Chemical Spills and Remediation Costs: Can an Insurer Directly Recover for Remediation Costs under the Environmental Protection Act?

  • 30 janvier 2023
  • Lujza Csyani

The Ontario Court of Appeal in Intact Insurance Company v Zurich Insurance Company Ltd.[1] considered whether Intact Insurance (“Intact”) could recoup money it paid beyond its policy limits from parties other than its own insured, by direct action, for the clean up of a chemical spill.

This case highlights that insurers, when viewed independently of their insured, do not fall within the category of individuals who may avail themselves of the right of compensation under section 92(2) of the Environmental Protection Act[2]. Moreover, this case demonstrates the hurdles that an insurer may face in arguing unjust enrichment, when a payment is made voluntarily, for the benefit of its own insured.

The Facts:

The appellant, Intact, insured a transportation company (the “insured”) against liability for damage to the property of others. The policy limit was $5 million.[3]

In an unfortunate turn of events, while carrying a shipment of liquid formaldehyde, one of the insured’s trucks overturned, releasing 30,000 litres of formaldehyde into the surrounding residential area and municipal water supply in North Bay, Ontario.[4]

The spill engaged the insured’s duty to remediate the adverse effects of the spill under section 93 the EPA. This statutory duty arose for two main reasons. First,  formaldehyde is a pollutant within the meaning of the EPA.[5] Second, the insured was in control of the pollutant at the time of the spill.[6] In accordance with its policy obligations, Intact began making payments toward remediation efforts.[7]

The respondents, Tembec Inc. (“Tembec”), ARC Resins Corporation (“ARC”) and Group G3 Inc./Le Groupe G3 Inc. (“G3”) were also subject to a remediation order under the EPA. These respondents were the shipper, the company to whom the pollutant was shipped, and the broker. Intact formally advised Zurich, the insurer for the respondents, that the $5 million policy limit would soon be reached, at which point Zurich would have to take over payments.[8] Zurich advised that it would not pay money towards the remediation until it was formally in receipt of a Minister’s Order under the EPA.[9]

Intact continued paying for remediation efforts, eventually paying $7.96 million — $2.96 million over and above the insured’s policy limits.[10] Intact subsequently brought an action against the respondents and Zurich to recover these excess payments.[11]