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UBC Theses and Dissertations

The insurance of environmental risks Ashton, Ronald Shaw 1976

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THE INSURANCE OF ENVIRONMENTAL RISKS by RONALD SHAW ASHTON LL.B. (HONS.) Universi ty of Queensland A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF LAWS in the Faculty of Law We accept th is thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA A p r i l , 1976 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of Brit ish Columbia, I agree that the Library shallmake it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of LAW The University of Brit ish Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 Date May 3, 1976. ( i ) ABSTRACT L i t t l e i s known and less i s understood about the i n s u r a b i l i t y of l i a b i l i t i e s for environmental damage or about the need f o r , nature, extent or value of the coverages offered by the insurance industry in th i s f i e l d . I t i s the object of th is work to canvass these matters. At the outset , i t i s sought to focus attent ion upon the ex i s t ing environmental l i a b i l i t y r i sks and to i ( identify some of the new common law theories that are evolving to meet the demands of soc ie ty ' s emerging "environmental consciousness" and thereby broadening the area of r i s k . Against th is background, the provisions of the avai lab le envi ron-mental l i a b i l i t y insurance f a c i l i t i e s are then presented in d e t a i l , examined and evaluated. Since i t cannot be assumed ipso facto that a l l environmental l i a b i l i t i e s are insurable , the i n s u r a b i l i t y question i s addressed in the l i g h t of the orthodoxies of publ ic po l icy and insurance p r i n c i p l e . F i n a l l y , t h i s thesis inquires whether l i a b i l i t y insurance can make a pos i t i ve contr ibut ion to environmental regulat ion and to the promotion of sound environmental values. The f i r s t conclusion drawn herein i s that the area of r i sk i s s u f f i c i e n t l y broad to warrant serious attent ion both from those at r i sk and from the insurance industry . Tradit ional l i a b i l i t y insurance f a c i l i t i e s are assessed to be inadequate and negative in the i r handling ( i i ) of the r i s k s , f a l l i n g considerably short of the goal of e f fec t i ve coverage. However, the new Environmental Impairment L i a b i l i t y Po l i cy i s seen as something of a " l i g h t in the dark". I t i s not without i t s shortcomings (these are adverted to and changes recommended) but, generally speaking, i s a worthwhile i n i t i a t i v e and a useful model for future development. On the question of the role of l i a b i l i t y insurance in environ-mental regu lat ion , i t i s concluded that there are indeed ways and means by which the insurance mechanism can help, provided that people in the insurance industry are appropriately motivated. (iii) CONTENTS page CHAPTER I. INTRODUCTION Footnotes - Chapter I 21 PART I ENVIRONMENTAL LIABILITY INSURANCE FACILITIES CHAPTER I I . THE GENERAL LIABILITY POLICY AND EARLY VARIATIONS A. The General L i a b i l i t y Po l i cy B. Exclusion of Environmental Risks in the General L i a b i l i t y Pol icy C. Some Early Variat ions on the General L i a b i l i t y Po l icy Footnotes - Chapter II 27 27 29 40 45 CHAPTER I I I . THE ENVIRONMENTAL IMPAIRMENT LIABILITY POLICY Footnotes - Chapter III 48 59 PART II THE EVALUATION OF THE INSURABILITY AND COVERAGE OF ENVIRONMENTAL RISKS CHAPTER IV. INSURABILITY AND COVERAGE OF INTENTIONAL AND UNINTENTIONAL LOSSES A. B. The Element of Intention in Categories of Environmental Damage I n s u r a b i l i t y : Intention Publ ic Po l icy and 61 62 65 ( iv ) page C. Avai lable Coverage 72 Footnotes - Chapter IV 74 CHAPTER V. INSURABILITY AND COVERAGE OF STATUTORY LIABILITIES 76 A. Nature and Insu rab i l i t y of the Statutory Damages Claims 76 B. Insurab i l i t y of Fines 85 C. Breach-of -Statute Exclusions in Environmental P o l i c i e s 106 Footnotes - Chapter V 114 CHAPTER VI. INSURABILITY AND COVERAGE IN OTHER AREAS 120 A. Economic Losses 120 B. Shutdown Losses 124 C. The Problem of Chronology 135 D. Gross Negligence 142 E. Jo int and Several L i a b i l i t i e s 143 F. "Packaging" of Environmental P o l i c i e s 145 Footnotes - Chapter VI 147 SUMMARY PART II 152 PART III A ROLE FOR INSURANCE CHAPTER VII . A ROLE FOR INSURANCE 155 A. Loss Prevention 155 (.v ) page B. Economic Influence 163 C. Reactions and Views 167 D. Assessment 169 Footnotes - Chapter VII 173 CONCLUSION 176 Bibliography Appendix 178 195 (v i ) Acknowledgment When I f i r s t corresponded from Aus t ra l ia with Professor R. T. Franson, the chairman of my facul ty supervisory committee, I expressed an in terest in Insurance Law and Environmental Law. I t was Professor Franson who helped me to c r y s t a l l i z e my thoughts and u l t imately to s e t t l e upon what i s , I th ink , a f r u i t f u l and important area for research. For that and f o r - h i s supervisory assistance during the course of my work, I thank him. I thank, too, my other superv isors , Professors B. M. McLachlin and G. R. Schmitt, for the i r time and e f f o r t . Because of the nature of my chosen topic of study, i t was necessary for me to seek out and re ly upon a great deal of empir ical information. I should l i k e to record my gratitude to the many persons and companies in the insurance industry who ass isted me in that endeavour. In p a r t i -cu lar I would mention: Dr. E. M. de Saventhem, the European d i rector of H. Clarkson (Overseas) L t d . , who was un fa i l i ng in the provision of fifeaftkand erudite answers to my many inqu i r ies about environmental l i a b i l i t y insurance in general and about his own company's Environmental Impairment L i a b i l i t y Po l i cy ;* Mr. Hanna and the other o f f i c e r s of the Safeco Insurance Group, S e a t t l e , who were so kind as to place the i r l i b r a r y at my d i sposa l ; Messrs. Thomas and Bateman of Reeidi Shaw Stenhouse L imited, insurance brokers, Vancouver, who provided so much valuable assistance in the early stages of my research; and Messrs. McGowan (Vancouver) Lewi son, Kirsop and Holt (Seatt le) of Marsh & McLennan, insurance brokers, who contributed s i g n i f i c a n t l y to my supply of empirical data. ( v i i ) The fol lowing people and organizations also helped me, in some measure, in the task of c o l l e c t i n g , ass imi la t ing and evaluating mater ia l . I owe them a debt of grat i tude. AetnasLife and Casualty, Hartford, Connecticut American Home Assurance Company, Toronto Dr. R. B i d w e l l , Environmental Resources L imited, London Mr. L. D. Bowden, S o l i c i t o r , Brisbane Mr. K. J . Ch iconi , S o l i c i t o r , Brisbane Mr. D. K. Derrington, Q.C. , Bar r i s te r -a t - Law, Brisbane Environmental Po l i cy Center (Maxine L i p e l e s ) , Washington, D.C. Hal i fax Insurance Company, Toronto Insurance Services O f f i c e , New York Insurance Bureau of Canada Insurers' Advisory Organization of Canada J . L. Jessiman, Bar r i s te r and S o l i c i t o r , Vancouver The Mercanti le and General Reinsurance Company L imited, London C. A. Mul le r , H. Clarkson (Overseas) L t d . , London The Munich Reinsurance Company, Munich The Phoenix Assurance Company of Aus t ra l ia L imited, Brisbane The Prudential Assurance Company L imited, Vancouver Dean R. Roddis, Univers i ty of Washington, Law School , Seatt le Royal Insurance, Toronto The State Government Insurance O f f i c e , Brisbane Swiss Reinsurance Company, Zurich The United South B r i t i s h Group, Brisbane. I t would be a major undertaking to compile a t ru l y exhaustive l i s t . I sha l l not attempt i t . To the others, then, my thanks. I t would be remiss of me to omit mention of The Universi ty of B r i t i s h Columbia and the B.C. Law Foundation both of which provided f inanc ia l assistance. Without the i r generosity, I could not have undertaken th is work. F i n a l l y , a thank you to my w i f e , M iche l le , who typed numerous drafts and ass isted with proof -reading. She best knows what i t meant to me. - 1 -Chapter I  INTRODUCTION The l a t t e r part of the 1960's and the f i r s t ha l f of th is decade have been characterized by a rapid growth of concern about the qua l i t y and management of the environment. The a r t i c u l a t i o n of th is concern has resulted in a p r o l i f e r a t i o n of l i t e r a t u r e on the subject and an expansion of debate and d iscuss ion. Some of i t has been informed and thoughtful , some of i t , a l a s , a larmist and s e n s a t i o n a l i s t , but almost a l l of i t has f i l t e r e d through to an increasingly interested pub l i c . In a l l of t h i s , one thing v i r t u a l l y has been forgotten. Insurance. This work w i l l seek to remedy the oversight . In the course of doing so, i t w i l l not espouse the cause of the environmentalists nor that of the technocrats. As a matter of f a c t , i t w i l l emerge that the i r in terests are strangely intertwined, at least in the sense that both can be served by the insurance mechanism. The "insurance mechanism", for purposes of th is d i s s e r t a t i o n , refers to l i a b i l i t y insurance. Thus, the subject of study i s not the insurance which might be taken out as a protection against environ-mental damage but rather that which i s sought as a protection against l i a b i l i t i e s incurred for causing such damage. Moreover, the study re lates to general l i a b i l i t y insurance and does not trespass upon the s p e c i a l i s t areas of nuclear , marine and aviat ion insurance, though these obviously deal with aspects of environmental damage. - 2 -L i a b i l i t y insurance has been confined p r i n c i p a l l y to the common law area. Mainly for reasons of p u b l i c p o l i c y , insurance against 1 statutory l i a b i l i t i e s has been discouraged by the courts and avoided by the insurance industry . Theanow changing character of statutory l i a b i l i t i e s , espec ia l l y in the environmental f i e l d , could 2 lead to a change in a t t i t u d e , but, for the present at l e a s t , the only s i g n i f i c a n t ro le for l i a b i l i t y insurance in the environment i s l i k e l y to be in the provision of protection against the f inanc ia l consequences of the appl icat ion of common law ru les . The subject of common law l i a b i l i t i e s f o r environmental damage i s widely docu-3 mented in Canada (where the pr inc ip les are s i m i l a r to those a p p l i -cable in B r i t a i n and Commonwealth Countries such as A u s t r a l i a and 4 New Zealand) and also in the United States. A comprehensive survey therefore w i l l not be undertaken, though a few words may be said by way of in t roduct ion . The common law, profoundly inf luenced, as i t has been, by the emerging "environmental consciousness", has created a s i tua t ion of high r i sk for those who cause environmental damage and the future development of l i a b i l i t y theory w i l l , i f anything, accentuate that r i s k . The t r a d i t i o n a l common law remedies have been applied a s s i -duously by increasingly responsive courts. Thus, in re la t ion to the nuisance a c t i o n , Lord Denning was led to conclude in Pride of Derby 5 v. B r i t i s h Celanese Ltd . "The power of the Courts to issue an in junct ion for nuisance has proved i t s e l f to be the best method so far devised for securing the c lean -l iness of our r i v e r s . " - 3 -The other causes of a c t i o n , too, such as negligence, Rylands v. Fletcher and trespass, have been employed (though with not the same success) in the quest for acceptable environmental qua l i t y and c o n t r o l . Even the intent ional torts against the person have been mooted as proper vehicles for environmental ac t ion . American w r i t e r s , in pa r t i cu la r have expressed some optimism in th is respect: " I t may also be suggested that po l lu t ion can be an intent ional t o r t . A battery , for example, i s an i n t e n t i o n a l , unpriveleged, un-consented-to touching which i s of fens ive . The intent required need only be the knowledge on the part of the actor that contact or apprehension is certain to occur. There i s no reason why the touching cannot be caused by the intent ional spewing forth of pol lutants or by the v ibrat ions of a i r pressure caused by a loud noise. Where in jury i s present, the harm could not be considered 'de m i n i m i s ' . " (6) Of course, these various causes of act ion won the i r places in the common law long before the emergence of what we euphemistical ly c a l l the "environmental problem". Inev i tably , then, there w i l l a r i se new and unique evidentiary and other matters to consider. The most useful i l l u s t r a t i o n i s in the area of r ipa r ian r i g h t s . Here i t would seem that a po l lu te r runs a serious r i s k . Po l lu t ion which might be regarded as " s l i g h t " in the sense that i t causes . i l i t t l e damage, can nevertheless amount to a v io la t ion of the r ipar ian owner's r ights i f there is "sensible a l t e r a t i o n " of water qua l i t y or quant i ty , and once th is v io la t ion be establ ished in the abst ract , there i s l i t t l e e lse upon which the po l lu te r might re ly to escape l i a b i l i t y . The prima fac ie r ight of the r ipar ian owner to in juc t i ve r e l i e f enlarges i - 4 -the problem for the p o l l u t e r , f o r , whatever his prospects of ob-ta in ing insurance coverage against damages, he has l i t t l e or no chance of obtaining indemnity for the economic loss a r i s i n g from a manda-7 tory shutdown. Now, the r ipar ian r ights doctrines are c l e a r l y of ancient o r i g i n . They emerged at a time when men were obliged to re ly upon the i r own perception and common sense in the determination whether a water flow had been "sensibly a l t e r e d " . But, nowadays, there i s a new dimension. The development of highly sophist icated s c i e n t i f i c instruments has made i t possible to monitor, with remarkable pre-c i s i o n , even i n f i n i t e ^ y s small changes in temperature, volume, or chemical content of water. Nor have the courts overlooked the 8 p o s s i b i l i t y of a v a i l i n g themselves of the resu l t ing data. I f that p o s s i b i l i t y i s ac tua l i zed , then a whole host of apparently harmless r i vers ide businesses and industr ies are l i k e l y to f ind themselves faced with substant ial l i a b i l i t y r i s k s . Undoubtedly, the courts would 9 "fashion some exceptions" to any new "hard - l ine" p o l i c y , but the probab i l i t y remains that standards and j u d i c i a l at t i tudes w i l l harden rather than mellow. In addit ion to developments of th is type, growing environmental act iv ism has brought new l i a b i l i t y perspectives to the ex i s t ing frame-work of the common law. Since th is paper w i l l be concerned with a very new, developing area of r i sk and insurance, an area in which i t - 5 -i s necessary to think as much about possible future developments as about ex i s t ing pr inc ip les and p rac t i ces , i t i s per t inent , to note in deta i l some of these emerging l i a b i l i t y theories which are l i k e l y to have an e f f e c t in the future on the types of r i sks to be faced by industry and on the a v a i l a b i l i t y of environmental l i a b i l i t y insurance. F i r s t l y , reference should be made to the dynamic character of the common law. The common law can be v i t a l and energet ic , responsive 1010 to change in soc ieta l standards. Indeed, i t has been rightlyonodted that each of the leading cases over the l a s t 200 years has been the 11 product of i t s pa r t i cu la r time - Rylands v. Fletcher a by-product of 12 the Industr ia l Revolution; Donoghue v. Stevenson a milestone in an 13 age of developing consumerism; and Hedley Byrne & Co. L td . v. He l le r the of fspr ing of commercial soph is t i ca t ion . There i s no need to suppose that the common law cannot or w i l l not respond further to the heightened publ ic awareness of environmental issues . This i s r e a l l y part of the theme of Professor McLaren's argument in h is a r t i c l e on 14 the nuisance actions and the environmental b a t t l e . He suggests that the nuisance act ion (and, by i m p l i c a t i o n , others l i k e i t ) has a f l u i d , adaptable character which, i f appl ied c reat ive ly and resource-f u l l y in the environmental context can be most useful in f i x i n g the po l lu te r with l i a b i l i t y . The fact i s that a l l of the common law l i a b i l i t i e s noted above are the product of steady development. There are signs that the development is continuing. Later evaluation of insurance f a c i l i t i e s w i l l p r o f i t from a background discussion of some of the developments and project ions. - 6 -Aesthet ics : T r a d i t i o n a l l y , courts have been reluctant to recognize aesthet ics as a basis for legal r i g h t s . Aesthetics have been thought to be f r i vo lous when compared with the economic in terests with which the i r protection would in te r fe re . Moreover, courts have f e l t that they are so much a matter of ind iv idual taste as to be beyond regulat ion in 15 any uniform or consistent way. For some years now, however, commen-tators have argued that there i s a fundamental inconsistency in the 16 recognit ion of "sound" and "smel l " nuisances and not "s ight" nuisances. J u d i c i a l surrender to th is and s i m i l a r arguments has been sporadic and equivocal , never going beyond the v indicat ion of an i d e n t i f i a b l e property r i g h t , but some of the cases hold promise. As ear ly as 1937, for example, Maxwell J . said in the Supreme Court of Appeals of West V i r g i n i a : " . . . evolut ional conceptions respecting the r igh t and duty of society to protect i t s e l f from un-desirable and disagreeable conditions are not of necessity confined to municipal zoning ordinances. There i s a growing b e l i e f that that which i s o f -fensive to the view, an eye-sore, a landscape-b l i g h t , may at ta in such s ign i f i cance as to warrant equitable i n t e r p o s i t i o n . " (17) and further on: "Courts must not be i n d i f f e r e n t to the truth that with in essent ia l l im i ta t ions aesthetics has a proper place in the community a f f a i r s of modern soc ie ty . " (18) In more modern t imes, a Canadian Court has recognized loss of enjoy-ment of natural beauty as a compensable head of damage. This was in 19 Lockwood v. Brentwood Park Investments Ltd. where the p l a i n t i f f - 7 -claimed that the defendants, by diminishing the flow of a stream through his property, had deprived him and his family of the pleasure of watching the stream in i t s natural s ta te . Dubinsky J . , de l i ver ing the judgment of the Nova Scot ia Supreme Court Appeal D i v i s i o n , con-cluded that the p l a i n t i f f ought to receive an award of $2,400 damages 20 to compensate him for the loss of "amenities and natural beauty". In A u s t r a l i a , too, there has been some tentat ive movement. In Kent 21 v. Cavanagh & ors . the p l a i n t i f f s , a group of Canberra c i t i z e n s , by way of a re la tor a c t i o n , sought an inter locutory in junct ion to rest ra in the eerection of a communications tower on Black Mountain, Canberra. I t was a l leged , in te r a l i a , in the statement of c la im, that the tower would "permanently d is f igure the natural sky l ine of 22 Canberra." Fox, J . , in the A.C.T . Supreme Court, had th is to say: " It i s not suggested that an in junct ion has ever been granted on th is basis and no authority was c i ted which would support the grant of such an in junc t ion . Nevertheless, I am not prepared to say that an i n -junct ion can never be granted on such a bas is . Actionable nuisances include things which offend the sense of hearing and the sense of smel l , and other senses, and there i s no reason why the sense of s ight should necessar i ly be excluded. The law in th is regard must remain f l e x i b l e and ready to adjust to new s i t u a t i o n s " . (23) His Honour referred to the American junk yard and wrecking yard cases which, although they do not recognize unsightl iness as actionable per se , nevertheless admit of the p o s s i b i l i t y of success for a p l a i n t i f f in a c lear case where the unsight l iness merges in to the 24 of fens ive . - 8 -Fox J ' s judgment i s of pa r t i cu la r s ign i f i cance because the case involved an al leged publ ic nuisance in which the p l a i n t i f f s ' claim was not attached s p e c i f i c a l l y to property i n t e r e s t s . At the 25 t r i a l of the a c t i o n , Smithers J . conceded that "the categories of nuisance are never closed?" but thought i t going too far to suggest that i t might be a crime to construct a bu i ld ing which offends even 26 a large majority of c i t i z e n s . The case reached the High Court where the appeal turned on a const i tut ional i ssue. The question of aesthet ic amenity did not receive consideration by the High Court judges. I t cannot be argued that these i so la ted examples are rep-resentat ive of the present state of the law i n the common law j u r i s -d i c t i o n s . For the most par t , there i s a continuing opposition to the 27 recognit ion of aesthetics as anbasis for legal r i g h t s . Where the courts have been prepared to intervene, i t has been more towards the 28 "prevention of unusual ugl iness" than the "protection of exceptional 29 beauty." But most s i g n i f i c a n t developments in the common law have started with i so la ted "boldness" and gradually gathered momentum. I t i s s u f f i c i e n t at th is point to draw attent ion to the p o s s i b i l i t i e s . Developments in Standing: I t i s beyond question that the most const r i c t ing feature of the common law as an environmental control technique has been i t s requi re -ment of p l a i n t i f f standing, usually attached in some way to a property - 9 -i n t e r e s t . The i n f l e x i b i l i t y of th is requirement has provided a fortui tous protection for i n d u s t r i a l po l lu ters and others whose a c t i v i t i e s impair the environment. The imaginative and fa r - s ighted scheme devised by Professor Sax, which culminated in the Michigan Environmental Protect ion Act of 30 1970, was amongst the f i r s t serious attacks upon the r i g i d i t y of the common law in th i s respect. I t i s now typ ica l of the l e g i s l a t i v e 31 pattern in a number of states of the U.S.A. The primary purpose of the Michigan Act i s : " . . . to f a c i l i t a t e through the medium of l e g i s -l a t ion the creation of an environmental common law by the Michigan Courts." (32) The strategy for environmental improvement i s thus based not on s t i f f e r cr iminal sanctions but on a stronger, more e f fec t i ve common law. This i s noteworthy for l i a b i l i t y insurance which, i t has been seen, has i t s main function in the common law f i e l d . The Michigan Act disposes of the standing problem by conferr ing upon "any legal ent i t y " the r ight to maintain an action in an appro-pr iate court fo r declaratory and equitable r e l i e f against " . . . any other legal en t i t y " for the "protection of the a i r , water and other natural resources and the publ ic t rust therein from p o l l u t i o n , im-33 pairment or dest ruct ion . " The defendant i s placed further at r i sk by the s tatute 's reverse-onus prov is ion . The p l a i n t i f f has only to show a prima fac ie case that the defendant has or i s l i k e l y to pol lute or otherwise damage any of the s ta te ' s natural resources. The - 10 -onus then s h i f t s to the defendant to e i ther rebut the p l a i n t i f f ' s evidence or res tab l i sh that there i s no " feasib le M and prudent a l -ternat ive" and that his a c t i v i t i e s are "consistent with the promotion of the publ ic heal th , safety and welfare in the l i g h t of the s ta te ' s paramount concern for the protection of i t s natural resources from p o l l u t i o n , impairment or dest ruct ion . " In addit ion to i t s adoption in other American s t a t e s , the Michigan Model has been recommended for 34 Canada. I t i s reasonable to suppose that s i m i l a r l e g i s l a t i v e prescr ipt ions w i l l be favourably considered in other j u r i s d i c t i o n s current ly grappling with the environmental problem. The increasing popular i ty of such l e g i s l a t i v e i n i t i a t i v e s i n -35 ev i tably must have an e f fec t on the a v a i l a b i l i t y of l i a b i l i t y insurance. The p o s s i b i l i t i e s are three: (1) that insurers w i l l be "fr ightened" out of the f i e l d e n t i r e l y , at least in those j u r i s d i c t i o n s which have l i b e r a l i z e d standing rules (2) that insurance w i l l be ava i lab le in the theoret ical sense but at proh ib i t i ve premium cost (3) that insurers w i l l adopt a cautious wait -and-see approach, being se lec t i ve in the i r acceptance of r i sk and meticulous in monitoring t h e i r claims experience u n t i l there i s s u f f i c i e n t data upon which to base a decision to withdraw from the f i e l d , to continue on a l imi ted basds, or to "open the doors" with provision of general indemnity f a c i l i t i e s . The t h i r d a l ternat ive i s c lea r l y the most r a t i o n a l . * * * * * - 11 -The now famous dissenting judgment of Douglas J . in the