Ruling says requirement to remove tank is a matter of contract law, not environmental law
The Ontario Superior Court has upheld an insurer’s denial of coverage for environmental clean-up based on an exclusion in the insurance policy for a pollution incident discovered during a voluntary removal of an underground storage tank.
In Fleetway Fuels Inc. v. Liberty Mutual Insurance Company, 2025 ONSC 2513, the plaintiff had a trucking business. Its premises included a trucking and refuelling station and an underground storage tank for diesel fuel on Garnet Road.
The plaintiff obtained a storage tank third-party liability corrective action and cleanup policy from the defendant insurance company. In the policy, endorsement no. 10 excluded from insurance coverage claims arising from a pollution incident discovered during a “voluntary removal” of an underground storage tank insured under the policy.
An insurance broker notified the plaintiff that it could no longer insure the tank due to age. At that time, the plaintiff considered that it would have to excavate the tank before selling its business or leasing its premises.
In February 2021, the plaintiff entered a commercial lease over the premises with the buyer of its trucking business. One condition in the lease required the plaintiff, as landlord, to remove the tank. The plaintiff hired a contractor to remove the tank and an environmental engineering company to observe the removal.
On Nov. 4, 2021, during the tank’s removal, the plaintiff discovered suspected hydrocarbons in the soil around the tank. Advised by its environmental engineers, the plaintiff facilitated the removal of the affected groundwater and soil and their disposal off-site.
The next day, the plaintiff filed a claim asking the insurer to indemnify it under the insurance policy for costs relating to the environmental clean-up.
In January 2022, the insurer denied coverage for the environmental clean-up based on the policy’s exclusion. The insurer alleged that the tank’s decommissioning and removal amounted to a “voluntary removal.”
The Ontario Superior Court of Justice ruled that the plaintiff’s removal of its underground storage tank was a “voluntary removal” excluded under endorsement no. 10 of the insurance policy.
The court determined that the parties did not intend, when entering the insurance contract, for the plaintiff to willingly decommission the tank without the insurer’s knowledge and consent, and then make the insurer pay the cost of corrective action for the decommissioning.
The court said the phrase “voluntary removal” in endorsement no. 10 captured the plaintiff’s intentional act. The court added that the parties intended for the usual meaning of the word “voluntary” to apply. Because that word was unambiguous, the court saw no need to use the rule as against the insurer.
The court rejected the plaintiff’s argument that the tank’s removal was involuntary since it was a material condition of the commercial lease. The court found no undue influence, duress, or compulsion. The court noted that the tenant could not have compelled the plaintiff to decommission the tank without the lease.
On the other hand, the court held that the plaintiff freely, willingly, and intentionally entered the lease with the tenant because it was commercially advantageous. The court found that the plaintiff willingly agreed to include the relevant contractual term.
The court said the plaintiff voluntarily assumed the obligations under the lease without the insurer’s prior permission and thus accepted the risk that the policy would not cover the situation arising from the tank’s removal.
Next, the court analyzed the policy as a whole, including the definitions of the phrases “corrective action” and “[e]nvironmental laws.”
The court concluded that the insurer agreed to pay for the cost of corrective action in the context of environmental legislation and regulations. The court stressed that the requirement to remove the tank was a matter of contract law, not environmental laws.
The court found it reasonable to interpret the policy as covering a discovered “pollution incident” if there was an involuntary removal of the tank, such as when an outside force or authority compels or directs the plaintiff to remove it.
The court said the language of the exclusion clause in endorsement no. 10 clearly showed this was the insurer’s intention.
