunities
-
Experts may also be
hired to determine whether:
·
A tank was installed
properly
·
Oil was delivered
negligently
·
The furnace was
inspected and cleaned appropriately
·
The delivery company
providing the oil had a responsibility to inform the owner of any defect, and
deterioration to the fuel line, or delivery conduits
-
Residential oil
spill claims have been difficult for insurers because TP damages have been
difficult to separate from direct damage to insured's property; limitation of coverage should always be a
matter of concern to the loss adjuster
-
Residential oil
spills must be reported to the M.O.E or like authority; if the insured is not available then it is
the responsibility of the insurer to report the incident to
M.O.E
-
Coverage may exist
for direct damage to insured's property, like the building and contents, and for
the soil underneath, which needs to be removed and replaced, but for surrounding
land, not belonging to the insured may also need to be treated. This may come as a direct order of the M.O.E
but the surrounding areas may be excluded from the policy coverage, resulting in
the insured to bear the cost
-
The direct damage to
the insured's property must be appropriately treated in order to prevent any
further PD or BI exposure; if not
properly treated, any future damages that occur could result in legal action
against the insurer through vicarious liability of its negligence to undertake
the work properly