United 36 States Supreme Court case of S ie r ra Club v. Morton foreshadowed another possible development in the law of standing. His Honour suggested that : "Contemporary publ ic concern for protecting nature's ecological equi l ibr ium should lead to the con-f e r r a l of standing upon environmental objects to sue for the i r own preservat ion." (37) He referred to the pract ice of recognizing legal personal i ty in other inanimate objects such as ships and corporations and saw no reason why th is ought not to be followed in respect of " v a l l e y s , a lp ine meadows, r i v e r s , lakes , es tuar ies , beaches, r idges , groves of t rees , swampland; or even a i r that feels the destructive pressures of modern 38 technology and modern l i f e . " The idea of conferring legal r ights upon the constituents of the environment and al lowing them to sue (presumably through some form of guardian) for the i r own preservation may at f i r s t seem b i za r re . But "as strange as such a notion may sound, i t i s neither fanc i fu l nor 39 devoid of operational content" and i t i s endowed with respectable 40 academic support. Although S ie r ra Club v. Morton was a case involv ing administrat ive review, i t would be i l l o g i c a l to r e s t r i c t any conferral of standing upon environmental objects to that narrow f i e l d of operation. A grant of legal capacity presumably would include the r ight to pro-ceed against pr ivate ind iv iduals in respect of damage they might cause or - 12 -threaten. Accordingly , th is l i a b i l i t y theory must rank among those which could conceivably a f fec t future insurance r i sk assessment. The wr i te r put th is matter to Dr. E. M. de Savethem, one of the prime movers of modern development in environmental r i s k insurance, and inquired as to the at t i tude of l i a b i l i t y insurers . His reply r e f l e c t s a concern to provide a " t o t a l " indemnity service tempered by an awareness of the caution which must be involved in re la t ion to new r i sk exposures: "We have not yet examined the problems that might a r i se from the legal development to which you re fe r . In l i ne with the basic concept of ' t o t a l po l lu t ion cover' we would natura l l y tend to pro-tect our insureds also in respect of claims made against them by those in whom future l e g i s l a t i o n might vest the r ights which you descr ibe. But we s t i l l have to discuss th is with our under-wr i ters as and when the legal s i tuat ion has become somewhat c lea re r " . (41) * * * * The most important standing-re lated matter in modern environ-mental l i t i g a t i o n i s the c lass ac t ion . I t has been suggested that 42 "the class act ion as a major tool of l i t i g a t i o n i s pecu l ia r l y American". Cer ta in ly , i t has had i t s most prodigious use in the United States , but there are some indicat ions that the American lead w i l l be followed in other common law j u r i s d i c t i o n s . The present form of the American class action springs from Rule 23 of the Federal Rules of C i v i l Procedure. The Rule was revised in 1966 with the e f f e c t that the c r i t e r i a for successful establishment - 13 -of a "c lass" were relaxed and the class action as a procedural device was greatly st imulated. However i t s growth was retarded by 43 two important Supreme Court decis ions. The f i r s t , Snyder v. H a r r i s , in 1969, held that the federal requirement of a j u r i s d i c t i o n a l m i n i -mum of $10,000 could not be met by aggregation of the claims of c lass 44 members "unless they share a j o i n t and common i n t e r e s t " . The 45 second case, Zahn v. International Paper Co. in 1973, took the Snyder p r inc ip le further by assert ing that each member of the c lass must have a claim for damages in excess of $10,000 minimum. These decisions obviously w i l l have a dampening e f f e c t on the continued development and use of the class a c t i o n , but, i f academic comment i s any guide, they 1 are to be regarded as only temporary s e t -backs. One wr i te r describes the Zahn case, for example, as mere 46 "footdragging"' in the gradual progression towards wider standing for groups and ind iv iduals bringing environmental s u i t s . Elsewhere i t has been argued that the consequences of Snyder and Zahn can be ameliorated by a "rejuvenation of the concept of a n c i l l a r y j u r i s d i c t i o n and a 47 recognit ion of i t s potential c lass action aspects ." In England and Aust ra l ia the c lass act ion and other extensions <o'f standing have not been quite so important because in those countr ies , unl ike the United States , the re la to r action through the Attorney-48 General i s s t i l l v i a b l e . The pr ivate c i t i zens r ights in th is connection were re iMorced bv Lord Denning's judgment in the recent - 14 -Court of Appeal case of A-G (on the re la t ion of McWhirter) v. 49 Independent Broadcasting Author i ty : " in the l a s t resor t , i f the Attorney-General refuses leave in a proper case, or improperly or unreasonably delays in giv ing leave, or his machinery works too slowil.y>, then a member of the p u b l i c , who has a s u f f i c i e n t in te res t can himself apply to the court i t s e l f . " (50) The Master of the Rol ls sa id that he "would not r e s t r i c t the circum-51 stances in which an ind iv idual may be held to have a s u f f i c i e n t i n t e r e s t . " Whether th is robust j u d i c i a l approach w i l l be extended beyond the regulat ionsof conduct by publ ic author i t ies to areas such as publ ic nuisances caused by pr ivate ind iv iduals or corporat ions, for the moment, remains in doubt. In 1955 a c lass act ion was used successfu l ly in an environmental 52 s u i t in England. The case, Martel l v. Consett Iron Co. L t d . , serves to underline the d i f f i c u l t y which environmental groups face by v i r tue of the law as to i l l e g a l maintenance of an act ion . In Aus t ra l ia the 53 use of the class action has received some academic attent ion and there are examples of j u d i c i a l sympathy for the p l igh t of groups of " l i t t l e people" who have suffered or a rea l ike l y to suf fer as a con-sequence of a p a r t i c u l a r ac t ion . - "The Courts must be, in p rac t i ce , and not simply in theory, avai lable to a l l " - (54) In Canada, the prospect of c lass actions in environmental su i ts i s at f i r s t glance quite remote. Cases such as the English decision of - 15 -55 Markt & Co. v. Knight Steamship Co. L td . and the Canadian decisions 56 57 in Turt le v. Toronto and St . Lawrence Rendering Co. v. Cornwall 58 are c i ted as insuperable b a r r i e r s . However, some comfort may be drawn from the benign at t i tude of the Court of Appeal in Martel v.• Consett to the communion of in te res t question. Moreover, the B r i t i s h 59 Columbia case of Shaw v. Real Estate Board of Vancouver raises some hope. The t r a d i t i o n a l problem has been that , the r ights or in terests of c lass members in environmental su i ts are pecul iar .to the i r own person or property and the members do not have a community of in te res t in some subject matter or fund. In Shaw there was a common fund of i l l e g a l l y deducted commissions to which members of the c lass of s a l e s -men were e n t i t l e d . But th is fact was apparently not essent ia l to the decision which permitted a class ac t ion . A recent Ontario High Court dec is ion , Northdown Drywall & 60 Construction L td . v. Austin Co. L t d . , went further than Shaw by al lowing damages in a c lass act ion based in t o r t . This was con-i s i s t e n t with the Ontario Court of Appeal decision, in Farnham v. Fingold which had also recognized the recoverab i l i t y of damages in a c lass 62 ac t ion . However, the Court of Appeal's review of Northdown Drywall , makes i t c lear that the damages must be sustained by the c lass as such rather than i n d i v i d u a l l y by members, a q u a l i f i c a t i o n which makes i t d i f f i c u l t to embrace the s i tuat ion of a c lass of environmental l i t i gants . - 1 6 -As an a l ternat ive to the tortuous task of marshall ing s u f f i c i e n t reconci lable authority to support an extension of the c lass act ion into property-based environmental s u i t s , one might adopt Professor McLaren's argument that the uniform concern of the members of the c lass for a healthful environment could be advanced as the i r "common 63 i n t e r e s t . " The d i f f i c u l t y with th is suggestion i s that the in te res t in a healthfiJl environment per se i s not one commonly v indicated by pr ivate law. Insurance industry awareness of the potent ia l of the c lass action i s quite acute, as the fo l lowing passage from a buyer-oriented insurance publ icat ion ind ica tes : "The class ac t ion 's legal process i s a product of new law. The advent of the c lass -ac t ion legal approach i s going to require a complete change of th inking as to what const i tutes r i sk and the f inanc ia l extent of certain r i s k s . Insurance com-pany claims attorneys t e l l us we are going to see more and more class actions i n s t i t u t e d , a l l eg ing an increasing var iety of c la ims . " (64) In the f i r s t p lace , the c lass action must have an impact on insurance as a matter of pure economics. Legitimate claimants who might other -wise have been deterred by the cost of l i t i g a t i o n or a natural r e -luctance to embark on l i t i g a t i o n alone, can, through the c lass action device, have the i r claims considered. The inev i tab le consequence i s higher awards and higher payouts by insurers . The class act ion would also mean the attachment of increased importance in r i sk assessment to the character of the surrounding neighbourhood. - 17 -While the spectre of the c lass act ion i s one demanding v ig i lance and caution from insurers , there i s no reason to suspect that the insurance industry could not cope with i t . The class act ion i s important not so much for i t s e f f e c t on insurance industry r i sk assessment and claims management as for the profound warning i t s sounds for the uninsured p o l l u t e r . Publ ic Trust: I t i s appropriate in the context of projected r i sks to note b r i e f l y the publ ic t rus t doctr ine. In terms of immediate impact upon the magnitude of r i s k , th is i s probably the most esoter ic of the pro-j ec t ions . However, i t s impl icat ions are important and worthy of a t tent ion . Professor Sax's exposit ion of the Publ ic Trust Doctrine i s recognized as seminal. He suggests that : "Of a l l the concepts known to American law, only the publ ic t rus t doctrine seems to have the breadth and substantive content which might make i t useful as a tool of general appl icat ion for c i t i zens seeking to develop a comprehensive legal approach to resource management problems." (65) In i t s "extended" form the doctrine postulates that a t rus t ex is ts in respect of publ ic property (which may be interpreted to include parklands, waterways, mountains e tc . ) and that the government as trustee i s responsible to the c i t i z e n r y as benef ic iary for the propertmanagement, use and control of the t rus t property. An improper - 18 -d ispos i t ion or despoi lat ion of t rust property i s a breach of t rus t and actionable at the s u i t of the benef ic iary . Although the doctrine comprehends mainly control of government, i t may also be directed 66 against pr ivate part ies whom the government has f a i l e d to regulate. The f i r s t and most s e r i o u s ! l i m i t a t i o n of the doctrine i s the d i f f i c u l t y of def ining the terms of the t rus t . By what c r i t e r i a does one decide whether the t rust property has been so used or abused as to const i tute a breach of t rust? Where there i s a c lear abdication of 61 r e s p o n s i b i l i t y or where s p e c i f i c property has been dedicated by 68 statute to s p e c i f i c uses, a decision can be made. Beyond cases such as these there i s a vast area of uncertainty. Otfter l i m i t a t i o n s include j u d i c i a l reluctance to entertain review of administrat ive actions dealing with publ ic t rus t lands and the tendency, so f a r , to confine 69 the t rust to certain narrow aspects of the publ ic domain. In i t s present form the publ ic t rus t doctrine does not represent a s i g n i f i c a n t concern for environmental l i a b i l i t y insurers or for the i r prospective c l i e n t s . I t i s s t i l l very much in i t s infancy and 70 very much r e s t r i c t e d to the publ ic law f i e l d . I t has the potent ia l for l imi ted appl icat ion in the private sphere but i s un l ike ly to rea l i ze i t without considerable enterprise on the part of the j u d i c i a r y . In the l i g h t of the foregoing, i t can be argued that the area of ex i s t ing and 1ikely future r i sk i s so s i g n i f i c a n t that , although environmental l i a b i l i t y insurance i s not compulsory in law, i t w i l l become universal ly recognized as a sound and necessary business - 19 -investment. Therefore i t i s important to know what insurance coverages are ava i lab le and how adequately they meet the needs of prospective insureds. Parts I and II respect ively of th is paper deal with these matters. Part I i s e s s e n t i a l l y the information base, d e t a i l i n g the provisions of the general l i a b i l i t y po l icy as they apply to envi ron-mental r i s k s , the early var iat ions of those provisions to extend coverage, and the background and terms of the new Environmental Impairment L i a b i l i t y P o l i c y . Part I I , i t w i l l be seen, dist inguishes between i n s u r a b i l i t y and coverage. In addit ion to assessing the ava i lab le coverages, the i r advantages and shortcomings, i t addresses the fundamental issue of i n s u r a b i l i t y of d i f fe rent kinds of environmental r i sks with a view to determining just how far an environmental l i a b i l i t y po l icy can or should go in the provision of indemnity. Part I I I , "A Role for Insurance", contains two i m p l i c i t assump-t ions . In the f i r s t p lace, i t i s assumed that the credent ials of the insurance mechanism as a compensator of vict ims and as a protect ive a id to enterprise and endeavour, are well accepted. Secondly, i t i s assumed that these credent ials alone may not be s u f f i c i e n t to j u s t i f y an insurance intervention in the environmental f i e l d at a time when publ ic fee l ing favours prevention rather than remedy and has l i t t l e a f fec t ion fo r enterpr ise and endeavour that t r a i l eco lo -g ical d isaster in the i r wake. This part of the d isser tat ion therefore - 20 -considers whether insurance can play a pos i t i ve r o l e , whether, indeed i t can contribute to the solut ion rather than to the problem. General ly , the discussion w i l l tend to a Canadian focus. But insurance pract ice and thinking large ly transcend national boundaries (subject to minor exceptions) and, in recognit ion of t h i s , author i t ies and views from the other major English-speaking j u r i s d i c t i o n s w i l l be introduced wherever possible and appropriate. - 21 -FOOTNOTES - CHAPTER I 1. See "Insurance Against Fines" (1936) 100 Just ice of the Peace 248. 2. An argument to th is e f f e c t i s made out in Chapter V, i n f r a . 3. See, in te r a l i a : E s t r i n , D. Annual Survey of Canadian Law Part 2 Environmental  Law (1975) 7 Ottawa Law Review 397. Stroppa B. Federal Leg is la t ion and Common Law Aspects of  Environmental Problems in Canada (1975) 13 Alberta Law Review 18. Case Comment Visual P o l l u t i o n : Unaesthetic Use of Land as  Nuisance (1974) 12 Alberta Law Review 542. Morrison B. The Nuisance Act ion : A Useful Tool for the  Environmental Lawyer (1974) XXIII Univers i ty of New Brunswick Law Review 21. Burns P . , Franson R., Matkin J . and S lutsky , B. Environmental  Abuse and the Canadian C i t i zen (1973) Unpublished manuscript, Faculty of Law, Univers i ty of B r i t i s h Columbia. Elder P. Environmental Protection Through the Common Law (1973) 12 Western Ontario Law Review 107. Lewis D. Legal L i a b i l i t y in the Canadian A r c t i c Relat ingtto  Oi l s p i l l s and Blowouts (1972) 10 Alberta Law Review 440. McLaren J . The Common Law Nuisance Actions and the Environmental  Bat t le - Well Tempered Swords or Broken Reeds? (1972) 10 Osgoode Hall Law Journal 505. Jurgensmeyer J . Common Law Remedies and Protect ion of the Environment (1971) 6 Universi ty of B r i t i s h Columbia Law Review 215. Lucas A. Legal Techniques for Po l lu t ion Contro l : The Role of  the Publ ic (1971) 6 Universi ty of B r i t i s h Columbia Law Review 167. Lucas A . , Wilson J . , Berger T. (panel) Environmental Control  Through C i v i l Legal Act ion (1970) B.C. Annual Law Lectures 14. Lucas A. Water Po l lu t ion Control Law in B r i t i s h Columbia (1969) 4 Univers i ty of B r i t i s h Columbia Law Review 56. - 2 2 . -4. See, in te r a l i a : Boger K. The Common Law of "Public Nuisance in State Environmental  L i t i ga t ion" (19.75) IV En vi ronmental Affa i r s 367. Hashim J r . M. Pr ivate Nuisance Law: Protect ion of the  Ind iv idua l ' s Environmental Rights (1974) 8 Suffolk Universi ty Law Review 1162. Meyers R. The V i a b i l i t y of Common Law Actions for Po l lu t ion  Caused Injur ies and Proof of Facts (1973) 18 New York Law Forum 935. Rossi J r . V. Inverse Condemnation and Nuisance: A l ternat ive  Remedies for A i rpor t Noise Damage (1973) 24 Syracuse Law Review 793. Broughton R. Aesthetics and Environmental Law: Decisions and  Values (1972) 7 Land & Water Law Review 451. Furrow B. Leg is la t i ve and Jud ic ia l Remedies for Environmental  Wrongs (1972) 6 Suffolk Universi ty Law Review 536. Reitze J r . A. Pr ivate Remedies for Environmental Wrongs (1971) 5 Suffolk Univers i ty Law Review 779. Warren D. Nuisance Law as an Environmental Tool (1971) 7 Wake Forest Law Review 211. Kramon J . Noise Control : Tradi t ional Remedies and a Proposal  for Federal Action (1970) 7 Harvard Journal on Leg is la t ion 533. Lohrmann R. The Environmental Lawsuit: T radi t ional Doctrines  and Evolving Theories to Control Po l lu t ion (1970) 16 Wayne Law Review 1085. Peterson N. and Lawrence R. The Challenge of Environmental  Qual i ty : An Outline of Remedies to Meet I t . (1970) 1 Environmental Law 72. 5. [1953] 2 W.L.R. 58 (C.A.) 6. Myers, supra, note 4 at 949. 7. See Chapter VI , note 27 and accompanying tex t . 8. E lder , supra, note 3 at 140.. 9. Id. 10. Bowden, L . , Evolution of Involvement of Lawyers in Environmental  Problems (1975) 49 Austra l ian Law Journal 399. - 23 -11. (1866) L.R. 1 Ex 265; (1868) L.R. 3 H.L. 330. 12. [1932] A.C. 562 (H.L.) 13. [1964] A.C. 465 (H.L.) 14. McLaren, supra, note 3. 15. See Broughton R. Aesthetics and Environmental Law: Decisions  and Values (1972) supra, note 4 at 461; and Leighty L. Aesthetics  as a Legal Basis for Environmental Control (1971) 17 Wayne Law Review 1347. 16. See for e . g . , Smith J . Injunction Against 'S ight ' Nuisance (1936) 2 Universi ty of Pittsburgh Law Review 191, 193; Leighty, supra, note 15 at 1353; and Visual P o l l u t i o n : Unaesthetic Use of Land  as Nuisance (1974) 12 Alberta Law Review 542, 546. 17. Parkersburg Bui lders Material Co. v. Barrack 191 S . E . 368, 370 (S.C. of App. , W. Va . ) . 18. Id., at 371. 19. (1970) 10 D.L.R. (3d) 143 (N.S.S.C. App. D i v . ) . 20. i d at 166. 21. [1973] 1 A.C.T.R. 43 ( S . C ) . 22. Id. at 52. 23. Id at 52 -3 . 24. Id. at 53. 25. (1973) 21 F.L.R. 177 ( S . C ) . 26. Id at 212. 27. Morris v. Dominion Foundress Ltd . [1947] 2 D.L.R. 840 ( O n t . H . C ) ; Kent v. Johnson (1973) 21 F.L.R. 177 ( S . C ) . 28. Broughton supra note 4 at 460-1. 29. Id-30. Mich. Comp. Laws Ann. || 691. 1201-1209 (Supp. 1971). 31. Including: Minnesota, Massachusetts, F l o r i d a , Indiana, Connecticut and Ca l i fo rm'a . - 24 -32. Michigan Environmental Protection Act (1970) 4 Journal of Law Reform' 358. 33. § 691. 1202 (1) 34. Franson R. and Burns P. Environmental Rights for the Canadian  C i t i z e n : A Prescr ipt ion for Reform (1974) 12 Alberta Law Review 153. 35. Where the l e g i s l a t i o n permits only in junct ive r e l i e f and not damages the insurance f a c i l i t y w i l l not be af fected . But there i s every reason to suppose that future schemes might ex-pand to include the area of damages. 36. 405 U.S. 7272(1972) 92 S. Ct. 1361. 37. 92 S. Ct. 1361, 1369. 38. Id. at 1370. 39. Stone C , Should Trees have Standing? - Toward Legal Rights For  Natural Objects (1972) 45 Southern C a l i f o r n i a Law Review 450. 40. e .g . Oakes, J . , Environmental L i t i g a t i o n : - Current Developments  and Suggestions for the Future (1973) 5 Connecticut Law Review 531; and Stone, supra, note 39. 41. Personal Correspondence dated 31st November, 1975. 42. Taylor, G . , Rights of Standing in Environmental Matters , published in Environmental Law: The Austra l ian Government's Role ('Australian Government P r i n t i n g Serv ice , 1975) 46, 51. 43. 394 U.S. 332!(H969) 89 S. Ct. 1053. 44. 89 S. Ct . 1053, 1059. 45. 94 S. Ct. 505 (1973). 46. Oakes, supra, note 40 at 536. 47. Lavehhar J . The Environmental Class Action a f t e r Snyder and  Zahn: Obtaining Federal Divers i ty J u r i s d i c t i o n Over the Class  Through Appl icat ion of A n c i l l a r y J u r i s d i c t i o n (1975) 6 St . Mary's Law Journal 866, 890-1. 48. Taylor, supra, note 42 at 50. 49. [1973] 1 A l l E.R. 689 (C.A.) - 25 -50. U at 698. 51. Id. 52. [1955] 1 A l l E.R. 481 (C.A.) 53. Taylor , supra, note 42 at 52 refers to an "enthusiast ic" a r t i c l e by Alstow, P . , Representative Class Actions in Environmental  L i t i g a t i o n (1973) 9 Melbourne Universi ty Law Review 307. 54. Kent v. Cavanagh [1973] 1 A.C.T.R. 43, 55 ( S . C ) . 55. [1910] 2 K.B. 1021 (C .A . ) . 56. (1924) 56 O.L.R. 252 (C .A . ) . 57. [1951] O.L.R. 669 ( H . C ) . 58. See McLaren, supra, note 3 at 518; Generally on c lass actions in Canada, see Kazanjian, J . , Class Actions in Canada (1973) 11 Osgoode Hall Law Journal 397; and Wi l l iams, N . , Consumer Class  Actions - Some Proposals for Reform (1975) 13 Osgoode Hall Law Journal 1. [1973] 4 W.W.R. 391 (B.C.C.A) . (1975) 52 D.L.R. (3d) 351 (Ont. H . C ) . (1973) 33 D.L.R. (3d) 156 (Ont. C .A . ) . (1976) 8 O.R. 691 ( C A . ) . , (1976) 59 D.L.R. (3d) 55. McLaren, supra, note 3 at 518-19. Insurance Buyer's Guide Vo l . XIV No. 7 June, 1971 8 . 5 . Sax, J . , The Publ ic Trust Doctrine in Natural Resource Law:  E f fect ive J u d i c i a l Intervention (1970) 68 Michigan Law Review 473, 474. 66. Id at 474 note 14. 6_7. I l l i n o i s Central Rai lroad Company v. I l l i n o i s 146 U.S. 387 (1892) 13 S. Ct. 110. 68. In the Austra l ian case, Kent v. Johnson (1973) 21 F.L.R. 177 (S.C.) i t was argued that the construction of the communications tower on a reserve which had been declared as a publ ic park was a breach of publ ic t r u s t . Smithers J . rejected the argument without speaking as to general v i a b i l i t y of a publ ic t rus t doctr ine . - 26 -69. See, Lohrmann, supra, note 4. 