Court distinguishes between pollution-related losses and claims

In a commercial D&O policy, exclusions for “pollution-related losses” are not the same thing as exclusions for “pollution-related claims,” the Ontario Court of Appeal has ruled.
In Boliden Ltd. v. Liberty Mutual Insurance Company, Liberty issued a directors’ and officers’ liability policy to Boliden, a mining company.
In April 1998, a dam at a tailings pond (containing toxic waste) and owned by a Boliden subsidiary in Spain collapsed, causing an environmental disaster in the surrounding Spanish countryside.
The company’s stock plummeted from $16/share just one year prior to the incident to $5.35/share by November 1998. Canadian shareholders sued, alleging Boliden misrepresented them in an Initial Public Offering (IPO) issued just prior to the environmental disaster.
Boliden defended its directors and officers, paying Cdn$3 million in defence costs. It then sued its insurer, Liberty, which had denied coverage on the basis of an exclusion from any “loss resulting from or attributable to or in any way involving directly or indirectly” the escape or discharge of contaminated “pollutants.”
Liberty argued all losses contained in the shareholders’ claim were in some way attributable to the collapse of the tailings pond, and so the exclusion applied to the entire claim.
The court, however, disagreed. “The motions judge proceeded on the basis that the exclusion clause excludes pollution-related losses, not exclusion-related claims,” it ruled. “The applicability of the exclusion clause requires a consideration of whether the allegations of wrongful acts or omissions on the part of the directors and officers in the statement of claim give rise to both pollution loss and loss other than pollution loss.”
Since individual allegations in the claim related to pollution losses while others did not, the court ruled, an allocation endorsement in the policy applied, meaning the insurer would cover 80% of all of Boliden’s defence costs.