The case involved an "all risks" insurance
policy. A tenant inserted a piece of cardboard to bypass a furnace
thermostat so that heat would run to a second floor apartment
during her absence. This caused the furnace to run continuously at
an excessively high temperature, which in turn caused an ignition
component to fail, resulting in an overflow of oil to the
building's main floor commercial units.
The insurer argued that the losses should not be covered because
of exclusions in the landlord's insurance policy for pollution,
as well as for "mechanical or electrical breakdown or
derangement."
The trial judge held that the exclusion for mechanical breakdown
or derangement did not apply and the Court of Appeal agreed. The
furnace was well maintained and had no internal problem or defect.
The cause of the loss was the tenant's actions. As for the
pollution exclusion, the Court of Appeal held that, on a plain
reading of the policy, there had to be another operative