70. Nanda and Ris have suggested an appl icat ion of the doctrine in the internat ional arena: The Publ ic Trust Doctrine: A  Viable Approach to International Environmental Protect ion (1976) 5 Ecology Law Quarterly 291. - 27 -THE INSURANCE OF ENVIRONMENTAL RISKS PART 1 ENVIRONMENTAL LIABILITY INSURANCE FACILITIES - 27a-CHAPTER II THE GENERAL LIABILITY POLICY AND EARLY VARIATIONS A. The General L i a b i l i t y P o l i c y : The insurance industry deals with environmental l i a b i l i t y r i sks pr imar i l y through the standard general or publ ic l i a b i l i t y p o l i c y . There i s some var iat ion between the pol icy wordings used in d i f fe ren t national markets, but there i s l i t t l e di f ference in substantive e f f e c t . B r i t i s h in f luence , as in many other areas of insurance, has been pervasive in the English-speaking countr ies. Thus the B r i t i s h form, which t y p i c a l l y provides indemnity to the insured for a l l sums he may become l e g a l l y l i a b l e to pay as damages in respect of bodi ly in jury to any person or accidental loss of or damage to 1 property of th i rd p a r t i e s , has formed, with minor semantic var iat ions ("caused by accident" i s popular) , the basis of po l icy cover in Canada, A u s t r a l i a , New Zealand and, u n t i l recent ly , the United States . Since 1966, American insurers have moved away from the use of the word "acc identa l " or the expression "caused by accident" in reference to the damage for which l i a b i l i t y cover i s rendered. They have pre-ferred to use the word "occurrence". A typ ica l po l icy wording w i l l thus provide indemnity " . . . for a l l sums which the insured shal l become lega l l y l i a b l e to pay as damages because of A. Bodily i n j u r y , o r , B. Property damage to which th is insurance applies caused by an occurrence" (2) - 28 -"Occurrence" i s then defined in the pol icy as: "an accident , inc luding in jur ious exposure to condi t ions , which r e s u l t s , during the pol icy per iod, in bodi ly in jury or property damage neither expected nor intended from the stand-point of the insured." (3) The pr inc ipa l reason for the change of po l icy wording i s re f lec ted in th is d e f i n i t i o n of "occurrence". Some courts and some insurers had interpreted the "accident" wording to refer only to sudden, unintended, unexpected happenings. I t was thus thought that damage which was un-intent ional and unexpected but occurred over a period of time would not be the subject of indemnity unless the extended "occurrence" coverage were provided. This appears to have been a pecu l ia r l y American concern,and, even some of the American commentators have doubted whether there i s any s i g n i f i c a n t d i s t i n c t i o n between the 4 "accident" and "occurrence" coverages. In Canada, (although most standard forms use an "accident" wording) out of an abundance of caut ion , "occurrence" coverage i s made avai lab le by way of special endorsement for an extra premium charge. Whether or not the "occurrence" extension i s sought by a pa r t i cu la r insured w i l l depend upon the nature and s i ze of his business, broker advice, r e l a t i v e cost e t c . The Supreme Court's judgment in Canadian Indemnity Co. v. Walkem 5 Machinery L td . would suggest that "accident" w i l l be interpreted widely enough in Canada to include the gradual damage s i t u a t i o n . Pigeon J . , denying the need to resort to a d ict ionary to show the meaning of the word in everyday use, concluded that i t appl ied to "any - 29 -unlooked for mishap or occurrence". His Lordship did not speci fy 6 nor imply a r e s t r i c t i o n to sudden events. In Hildon Hotel (1963) 7 L td . v. Dominion Insurance Corp. po l lu t ion resulted from seepage of o i l from a hotel storage tank into Vancouver Harvour. Although th is was obviously a gradual process and did not resu l t from any i d e n t i -f i a b l e , s p e c i f i c , or sudden act or omission by any person, the insurer conceded that i t was "caused by accident" within the meaning of the 8 9 po l i cy . English and Austra l ian cases do not reveal any attachment to the notion that "accidents" must be sudden and, indeed, i t would surely be surpr is ing to a layman that any such de l imi tat ion of the natural meaning of the word should be contemplated. S t r i c t l y speaking i t should not be necessary to refer at a l l in the pol icy to an "accildent" or to "accidental cause" e t c . , for i t would be contrary to publ ic po l icy and to the nature of the insurance con-t rac t to enforce an indemnity for l i a b i l i t i e s other than those acc identa l ly incurred. Some insurers recognize th is and accordingly delete from the i r p o l i c i e s any "accident" wording (though they s t i l l carry an express exclusion of del iberate damage). I t i s probable that the only di f ference with theseepol ic ies from the pract ice under the old form w i l l be a s h i f t in onus from the insured to the insurer 10 as to proof of the accidental or non-accidental character of the damage. B. Exclusion of Environmental Risks in the General L i a b i l i t y P o l i c y : The uncertainty as to the ambit , in the late s i x t i e s , of po l icy coverages and the increasing s i ze and frequency of environment-re lated claims made for considerable "nervousness" amongst l i a b i l i t y - 30 -insurers . This has led them in the present decade to c u r t a i l the scope of indemnity offered in th i s area. MAmongst the f i r s t s i g n i f i c a n t developments was the act ion in 1970 by the United States Insurance Rating Board (now Insurance Services Off ice) in f i l i n g on behalf of i t s member companiiil§s the fol lowing exc lus ions: "IRB-G335 I t i s agreed that the insurance does not apply to bodi ly in jury or property damage a r i s i n g out of the discharge, d i s p e r s a l , release or escape of smoke, vapors, soot, fumes, ac ids , a l k a l i s , tox ic chemicals, l i qu ids or gases, waste materials or other i r r i t a n t s , contaminants or pol lutants into or upon land, the atmosphere or any water-course or body of water; but th is exclusion does not apply i f such discharge, d i s -p e r s a l , release or escape i s sudden and a c c i d e n t a l . " "IRB-G336 I t i s agreed that , i f with respect to operations described in th is endorsement there i s a discharge, d i s p e r s a l , release or escape of o i l or other petroleum substance or der ivat ive ( inc luding any o i l refuse or o i l mixed with wastes) into or upon any watercourse or body of water, the insurance does not apply to bodi ly in jury or property damage a r i s i n g out of such discharge, d i s p e r s a l , release or escape whether or not sudden and acc identa l . Description of Operations Gas Lease Operators - natural gas Gasoline Recovery - from casing lead or natural gas Non-operating working interests Oi l or Gas well shooting Oi l or Gas wel ls - ac id i z ing Oi l or Gas wel ls - cementing Oi l or Gas wel ls - cleaning or swabbing - by contractors O i l or Gas wel ls - d r i l l i n g or r e d r i l l i n g , i n s t a l -l a t ion or recovery of casing Oi l or Gas wel ls - instrument logging or survey work in wel ls Oi l or Gas Wells - perforat ing of casing Oi l Lease operators O i l Pipe Lines - operation including maintenance - 31 -Oi l Rig or Derrick Erecting or Dismantling - wood or metal - inc luding construction of foundations or structures or i n s t a l l a t i o n of equipment." The publ icat ion of these exclusions was accompanied by an explanation by the Board. I t was said that the f i r s t exc lus ion , IRB-G335, would merely c l a r i f y the "question of i n t e n t " , by emphasizing that damages which are expected or intended would be excluded by the d e f i n i t i o n of • "occurrence". In f a c t , the exclusion goes much further than t h i s , for i t removes indemnity in cases of damage a r i s i n g from non-sudden but accidental "discharge, d i s p e r s a l , release or escape." In re la t ion to the second exc lus ion , IRB-G336, the Board ad-vanced two basic j u s t i f i c a t i o n s : (1) o i l sp i l l age into water " i s a catastrophic phenomenon of recent occurrence and not contemplated when ex is t ing rates were made" (2) The publ ic i s increasingly aware of "agonizing ef fects of o i l s p i l l a g e : and making insurance readi ly ava i lab le might be interpreted as a disregard of the publ ic i n t e r e s t . Frankly, the f i r s t of these j u s t i f i c a t i o n s i s the more p l a u s i b l e . I t i s d i f f i c u l t to understand why the insurance of o i l po l lu t ion r i sks would be any more or less contrary to the publ ic in te res t than would the insurance of any other environmental r i s k . Typical of the general confusion about just where the publ ic in te res t does l i e , i s the fact that the insurance laws of one State 11 l eg i s la tu re in the United States have forbidden the sale of po l lu t ion insurance unless i t s scope i s l im i ted along the l ines of - 32 -12 the f i r s t of the above exc lus ions, while three other states have forbidden the use of the exclusions for fear that vict ims might be deprived of the opportunity of redress against a solvent party. The Canadian Underwriters' Associat ion (now Insurers' Advisory Organization of Canada) followed the American Insurers' lead with the promulgation of the fol lowing exc lus ion: "The insurer sha l l not be l i a b l e under th is sect ion of th is pol icy in respect of in ju ry , disease, loss or damage caused through a i r or water po l lu t ion to persons or property unless proved to have been caused by immediate discharge consequent upon an accident (or unless due to defective dra ins , sewers, or sanitary arrangements." (13) The expression "immediate discharge consequent upon an accident" presumably i s designed to have the same e f f e c t as the Insurance Rating Board's exc lus ion , i . e . to require not only that the damage be accidental but that i t also be sudden. The wording leaves open to doubt the status of an escape or discharge which commences immediately a f te r an accidental act or omission but continues for some time, gradually accumulating un t i l actionable damage occurs. The w r i t e r ' s view i s that such damage would be excluded. Although some po l lu t ion occurs immediately, the damage ul t imately sued upon i s a product of the immediate discharge and al1 that followed a f te r i t . I t should be understood that not a l l Canadian insurers w i l l use prec ise ly the same exclusion wording. Some of them favour the American form or some adaptation of i t . Others are guided by the 14 wording promulgated by Lloyds of London. S t i l l others use the i r own - 33 -version of the Canadian Underwriters' Associat ion wording. Moreover, the exclusions are sometimes omitted from the po l i cy . The forms current ly published by the Insurance Bureau of Canada (the body which now deals with the pol icy design matters formerly handled by the Underwriters' Associat ion) do not contain a po l lu t ion or environmental damage exc lus ion. When the po l icy forms were d is t r ibuted to users, the omission of the exclusion was drawn to the i r attent ion and the suggestion was made that indiv idual insurers should inse r t the ex-15 elusion when appropriate. The pract ice i s to apply the exclusion unless the insurer agrees to i t s being "bought back" in an exceptional case at an appropriately increased premium. Canadian insurers appear to be more ob l ig ing in th is respect than do the i r American counter-16 parts . In 1970, Lloyds' Underwriters' Non-Marine Associat ion prepared a set of exclusion clauses for the guidance of Underwriters, but these have not been applied uniformly in the English market. Instead, English insurers have preferred to remain as f l e x i b l e as poss ib le , employing those s t ipu la t ions best suited to the class of insurance 17 business they are w r i t i n g . The Lloyds wordingssare set out below. Clauses 1 and 2 were proposed for insureds engaged in the o i l and gas indus t r ies , and clauses 3 and 4 for those engaged in other indus t r ies : SEEPAGE, POLLUTION AND CONTAMINATION CLAUSE No. 1 (Approved by Lloyd's Underwriters' Non-Marine Associat ion) This Insurance does not cover any l i a b i l i t y f o r : (1) Removal o f , loss of or damage to sub-surface o i l , gas or any other substance, the property of others , provided always that th is paragraph (1) sha l l not - 34 -apply to any l i a b i l i t y which would otherwise be covered under th is Insurance for such removal, loss or damage d i r e c t l y a t t r ibutab le to blow-out, crater ing or f i r e of an o i l or gas well owned or operated by, or under the control o f , the Assured. (2) Loss of , damage t o , or loss of use of property d i r e c t l y or i n d i r e c t l y resu l t ing from subsidence caused by sub-surface operations of the Assured. (3) Personal Injury or Bodily Injury or loss of , damage to , or loss of use of property d i r e c t l y or i n d i r e c t l y caused by seepage, po l lu t ion or contamination, pro-vided always that th is paragraph (3) sha l l not apply to l i a b i l i t y for Personal Injury or Bodily Injury or loss of or physical damage to or destruction of tangible property, or loss of use of such property damaged or destroyed where such seepage, po l lu t ion or contamination i s caused by a sudden, unintended and unexpected happening during the period of th is Insurance. (4) The cost of removing, n u l l i f y i n g or cleaning-up seeping, po l lu t ing or contaminating substances unless the seepage, po l lu t ion or contamination i s caused by a sudden, unintended and unexpected happening during the period of th is Insurance. (5) F ines, pena l t ies , punit ive or exemplary damages. This Clause sha l l not extend th is Insurance to cover any l i a b i l i t y which would not have been covered under th is Insurance had th is Clause not been attached. SEEPAGE, POLLUTION AND CONTAMINATION EXCLUSION CLAUSE NO. 2 (Approved by Lloyd's Underwriters' Non-Marine Association) ( l )This Insurance does not cover any l i a b i l i t y f o r : (1) Personal Injury or Bodily Injury or loss of , damage to , or loss of use of property d i r e c t l y or i n d i r e c t l y caused by seepage, po l lu t ion or contamina-t i o n . (2) Cost of removing, n u l l i f y i n g or cleaning-up seeping, po l lu t ing or contaminating substances. (3) Loss o f , damage to , or loss of use of property d i r e c t l y or i n d i r e c t l y resu l t ing from subsidence caused by sub-surface operations of the Assured. - 35 -Removal or , loss of or damage to sub-surface o i l , . gas or any other substance, the property of others. Fines, pena l t ies , punit ive or exemplary damages. INDUSTRIES, SEEPAGE, POLLUTION AND CONTAMINATION CLAUSE No. 3  (Approved by Lloyd's Underwriters' Non-Marine Associat ion) This Insurance does not cover any l i a b i l i t y f o r : Personal Injury or Bodily Injury or loss o f , damage t o , or loss of use of property d i r e c t l y or i n d i r e c t l y caused by seepage, po l lu t ion or contamina-t i o n , provided always that th i s Clause sha l l not apply to l i a b i l i t y for Personal Injury or Bodily Injury or loss of or physical damage to or destruct ion of tangible property, or loss of use of such property damaged or destroyed, where such seepage, po l lu t ion or contamination i s caused by a sudden, unintended and unexpected happening during the period of th i s Insurance. The cost of removing, n u l l i f y i n g or cleaning-up seeping, po l lu t ing or contaminating substances unless the seepage, po l lu t ion or contamination i s caused by a sudden, unintended and unexpected happening during the period of th is Insurance. F ines, pena l t ies , punit ive or exemplary damages. This Clause sha l l not extend this Insurance to cover any l i a b i l i t y which would not have been covered under th is Insurance had th is Clause not been attached. INDUSTRIES, SEEPAGE, POLLUTION AND CONTAMINATION EXCLUSION CLAUSE No. 4.  (Approved by Lloyd's Underwriters' Non-Marine Associat ion) This Insurance does not cover any l i a b i l i t y f o r : Personal Injury or Bodily Injury or loss o f , damage to or loss of use of property d i r e c t l y or i n d i r e c t l y caused by seepage, po l lu t ion or contamination. The cost of removing, n u l l i f y i n g or cleaning-up seeping, po l lu t ing or contaminating substances. F ines, pena l t ies , punit ive or exemplary damages. - 36 -In A u s t r a l i a , as in England, there has been no industry-wide adoption of po l lu t ion exc lus ions, though some insurers have followed the American and Canadian trend towards Restr icted coverage. The 18 fo l lowing clause supplied by Austra l ian brokers, seems to combine the two American exclusions. I t i s used most commonly, in A u s t r a l i a in re la t ion to r i sks which are the subject of reinsurance contracts or treaty arrangements with foreign underwriters: "The company shal l not be l i a b l e for claims in respect of bodi ly in jury or damage to property a r i s i n g d i r e c t l y or i n d i r e c t l y out of or caused by po l lu t ion and/or contamination caused by the discharge, d i s p e r s a l , release or escape of : (1) o i l into or upon any watercourse or body of water or (2) o i l into or upon land or the atmosphere or (3) any other contaminants or pol lutants into or upon land, the atmosphere or any watercourse or body of water. Sections (2) and (3) of th is exception do not apply i f such discharge, d i s p e r s a l , release or escape i s sudden, acc identa l , unexpected and unintentional from the standpoint of the insured. As used in t h i s endorsement: " o i l " includes any petroleum substance, petroleum der i va t i ve , o i l waste and o i l mixed with waste; "contaminants and po l lutants" inc luding smoke, vapors, soot , fumes, ac ids , a l k a l i s , tox ic chemiitcails?, l i q u i d s , gases, waste mater ia ls , other i r r i t a n t s . " The obvious general e f fec t of the various exclusions i s to circum-scr ibe environmental l i a b i l i t y coverages. However, the precise interpretat ions which they w i l l receive from the courts are , at th is stage, fa r from obvious. One surpr is ing aspect of a l l of the exclusions i s that they do not mention noise, l i g h t , r a d i a t i o n , or temperature. I t i s arguable - 37 - • that these are comprehended by such terms as " p o l l u t i o n " , "contaminants", " i r r i t a n t s " e t c . , but the combined operation of the contra proferentem and ejusdem generis rules would make i t d i f f i c u l t to persuade a court that th is i s so. Having regard to the increasing publ ic awareness of the detriment occasioned to physical health and enjoyment of l i f e by excessive noise leve ls in p a r t i c u l a r , the omission i s not i n -s igni f i c a n t . The American, Canadian and Austra l ian exclusions focus upon the emissions in the i r requirement of suddeness or immediacy. That i s to say, the discharge, escape, e tc . rather than the act from which they a r i s e , must be sudden or immediate. The Lloyds exc lus ions , on the other hand, address the character of the o r ig inat ing a c t , requi r ing that i t be a sudden, unintended and unexpected happening. The d i s -charge fol lowing upon i t , presumably could be a gradual one. Consider the example of a chemical factory employee who a c c i -dental ly ( i . e . not de l iberate ly ) omits to close a valve, as a con-sequence of which,gas escapes into the atmosphere, accumulates over a period of weeks and f i n a l l y causes damage. I t seems that the resu l t ing po l lu t ion l i a b i l i t y would be covered by some of the above-given ex-clusions but not by others. The employee's omission was sudden ( in the sense of s p e c i f i c , i d e n t i f i a b l e and non-gradual) , unintended and unexpected, and i t caused a gradual leakage of gas which u l t imately occasioned actionable damage. The gradual leakage would not s a t i s f y the tests of suddeness and immediacy imposed by the American, Canadian and Austra l ian forms, but there would be no such d i f f i c u l t y under the English prescr ip t ions . - 38 -A note of caution might be added - courts in a l l j u r i s d i c t i o n s have demonstrated remarkable a g i l i t y in in terpret ing insurance po l icy wording to the benef i t of insureds. Thus, in A .F . & G. Robinson, v. 20 Evans, two d i f fe ren t po l icy wordings,"accidental damage to property" and "damage to property a r i s i n g out of an accident happening during the continuation of the p o l i c y " , seemed to focus, respect i ve ly , on the or ig inat ing act and the resu l t ing damage, yet they were i d e n t i c a l l y construed. I t may therefore go too far to d issect these exclusions in terms of emissions and the i r o r ig inat ing sources, or at least one should be careful not to accord the differences inordinate weight. The American Insurance Rating Board exclusion G336, dealing with the o i l and gas indus t r i es , deletes the reference to land po l lu t ion which appears in G335. This appears to be something of an anomaly. I t would be s u r p r i s i n g , indeed, i f insurers saw no r i sk of o i l po l lu t ion of the s o i l or land and of substant ial l i a b i l i t y claims a r i s i n g therefrom, notwithstanding that the r e a l l y dramatic o i l po l lu t ion claims so far have involved mainly the contamination of waterways. By way of evidence of the potent ia l seriousness of the r i s k , the Mercanti le and General Reinsurance Company Limited in the i r 21 pub l i ca t ion , Po l lu t ion and Insurance, have reported two major losses , one in Germany, the other in Switzer land, involv ing o i l seepage into land. The German c la im, which arose from a p ipe l ine leak, resulted in a cost of $250,000 fo r remedial work, while the Swiss c la im, in which o i l leaked from a storage tank into adjacent farm land, c u l -minated in a damages award exceeding $200,000. Insurers re ly ing upon the American exclusion would seem to be exposed to r i sks of th is k ind . - 39 -The Austra l ian form, though obviously based upon the American model, has retained the reference to po l lu t ion of the land , and the Lloyds forms have overcome the problem by avoiding the s p e c i f i c designation of atmosphere, water, land e t c . and simply excluding coverage where there is any seepage, po l lu t ion or contamination. The s p e c i f i c reference in the English exclusions to clean-up costs , f i n e s , and exemplary damages ra ises the question whether the American, Canadian and Austra l ian forms, by omitting to refer to these matters, have retained a r i sk exposure. Later discussion w i l l show that " f ines" (as they are understood at least in the United States , Canada and Aus t ra l ia at t h i s time) are uninsurable. Their designation in the exclusion wording therefore would be redundant. A s i m i l a r posi t ion obtains in respect of exemplary damages except in those few American states in which exemplary damages are deemed to be compensatory rather than puni t i ve . As to clean-up costs , an answer may be found in the reasoning 22 of the Hi!don Hotel case. In that case, i t waslsaid -that clean-up costs were "damages" which a person i s l i a b l e to pay because of in jury to property. I t does not matter that the in jured property i s not owned nor possessed by the party to whom the clean-up costs are payable. Thus the exclusion of coverage for a damages l i a b i l i t y resu l t ing from po l lu t ion - caused property damage would remove clean-up costs from the area of r i sk covered. The var ia t ion in pract ice and pol icy wording from one insurer - 40 -to another, and the untested ambiguities which abound in the standard form exclusions together make i t d i f f i c u l t to generalize about the extent to which environmental r i sks are covered by the t r a d i t i o n a l general l i a b i l i t y insurance f a c i l i t y . In the United States and Canada, and, to some extent in the United Kingdom and A u s t r a l i a , non-sudden environmental " inc idents " , whether accidental or not , are l i k e l y to be outside the scope of coverage. Sudden accidental " inc idents" can be the subject of a grant of indemnity except where the o i l and gas industr ies are involved. In the i r case, environmental l i a b i l i t y cover of any kind i s v i r t u a l l y unobtainable unless by way of special (and exceptional) arrangement with a par t i cu la r insurer . Of course, the above i s subject to what has been said previously about d i f fe rent pract ices in d i f fe rent markets and the defects in exclusion wordings. C. Some Early Variat ions on the General L i a b i l i t y P o l i c y : The withdrawal symptoms which gripped American l i a b i l i t y i n -surers in the late s i x t i e s and early seventies were shaken of f by a few adventurers, who were prepared to supplement the narrow coverages provided by the rest of the industry . The Travelers insurance group avoided the use of the "sudden and acc identa l " catch phrase in the i r po l lu t ion exclusion and, instead, merely excluded po l lu t ion or contamination which was "expected or 23 intended from the standpoint of the insured" . This represented a s i g n i f i c a n t extension of the coverage generally ava i lab le on the American market. Also in re la t ion to o i l s p i l l a g e , the Travelers - 41 -exclusion was less st r ingent than most. Thus indemnity s t i l l was offered in respect of bodi ly in jury unexpected and unintended, a r i s i n g from o i l s p i l l a g e . And, even in the case of property damage, some cover was afforded where there was a " f i r e or explosion a r i s i n g out 24 of any emission". The Environmental Protector Pol icy (E.P.P.)