Pollution Exclusions in Commercial General Liability Policies

This article originally appeared in the November/December issue of Construction Business.

A recent ruling from the British Columbia Court of Appeal has clarified pollution exclusion clauses by focusing on causation and liability. In Precision Plating v. AXA Pacific Insurance Co. (“Precision”), the Court of Appeal considered the effectiveness of a pollution exclusion contained in a Commercial General Liability (“CGL”) policy. Businesses need to ensure that policy exclusions are understood to avoid any surprise exclusions.

Precision Plating, who was insured by AXA, operated out of a multi-tenanted commercial building. A fire broke out, which triggered the sprinkler system, filling chemical vats and causing them to overflow. The overflowing vats seeped diluted chemicals into neighbouring businesses, contaminating the surrounding property. Alleging property damage due to the contamination, the neighbouring property owners commenced an action against Precision Plating.

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