BC Court Upholds Pollution Exclusion Clause

In Dave's K. & K. Sandblasting (1988) Ltd. v. Aviva Insurance Co. of Canada (2007), the B.C. Supreme Court considered the enforceability of an exclusion clause relating to coverage for the costs of environmental remediation under cost-recovery legislation such as the British Columbia Environmental Management Act. In the proceeding, the insured ("DKKS") sought a declaration that its insurer ("Aviva") was obliged to defend DKKS in an underlying action for remediation costs brought by the owner of a contaminated site that DKKS had previously leased, and that any resulting liability fell within the scope of the insured's coverage.

In finding that the exclusion policy applied, that coverage was excluded, and no duty to defend on the part of Aviva arose, the court reviewed the history of the pollution exclusion clause. It noted that under earlier jurisprudence, the clause was held not to apply where the