_ launched by Chicago brokers, Excess Underwriters Inc. in 1972, has been to date the most ambitious foray into the environmental l i a b i l i t y f i e l d by American insurers . The programme was backed by the Mutual F i re Marine and Inland Insurance Company of Phi ladelphia and the Insurance Company of Indianapol is , indemnity l i m i t s being f ixed for each insured at $1 m i l l i o n for any one claim and as an aggregate for any one po l icy year. The E .P .P . was designed as a manuscript-type form to be hand-ta i l o red to the exposure presented by each indiv idual r i s k . Its purpose was described as "buying-back" the po l lu t ion exclusion of standard publ ic l i a b i l i t y forms to the extent that i t would be reasonable to do so. In explaining the "philosophy" behind the E . P . P . , the president of Excess Underwriters Inc. had th is to say: "We agree that i t ' s wrong for a f i rm to pol lute or contaminate knowingly and that i t s contrary to publ ic po l icy for insurers to protect the wrong-doer from the ef fects of intent ional po l lu t ion or intent ional contamination. Nevertheless, the ex-c lusion of ' a l l but sudden and acc identa l ' i n -stances of po l lu t ion or contamination l e a v e s . . . c l i e n t s with large and s i g n i f i c a n t gaps in the i r insurance coverage." (25) - 42 -The attempt to f i l l the gap i s contained in the substantive indemnity provision of the pol icy which covers a damages l i a b i l i t y imposed by law or assumed under contract because of personal in jury or in jury to or destruction of tangible property caused by: "Seepage, po l lu t ion or contamination which i s not a sudden or accidental happening during the pol icy per iod. The discharge, d i s p e r s a l , release or escape of smoke, vapors, soot, fumes, ac ids , a l k a l i s , , tox ic chemicals, l i qu ids or gases, waste material or other i r r i t a n t s , contaminants or pol lutants into or upon land, the atmosphere or any watercourse or body of water where such discharge, d i s p e r s a l , release or escape i s not a sudden or accidental happening during the pol icy per iod. Any emission, discharge, seepage, release or escape of any l i q u i d , s o l i d , gaseouss or thermal waste or po l lutant i f such emission, discharge, seepage, release or escape i s not sudden or accidental from the standpoint of any insured or any person or organization for whose acts or omissions any insured i s l i a b l e which happens during the pol icy per iod. The cost of removing, n u l l i f y i n g or cleaningyup seepage, po l lu t ing or contaminating substances where such seepage, po l lu t ion or contamination i s caused by aonon-sudden or non-accidental happening during the pol icy per iod . " (26) As in the case of the po l lu t ion exc lus ions , these pol icy provisions contain no reference to noise , r a d i a t i o n , l i g h t and temperature (unless temperature i s comprehended by "thermal wastes") . An appl icat ion of theccontra proferentem rule here would tend to expand the terms to embrace these unspecif ied forms of environmental damage rather than (as would occur with the exclusions) to r e s t r i c t the i r breadth of operation. The pol icy obviously i s supplementary in character. I t i s intended ^ 43 -not to replace the general l i a b i l i t y p o l i c y , but to supplement i t by covering the otherwise excluded r i s k exposures. Indeed, i t i s a condition of the E .P .P . that an insured must warrant the a v a i l a b i l i t y of other l i a b i l i t y insurance to complete the "package", and, in the event of a l o s s , must claim f i r s t l y against the general l i a b i l i t y insurer . A coverage of a l l non-sudden and non-accidental environmental damage would seem to be quite an extraordinary expansion on orthodox indemnity p r i n c i p l e s . But, p a r t i c u l a r l y in the North American insurance community, ther term "accident" has become a term of a r t , importing immediacy or suddeness. The purported coverage of non-accidental events must be taken to refer to cases of non-sudden * un-intended damage. Having regard to publ ic p o l i c y , the E.P.P insurance con t r a c t s i t s e I f and the comments which accompanied the introduction of the programme, i t ce r ta in l y would not refer to expected or i n -tentional damage. An intent to l i m i t coverage to prudent and responsible insureds 27 i s re f lec ted in the further conditions that 1. The insured must comply with the regulat ions , laws or ordinances of a l l Federal , State or otherppol i tdcal bodies with respect to po l lu t ion or contamination of the a i r , water or environment. 2. the prospective insured must be c e r t i f i e d by a po l lu t ion control engineer (designated by the insurer) -as e l i g i b l e for the insurance and in compliance with a l l environmental laws and must comply with any wr i t ten recommendations or requirements he may s t i p u l a t e . 3. The prospective insured must be audited by an environmental control engineer to c e r t i f y that a l l f a c i l i t i e s are operated at design e f f i c i e n c y . - 44 -At a ser ies of meetings of the world's major reinsurers held in Paris in 1972 to review the problem of "po l lu t ion and insurance", the E .P .P . programme was summed up rather succ inct l y as o f fe r ing "very wide cover, with extremely s t r i c t contractual condi t ions , having pa r t i cu la r regard to the regulations of ind iv idual States 28 and Federal A u t h o r i t i e s . " Though i t s substantive indemnity pro-v is ions are ambitious, the stringency of i t s conditions and the fac t that i t s indemnity l i m i t i s r e l a t i v e l y low at $1 m i l l i o n must ra ise doubts about the extent of actual r e l i e f i t represents. - 45 -Footnotes - Chapter II 1. Madge, P. L i a b i l i t y Insurance in the United Kingdom (London: The Financial Times, L t d . , 1975) 13. 2. Holmes E. A p p l i c a b i l i t y of L i a b i l i t y Insurance Coverage To  Pr ivate Po l lu t ion S u i t s : Do We Insure Pol lut ion? [1973] 40 Tennessee Law Review 377, 386. 3. See The Defense Research Inst i tu te Inc. The New Comprehensive  General L i a b i l i t y Insurance P o l i c y : A Coverage Analysis (Milwaukee: The Defense Research Inst i tu te Inc . , 1966) 6. • 4. Holmes, supra, note 2 at 388 and Wheeler J . "Caused by Accident" as Used in Comprehensive L i a b i l i t y P o l i c i e s (1956) Insurance Law Journal 87, 107. On the debate generally see: Visscher B., The Use of "Occurrence" for "Accident" As an  Extension of Coverage (1944) Insurance Law Journal 587. Snow G. Occurrence vs. Accident - Just What i s Covered? (1954) 21 Insurance Counsel Journal 30. Bean G. The Accident Versus the Occurrence Concept (1959) Insurance Law Journal 550. Tarengelo R. "Accident" and "Occurrence" Revis i ted (1973) Insurance Law Journal 528. 5. (1975) 53 D.L.R. (3d) 1 (S .C .C . ) . 6. Id. at 6. 7. [1969] I .L .R. 627 (B .C .S .C . ) . 8. M i l l s v. Smith ( S i n c l a i r Third Party ) [1963] 2 A l l E.R. 1078 (Q.B. ) . 9. A .F . & G. Robinson v. Evans [1969] V.R. 885 (S .C . ) . 10. Madge, supra, note 1 at 15. 11. New York. 12. Maryland, New Hampshire and Vermont. 13. Lanctot P. The Reaction of the Insurance Market to the Problems  of P o l l u t i o n , Canadian Risk Management & Business Insurance May/June 1971, 11. - 46 -14. I n f ra , note 17 and accompanying tex t . 15. Personal correspondence from the Insurers' Advisory Organization of Canada, dated 26th January, 1976. 16. Lanctot, supra, note 13 at 1 0 . ; note that , in the United States , the exclusionary language of IRB-G335 has been incorporated in the body of the pol icy document (and i s no longer a mere en-dorsement) as a resu l t of the January 1, 1973 po l icy r e v i s i o n . IRB-G336 has been continued as an endorsement since i t has appl icat ion to a l imi ted number of r i s k s : personal correspondence from Insurance Services O f f i c e , dated 12th March 1976. 17. See Sigma No. 12/ December, 1972 Swiss Resinsurance Company Zurich. Economics Department 11 and Madge, supra, note 1 at 21-22. 18. Stenhouse Limited (Brisbane, Aus t ra l ia o f f i c e ) . 19. The contra proferentem pr inc ip le i s that , where there i s doubt about the meaning of the terms of a document, the interpretat ion of the terms w i l l i n c l i n e against the party who see;ks to re ly upon them. The ejusdem generis rule postulates that , where general words fol low an enumeration of s p e c i f i c things of a s i m i l a r kind or class ( in th is case, "smoke, vapors, soot, f u m e s . . . ) , the general words w i l l be interpreted as applying only to things of the same kind or c l a s s . See: B lack , H. , B lack 's Law Dict ionary (Rev'd 4th e d . , S t . Pau l : West Publ ishing Co. , 1968) 393 and 608. 20. [1969] V.R. 885 (V ic . S .C. ) see i n f r a , notes 10-12 and accompanying tex t , Chapter 4. 21. The Mercanti le and General Reinsurance Company Limited Po l lu t ion  and Insurance London 1972. 22. [1969] I .L .R. 627. 23. Anderson, D. What Role Wi l l the Insurance Industry Play in the  Eight Against "Pollution? (1972) C.P.C.U. Annals, March. P. 23, 27-28. 24. Id at 28. 25. Undated advert is ing publ icat ion by Thomas F. Sheehan C.P.C .U. President of Excess Underwriters Inc. 26. Extracted from a l e t t e r from Excess Underwriters Inc. to Vancouver Insurance Brokers dated 18th November, 1974. 27. Id-28. Mercanti le and General Reinsurance, supra, note 20 at 16;Hure C. Insurance and P o l l u t i o n , S .C .O .R . , Par is 1973 at 13. 48 CHAPTER III THE ENVIRONMENTAL IMPAIRMENT LIABILITY POLICY The most thoroughgoing attempt to date to provide a complete, i n t e r n a t i o n a l , l i a b i l i t y insurance service in the environmental f i e l d i s the Environmental Impairment L i a b i l i t y (E . I . L . ) po l i c y . This programme was f i r s t introduced by the London insurance brokers, H> Clarkson (Overseas) L td . in 1974. In the United Kingdom form of the pol icy Form EIL (U.K.) 474 (a copy of which forms, i s contained in the Appendix hereto) , the major indemnity provision appears in clause I of l a r t I "In consideration of the Premium and subject to the l i m i t s of Indemnity herein expressed the Insurers agree to indemnify the Insured against a l l sums which the Insured sha l l become lega l l y l i a b l e to pay in respect of claims made against the Insured for compensation in the event of (a) Bodily in jury and/or i l l n e s s ( fa ta l or non- fata l ) to persons (b) Loss of use of or doss or impairment of or damage to property (c) Impairment or diminution of or other i n t e r -ference with any other r igh t or amenity pro-tected by law happening within the T e r r i t o r i a l Limits and caused by Environmental Impairment in connection with the Business and in respect of which a claim has been made against or other due notice has been received by the Insured during the Period of Insurance." Part I of the pol icy further provides indemnity for l i t i g a t i o n expenses {,!) and for clean-up cos ts , inc luding costs incurred in 2 endeavouring to avert a loss covered by the po l i cy . In Part III of the p o l i c y , the d e f i n i t i o n sec t ion , "Environmental Impairment" i s defined in the fol lowing terms; "(a) the emission discharge dispersal disposal seepage release or escape of any l i q u i d s o l i d gaseous or thermal i r r i t a n t contaminant or po l lu tant into or upon land the atmosphere or any water-course or body of water (b) The generation of smell noises v ibrat ions l i g h t e l e c t r i c i t y radiat ion changes in temperature or any other sensory phenomena a r i s i n g out of or in the course of the insured's operations i n s t a l l a t i o n s or premises a l l as designated in the Schedule" Part II of the E . I .L . po l icy contains the exclusions. These are 3 divided into two groups. The f i r s t group excludes war r i s k s , 4 5 nuclear hazards, workmens compensation claims and claims in which 6 there has been a breach of environmental regulat ions. I t w i l l be seen that breach of law does not render a l i a b i l i t y automatical ly uninsurable; y e t , the E . I .L . po l icy s p e c i f i c a l l y excludes indemnity where environmental regulations are breached: "The Insurance expressed in t h i s Po l icy sha l l not apply to or inc lude: . . . 4. L i a b i l i t y a r i s i n g from Environmental Impairment in respect of which any executive Director or any o f f i c e r of the Insured or any employee with s p e c i f i c r e s p o n s i b i l i t y for Environmental Contro l . (a) was aware of such Environmental Impairment being caused or aggravated by unlawful non-compliance with any regulation or ins t ruc t ion issued by competent authority and designed to prevent or minimize such Environmental Impairment (b) was aware or should reasonably:have been aware ( i ) that permitted leve ls of emission were being exceeded e i ther repeatedly or con-t inuously - 50 -( i i ) that any devices or processes or other means designed to prevent-or minimize Environmental Impairment were in such need of repair improvement adaptation or replacement-as to render them incapable of f u l f i l l i n g the i r design purpose un t i l such repair improvement adaptation or replacement had been e f fec ted . ( i i i ) that any fuel raw material or other sub-stances used in the Business were of a kind to cause permitted leve ls of emission to be exceeded e i ther repeatedly or con-t inuously PROVIDED ALWAYS that th i s exclusion sha l l cease to apply a f ter the i n i t i a t i o n of such remedial measures as could reasonably be deemed appro-pr iate in the circumstances and that in respect of the ind iv idual concerned th is exclusion sha l l cease to apply as soon as he or she has taken such action in respect of the facts l i s t e d in (a) and (b) above as he or she could reasonably deem appropriate in theccircumstances to i n i t i a t e the remedial measures referred to above." The second group of exclusions deals with a d i ve rs i t y of matters. Consistent with the avowed aim of the E . I .L . f a c i l i t y not to i n t e r -7 fere with ex i s t ing marine and a i r l i n e programmes, claims in these two areas are excluded in Part I I , clauses 5 and 6 respect ive ly . Exclusion 7 precludes coverage for a l i a b i l i t y for environmental impairment a r i s i n g from any goods supplied or i n s t a l l e d by the i n -sured and happening elsewhere than at the Insured's premises a f te r the insured has ceased to exercise physical control over the goods; clauses 8, 9 and 12 respect ive ly remove from the scope of coverage l i a b i l i t i e s for sudden, unintended and unexpected happenings .(covered, of course, under the general l i a b i l i t y p o l i c y ) , genetic damage and f i n e s . Exclusion 10, a f a m i l i a r one in l i a b i l i t y p o l i c i e s , deals with - 51 -damage to property in the care, custody or 'cont ro l of the insured. Exclusion 11 i s of some par t i cu la r in te res t because i t attempts to s h o r t - c i r c u i t the problem of concurrent l i a b i l i t i e s , a very real one in an environmental context. I t provides as fo l lows . "The insurance in th i s Po l i cy sha l l not apply to or i n c l u d e . . . 11. L i a b i l i t y a r i s i n g as a resu l t of the Insured being held responsible under the concept of ' j o i n t and severa l ' l i a b i l i t y for Environmental Impairment caused or contributed to by others in which case the Insurance expressed in th is Po l i cy sha l l bn% apply to that part of any claim which corresponds to the Insured's ascertained c o n t r i -bution to such Environmental Impairment." I t should be noted that the exclusions contained in th is second group (except for exclusion 12, dealing with f ines) may be "bought back" provided "reasonable addit ional information" i s supplied and subject 8 to"an appropriate addit ional premium". The provisions extracted above from the United Kingdom form w i l l be applied in a l l markets, subject to appropriate adaptations to local circumstances. Insofar as the Canadian, Austra l ian and United States markets are concerned, some adaptation w i l l no doubt occur, but the var iat ions are l i k e l y to be, as Dr. de Saventhem, Clarkson's European d i r e c t o r , describes them, "more a matter of s t y l e 9 and presentation than of substance." This i s not to say that there w i l l be no substantive changes at a l l . For example, a change to exclusion 4 dealing with breach of environmental regulations i s proposed for the United States po l icy form (this w i l l be referred to again in Chapter V dealing with the i n s u r a b i l i t y and coverage of - 52 -statutory l i a b i l i t i e s ) . And, in the United States po l icy form, there w i l l be s p e c i f i c exclusion of punit ive and exemplary damages, doubtless because of the wi l l ingness of some of the American courts to regard these as compensatory in character and therefore covered by the pol icy unless expressly excluded. Moreover, i t has to be remembered that the E . I .L . programme i s only now emerging. I t i s reasonable to suppose that , in i t s formative years , there w i l l be considerable experimentation with po l icy wording as well as with r a t i n g , risk-assessment and underwriting. Therefore the United Kingdom form, though a useful and appropriate model for present discussion ought not to be assumed to be immutable in i t s s t ructure . The indemnity l i m i t s at present ava i lab le under the E . I .L . f a c i l i t y are U.S. $7.5 m i l l i o n per occurrence and U.S. $15 m i l l i o n in the aggregate in any one pol icy year. The Clarkson experience so far has been that the larger i n d u s t r i a l c l i e n t s automatical ly seek f u l l indemnity l i m i t s but that lower l i m i t s are found acceptable in many other cases, p a r t i c u l a r l y in continental Europe where th i rd party po l i c ies generally are wri t ten for much smaller l i m i t s than are customary in North America and where the concept of umbrella 10 coverage for very large addit ional l i m i t s i s v i r t u a l l y unknown. The l i m i t s may be adjusted in the other d i r e c t i o n , too ( i . e . i n -11 creased), and i t appears that th is has been done in some cases. The E . I .L . programme, as presently s t ructured, seems to con-template the retention of some d i rec t insured-involvement beyond the mere payment of premiums. This approach has i t s c learest expression - 53 -in the arrangements as to deductibles and coinsurance. Fixed deduc-t i b l e s are se t t led in negot iat ion , case by case, there being certa in 12 minimum l i m i t s re lated to the s ize of the insured's operation. In add i t ion , a 10% coinsurance requirement i s commonly imposed upon the insured. This requirement may be waived by the insurer in ex-change for an addit ional premium in cases where the insured has 13 opted for a higher deductible than the prescribed minimum. Since the assessment of any par t i cu la r r i sk pm'tor to acceptance under the E . I .L . po l icy normally w i l l require an evaluation by outside s p e c i a l i s t s , at the expense of the prospective insured, the programme makes allowance for 10% of the f i r s t year 's premium to be appl ied in refunding these costs to the insured where cover i s sub-sequently e f fected . As at January 1976, there had been only one case 14 in which th is allowance had been i n s u f f i c i e n t to cover the f u l l cost . The highest premium so far i s $180,000 paid by a major United States 15 corporation in the paper industry . One of the real strengths of the E . I .L . f a c i l i t y seems to be the support i t has received from reinsurers and d i rec t insurers a l i k e . I t i s underwritten by a pool of nearly seventy of the world's major insurance companies, with three of the largest professional reinsurers 16 as pool leaders. Unlike most new developments in the insurance world, the i n i t i a t i v e seems to have been taken by reinsurers rather than by the d i rec t market. One prominent reinsurance f i g u r e , re fer r ing to the fac t that re insurers ' more e x p l i c i t involvement in the ear ly stages of th is development, w i l l remove some of the mystery, uncertainty - 54 -and d i f f i c u l t y which often surround new experiments put to them by the d i rec t market, had th is to say: "even i f th i s experiment i s ' l e s s e x c i t i n g ' , i t i s , or should be,more shock^proof and reinsurers can never, in th is case, complain of being led b l i n d f o l d to the s laughter . " (17) The ground rules of the pool provide that no E . I .L . p o l i c i e s w i l l be issued unless the r i sks have been assessed and cleared by 18 Environmental Risks Analysis Systems (E .R.A.S. ) and that the ent i re r i s k - apart from the issuing company's net retention - w i l l 19 be ceded into the pool , rather than into normal reinsurance channels. Clarkson's posi t ion in re la t ion to the pool i s r e a l l y that of 20 manager (other than i n re la t ion to the i r own c l i e n t s ) . The market they have assembled takes the form of a Broker's Cover for acceptance of the fo l lowing : (1) Direct business to the Clarkson group (2) Direct business offered by other brokers (3) Individual r i sks ceded by an Insurance company 21 (4) Reinsurance t reat ies .( Marketing of the new cover in each country w i l l fol low the normal pattern for that country, with p o l i c i e s being issued by nat iona l l y admitted companies. To comply with admission requirements for re insurers , one of the E . I .L . pool 's leading reinsurers issues i t s own c e r t i f i c a t e for the whole amount ceded into the pool . Within 22 the pool the r i sk i s then red is t r ibuted under retrocession t r e a t i e s . Some p o l i c i e s already have been issued by Canadian insurers and there 23 i s a wi l l ingness to look at further proposals. Where insurers are * 55 -anxious to safeguard special re lat ionships with major accounts, the pool 's capacity i s put at the i r d i sposa l , so that the pol icy would 24 be issued 100% in the name of the issuing company. A c r i t i c a l feature of the whole programme, and one emphasized 25 again and again by Clarkson and the pool pa r t i c ipants , i s the system of rat ing and r i sk assessment. The h is tory and nature of th is system i s of special in te res t and relevance for l a t e r discussion about the future ro le of the insurance industry in the environmental 26 f i e l d . In the developmental stages of the programme, the Clarkson study group commissioned an independent f i rm of s c i e n t i f i c consultants, Environmental Resources L imited, to devise a scheme by which the exposure of d i f fe rent industr ies could be measured and, in e f f e c t , a basic rat ing manual prepared. The avai lab le data on environmental " inc idents" was i n s u f f i c i e n t to permit ca lcu lat ion on an actuar ia l basis and there was the added problem that , even i f a v a i l a b l e , data of thiis type would be of very l im i ted assistance because of s i g n i f i c a n t 28 variables such as changing publ ic a t t i t u d e s , s c i e n t i f i c advances, e t c . In l i e u of an actuar ia l a n a l y s i s , a more fundamental approach was devised by consideriirigng how a claim for environmental impairment might ar ise and then analysing the var iables that l inked causedwith 29 e f f e c t . Most important for the underwriters was that there be some basis for comparison between d i f fe rent indus t r ies . Environmental Resources Limited operated on the p r inc ip le that "there are substances in the environment that can cause po l lu t ion incidents of varying degrees of seriousness; and by the nature of the i r a c t i v i t i e s some industr ies are more l i k e l y to release these substances than are others . " (30) - 56 -Various classes of pol lutants and contaminants were weighted according to the l i ke l ihood of the i r causing actionable environmental impai r -ment. An assessment was then made of the l i k e l i h o o d that d i f fe rent industr ies (having regard to the raw materials used and wastes discharged) would release these substances into the environment. From these p robab i l i t y ca lcu lat ions a "score" was devised for each industry that re f lected i t s potent ial for environmental damage. Scores ranged from as low as 200 for r e l a t i v e l y innocuous industr ies such as rope-making up to 2000 for industr ies such as tanning and 31 lead-smelt ing. The ca lcu lat ion o«f these scores was not by any means the f i n a l answer. Dr. BidwelT, a d i rector of Environmental Resources Limited wrote: " . . . i t w i l l be appreciated that such a score can provide no more than a very rought and ready ind icat ion of r i s k when rat ing an actual company: there are a large number of factors that w i l l greatly influence the r i sk in a s p e c i f i c s i t u a t i o n . These re late both to the company ( i t s s i z e , processes employed, methods of waste disposal e tc . ) and to the local environment." (32) In th is area of l i a b i l i t y insurance, perhaps as in no other, a l l -embracing rat ing systems can be helpful only to a point . Beyond t h i s , there i s an inescapable demand fo r ind iv idual r i sk assessment as a guide not only to acceptab i l i t y for cover but to premium s i z e . Dr. Bidwell i d e n t i f i e d three major areas that ought to be explored in 33 re la t ion to each r i s k : 1. The att i tudes of management and personnel to environmental quali ty . 2. Present and past waste disposal practices (the E . I .L . pol icy covers, claims a r i s i n g during the period of - 57 -insurance. The p o s s i b i l i t y of past , cumulative environmental impairment manifesting i t s e l f during the pol icy period must therefore be taken into account.) 3. The nature of the external environment ( a b i l i t y to absorb wastes, ex i s t ing po l lu t ion l e v e l s , proximity of r e s i d e n t i a l , areas and recreat ional f a c i l i t i e s . ) Other var iables which are of s ign i f i cance in the assessment of a par t i cu la r r i sk inc lude: past record of c la ims; s t r i c tness of-, standards l a i d 'down by the authority for the industry or area; r e l a t i v e effect iveness of enforcement agencies; nature of statutory 34 and common law l i a b i l i t i e s . Most of these are matters of record or fac t which can be determined and assessed. This cannot be s a i d , however, of the common law l i a b i l i t i e s . Th is , the greatest potent ial (and actual) source of indemnifiable damages imposts, i s the least def ined, the most uncertain and the most v o l a t i l e . I t i s fo r th is reason that close regard should be had not merely by prospective defendants, but by underwriters, to the ex i s t ing common law theories and projections for the future development of the law. In order to meet the demands of on-the-spot r i s k assessment, Clarkson, Swiss Reinsurance, Mercanti le and General Reinsurance and Environmental Resources Ltd . have together set up the Environmental Risks Analysis Systems (E .R.A.S. ) network. E .R.A.S. now has a presence in a l l of the major indust ra l i zed countries in which the E . I .L . po l icy i s marketed. The functions of E .R.A.S. in each country 35 are stated to be: 1. 1. Monitor a l l relevant general information and process i t for input into a central "data bank". 58 -2. Monitor a l l s p e c i f i c ( i . e . insurance-related) data, i n -cluding claims adjusters ' reports , and formulate suggestions for insurers ' consideration where appro-p r i a t e . 