Oil spill case resolved after party that was not at fault paid for the clean-up

A homeowner whose insurance did not cover the full cost of cleaning up his furnace oil spill was recently awarded $473,000 in legal costs after he sued the fuel company.

The December 2008 incident, in which hundreds litres of oil spilled into a lake in Ontario’s cottage country, cost $2 million to clean up. The case was remarkable because a party that was not found to be responsible for the leak was nevertheless ordered to pay for the clean-up costs.

The case finally concluded in a ruling released Mar. 29, 2018, when Ontario Superior Court Justice Robert Charney awarded the homeowner Wayne Gendron $473,000 in costs.

The oil spill case “is the one that I would consider the most precedent-setting from an underwriting perspective,” Dennis O’Leary, a litigation lawyer with Toronto-based Aird & Berlis LLP, told Canadian Underwriter in 2015. This is because “somebody that truly didn’t cause the problem and didn’t have control of it in the first instance” was ultimately forced to pay pollution cleanup costs. “It shows there are situations where it’s hard for you to fully appreciate what the potential risks are,” O’Leary said.

Since Gendron had exhausted the limits of his insurance, the Ontario Ministry of the Environment ordered the City of Kawartha Lakes to pay for clean-up. The city argued it should not be liable, but the Court of Appeal for Ontario ruled against the city in Kawartha Lakes (City) v. Ontario (Environment), released May 10, 2013.

Essentially, the courts said the aim of clean-up orders is to protect the environment, not to punish polluters, so therefore it does not matter if the organization having to pay for clean-up is at fault.

Gendron owned a home in the City of Kawartha Lakes, near Sturgeon Lake, that was heated by oil. Thompson Fuels delivered 700 litres of oil on one afternoon in 2008. The night after the furnace fuel was delivered, Gendron found oil leaking into his basement. He collected it into several cans and complained to the fuel company that he was billed for far more oil than was actually delivered. Gendron did not find out until later that most of the oil had actually leaked through a crack, flowing under the home. Some of the oil flowed into the municipal storm system and into the lake.

Ultimately, Gendron made a claim on his insurance policy, but that policy did not cover the full cost of clean-up. Gendron sued the fuel company. In a ruling released in July 2017, the fuel company was found to be 40% liable and Gendron was found to be 60% liable. Gendron’s total damages were assessed at $2.1 million. Thompson Fuels owed Gendron $901,000, consisting of $865,000 plus interest.

Gendron had asked for $725,800 in costs, including $554,000 in lawyers’ fees, $100,000 in disbursements, and $72,00 in sales tax.

The fuel company argued Gendron’s cost award should only be $333,000, with a 60% reduction down to $133,000 to account for the fact that Gendron was partly at fault.

The cause of the leak was found to be the build-up of water and sludge, which, when combined with microbes, led to the production of sulphur and organic acid that corroded the tank.