3. Appraise data supplied in proposal forms by applicants for E . I . L . cover and decide where a special envi ron-mental survey may be required : arrange for or carry out such a survey. 4. Provide guidance on rat ing - both for major ind iv idual r i sks and for E . I .L . t a r i f f s drawn up by loca l insurers for any one country. 5. Liase with loca l t a r i f f organizations or other associat ions of insurers requir ing guidance on s c i e n t i f i c aspects of E . I .L . cover. 6. Provide s c i e n t i f i c back-up for claims adjusters where required. 7. Act as independent consultants to solve s p e c i f i c problems submitted by ind iv idual c l i e n t s (whether E . I .L . covered or not ) . The E . I .L . pol icy seems to have enjoyed wide ear ly acceptance. As at mid-1975 between twenty and t h i r t y p o l i c i e s had been underwritten 36 and another three hundred applicants were under considerat ion. Not s u r p r i s i n g l y , the main in te res t has come from the heavi ly i n d u s t r i a l i z e d countries such as the United Kingdom, the United States , Canada, 36 Japan and Scandanavia. In A u s t r a l i a , where the Aust ra l ian Reinsurance Co. (a member of the Swiss Reinsurance group) has been opt imis t i c about the p o l i c y ' s marketab i l i t y , an E .R.A.S . representative w i l l soon be 38 nominated so that a serious marketing e f f o r t can be commenced. - 59 -Footnotes - Chapter III 1. Part I clause 2. 2. Part I clause 3. 3. Part II clause 1. 4. Part II clause 2. 5. Part II clause 3 . 6. Part II clause 4. See Reinsurers Help Market Develop New Environmental Impairment  Coverage Canadian Insurance/Agent & Broker July 1975, 10. 8. A note appearing in the specimen pol icy supplied to interested brokers. 9. Personal correspondence from Dr. de Saventhem dated 8th January, 1976. 10. Personal correspondence from Dr. de Saventhem dated 31st November, 1975. 11. See Reinsurers Help Market Develop New Environmental Impairment  Coverage, supra, note 7 at 12. 12. Id. 13. Id.; also personal correspondence from Dr. de Saventhem dated 8th January, 1976. 14. Personal correspondence from Dr. de Saventhem dated 8th January 1976. 15. Id. 16. Id ; a lso Sigma No. 4 / A p r i l , 1974 Swiss Reinsurance Company Zur ich , Economics Department; and personal correspondence from Dr. de Saventhem dated 15th March 1976. 17. Neave J . (Chairman R.O.A.) Po l lu t ion (1974) The Review 576, 583. 18. See, i n f r a . 19. Sigma,=supra, note 16 at 4. 20. External Environmental Impairment and L i a b i l i t y Insurance: A  New I n i t i a t i v e unpublished manuscript by H. Clarkson (Overseas) Limited 4 - 6 . - 60 -21. Id. 22. Personal correspondence from Dr. de Saventhem dated 15th March 1976. 23. This information was supplied to the wr i te r by l e t t e r dated 26th January, 1976 responding on behalf of the Insurance Bureau of Canada to the wr i te rs ' i n q u i r i e s . 24. Clarkson manuscript, supra, note 20. 25. See id.; Sigma, supra, note 16; Reinsurers Help Market Develop  New Environmental Impairment Coverage, supra, note 7 at 14. 26. See Chapter VII , i n f r a . 27. B idwe l l , R. Assessing The Risks For the Insurer Process Engineering, February, 1975. 28. Id. 29. Id.. (Dr. Bidwell supplied to the wr i te r a pre -publ icat ion draft of th is a r t i c l e which expands somewhat on a few of the features of the published work.) 30. Id. 31. Id., (pre -publ icat ion d r a f t ) . 32. Id. 33. Id. 34. Environmental Impairment L i a b i l i t y Insurance: A New  I n i t i a t i v e a booklet d is t r ibuted by H. Clarkson (Overseas) Ltd . Ibex House, Minor ies, London EC3N 1H5 at P. 6. 35. Id. at 7. 36. Clarkson A l t e r Environmental Risk Pol icy for Heavy U.S. Marketing  E f fo r t Business Insurance June 16th, 1975. 37. Supra, note 23 and personal correspondence from Dr. de Saventhem dated 15th March 1976. 38. Personal correspondence from Dr. de Saventhem dated 15th March 1976. THE INSURANCE OF ENVIRONMENTAL RISKS PART 11 EVALUATION OF THE INSURABILITY AND COVERAGE OF ENVIRONMENTAL RISKS - 61a-CHAPTER IV INSURABILITY AND COVERAGE OF INTENTIONAL AND UNINTENTIONAL POSSES At the outset one must d is t inguish between the two notions of " i n s u r a b i l i t y " and "coverage". For our present purposes i n s u r a b i l i t y 1 of a p a r t i c u l a r r i sk e s s e n t i a l l y depends upon two matters (4) whether the provision of insurance protection against the r i sk would be con-s i s t e n t with publ ic p o l i c y , and whether there i s an element of cont in -gency about the happening of the event ( l i a b i l i t y ) insured against . These two matters tend to overlap conceptually and are often discussed interchangeably by the j u d i c i a r y . The reason i s s imple; the var iable accorded most prominence by the courts in the i r assess-ments of the publ ic po l icy impl icat ions of granting insurance protect ion i s that of wi l fu lness or intent ion in the insured. This same var iable i s at the heart of the "contingency quest ion". In the words of Lord  Atfeii'na, "On ordinary pr inc ip les of insurance law an assured cannot by his own del iberate act cause the event upon which the insurance money i s payable." (2) S t r i c t l y speaking, the issue of i n s u r a b i l i t y in an ind iv idual case can be determined only re t rospect i ve ly , i . e . a f t e r the event has taken place and the degree of intent ion in the insured i s ascertained. However, i t i s also possible to say prospectively whether certain r i s k s , as categories of r i s k s , are or are not insurable . - 62 -The term "coverage" i s intended to refer to the ava i lab le insurance f a c i l i t y . Whether the insurance industry w i l l o f f e r "coverage" of a p a r t i c u l a r kind of r i s k w i l l depend in the f i r s t instance upon i t s i n s u r a b i l i t y , but i t a lso w i l l involve many other considerations not the least of which i s economic v i a b i l i t y . In view of the important place of the " intent ion var iab le" in the scheme of th ings , i t i s proposed now to i d e n t i f y , in terms of that va r iab le , the various categories of environmental damage for which a 3 legal l i a b i l i t y might be imposed. I t must be remembered that the discussion w i l l be concerned only with actionable damage, for only damage which can be the subject of a legal l i a b i l i t y i s of any immediate in te res t to the l i a b i l i t y insurer . Af ter the categories of environmental damage have been thus i s o l a t e d , the i n s u r a b i l i t y of the i r attendant l i a b i l i t i e s w i l l be con-s idered. And, f i n a l l y in th is chapter, there w i l l be a b r i e f d i s -cussion of the ava i lab le coverage in the l i g h t of the conclusions about i n s u r a b i l i t y . A. The Element of Intention in Categories of Environmental Damage: . 1. Intentional Environmental Damage: In th is category both the o r ig inat ing act and the resultant damage are intended. A c lear example i s the del iberate shooting of a protected animal. This category contemplates, too, damage which, although not s p e c i f i c a l l y intended, i s nevertheless the inev i tab le consequence of an intended act . Thus where a - 63 -man f i r e s a r i f l e ind iscr iminate ly into a herd of protected animals, a resu l t ing death must be taken to have been intended. (2) (2) Immediate Unintentional Environmental Damage: In America at l e a s t , th is would be described in insurance parlance as "acc identa l " damage. I t refers to sudden, unexpected unintended damage resu l t ing from an unintended o r ig inat ing act . Damage caused when a road tanker negl igent ly c o l l i d e s with another vehicle s p i l l i n g o i l over the surrounding area would f a l l within th is category, ( i . e . neither the c o l l i s i o n nor the o i l damage are intended). (3) Extended Unintentional Environmental Damage: As in the previous category, the damage here i§ unintentional and so i s the o r ig inat ing act , but the damage occurs gradual ly , over an extended time rather than suddenly. This would be i d e n t i f i e d by American insurers as "occurrence" damage. By way of example, one might return to the s i tuat ion of an employee at a checmical factory who unintent ional ly leaves - a release valve par t ly open thereby al lowing a slow leakage of gas which, a f ter a period of accumulation, occasions actionable damage. (4) Unintended Environmental Damage Result ing from Intended Acts : Within th is broad category, three types of environmental damage can be i s o l a t e d : - 64 -Residual Environmental Damage: where intent ional but o f f i c i a l l y to lerated environmental impairment resu l ts in actionable damage, as in the case of a pulp m i l l d d i s -charging e f f luent within the terms of an o f f i c i a l permit, and with an exercise of a l l reasonable care but nevertheless occasioning actionable damage t o , say, a r ipar ian owner. Coincidental Environmental Damage: Such damage occurs where an intended but non-actionable environmental impairment combines with another source of impariment in such a way as to cause actionable damage. For example, two sources of noise might be separately to lerab le ;but together act ionable ; or the e f f luent discharged by a factory into a stream might be harm-less in i t s e l f but might combine with ef f luents from other factor ies to cause actionable water p o l l u t i o n . A var iant of the coincidental environmental damage ar ises where a harmless emission from one source reacts s y n e r g i s t i c a l l y with that from another source with resul tant damage. Contingent Environmental Damage: This sub-category contemplates intended acts which are not known at the time to be actua l l y or po tent ia l l y harmful to the environment e .g . the d i sposa l , through a sewage system into a r i v e r , of wastes which are subsequently d i s -covered by science to be tox i c . - 65 -Now, in each one of the categories out l ined above, a legal l i a b i l i t y conceivably could a r i s e . In some cases i t might be a l i a b i l i t y to cr iminal sanction (shooting protected animals) ; in most, i t would be a l i a b i l i t y in c i v i l damages pursuant to one of the recognized common law theor ies . Even in the sub-category of coincidental damage, l i a b i l i t y at common law can be imposed. Indeed the examples of combining noises and cumulative ef f luents c i ted above are taken from cases in which defendants, were held responsible notwithstanding that the i r respective 4 contr ibutions to the damage were separately non-act ionable. B. I n s u r a b i l i t y : Publ ic Po l icy and Intention In re la t ion to our f i r s t category, intent ional damage, i t i s c lear that the r i s k i s uninsurable. In the f i r s t p lace, i t would be contrary to publ ic po l icy to allow persons to escape the punishment of a damages award where they have acted de l ibe ra te l y , intending an in ju ry : "An area of s t a b i l i t y in the law i s that which states that i t i s against publ ic pol icy to indemnify the insured for h is intent ional or w i l f u l wrongs".(4a) Secondly, as a matter of insurance p r i n c i p l e , the r i s k i s uninsurable because there i s no element of contingency or f o r t u i t y about i t . Insurance contracts deal in contingencies, not ce r ta in t ies and, as we have seen, i t i s never intended to provide indemnity on the happening 5 of an event which i s e n t i r e l y within the control of the insured. I t can be said with equal confidence that l i a b i l i t y for unintentional environmental damage, whether immediate (category 2) or extended - 66 -(category 3) i s an insurable r i s k . The l i a b i l i t y normally would be founded in negligence and i t i s true that , to allow l i a b i l i t y insurance has the e f fec t of removing the punit ive and deterrent elements in the damages award. But the law does not cav i l at that prospect, for the compensatory function of tor ts law in th is area usual ly i s thought to be of much greater importance than i t s punit ive or deterrent functions and, of course, insurance greatly f a c i l i t i e s the achievement of proper compensation. Whether one might insure against a l i a b i l i t y for unintended damage consequent upon intended acts (category 4) i s a d i f f i c u l t and widely l i t i g a t e d question. I t does involve a publ ic po l icy i ssue , f o r , arguably, to allow insurance could encourage recklessness, or at least complacency in the insured. But the courts have given l i t t l e attent ion to the publ ic po l icy aspects, p re fe r r ing , instead, to t reat the matter as one of intent ion and interpretat ion in insurance contracts . In most cases the indemnity has been in respect of l i a b i l i t y for damage "caused by accident" and the j u d i c i a l approach has been to question whether the facts come within that expression as i t was intended by the part ies to the insurance contract . However, th is does not neces-s a r i l y l i m i t the assistance we can derive from the dec is ions , because, for the most par t , th is inquiry has been treated as , in e f f e c t , a s p e c i f i c framing of the wider questions of the i n s u r a b i l i t y of accidental and non-accidental ( " in tent ional" ) losses and the dif ference between the two. As a consequence, the judgments invar iab ly contain a mixture of narrow foss ick ing amongst the problems of po l icy construction and broad dogmatizing about the pr inc ip les of i n s u r a b i l i t y . - 67 -Canadian courts have tended to take a very broad view of the expression "caused by acc ident . " Cer ta in l y , the mere fact that a par t i cu la r damage i s forseeable, in the sense required for negligence, w i l l not prevent i t from being acc identa l . As Berger J . sa id in r6 Prince George White Truck Sales Ltd . v. Canadian Indemnity Co. : "The law owes a decent respect to common sense. An accident i s an accident. I t seems to me against a l l reason to say on the one hand that 'accident ' i s not a technical legal term and then to say that a negligent occurrence i s not an accident when anyone not a lawyer would say that i t was. Reasonable f o r s e e a b i l i t y deter -mines whether there has been negligence. I t i s not a test to determine whether there has been an acc ident . " The theme emerging from the Canadian cases up to 1975 was that the accidental or non-accidental character of a pa r t i cu la r happening should be decided according to the qua l i t y of i t s resul ts rather than the qua l i t y of i t s causes. I f the resu l ts were intended or expected (rather than merely forseeable) , then they were not "caused by 7 accident" . The important Supreme Court of Canada decision in Canadian 8 Indemnity Co. v. Walkem Machinery and Equipment L t d . , handed down in January 1975, widens the scope of coverage. Walkem had supplied to a company ca l led S t r a i t s Towing Ltd . two cranes for use on a log barge. Walkem was involved in examining the cranes af ter they had been in use for some time and in making repairs to them. One of the cranes sub-sequently co l lapsed, causing damage. The Canadian Indemnity Co. insured Walkem in respect of damage "caused so le l y and d i r e c t l y by an - 68 -accident" . The t r i a l judge found as a fact that "Walkem knew of the dangerous condit ion of the crane but nevertheless pawned o f f on an unsuspecting customer an inadequately and negl igent ly repaired piece of equipment." The insurer refused indemnity to Walkem for i t s l i a b i l i t y claiming that the damage was not caused by accident. The Supreme Court, unanimously affirmed the B r i t i s h Columbia Court of Appeal's decision in favour of Walkem. (Ri tchie J . dissenting as to the scope of the majority decision but not i t s r e s u l t ) . Pigeon J . who del ivered the major judgment, thought that an accident was "any unlooked for mishap 9 or occurrence" and that th is included calculated r i sks and dangerous 10 operations. This judgment would seem to leave very l i t t l e that cannot be insured. In the environmental sphere, p a r t i c u l a r l y , i t might often be that an insured de l iberate ly emits a pol lutant into the atmosphere or discharges e f f luent into a stream perhaps expecting damage but cer ta in l y not " looking for" i t . He i s taking a calculated r i sk and, according to the Supreme Court, th is i s insurable . Nor does th is conclusion make too much of Pigeon J ' s words, for on the facts alone, a decision in favour of the insured necessar i ly implied a very wide interpretat ion of "accident" . 11 An Austra l ian case, A .F . & G. Robinson v. Evans Bros. Pty. L t d . , provides an in terest ing contrast . The p l a i n t i f f s owned and operated a market garden on land adjoining the defendant Company's brickworks. In 1965, 1966 and 1967, the p l a i n t i f f ' s crops of brussels sprouts were damaged by the development of brown spots and scorching on the leaves. Amid complaints from the p l a i n t i f f s , the defendants car r ied out tests - 69 -and made inqu i r ies and, f i n a l l y , in 1967 increased the height of the stack at the brickworks. The p l a i n t i f f s brought an action against the defendant a l l eg ing that the damage was caused by noxious emissions from the stack. The defendant joined i t s insurer as a t h i r d party to the act ion claiming indemnity under two l i a b i l i t y p o l i c i e s . The f i r s t , covering the period from 1962 to 1966, referred to " l i a b i l i t y fo r accidental damage". The second, covering 1967, referred to l i a b i l i t y for damage occurr ing "as a resu l t of an acc ident" . Starke J . held tha t , in respect of both po l icy word ings , i t was necessary to look at the accidental or non-accidental character of the damage, hot i t s cause. He thought the test to be whether the damage was expected and that th is ought to be determined ob jec t i ve l y : "The t e s t , I th ink , i s whether an ordinary, reasonable, sensible man in t h i s pos i t ion of the responsible o f f i c e r s of the company would or would not have expected the occurrence." (12) Applying t h i s t e s t , his Honour found that , fo r the damage occurring up to 1967, there could be no indemnity because i t was expected, but , a f t e r 1967, having taken the precaution of increasing the height of the s tack , the defendant no longer expected the r e s u l t and was en-t i t l e d to indemnity. I t i s s i g n i f i c a n t that his Honour used the same "calculated r i s k " terminology as was subsequently used by Pigeon J , but with rather a d i f fe ren t view. Referring to the period up to 1967, Starke J s a i d : "[The defendant] took, i f you l i k e , a calculated r i s k . The gamble f a i l e d to pay o f f . In these circumstances, I f ind i t impossible to say that - 70 -the damage to the sprouts was an unexpected event. I t was not hoped f o r , rather than not expected." (13) His Honour's decision was consistent with previous Aust ra l ian 14 authority on the point and also had considerable support in American j u r i s d i c t i o n s . At least thi r teen American s t a t e s , . i t seems, followed the "character of the consequences" c r i t e r i o n , wh i l s t another twenty-four preferred to examine the character of the o r ig inat ing act in 15 test ing the "acc identa l" nature of the happening. In mahyoof the former, i t was reasoned by the courts that whether or not damage has been "caused by accident" ought to be determined according to the viewpoint of the injured person, i . e . was the damage expected by the 16 injured party? This i s a very indulgent approach insofar as the insured i s concerned, for i t i s very rare ly that a complainant expects his in jury and almost always, then, the insurer would be obliged to grant indemnity. Insurers have avoided th is in terpretat ion by including in the d e f i n i t i o n sections of the i r p o l i c i e s a requirement that the deter -mination be made from the insured's point of view. But th is does not go to the fundamental d i s t i n c t i o n between causes and resu l ts which remains the point of departure for most of those j u r i s d i c t i o n s favouring a wide 17 ambit of coverage. The decision in White v. Smith i s a useful i l l u s t r a t i o n . The p l a i n t i f f obtained an in junct ion and an award of damages for nuisance against the defendant who operated an abbattoir adjacent to the i r property over a period of s i x years. The odours emanating from a pond into which blood, o f f a l and waste material were - 71 -drained, the smell from the slaughterhouse i t s e l f and the noises made by stock awaiting slaughter , together const i tuted an interference with the p l a i n t i f f s enjoyment of the i r property. The p l a i n t i f f s brought garnishment proceedings against the defendant's l i a b i l i t y insurer , the Coutryside Casualty Company. The insurer defended, i n te r a l i a , on the ground that the damage was not "caused by accident" as required by the po l i cy . Stone J , in the Spr ing f ie ld Court of Appeals, Missour i , found for the p l a i n t i f f s . An extract from his judgment appears below: " . . . neither po l icy nor p r i n c i p l e excludes from the category of damages 'caused by accident* for which coverage i s afforded by a l i a b i l i t y insurance p o l i c y , even damage which might be, for other purposes, regarded as construct ive ly intent ional or damage resu l t ing from wanton and reckless conduct. No doubt instant defendants acts were intended, but the t r i a l court in the nuisance motion found (and the record in the garnishment proceeding i s to the same ef fect ) that the resu l t i . e . damage for which ammonetary judgment was rendered, was not intended. 'There i s a vast di f ference between an intended act and an intended r e s u l t . " " (18) I t i s erroneous to assume that a l l of the cases are based upon the prec ise , c l i n i c a l appl icat ion of legal ru les . The contrary i s often true and, indeed, i f th is be remembered, the seeming inconsistency in the cases can be explained. Among the factors which may operate with varying impact from case to case are the desire of the courts to see that the p l a i n t i f f does not go uncompensated, the i r natural reluctance to deny to a man the benef i t of an insurance pol icy for which he has paid his premium, and the tendency to look to the economic disadvantage resu l t ing to a par t i cu la r community i f a defendant i s denied insurance coverage and perhaps forced out of business. - 72 -I f there i s a lowest common denominator of a l l of the "character of the consequences" dec is ions , i t i s that once a consequence i s expected i t i s "non-accidental" and i s then to be treated as i f intended. Thus, i t can be argued that , as a matter of insurance p r inc ip le (and, in some cases, of publ ic p o l i c y ) , intent ional and expected losses are i m p l i c i t l y excluded from l i a b i l i t y coverage, whether or not referred to in the wording of the po l i cy . There may be an exception in Canada and some of the American States , where the "calculated r i s k s " or a s i m i l a r c r i t e r i o n i s employed. C. Avai lable Coverage: I t has been argued that purely unintentional losses and those which are the unintended consequences of intended acts can be leg i t imate ly insured. But $he general l i a b i l i t y po l icy has not provided unqual i -f i e d coverage of these r i s k s . I t has instead r e s t r i c t e d coverage to sudden losses . This i s r e a l l y quite s i g n i f i c a n t , because the typ ica l po l lu t ion l i a b i l i t y , based in nuisance, and cOmiiinigwithin the "intended acts - unintended consequences" category, usual ly involves gradual ( i . e . non-sudden) damage. There i s no requirement in law or pol icy for th is r e s t r i c t i o n . Nor does i t stem from any convict ion amongst insurers that involvement in extensive environmental l i a b i l i t y coverages w i l l lead to f inanc ia l d i sas te r . Rather, there i s simply a fear of the unknown, a wariness of b i t i n g o f f more than can be chewed. Only time w i l l t e l l whether these - 73 -fears are to be l a i d to rest or v indicated. The E.P.P and E. I .L poHc ies have gone further than the t r a d i t i o n a l po l icy by extending coverage to non-sudden inc idents . The E . I . L . , in p a r t i c u l a r , abandons a l l together the confused notions of "accident" and "occurrence" and introduces the concept of "environ-mental impairment" in the i r p lace. However, th is extension of coverage may not be as s i g n i f i c a n t as f i r s t appears. I t w i l l be remembered that intended and expected losses are uninsurable in most j u r i s d i c t i o n s . But, l o g i c a l l y , a loss i s only unexpected the f i r s t time i t happens. On each subsequent time, past experience suggests that i t ought to have been expected, unless, of course, the circumstances of the f i r s t occurrence were freakish or exceptional and not reasonably to be expected to recur. This means that , a f te r the fircst c la im, or perhaps the f i r s t few c la ims, the insured could not longer re ly upon coverage unless he has taken some steps (e .g . by way of po l lu t ion c o n t r o l , as in 19 Robinson v. Evans ) to render the damage less expectable. This i s not at a l l a bad thing from the point of view of environmental control and soc ia l j u s t i c e . In a sense, the insurance coverage provides the best of both worlds - i t indemnifies the insured against the f i r s t c la im, thereby guaranteeing that he i s not f i n a n c i a l l y ruined by th is "surpr ise" l i a b i l i t y and that his unfortunate v ic t im i s compensated; but i t does not allow him to languish in delinquency. He i s presented, instead, with a pos i t i ve incentive to take whatever steps are necessary to render a recurrence "unexpectable". - 74 -FOOTNOTES - CHAPTER IV 1. Other fac to rs , such as the existence of an insurable i n t e r e s t , can a f fec t i n s u r a b i l i t y but present no problem in the present context. 2. Beresford v. Royal Insurance Co. [1938] A.C. 586, 595 (H..L.) 3. The framework for the categor izat ion was developed by Dr. de Saventhem. See de Saventhem E. Providing Total Cover for  Po l lu t ion L i a b i l i t y Process Engineering, February, 1975. 4. Lambton v. Mel l i sh [1894] 3 Ch. 163. Pride of Derby and Derbyshire Angling Associat ion v. B r i t i s h  Celanese Ltd. ["1953] 2 W.L.R. 58 (C .A . ) ; see also Newark F. The Pride of Derby Case (1953) 16 Modern Law Review 241. 4a. Johnson J . L i a b i l i t y Insurance: Spec i f i c Exclusion of L i a b i l i t y  for Injury Intent ional ly Caused by the Insured (1967) 12 South Dakota Law Review 373, 374." 5. See Brennan W. The Word "Accident" in Insurance P o l i c i e s . (1961) Canadian Bar Papers 246; also supra, note 2 and accompany-ing text . 6. (1974) 40 D.L.R. 616, 619 (B .C .S .C . ) . 7. See Crisp v. Delta T i le and Terrazo Co. [1961] O.W.N. 278 (C .A . ) ; R. D. McCollum Ltd . v. Economical Mutual Insurance Co. [1962] O.R. 850 (H.C. ) ; Pont v. Perth Mutual F i re Insurance Company [1967] 59 W.W.R. 550 (B .C .C .C . ) ; S t r a i t s Towing L td . v. Walkem  Machinery and Equipment Ltd. and Washington Iron Works (1974) 38 D.L.R. 265 (B .C .C .A . ) ; Prince George White Truck Sales Ltd.-v. Canadian Indemnity Co. (1974) 40 D.L.R. 6161(B.C .S .C . ) . 8. (1975) 53 D.L.R. 1 (S .C .C . ) . 9. Id at 6. 10. Id. at 7. 11. [1969] V.R. 885 (V ic . S . C ) . 12. Id at 896. 13. Id. at 897. 14. See Fire and A l l Risks Insurance Co. Ltd . v. Powel1 [1966] V.R. 513 ( F . C . ) ; see also D i s t i l l e r s Co. v. Ajax Insurance (1974) 2 A .L .R . 321 where, in a somewhat d i f fe rent context, and without deciding the matter conc lus ive ly , members of the High Court - 75 -tended to focus upon the mishap ratherlthan i t s consequences when "occurrence" was used instead of "accident" but, in re la t ion to "accident" favoured a "nature of the consequences" ana lys is . 15. A .F . & G. Robinsons v. Evans Bros. Pty. Ltd . [1969] V.R. 885, 893 (Vic . S . C ) . 16. Some of the cases are co l lected in Willmarth H. Outl ine of  Insurance Developments (1971) 21 Federation of Insurance Counsel Quarterly 23, 24 -5 . 17. 440 S.W. 2d 497 (1969) (C.A. S p r i n g f i e l d , Mo.). 18. Id. at 507. 19. [1969] V.R. 885 ( S . C ) . CHAPTER V INSURABILITY AND COVERAGE OF STATUTORY LIABILITIES There are two d i s t i n c t general categories of f inanc ia l l i a b i l i t y which might ar ise as a resu l t of the breach of a l e g i s l a t i v e prov is ion . On the one hand, i s the d i rec t pecuniary impost o r d i n a r i l y ca l led a " f i n e " . On the other, i s the l i a b i l i t y in common law damages. In the case of th is second category, three d i f fe ren t vehicles may be used to establ ish the l i a b i l i t y . The most usual i s the act ion for breach of statutory duty. However, the Austra l ian High Court, has recently revived an in terest ing var iant based upon the old form of action on the case. A d d i t i o n a l l y , there i s the t h i r d s i tua t ion in which a damages action resul ts from conduct const i tut ing a breach of s ta tu te , though the statute i s not i s e l f the source of the cause of ac t ion . A l l three of these vehicles of l i a b i l i t y in common law damages w i l l be con-sidered under the compendium "statutory damages c la ims" . A. Nature and Insurab i l i t y of the Statutory Damages Claims Breach of Statutory Duty: There has been considerable j u d i c i a l and academic controversy about the conceptual nature of the action for breach of statutory duty. The d i f f i c u l t y has centred upon the question whether the action i s an autonomous creature free of any connection with the pr inc ip les of common law negligence or whether, on the other hand, i t i s simply a - 77 -special category of negligence. Di f ferent j u r i s d i c t i o n s have reached d i f f e r i n g conclusions. In England, for example, the preva i l ing at t i tude seems to be that l i a b i l i t y w i l l flow from the factum of statutory breach, provided a l e g i s l a t i v e in tent to grant a pr ivate r ight of act ion can be discerned, and provided the breach can be said to have caused the damage. Because the l i a b i l i t y i s statutory in character and not subject to the usual considerations i m p l i c i t in a negligence f i n d i n g , 1 i t i s s t r i c t l y or absolutely imposed. Linden has described the English pos i t ion as an " a l 1 - o r - n o t h i n g -a t - a l l " approach in which the courts declare that the l eg i s la tu re intended to confer a cause of action for breach of s ta tu te , or they hold that there was only a publ ic duty and no pr ivate c i v i l res -p o n s i b i l i t y . In the former case there i s no excuse, in the l a t t e r , 2 evidence of excuse i s superf luous, and the statute i s then relevant only insofar as i t may provide a non-binding guide as to what i s a reasonable standard of care in a par t i cu la r s i t u a t i o n . Aust ra l ian authority on the matter tends to altgn1 with the English 3 p o s i t i o n , though there i s evidence of an endeavour to take into account relevant circumstances rather than to focus s p e c i f i c a l l y upon 4 whatever i s imagined to be the intent of the l e g i s l a t u r e . Those cases in which a p a r t i c u l a r l y s t r i c t approach has been adopted have almost always involved what may be ca l led "safety statutes"and, i n v a r i a b l y , have been concerned with personal in ju r ies c laims. Whether the doctrine w i l l have the same force in connection with a n t i - p o l l u t i o n - 78 -s t y le statutory provisions (very often directed at property and en-vironmental damage rather than health damage) i s uncertain. The un-certa inty occurs because the doctr ine has always had as i t s rat ionale th is amorphous notion of the "presumed intent of the l e g i s l a t u r e " . 5 Although, according to Fleming, th is i s a "barefaced f i c t i o n " 6 and, according to Dixon J . in O'Connor v. S . P . Bray L t d . , more often involves "presumption and pol icy" rather than the meaning of the s ta tu te , the courts s t i l l c l i n g to i t . In the case of indus t r ia l safety l e g i s -l a t i o n and s i m i l a r enactments, they have read i l y discovered the requ is i te l e g i s l a t i v e in tent , but where the statute cannot be seen to be di rected s p e c i f i c a l l y at health and physical safety , greater d i f f i c u l t y i s experienced. Whatever the degree of s t r i c tness in the l i a b i l i t y , i t does seem that English and Austra l ian jurisprudence w i l l regard that l i a b i l i t y as statutory in o r i g i n and character. In American courts the l i a b i l i t y , i t i s s a i d , i s "more e x p l i c i t l y envisaged as a par t i cu la r species of common law negligence, sometimes described as 's tatutory negligence' but nevertheless const i tuted as a 7 remedy by v i r tue ul t imately of the determination of the t r i a l court" . I t i s d i f f i c u l t to be dogmatic about the American posi t ion because of the large number of decisions in d i f fe rent j u r i s d i c t i o n s adopting d i f fe rent postures. Indeed, as Linden has remarked: "Ihe American courts have developed a r i ch array of varying weights that can be given 18 to s ta tutes" . But, the important point i s that there i s a d i sce r -n ib le tendency to l i n k the statutory breach with t r a d i t i o n a l negligence theor ies . - 79 -The Canadian view i s neither one nor the other. Binchy has seen i t as s i m i l a r to the American p o s i t i o n , but at the same time points to a number of recent cases which tend towards the* English o r i e n t a t i o n . To his l i s t may be added an e a r l i e r case involv ing an a n t i - p o l l u t i o n 10 provision in the Canadian Fisheries Act . The case, Suzuki v. 11 "Ionian Leader" reveals a j u d i c i a l d ispos i t ion to recognize pr ivate r ights d i r e c t l y attendant upon prohib i t ions contained in environmental 12 l e g i s l a t i o n . There i s no compelling log ic in the maintenance of empty f i c t i o n s about l e g i s l a t i v e intent manifested in the wording of the s ta tute . I f the statute does not s p e c i f i c a l l y address the question of pr ivate r ights then i t can only mean that the l e g i s l a t o r s simply did not turn the i r minds to the grant of pr ivate r i g h t s , or that they did so, and dismissed the idea. In e i ther case, i t i s nonsense to talk about l e g i s l a t i v e intent to create pr ivate r ights save insofar as i t i s thought to be legit imate to determine what (the l e g i s l a t o r s would have intended i f they had thought about the matter. A frank recognit ion of the pol icy influences which (quite r i g h t l y , in t h i s w r i t e r ' s submission) weight, in the minds of judges, would remove some of the a r t i f i c i a l i t y which has plagued j u d i c i a l pronouncements in th i s area and would make for easier understanding by a l l those concerned with the subsequent analys is of a dec is ion . The question to be formulated by the courts no longer would be whether or not the l eg i s la tu re intended to grant a pr ivate r igh t of a c t i o n , but, rather , whether the i n t e r e s t s , with which the statute i s concerned, would be furthereddor protected by - 80 -al lowing the pr ivate ac t ion . I f that Hatter question can be answered a f f i r -ma"ti:vely= and there i s no other more compelling in te res t the protection or furtherance of which would m i l i t a t e against pr ivate r i g h t s , the 13 act ion should be allowed. I f the breach of an environmental statutory duty i s simply a species of negligence, i t may not be offensive to provide insurance r e l i e f to a defendant in the same way as he might be re l ieved from the consequences of his negligence, say, in the handling of an automobile. But i f the act ion for breach of statutory duty i s characterized as a creature of l e g i s l a t i v e in tent , then arguably the l i a b i l i t y to damages assumes the appearance almost of a l e g i s l a t i v e sanction for breaking the law and i t s i n s u r a b i l i t y i s thereby brought into question. The th i rd a l t e r n a t i v e , i t has been suggested, i s to t reat the question as one of po l i cy . I t then becomes a matter of weighing d i f fe rent p o l i c i e s . I t may be that the interests protected in the statute are s u f f i c i e n t l y important to permit or require pr ivate act ions . The i n s u r a b i l i t y question must u l t imately depend upon whether to allow insurance pro-tect ion to the deifendant would, in any serious way, prejudice or defeat those in te res ts . Action on the Case: 14 Apart from one short comment, th is action has been ignored in the extensive Canadian and American l i t e r a t u r e on environmental remedies. I t has i t s genesis in the act ion on the case and i t s modern rev ival in the Austra l ian High Court decision of Beaudesert Shire - 81 -15 Council v. Smith. B r i e f l y , the facts were these: Mr. Smith was the holder of a l icense under the Queensland Water Acts which e n t i t l e d him to i n s t a l a pumping plant on the Albert River for the purpose of i r r i g a t i n g his farm. Pursuant to the permit, he duly i n s t a l l e d the pump at a point where there was a natural and permanent pool in the r i v e r - b e d , so that , independently of surface f low, water was always avai lab le for pumping. Smith used the pumps for a period of thi r teen years u n t i l , in 1957, the Beaudesert Shire Council removed 12,000 h yards of gravel from the r i v e r bed for road construct ion. This had the e f fec t of mater ia l l y a l t e r i n g the flow of the r i v e r , and Mr. Smith's pump, as i t was then s i tua ted , was rendered useless. Smith brought an act ion for damages against the Shire Counci l . He al leged that what the Council had done was wrongful, and had caused him loss and damage. On appeal from the Supreme Court of Queensland, the High Court held at the outset that the Council had, indeed, acted unlawful ly . On the further quest ion, whether the Counci l 's unauthorized act gave r i se to any cause of a c t i o n , the court concluded: " . . . i t appears that the author i t ies c i ted to j u s t i f y a proposit ion that , independently of trespass, negligence or nuisance but by an action for damages upon the case, a person who suffers harm or loss as the inev i tab le consequence of the unlawful , in tent ional and pos i t ive acts of another i s e n t i t l e d to recover damages from that other ." (16) 17 In Kitano v. The Commonwealth, Mason J . , held the Beaudesert decision to be binding upon him, though not appl icable in the par t i cu la r circumstances. Professor Lucas has suggested an obvious potential for - 82 -18 the cause of action in environmental protect ion. However, the decision has not been followed outside A u s t r a l i a , and, indeed, has received some unf la t te r ing academic comment: " . . . the Beaudesert proposit ion cannot be correct as stated and cannot be accepted as new law. The law of tor ts i s ce r ta in l y capable of development and s i g n i f i c a n t changes in i t can no doubt be brought about by j u d i c i a l l e g i s l a t i o n . But fundamental p r inc ip les are not simply blown or puffed away by a for tu i tous sidewind." (19) For those who might otherwise have been at r i s k under the Beaudesert p r i n c i p l e , i t may be fortunate that the development has not gained wide acceptance. The element of intent ional unlawful conduct and the attendant publ ic pol icy considerations would make th is a most proble-matical area for l i a b i l i t y insurance cover. Some of the author i t ies upon which the High Court r e l i e d in i t s analysis involved damage a r i s i n g ifrom a breach of duty owed to a th i rd person rather than from intent ional breach of law in the s t r i c t sense. This could leave some scope for l i a b i l i t y coverage. But the p r i n c i p l e f i n a l l y enunciated by the court seems to be predicated upon an intent ional breach of law in the sense of s tatute . I f that be so, then i t i s un l ike ly that the l i a b i l i t y would be insurable. Breach of Statute and Other Damages Act ions: So far we have considered insurance of l i a b i l i t y for common law damages based on the act ion for breach of statutory duty or the action on the case. I t sometimes happens that a defendant i s held l i a b l e in damages, in some other cause of a c t i o n , such as negligence, - 83 -for conduct which, i n c i d e n t a l l y , i s a breach of s tatute . The best example ar ises where a defendant breaches a s ta tu te , thereby causing damage, but the statute gives no private r ight of ac t ion . Is the defendant " ta inted" by his breach and prevented from obtaining indemnity i f successful ly sued on some other cause of action a r i s i n g out of the same facts? I t was once thought that publ ic po l icy could not to lerate the grant of indemnity against the consequences, even the purely c i v i l 20 consequences, of a cr iminal act . There has been a gradual erosion of th is p o s i t i o n . F i r s t l y , the compelling soc ia l in te res t in assuring v ic t im - compensation led to a mellowing of j u d i c i a l at t i tudes where the l i a b i l i t y was at t r ibutab le to cr iminal negligence rather than to 21 intent ional cr iminal breach. Even the rat ionale for a continuing 22 i n f l e x i b i l i t y in th is l a t t e r category has been exposed as ser ious ly suspect: "This posi t ion seems to rest on emotion rather than r e f l e c t i o n , heedless that 'moral i n d i g -nation 'must not be mistaken for publ ic p o l i c y . " (23) And the modern approach, in those cases of cr iminal conduct where the damage was not intended, i s to assess a l l of the relevant circum-stances rather than to assume ipso facto that an insurance claim i s 24 unenforceable. This trend i s re f lec ted in l e g i s l a t i o n and case 25 law. Amongst the most thoughtful analyses i s that of the V ic tor ian 26 Ful l Court in F i re and A l l Risks Insurance Co. L td . v. Powel l . In - 84 -that case, the insured, a road c a r r i e r , had de l iberate ly v io la ted a provis ion of the Motor Car Act requi r ing that a motor vehic le carry ing a load exceeding 12 feet 6 inches in height should be operated on a highway only under special permit. Driving on the highway without a permit, the insured damaged his load in t ry ing to negotiate an under-pass less than 12 feet 6 inches in height. He was held l i a b l e to the owner of the load and sought indemnity from his l i a b i l i t y insurer . This extract from the judgment of Smith J . sets out the matters which ought to be taken into account in determining the r ights to indemnity in such a case: " . . . i t may be that in re la t ion to crimes of the gravest sor t the r u l e , in i t s a p p l i c a t i o n , i s i n f l e x i b l e , taking no account of the pa r t i cu la r circumstances. Outside that f i e l d , however, i t would seem that the basis on which the ru le rests requires that i t s appl icat ion should depend upon a weighing with reference to the publ ic i n -te res t , of a l l the relevant circumstances. And these, I consider, must include the gravity of the c lass of crime, the degree of l i k e l i h o o d that i f enforcement were allowed the commission of s i m i l a r crimes would be promoted; the degree of l i k e l i h o o d that en fo rceab i l i t y would promote the in te res t of the v i c t ims ; and the publ ic in te res t in observance of cont racts . " (27) The idea of d is t ingu ish ing between offences which are mala prohib i ta and those mala in se (or, as Davis J . of the Supreme Court 28 of Canada preferred, fe lo de se ) i s c l e a r l y the crux of th is ana lys i s . 29 The approach i s much more "comfortable with current thought" but i t c a l l s for d i f f i c u l t value judgments on the part of the j u d i c i a r y . No-where i s th is better c r y s t a l l i z e d than in the environmental f i e l d . Environmentalists may well feel that any environmental offence i s - 85 -i n t r i n s i c a l l y wrong. To others, the whole range of environmental l e g i s l a t i o n i s r e a l l y regulatory in character and does not deal with matters mala in se. The answer i s simply that , d i f f i c u l t or not, the courts must make the value judgments and, in doing so, must bear in mind that the question i s not whether, in the abst ract , the insured's conduct i s reprehensible but whether i t i s so reprehensible.that the notions of punishment and deterrence must hold sway over competing pol icy interests such as victim-compensation and loss d i s t r i b u t i o n . In some areas, leg is la tures have pre-empted the jud ic ia ry by embodying the pol icy decision in the l e g i s l a t i o n . Such i s the case in statutes dealing with compensation and compulsory insurance against marine o i l po l lu t ion r i s k s , and in the compulsory nuclear insurance schemes. As a matter of i n t e r e s t , i t has never been ser ious ly argued that the existence of an insurance f a c i l i t y has encouraged delinquency in e i ther of these areas. B. INSURABILITY OF FINES: I t i s widely understood and accepted that proper respect for the po l icy of a pa r t i cu la r statute w i l l demand deterrence and/or punish-ment of those who w i l f u l l y or reck less ly offend i t s prov is ions . And i t i s a hallowed tenet that , to allow any a c t i v i t y to detract from the main thrust of any law, thereby encouraging indi f ference to that law, i s contrary to publ ic po l i cy . But publ ic pol icy has not normally required, and has even recoi led from, the punishment of non- intent ional acts or omissions, at least where there i s no negligence. These ideas are at the heart of the debate about i n s u r a b i l i t y . The publ ic po l icy - 86 -argument most often advanced against l i a b i l i t y insurance for statutory imposts i s that i t s f inanc ia l indemnity provisions would tend to en-courage commission of the s t a t u t o r i l y prohibited acts by reducing the effect iveness of punishment and deterrence. This argument i s predicated upon the assumption that there i s something the offender could have done to comply with the p r o h i b i t i o n , in other words, that his conduct was w i l f u l . , reck less , negligent o r , at l e a s t , imperfect. Criminal law knows the element of f a u l t as mens area. I t i s proposed now, with a view to set t ing the stage for a la te r discussion of the i n s u r a b i l i t y of f i n e s , to look at the mens rrea content of certain environmental l e g i s l a t i o n . I t i s neither pract icable nor necessary to survey the l e g i s l a t i o n in a l l of the common law j u r i s -d i c t i o n s . The object of the discussion i s not to discover what a l l the statute law i s , but merely to show, by reference to some case s tud ies , how certa in kinds of statute law can be interpreted and to pave the way for the asking of some important questions about what i s or should be the purpose of a cr iminal sanction system in the environ-mental f i e l d . Four Canadian l e g i s l a t i v e prov is ions , two federal and two p r o v i n c i a l , have been chosen for d iscuss ion . F isher ies Act : 30 S. 33 (2) i s the operative provision in the federal F isheries Act . I t provides as fo l lows: "Subject to subsection (4) , no person sha l l deposit or permit the deposit oif; a deleterious substance of any type in water frequented by f i s h or in any - 87 -place under any conditions where such deleterious substance or any other deleterious substance that resu l ts from the deposit of such deleterious sub-stance may enter any such water." "Deleterious substance" i s defined in subsection (II) in very broad fashion to include almost every conceivable substance ac tua l l y or po tent ia l l y capable of degrading water qua l i t y and being deleter ious to f i s h . Unt i l 1970, the act included the requirement that an offender must have "knowingly" deposited the deleterious substance. This expression undoubtedly cast an onus upon the Crown to show the requ is i te intent in the accused. An onus of th i s type i s imposed by the common law and i s regular ly incorporated into s tatute . As was observediin 31 R. v. Ford Motor Co. of Canada: "The common law required the Crown to estab l ish mens rea on the part of an accused before a convict ion could be rendered. In other words, no man shal l be punished for committing a crime unless a g u i l t y mind could be imparted to him. The common law p r inc ip le has in general been incorporated into our cr iminal statutes by the inc lus ion of such words as ' m a l i c i o u s l y ' , . 'knowingly ' , ' w i l f u l l y ' , ' f raudulent ly ' and 'with intent to ' in various sect ions" . The removal of the word "knowingly" by a 1970 amendment ra ised the question whether an offence of absolute l i a b i l i t y was thereby created or whether the Crown had simply been re l ieved of i t s burden of proof so that i t would s t i l l be open to the defendant to escape by showing he was f a u l t l e s s in the matter. One would have thought that an argument of some force could be made out in favour of the l a t t e r propos i t ion , but j u d i c i a l treatment of the section has taken a d i f fe rent route. - 88 -32 In 1971 Arke l l D.C.J , in R. v. Churchi l l Copper held that the section contained no mens rea element. Imp l i c i t in his judgment, however, i s the b e l i e f that , there must s t i l l be some residual f a u l t fac tor : "A lso , as stated by Lord Diplock in Sweet v. Pars ley , the inference i s not to be l i g h t l y drawn that th is i s an offence of absolute l i a b i l i t y , 'unless there i s something that the person on whom the obl igat ion i s imposed can do d i r e c t l y or i n d i r e c t l y , by supervision or inspect ion , by improvement of his business methods or by exhorting those whom he may be expected to inf luence or control which w i l l promote the observance of the o b l i g a t i o n ' . , Here the defendant company could 'promote the observance of the ob l iga t ion ' imposed by the Fisheries Act by the adoption of d i rec t super-v i s i o n , inspect ion , and improvement of the i r operat ion." (33) As the facts turned out, his Honour was able to f ind true mens rea by imputing the knowledge of the defendant's employee to the employer, but his c lear at t i tude was that , in the absence of such knowledge (from knowledge one might in fe r adoption or i n ten t ion ) , i t was necessary that there be f a u l t in the sense that the defendant could have dbfre something to avert the breach but f a i l e d to . Note that th is f a u l t standard i s considerably higher than mere negligence for i t imposes l i a b i l i t y i f the defendant could have done anything at a l l , whether or not events were forseeable and whether or not the defendant had taken a l l reasonable precautions. In 1973, the matter was taken much further by Ost ler D.J. in R^ . v. 34 Jordan River Mines L td . The essence of his decision i s that s . 33 does not now require any notion of f a u l t . The defendant in that case - 89 -was charged in respect of two leakages which occurred in l ines carry ing t a i l i n g s from i t s mine to the sea. His Honour observed that , i f mens rea were an ingredient of the offence, then i t could be found in the defendant's f a i l u r e "to make a comprehensive inspection and subsequent 35 surve i l lance" of the equipment. The defendant, he s a i d , "had the 36 power, the means, and the duty to prevent th is occurrence." But, in any event, as his Honour e a r l i e r concluded, mens rea of th is type was not a necessary ingredient of the offence. I t follows that , even i f the defendant had constantly inspected and surveyed the equipment and taken every conceivable (not merely reasonable) precaution, and even i f i t had not had the "power" or the "means", i t would, presumably, s t i l l have the duty to prevent the deposit of the deleter ious sub-stance. This interpretat ion i s so far - reaching that , even i f , fo r example, the pipes had burst because of some latent molecular i r r e -g u l a r i t y , i n the cas ing, the defendant would s t i l l be caught by the s tatute . In a t rad i t i ona l cr iminal law perspective th is might seem to be a t ru l y remarkable extension of the s t r i c t l i a b i l i t y concept. I t may be admitted that , even in the hypothetical s i tuat ion of the latent defect in the pipe, i t i s always within the power of the defendant to avoid the leakage in the sense that he might simply close his operation. Ontthe same hypothesis, industry and business of a l l types would have to close down for the mere fear that somewhere in the operation something (a lbe i t latent and undiscoverable) might go wrong and lead to a convict ion under the s tatute . But perhaps these conclusions are too much the product of t r a d i t i o n a l i s t th ink ing . Cer ta in l y , they depend upon the assumption that there i s some measure of immorality or impropriety involved in the breach of environmental s tatutes . The v a l i d i t y of that thought-frame in the context of environmental regu-l a t i o n i s at least open to doubt and, indeed, i s questioned at a l a t e r pointed in th is chapter. Canada Shipping Act : 37 Section 752 of the Canada Shipping Act makes i t an offence punishable by a f ine of up to $100,000 for any person or ship to discharge a pol lutant in contravention of any regulat ion made by s . 728 of the Act . Section 5 of the Oi l Po l lu t ion Prevention Regulations provides that "no ship sha l l discharge o i l or any o i l y mixture into any of the waters" therein described. Section 6 of the regulations provides for defences where the o i l or o i l y mixture i s discharged from a ship (a) for the purpose of saving l i f e or preventing the immediate loss of a sh ip ; (b) due to damage to or leakage from the ship as a resu l t of stranding, c o l l i s i o n or foundering i f a l l reasonable precautions were taken; ( i ) to avoid the stranding, c o l l i s i o n or foundering, and ( i i ) to prevent or minimize the discharge; or (c) through the exhaust of an engine or by leakage from an underwater machinery component where such discharge i s minimal, unavoidable and essent ia l to the operation of the engine or component. - 91 -38 R. v. The Vessel Aran was an important case involv ing these prov is ions. The "Aran" discharged o i l into Vancouver Harbour as a resu l t e i ther of over-pumping or over -heating. I t was unclear which was the cause, but i t was establ ished that e i ther of them would have involved negligence. I t was urged by the defence that the Crown must estab l ish the s p e c i f i c act or neglect which caused the discharge. The Court thought otherwise. Dismissing an appeal from the Prov inc ia l Cour t i l 1 conv i c t ion of the defendant, Munroe J . said in the B r i t i s h Columbia Supreme Court: " It i s not incumbent upon the Crown to prove the cause of such discharge. I f the discharge had occurred for any of the reasons set forth in s . 6 of the Regulations, there would be no of -fence, because there would then be a lawful excuse; otherwise, upon the p la in meaning of the words used, the l i a b i l i t y of the ship for contravening s . 5 of the Regulations i s ab-solute and mens rea i s not an essent ia l i n -gredient of the offence? (39) His Honour's analysis was approved on appeal to the B r i t i s h Columbia Court- of Appeal. On the par t i cu la r facts of the case the Court went no further than to impose a cr iminal sanction where there had been negligence. But there are much wider impl icat ions in the judgments. I t would seem that a defendant could not be heard to say that i t was beyond his power to prevent the s p i l l , for the Court does, not even require proof of what caused the s p i l l , but merely that i t emanated 40 from the ship . Of course, on the facts of th is case, the only possible causes involved negligence, but the judgments contain no general r ider that th i s must always be the case. ORe saving feature - 92 -might have been found in Bul l J . A . 1 statement that i t must at least be shown that the discharge was "caused" by someone on board the sh ip . This might be taken to mean t t h a t , although the Crown was re l ieved of i t s probative burden, a causation defence was s t i l l open to the defendant. But?, in a subsequent B r i t i s h Columbia Court of Appeal dec is ion , i t has been held that , by "caused", his Lordship r e a l l y meant "committed". 41 The decision was that of The B i l k a r r a v. The Queen. The "D i lka r ra" had discharged o i l into Vancouver Harbour during a f u e l l i n g operation. The sh ip ' s engineers had overestimated the amount of fuel necessary to f i l l the sh ip 's tanks. The error normally would have been neutrailizedeb'y an e l e c t r i c a l alarm device designed to sound a warning when the contents of the tank reached 75% capacity . However, the alarm f a i l e d because of a latent defect (undiscoverable by i n -spection) u l t imately traced to the manufacturer. I f there was un-certa inty about what was meant by "caused", i t was hardly d ispe l led by the subst i tut ion of the equally ambiguous term "committed". But, 42 the subsequent words of Taggart J . A . , who de l ivered , the Court's judgment, give some i n k l i n g of what was contemplated. He pointed out 43 that the persons on the vessel were "ac t i ve l y in cont ro l " of the operation of f i l l i n g her tanks and that , l i a b i l i t y being absolute, i t was no answer to say that the discharge would not have occurred but for the f a u l t of persons not on board or because there had been a miscalculat ion of the quantity of o i l required. Apparently, in the court 's mind, these features did not const i tute a defence - neither - 93 -separately nor together. I t may be assumed that the court , in sub-s t i t u t i n g "committed" for "caused", was not merely ifridu^ging in semantics. The only reasonable inference i s that , in the court 's view, the defendant would have been excused on a t r a d i t i o n a l causation t e s t . Since the defendant was not, in the event, excused, i t must fol low that conduct s u f f i c i e n t to be caught by the statute need not have that element of "proximity" commonly demanded by the courts in cr iminal cases. This dec is ion , on one reading at l e a s t , might even lead to the conclusion that a l i a b i l i t y for convict ion w i l l a r i se whenever persons on board have done anything but for which the discharge would not have occurred. The "unfortunate" or extenuating circumstances of a p a r t i c u l a r s p i l l would go only to sentence. An argument of th is kind was advanced by the Crown in R. v. 44 "M. V. Al lunga" in which the charge under s . 5 of the Oi l Po l lu t ion Prevention Regulations had arisen out of a discharge of o i l into New Westminster Harbour, B r i t i s h Columbia. The o i l escaped through a la ten t l y defective coupling in a b a l l a s t l i n e . Govan Prov. Ct. J . answered the Crown's argument in orthodox causation terms: "In my research I have not found any case on a l l fours with the case at bar. In fact i t could be sa id that Captain Rose acted vo lunta r i l y in ordering the pumping of the b a l l a s t tank or that the man who actuated the pump in the engine room acted vo lun ta r i l y . The real cause of the s p i l l , however, was the defective coupling and th is was a latent defect and not discoverable by ordinary means". This decision stands out as something of a " loner" in an area in which - 94 -s t r i c tness i s c l e a r l y the rule rather than the exception. 45 Ontario Environmental Protection Act : The trend to s t r i c tness in formulation and interpretat ion of l e g i s l a t i o n may be detected at the Canadian prov inc ia l level as wel l as in the federal sphere. The Ontario Environmental Protection Act 1971, which replaced the A i r Po l lu t ion Control Act 1967, contains extensive a n t i - p o l l u t i o n measures. To throw some l i g h t upon the relevant prov is ions , i t w i l l be appropriate to examine the case of JR. 46 v. Ford Motor Co. of Canada, a most ins t ruc t i ve decision concerned with the e a r l i e r A i r Po l lu t ion Control Act . The Ford Motor Co. was charged with a breach of 0 Reg 133/70 under the Act in that i t "d id causedthe emission of an a i r contaminant to such an extent or degree as• may cause discomfort to p e r s o n s . . . " . McMahon Prov. Ct. J . made the fol lowing f inding of f a c t : "(a) that on the date and time in question the Ford Motor Company of Canada Limited did emit an A i r contaminant to such a degree as may cause discomfort to persons (b) that the Company had not been d i la to ry or n e g l i -gent in attempting to comply with the s p e c i f i c regu-la t ion but has, on the other hand, been ac t i ve l y attempting by various means within i t s capacity , short of terminating i t s operation to f ind an e f fec t i ve remedy". (47) 48 His Honour referred to the decision in R. v. Peconi in which the same regulation had been considered. In that case, Stewart J . had concluded that the regulat ion had no mens rea requirement. He made no mention of any exception in cases where i t was beyond the power - 95 -of the defendant to avert the breach. In the Ford Motor Co. Case, of course, there was no question that the defendant had knowledge in the sense that i t knew of the emissions. E s s e n t i a l l y , i t was propounding a defence of i m p o s s i b i l i t y of compliance, rather than absence of knowledge. Relying f i n a l l y upon Peconi , McMahon Prov. Ct. J . con-cluded that the statute was one of absolute prohib i t ion and a con-v i c t ion must be recorded. This decision could have meant closure of a major i n d u s t r i a l plant the continued operation of which was apparently of some s ign i f i cance to the loca l and regional economy. But the seemingly disastrous consequences of the decision were tempered by the r e a l i t i e s of the s i t u a t i o n . Af ter the date on which the offence occurred, but before the date of t r i a l , the A i r Po l lu t ion Control Act was replaced by the Environmental Protection Act . Section 10 of the l a t t e r provided a f a c i l i t y for obtaining approval of an emission con-t ro l programme which approval could then be pleaded (but not re t ro -spect ively) in bar to prosecution. Ford obtained an approval and thereby had a means of avoiding future prosecution, provided the terms of the approval were complied wi th . The a v a i l a b i l i t y of th is programme approval f a c i l i t y was thought to be of some s ign i f i cance in the l a t e r case of R. v. Chinook Chemical 49 Corp. Ltd . This case involved the hearing of charges that , on three d i f fe rent dates, the defendant corporation caused or permitted to be caused, the emission of an a i r contaminant from i t s chemical p lant . As in the Ford Motor Co. Casef the defence of i m p o s s i b i l i t y was advanced. - 96 -The learned Prov inc ia l Court Judge's observations are of i n t e r e s t : "As I have already stated the Act absolutely pro-h i b i t s the emission of an a i r contaminant into the atmosphere which may cause loss of enjoyment of normal use of property, and I f ind that the accused p lant , by reason of the fact that they were ac t i ve l y carrying on the business of a chemical manufacturing process, were v i o l a t i n g the Regulation and the Act in question by causing or permitt ing to be caused the emission of an a i r contaminant into the atmosphere. This c l e a r l y would be by reason of the fact that they were carrying on business on the date of the offence in question and by the very nature of the accused operation trimethyl amine was bound to escape sooner or l a t e r into the atmosphere. The accused took his chances in th is regard in not having obtained any kind of programme approval from the D i rector . " (49a) His Honour seemed to have had in mind that i t was within the defendant's power to avoid the emission by not operating the chemical plant at a l l and that , in the absence of an arrangement with the Di rector , i t would be necessary to go to th is extreme. 50 Ontario Hater Resources Act : Section 32(1) of the Ontario Hater Resources Act provides: "Every munic ipal i ty or person that discharges or deposits or causes or permits the discharge or deposit of any material of any kind into or in any w e l l , lake , r i v e r , pond, spr ing , stream, reservo i r or other water or watercourse or on any shore or bank thereof or into or in any place that may impair the qua l i t y of the water of any w e l l , lake , r i v e r , pond, spr ing , stream, reservoi r or other water or watercourse i s g u i l t y of an offence and on summary convict ion i s l i a b l e on f i r s t con-v i c t ion to a f ine of not more than $5,000 and on each subsequent convict ion to a f ine of not more than $10,000 or to imprisonment for a term of not more than one year , or to both such f ine and imprisonment." - 97 -This sec t ion , too, has received an interpretat ion which takes i t well outside the scope of the t rad i t i ona l common law protection against 51 l i a b i l i t y without f a u l t . In R. v. Industr ia l Tankers Ltd . the section was judged to contain no mens rea element, but there was the f a m i l i a r q u a l i f i c a t i o n that the act or omission const i tu t ing the offence must have been one which the accused had the power and author i ty to prevent, and could have prevented, but did not prevent. In j*. v. 52 Cherokee Disposals & Construction Ltd . the view seems to have been taken that , i f i t was within the accused's power to avoid the offending emission by simply not conducting whatever business i t i s that he i s engaged i n , a convict ion w i l l be recorded. I t i s apparenly no answer to say that the intervening negligence of t h i r d part ies caused the breach, i f the accused i s nevertheless in control of the overa l l 53 operation. Whilst the reservation that i t must have been with in the power and author i ty of the accused to prevent the breach receives l i p se rv ice , in p rac t i ca l terms, i t w i l l ava i l the accused l i t t l e , except 54 in the most extraordinary cases. I t may be dangerous to draw weighty conclusions about s t r i c t l i a b i l i t y from the j u d i c i a l treatment of th i s somewhat random select ion of statutory prov is ions. In the f i r s t p lace, lawyers are conscious of the d i f f i c u l t y of making accurate general izat ions from such j u d i c i a l decisions because of the i r intimate dependence upon the wording of the pa r t i cu la r s tatute . Secondly, the observations about s t r i c t l i a b i l i t y of a type going beyong punishment for w i l fu lness or - 98 -negligence are , mostly ob i ter d i c ta because, in most of the cases, some evidence of negligence could be found. There i s necessar i l y a good deal of speculation (at times strained) in the w r i t e r ' s argu-ments as to in terpretat ion because the judgments normally have been d i r e c t l y concerned with the immediate narrow issues and, insofar as they have addressed wider questions, have.done so in rather oblique fashion. However, with a l l of that s a i d , i t i s nevertheless submitted that some general observations can be v a l i d l y made. The se lect ion i s i l l u s t r a t i v e of a moder of l e g i s l a t i n g and a mode of j u d i c i a l reasoning which have as the i r inev i tab le consequence, a much greater burden for industry ; i t i s apparent that that burden does now, (or , at least in the forseeable fu ture , might) exceed that which t r a d i t i o n a l publ ic po l icy standards would regard as reasonable; and, f i n a l l y , and most importantly for subsequent argument, i t i s conceivable that the selected statutes and those l i k e them in other l e g i s l a t i v e systems do or perhaps should have other pol icy rat ionales than those of punish-ment and deterrence of p o l l u t e r s . Against th is background, we can now turn to a consideration of the i n s u r a b i l i t y of environmental f ines . Most courts and most insurers would answer the question whether cr iminal f ines are insurable with an unequivocafltONO. In 1936, when i t came to the attent ion of the editors of the Just ice of the Peace Journal in England that cer ta in insurers were o f fe r ing indemnity for t r a f f i c f i n e s , they roundly denounced the - 99 -p rac t i ce . In the i r opin ion, not only would such a contract of i n -surance be void as contrary to publ ic p o l i c y , but the insurers would be gu i l t y of the misdemeanour of "doing an act to the publ ic Mischief" and would be g u i l t y , with the i r insureds, of a conspiracy to defeat 55 the course of publ ic j u s t i c e . The rat ionale obviously goes to deterrence and punishment. In many cases (such as the intent ional shooting of protected animals) the good sense of th is approach i s ind isputable . But i t i s one of the canons of cr iminal j u s t i c e that only people who are at fa u l t should be punished and i t i s a matter of the simplest log ic that only people who have the power to avoid the forbidden behaviour can be deterred. Yet, i t has been seen that some environmental statutes have been so interpreted as apparently to make nonsense of these basic notions. McMahon C .C . J , obviously was concerned about 56 th is in R. v. Ford Motor Co. His Honour found himself obl iged to convict the defendant, but having expressed his own b e l i e f that de-fences of i m p o s s i b i l i t y should l i e where every reasonable step short of closure had been taken (and publ ic harm would resu l t from a closure) he went on to quote the fol lowing passage from Edwards' Mens Rea in  Statutory Offences (1955): "The process of basing cr iminal l i a b i l i t y upon a theory of absolute proh ib i t ion may well have the opposite e f f e c t to that intended and lead to a weakening respect for the law. There i s a very real danger that the cr iminal law w i l l come to be regarded with contempt." (57) - 100 -Most cr iminal lawyers would share th is concern. But perhaps the debate, insofar as i t re lates to environmental offences, i s unneces-s a r i l y s t r a i t - j a c k e t e d by the framework of orthodox cr iminal law thinking and i t s associated terminology. The term " f i n e " , for example, conjures up thought of punishment, re t r ibu t ion and "negative deter-rence" (the idea that the offender and any others who might have been tempted to fol low his "example" must be taught a lesson) . A l l of these are f a m i l i a r concepts to the cr iminal lawyer, but they are incongruous, to say the l e a s t , in the context of modern theories of environmental regulat ion . Many of these theories work towards what the economists c a l l "cost i n t e r n a l i z a t i o n " . The argument runs th is way" environmental impairment involves certain costs . These may be re f lec ted d i r e c t l y in such factors as demands for medical serv ices , property devaluations, los t manhours of productive work, lower crop y i e l d s , shorter useful l i ves of man-made st ructures , animal losses and s o i l i n g costs o r , more 58 subt ly , in such considerations as aesthetics and the qua l i t y of l i f e . These costs , i t i s s a i d , sought iiotl;to"betborne by society in general , but ought to be " in te rna l i zed" to the industr ies causing them. The best way of achieving th is i s to impose a s t r i c t l i a b i l i t y so that 59 these costs becomes, in e f f e c t , a cost of doing business. Like any other business cost , th is would be passed on to the consumer. But consumers could be expected to switch to goods and services which are less expensive because produced at lower po l lu t ion cost . Thus a state - 101 -of competition to produce low-pol lut ion products and services would be 60 developed. Sett ing as ide , for the moment, the question of damages l i a b i -l i t i e s , might i t not be argued that absolute statutory imposts (a more comfortable term than f ines because free of unfortunate "c r imina l " connotations) are a means of achieving the cost i n t e r -na l i za t ion aim? 61 Professor Michelman, having recognized that the cost i n t e r -n a l i z a t i o n rat ionale enjoys some currency amongst commentators, has suggested that i t might draw p ro f i tab l y upon Guido CalabresiNs legal and economic analysis of the costs of accidents as a " theoret ica l 62 63 s c a f f o l d i n g " . The Calabresian model deals , in te r a l i a , with 64 the problem of control of the primary cost of accidents. I t d i s -t inguishes between a "general" (or "market") deterrence whereby decisions about how far to go in diminishing or a l t e r i n g accident -causing a c t i v i t i e s for the sake of saving accident costs are l e f t to the market, and, on the other hand, " s p e c i f i c " (or " c o l l e c t i v e " ) 65 deterrence whereby such decisions are c o l l e c t i v e l y made by "soc ie ty " . Calabresi would argue that the former, though not without i t s d i f -66 67 f i c u l t i e s , i s a far more e f f i c i e n t method of primary cost cont ro l . He would argue further that l i a b i l i t y ( for cost) should rest upon the 68 cheapest cost avoider and that one of the guides to who i s the cheapest cost avoider i s which a l l o c a t i o n of l i a b i l i t y would best 69 avoid "ex terna l i za t ion" of the cost . - 102 -Suppose that , in the po l lu t ion context, po l luters are the cheapest category of cost-avoiders out of a l l the imaginable categories of cost -70 bearers. And suppose that s t r i c t l i a b i l i t i e s imposed upon the po l lu te r without regard to fault ,would best achieve "general" or 71 "market" deterrence. The absolute statutory impost enforced against a po l lu te r whenever he exceeded a certain threshold level of po l lu t ion would be one such l i a b i l i t y . The e f fec t would be to create a s i tuat ion in which the po l lu te r i s faced with to lerably c lear economic a l t e r -natives - a kind of "pos i t i ve deterrence" i s forced upon him; he must now take account of statutory imposts as a cost of doing business and, in the search for an optimal procedure, he must balance th is cost against the costs ,of reducing his p o l l u t i o n . I f the resu l t of th is balancing is a below-market rate of return for the p o l l u t e r , then, as Professor Michelman points out, his business operat ion, presumably 72 w i l l cease. Note that the question here i s one of economics, not moral i ty . Lest the present reference be thought too narrow, i t should be pointed out that economists have urged a number of d i f fe rent po l lu t ion control schemes, generally involv ing the creation of special taxes or 73 fees based on waste discharges. And some commentators, such as Pro-fessor Dales, have argued for the creation of a r t i f i c i a l markets in 74 transferable waste discharge r i g h t s . At the bottom of a l l of these seems to be the same notion that the problem of environmental regu-la t ion can be reduced to a question of market economics. - 103 -Where does insurance f i t in a l l of th is? F i r s t l y , i t may be said with some confidence that , i f the foregoing analys is f a i t h f u l l y represents the pol icy rat ionale of the "penal" provisions in e x i s t i n g environmental s ta tutes , then a l i a b i l i t y insurance f a c i l i t y the cost of which to the po l lu te r ef fects a proper i n t e r n a l i z a t i o n by taking s p e c i f i c a l l y into account such matters as the frequency and sever i ty of "impostable" inc idents , would not be object ionable. Ideas of punishment and what we have c a l l e d "negative deterrence" would be i r re levant and the question of i n s u r a b i l i t y would come down to a consideration of the inev i tab le or contingent character of the impost l i a b i l i t y . I f there i s something fortu i tous about the l i a b i l i t y - i t s im-posi t ion might be absolute when the threshold i s exceeded, but the act of exceeding the threshold i s accidental - t h e n , i t would not be inconsistent with the "contingency" character of the insurance con-t rac t to provide for indemnity which, presumably, would be sought i f the frequency and amount of the imposts created s u f f i c i e n t pressure upon potent ial insureds. On the other hand, i f the impost i s a fee, pure and simple, paid by the p o l l u t e r so that he might be permitted to pol lute ( in tent iona l l y ) with impunity, then the l i a b i l i t y for that impost cannot be insured against , though not, of course, for reasons of publ ic po l icy but simply because there i s nothing (fortuitous about i t . I t i s to be hoped that these conclusions about the i n s u r a b i l i t y - 104 -of statutory imposts, where the statutory pol icy i s one of employing market economics to achieve optimal environmental c o n t r o l , w i l l be helpful at some point in the future. Unfortunately, for the moment, they may not take us very fa r . Although the foregoing i s a p laus ib le r a t i o n a l i z a t i o n of the s t r i c t j u d i c i a l and l e g i s l a t i v e approaches, th is wr i ter personally remains unconvinced that i t does indeed represent the i r intended premise. There are two main reasons for doubt. F i r s t l y , , there remains in the minds of at least some members of the community, inc luding l e g i s l a t o r s and judges, a preoccupation with a "non-monetizable" morality e t h i c , an idea that po l luters must be dealt the i r jus t deserts by being " d i s c i p l i n e d " to the f u l l extent of the law and that they and others l i k e them w i l l thereby learn a lesson. The second reason for doubt i s that there i s no evidence that the f ines provided for in l e g i s l a t i o n and imposed by judges are in any sense a monetization of a po l lu t ion cost . Indeed, they seem to be quite unrelated to actual po l lu t ion cost. They are at worst purely a r b i t r a r y , at Best an index of community abhorrence ( i t might, perhaps, be urged that community abhorrence or d is t ress i s a po l lu t ion cost ) . In the area of c i v i l damages, where the monetary f igure i s much more tangibly re lated to actual po l lu t ion cost , there has been no large scale endeavour by the leg is la tures or the courts to impose absolute l i a b i l i t i e s or otherwise to seek to implement a "market so lu t ion" philosophy. I t would be s u r p r i s i n g , therefore, i f that were the i r philosophy in r e l a t i o n to what we know as f i n e s . I t i s in te res t ing - 1 0 5 -to note in th is context that Ca labres i , in arguing for abandonment of the c i v i l f a u l t - t o r t s l i a b i l i t y regime ( in the motor accident sphere), suggests that a desire to deter s p e c i f i c acts d i r e c t l y could s t i l l be 75 s a t i s f i e d by employing uninsurable f i n e s . We are now thrown back upon three possible r a t i o n a l i z a t i o n s ; e i ther the leg is la tures did not intend t ru l y absolute l i a b i l i t i e s and always intended an ultimate q u a l i f i c a t i o n oftthe type contemplated by 76 Lord Diplock in Sweet v. Parsileyy so that the sanctioned conduct must always be fau l ty at least in some l imi ted sense; or these l e g i s -l a t i v e prov is ions , as interpreted by the cour ts , are an appl icat ion of the u t i l i t a r i a n theory that s t r i c t l i a b i l i t y i s j u s t i f i a b l e i f the tota l i n t r i n s i c value of i t s consequences (higher standard of con-duct) exceeds the i n t r i n s i c disvalue of the harmful consequences of 77 sanctioning "faultt less" offenders; or they are an appl icat ion of what one wr i te r has ca l led " te leo log ica l r e t r i b u t i v i s m " , the " p l u r a l i s t 78 theory of sanctions" according to which the imposition of t ru l y absolute l i a b i l i t i e s i s defensible i f th is would deter a s i g n i f i c a n t l y large volume of s u f f i c i e n t l y serious future harm at the cost of only "a few innocents". I f the po l icy behind a statutory impost contemplates any of these a l t e r n a t i v e s , then, the l i a b i l i t y for such an impost would be unin-surable for reasons of publ ic po l i c y . The a l te rnat i ve "market economics" po l icy has been canvassed, though th is wr i te r i s not yet s a t i s f i e d that i t cor rect ly explains l e g i s l a t i v e or j u d i c i a l ac t ion . I t may be - 106 -s a i d , however, that the torture to which some of the environmental statutory provisions have been subjected in j u d i c i a l in terpretat ion and the doubts which certain commentators have ra ised about the wisdom 79 of a penal approach to environmental problems could set the l e g i s -latures to thinking about new pol icy pursuits of the type out l ined here in . In the absence of development in t h i s d i r e c t i o n , there i s no place for l i a b i l i t y insurance. I t fol lows that the E . I .L . exc lu -sion of f ines i s unnecessary in the common law j u r i s d i c t i o n s at least for the present. C. Breach-of -Statute Exclusions in Environmental P o l i c i e s : Although both the E .P .P . and E . I .L . programmes provide a generally wider l i a b i l i t y coverage than do the t rad i t i ona l f a c i l i t i e s , the area of statutory l i a b i l i t i e s i s one in which the general l i a b i l i t y po l icy i s apparently less r e s t r i c t i v e . The general po l icy imposes no special condit ions or exclusions re la t ing to claims which involve a breach of s tatute . The matter i s thus l e f t to the broad pr inc ip les of law and pol icy under which regard can be had to the character and purpose of the pa r t i cu la r statutory provis ion (malum prohibitum or malum in se ) , 80 the importance of guaranteeing compensation, and so on. The E .P .P. and E . I .L . p o l i c i e s e f f e c t i v e l y have excluded these considerations by s p e c i f i c a l l y requir ing compliance with relevant regulat ions. Exclusion 4 of the E . I .L . United Kingdom form does at least require knowledge of the breach in a responsible o f f i c e r of the - 107 -insured and that the breach must have caused or aggravated the en-vironmental impairment. But jus t i ce i s not always achieved by the refusal of indemnity where a breach of statute has caused or c o n t r i -81 buted to the damage. In p a r t i c u l a r , the useful soc ia l function of insurance in compensating injured persons i s u t te r l y defeated by a blanket r e f u s a l , e i ther by courts or insurers , to allow indemnity where there i s a breach of statute or regulat ion . I t i s unfortunately, to say the l e a s t , that the p l a i n t i f f ' s success in s a t i s f y i n g his judgment might depend upon whether he was unlucky enough to be i n -jured by an a c t i v i t y which was also a breach of law. The removal of the absolute proh ib i t ion of indemnity where there i s statutory breach need not "open the gates" to lawless conduct. Insurers can always go to the courts and defend the i r refusal of indemnity where the insureds conduct has been mala in se. More to the point , insurers can achieve a less a rb i t ra ry and probably no less sat i s fac tory resu l t by po l i c ing insured behaviour through the i r pol icy terms. Therei. isaexcellent potent ia l fo r the promotion of sound environmental pract ices by insureds through such terms as th is one which appears in condit ion 7 of the E . I .L . po l i c y : "The Insurers of the i r representatives shal l at a l l reasonable times have free access to inspect any property and in the event of any defect or danger being apparent ito the Insurers which the Insured can reasonably be expected to correct or minimize the Insurers without prejudice to the provisions of [exclusion] 4 above may give notice in wr i t ing to the Insured and thereupon a l l l i a b i l i t y of the Insurersein respect of such defect or danger or a r i s i n g therefrom sha l l be suspended unt i l the same be corrected or minimized to the s a t i s f a c t i o n of the Insurers. - 108 -The judic ious use of provisions l i k e these would enable insurers to detect and prevent trouble in advance rather than merely refuse i n -demnity a f te r the damage has been done. There i s a further important objection to the exclusion of a l l indemnity where regulations are breached. I t ar ises in connection with the claim of statutory author i ty as a defence to a nuisance a c t i o n . Nuisance, i s the most important and appropriate of the en-vironmental common law remedies, and the most- s i g n i f i c a n t of the defences to nuisance, espec ia l l y having regard to the increasing involve -ment of government and government inst rumental i t ies in a l l kinds of 82 publ ic works, i s that of statutory author i ty . The rat ionale i s that , i f the Parliament has authorized a pa r t i cu la r a c t i v i t y , i t i s not fo r the courts to in te r fe re with that author izat ion by imposing a 83 nuisance l i a b i l i t y upon the a c t i v i t y . Modern courts have been d i s -posed to r e s t r i c t the a v a i l a b i l i t y of the defence by r i g i d appl icat ion of the p r inc ip les that the l e g i s l a t i o n authoriz ing the a c t i v i t y must 84 be mandatory, and not merely permissive, that the nuisance complained 85 of must be an inev i tab le consequence of the authorized a c t i v i t y , 86 and that a l l reasonable care must- have been taken. Most of the statutory authority cases deal with a c t i v i t i e s by Crown agencies, special government corporat ions, or organizations working under contract to or in some special re la t ionsh ip with the Crown. But the increasing government regulat ion of po l lutant industr ies has given r i se to the p o s s i b i l i t y of a defence rather akin to statutory authorizat ion being avai lab le to pr ivate ind iv iduals and corporations - 109 -which have no special status or re lat ionsh ip with the Crown. Suppose that a governmental po l lu t ion control agency has issued a permit to a pa r t i cu la r indus t r ia l p lant , under the terms of which, the plant i s authorized to emit a spec i f ied volume of gaseous waste (and no more) per day. In the event of a nuisance action being brought against the plant operators by ad-versely affected adjacent landowners, could i t be argued successfu l ly for the defendant that the terms of i t s permit were being complied w i t h , and that i t i s therefore protected from s u i t by l e g i s l a t i v e authority? The answer to th is question could have important repercussions for l i a b i l i t y insurance in 87 the environmental f i e l d . The ava i lab le environmental r i s k p o l i c i e s t y p i c a l l y make indemnity condit ional upon compliance by the insured with "any regulation or ins t ruc t ion issued by competent author i t y . " I f such com-pliance were s u f f i c i e n t to avoid common law l i a b i l i t y , then the l i a b i l i t y 88 coverage which the insurer purports to o f fer would be worthless. The only s i tuat ion in which the cover would be operative would be the one in which there was no l i a b i l i t y . Professor Lucas has adverted to the problem <in the context of the 89 permit system set up under the B r i t i s h Columbia Po l lu t ion Control Act . He analyses i t in terms of the t r a d i t i o n a l statutory authority defence and makes out an argument that a permit would not const i tute a defence because® i t i s merely permissive in character , and i s not endowed with the special 90 protection which attaches to mandatory prov is ions. He points also to 91 the d i f f i c u l t y for the defendant in proving i n e v i t a b i l i t y . His argument i s that the courts w i l l s t r i c t l y in terpret provisions such as those found 92 in the B r i t i s h Columbia Po l lu t ion Control Act . - 110 -The problem arose i m p l i c i t l y in Heineman v. Adventure Charcoal 93 Enterpr ises. In that case, the p l a i n t i f f sought to object to a c e r t i f i c a t e of approval which had been granted under the Ontario  Environmental Protection Act to the defendant for the construction of a charcoal plant near the p l a i n t i f f ' s home. Chief Just ice Wells in the D iv is iona l Court of the Supreme Court of Ontario held that , the statute gave no r ight of hearing in r e l a t i o n to the grant of c e r t i -f i cates but suggested that the appropriate time to test the s i tuat ion would be when the plant s tar ts operations (presumably by taking an act ion in nuisance). His Honour did not seem to think that the c e r t i f i c a t e (which, re lated to the environmental aspects of construc-t i o n ) , would represent any bar r ie r to la te r a c t i o n . 94 American courts have had occasion to consider the matter more d i r e c t l y , and have concluded that conformity to regulations issued by a po l lu t ion control administ rat ion , or conformity to a permit, w i l l not, of i t s e l f , preclude a nuisance ac t ion . As i s suggested in the fol lowing extract from one of the cases, the courts w i l l go behind the permit or other authorizat ion to the statute under which i t was issued: "In the instant case, although the D i s t r i c t was authorized to permit defendant to emit pol lutants w i th in t the standard of permissible l i m i t s set by the Dis.tfctct,wwe f ind nothing in the statutes de-l ineat ing the author i ty of the D i s t r i c t which give i t the express authority to permit commercial enterprises to engage in a c t i v i t i e s which the law pronounces to be a nuisance. M (95) - I l l -So f a r , the "compliance with permit" defence has been considered only as a species of statutory author i ty . But there is another way in which conformity to permit conditions might be advanced as a defence to a nuisance ac t ion . Reasonableness i s relevant in nuisance at least in re la t ion to the degree of interference by the defendant with the p l a i n t i f f ' s r i g h t s , and perhaps even to the extent that 96 unreasonable conduct amounting to negligence may have to be shown. Might i t not be argued that the defendant's compliance with permit conditions i s evidence of the reasonableness of his conduct? Surely a man of ordinary prudence would believe himself to be acting reason-ably whilever he remains within the governmental author i ty . The idea of a statutory provis ion being referred to as an ind icator of reasonable standards i s not at a l l foreign to the common law. T r a f f i c regulat ions , for example, are frequently referred to in considering tort ious l i a b i l i t y a r i s i n g from motor vehic le accidents. I t might be expected that , i f insurers become heavi ly involved in the environmental l i a b i l i t y f i e l d , i t would not be long before an enterpr is ing insurance lawyer, defending a po l lu te r by way of subrogation, would advance an argument of the kind out l ined above. Inev i tably , i f the argument were success-f u l , there would be an ultimate curtailment of the market for th is 97 kind of insurance. The problem, however, might be more imagined than r e a l . The concept of reasonableness, almost by d e f i n i t i o n , precludes hard and fas t ru les . What i s reasonable in one context may be out-rageous in another. Every case must be considered on i t s mer i ts . I t i s u n l i k e l y , therefore, that any general ru le would be developed by - 112 -the courts which had the e f fec t of barr ing nuisance actions whenever there was statutory compliance. Moreover, the s t r i c tness of approach adverted to by Professor Lucas would present a continuing obstacle to such a development.• Even i f E . I .L . exclusion 4 containing the requirement as to compliance with regulations were to be reta ined, there i s a cer ta in clumsiness about i t which c a l l s for some redra f t ing . The exclusion seeks to deal at once with the question of breach of regulations and the use of defective equipment (which need not be a breach of any relevant regulat ion) . I t then carr ies a proviso which might apply to e i ther or both. In the U.S.A. form, soon to be publ ished, i t i s pro-posed to streamline th is exc lus ion. The fol lowing i s the ant ic ipated wording: "This po l icy shal l not apply to or inc lude: 4. L i a b i l i t y a r i s i n g from environmental impair -ment in respect of which any executive d i rector or any o f f i c e r of the Insured or 1 any employee with s p e c i f i c r e s p o n s i b i l i t y for environmental control was aware of non-compliance with any appl icable regulation or ins t ruct ion r e l a t i n g to environmental impairment issued by competent j u r i s d i c t i o n a l author i ty Provided Always that un t i l the next renewal date of th is po l icy th is exclusion shal l not apply where the insured i s operating under conditions of noncompliance with the knowledge of such j u r i s d i c t i o n a l author i ty and with the intent ion to comply as soon as can reasonably be expected of the insured with any appl icable regulation or ins t ruct ion issued by that author i t y . " This form of the exclusion deletes the reference to defective devices and processes and also takes account of the not uncommon arrangement with po l lu t ion control author i t ies for a period of permitted noncompliance. - 113 -In the French form of the E . I .L . po l icy there i s a further a l te rnat ive version of the exc lus ion. I t excludes: "Claims in respect of which i t i s establ ished that they have been caused or aggravated with the assured's knowledge - by the nonobservance of norms and regulations issued by the competent authority - by the fact that the i n s t a l l a t i o n s destined to prevent the happening of environmental impair -ment were incapable of f u l f i l l i n g that purpose. Nevertheless the present exclusion shal l not apply to such s i tuat ions known and temporarily to lerated by the competent a u t h o r i t i e s , the assured having undertaken to put an end to them as soon as poss ib le . " Although th is text loses some of i t s precis ion in the t r a n s l a t i o n , i t i s s t i l l less cumbersome than the United Kingdom equivalent. I t w i l l be noted that i t retains the reference to defective processes (at least the po l lu t ion control processes) which was deleted in the U.S.A. form. In many cases, of course, the use of defective equip-ment or processes w i l l be a breach of regulations and a s p e c i f i c reference to them i s , to that extent unnecessary. Beyond) t h i s , the wr i te r would prefer to see a f l e x i b l e and pos i t ive use of provisions such as the United Kingdom condition 7 rather than the "a f te r the fact" solut ion offered by a negative, exclusionary approach. - 114 -FOOTNOTES - CHAPTER V 1. The reverse i s not necessar i ly t rue. That i s to say, the fact that l i a b i l i t y has been imposed s t r i c t l y does not mean that the l i a b i l i t y has been characterized as statutory . I t may mean simply that the l i a b i l i t y i s treated as "negligence per se" i . e . a c lass of negligence in which, e f f e c t i v e l y , the l e g i s l a t u r e ' s value judg-ment i s subst i tuted for that of the court. For a discussion of the English p o s i t i o n , see Samuels A. Breach of Statutory Duty as a Cause of Action (1971) 121 New Law Journal 610, 612 and Wi l l iams, G. , The Ef fect of Penal Leg is la t ion in Tort (1960) 23 Modern Law Review 233. 2. Linden A. Tort L i a b i l i t y fo r Breach of Automobile L ight ing  Leg is la t ion (1967) 45 Canadian Bar Review 121, 125-6. 3 . See Phegan C. Breach of Statutory Duty as a Remedy Against Publ ic Author i t ies ["19741 8 University of Queensland Law Journal 158. 4. See the judgment of Kittoi, J . in Sovar v. Henry Lane Pty. Ltd . (1967) 41 A . L . J . R . 129, 132. 5. Fleming, J . , The Law of Torts (4th e d . , Sydney: The Law Book Company L imited, 1971) 122. 6. (1937) 67 C.L.R. 464, 478. 7. Binchy W. Case Note on Jordan House L td . v. Menow and Honsberqer (1973) 38 D.L.R. (3d) 105 (S.C.C.) (1975) 53 Canadian Bar Review 344, 352. 8. Linden, supra, note 2 at 126. 9JS. Binchy, supra, note 7, at 352. 10. Fisheries Act 1932 (Can) C42. 11. [1950] 3 D.L.R. 790 (Exch. Ct. B.C. Admiralty) . 12. I t should be noted that , in Canada, a federal statute cannot confer a c i v i l r ight of ac t ion : see e .g . Heimler v. Calvert  Caterers L td . (1975) 4 O.R. (2d) 667, 673 (C .C . ) . 13. This i s the argument adopted by Phegan, supra, note 3. 14. Lucas Legal Techniques for Po l lu t ion Control : The Role of the  P u b l i c , supra, chapter 1, note 3 at 170. - 115 -15. (1966) 120 C.L.R. 145. 16. Id. at 156. 17. (1973) 47 A . L . J . R . 757. 18. Lucas, Legal Techniques for Po l lu t ion Contro l : The Role of the  P u b l i c , supra, chapter 1 note 3 at 170. 19. Dworkin, G. and Harar i , A . , The Beaudesert Decision - Raising  the Ghost of the Action upon the Case (1967) 40 Aust ra l ian Law Journal 296 and 347. 20. Weld-Blundell v. Stephens [1920] A.C. 596 ( H X . ) . ; O'Hearn v. Yorkshire Insurance Co. T1921] 50 O.L.R. 337 (H.C.) ; [1921] 51 O.L.R. 130 (App. D i v . ) . 21. T in l ine v. White Cross Insurance Associat ion Limited [1921] 3 K.B. 327; La Fonciere Compaqnie D'Assurance De France v. Perras et a l . [1943] S.C.R. 165. 22. See Smith v. Jenkins (1970) 44 A . L . J . R . 78 (and note by Luntz H. 44 A . L . J . 280); and Tallow v. Tai l feathers (1974) 44 D.L.R. (3d) 55 (A l ta . S.C. App. Div.) ; Gray v. Barr (Prudential Assurance  Co. Third Party ) [1970] 2 A l l E.R. 702; A f f d . [1971] 2 A l l E.R. 949 (C .A . ) ; S i r o i s v. Saindon [1975] I .L .R. 2290 (S .C .C . ) . 23. Fleming J . , Insurance for the Criminal (1971) 34 Modern Law Review, 176, 178. 24. See B r i t i s h Columbia Insurance Act , R.S. 1948, C164 s . 100. 25. See for e .g . F ire and A l l Risks Insurance v. Powell [1966] V.R. 513 ( f ' . C ) ; see also McNeel,y\-"< M . , I l l e g a l i t y As a Factory  in L i a b i l i t y Insurance (1941) 41 Columbia Law Review 26, 32 -3 . 26. I d . 27. Id at 527. 28. La Fonciere Compaqnie D'Assurance De France v. Perras et a l . [1943] S.C.R. 165, 177. 29. Fleming, supra, note 2>3J at 178. 30. Fisheries Act , R.S.C. 1970, F-14. 31. (1973) 12 C.C.C. (2d) 8 , 22 (Ont. P .C . ) . 32. (1972) 5 C.C.C. (2d) 319 ( B . C . P . C . ) . - 116 -33. Id. at 323. 34. [1974] 4 W.W.R. 337 ( B . C . P . C . ) . 35. Id. at 339. 36. Id.. 37. R.S.C. 1970 C S - 9 . 38. [1972] 7 C.C.C. 562 ( B . C . S . C ) ; [1973] 9 C.C.C. 179 (B.C.C. of A . ) . 39. [1972] 7 C.C.C. 562, 564. 40. The wr i te r had the opporunity of putt ing th is in terpretat ion to the Crown Prosecutor in The Aran case. He expressed an i n c l i n a t i o n to agree that the interpretat ion was f e a s i b l e . 41. [1974] 1 W.W.R. 258 (B .C .C .A . ) . 42. Id. at 263. 43. Id. 44. (1974) 4 W.W.R. 435 ( B . C . P . C ) . 45. Ont. 1971. 46. (1973) 12 C.C.C. (2d) 8 (Ont. P . C ) . 47. Id. at 19. 48. [1970] 3 O.R. 693 ( H . C ) . 49. (1974) 17 C.C.C. (2d) 559 (Ont. P . C ) . 49a. Id at 567. 50. R.S.O. 1970 C332 (formerly ca l led Ontario Water Resources Com- mission A c t . ) . 51. [1968] 4 C.C.C. 81 (Ont. C .C . ) . 52. (1974) 13 C . C . C (2d) 87 (Ont. P . C ) . 53. R. v. L iquid Cargo Lines U d . (1975) 18 C.C.C. (2d) 428 (Ont. P . C ) . 54. R. v. North Canadian Enterprises L t d . , (1975) 20 C.C.C.(2d) 55. Insurance Against Fines (1936) 100 Just ice of the Peace 248. 56. (1973) 12 C.C.C. (2d) 8. - 1 1 7 -Id at 24. The Economic Impact of Po l lu t ion Control : A Summary of Recent  Studies, Council on Environmental Qual i ty , Department of Commerce and Environmental Protection Agency 1972, 4. 59. Professor Michelman (Po l lu t ion as a Tort: A Non-Accidental  Perspective on Calabresisis 'Costs ' (1971) 80 Yale Law Journal 647, 667-8) refers to the "sweeping arguments" for s t r i c t l i a b i l i t y advanced by the "cost i n t e r n a l i z i n g school" , though he questions the universal v a l i d i t y of t h e i r assumptiongthat the po l lu te r i s always the cheapest cost avoider. 60. Supra, note 58. 61. Supra, note 59. 62. Id -at 667. 63. Ca labres is , G. The Costs of Accidents: A Legal and Economic  Analysis (New Haven: Yale Universi ty Press, 1970) see also Calabresi G. The Decision for Accidents: An Approach to Non- f a u l t A l locat ion of Costs (1965) 78 Harvard Law Review 713. 64. Ca labres i , The Decision for Accidents: An Approach to Nonfault  A l locat ion of Costs, supra, note 63 at 715. 65. Id at 716-721. 66. The d i f f i c u l t y of determining "what i s a cost?" and "what i s a cost of what?"; the problem of income d i s t r i b u t i o n in soc ie ty ; and the fact that the exercise of a l l oca t ing accident costs to the a c t i v i t i e s which cause them can be more expensive than i t i s worth. Calabresi acknowledges these d i f f i c u l t i e s in his w r i t i n g : see supra note 63. 67. Ca labres i , The Decision for Accidents: An Approach to Nonfault  A l locat ion of Costs, supra note 63 at 717-19. 68. Michelman, supra note 59 at 654-56. 69. Id at 655. 70. Professor Michelman questions th is assumption, see supra note 59. 71. The "cost i n t e r n a l i z a t i o n school" of commentators argue for s t r i c t l i a b i l i t i e s , see e .g . McCarthy R. Recent Legal Developments in  Environmental Defense (1970) 19 Buffalo Law Review 195, 201. 72. Michelman, supra, note 59 at 652. 73. Some of the schemes are discussed by Professor Marc Roberts in Environmental Protect ion : The Complexities of Real Pol icy Choice published in Swainson, N . , (ed) Managing The Water Environment" (Vancouver: Universi ty of B r i t i s h Columbia Press, 1976) 157. 57. 58. - 118 -74. See Dales J . Po l icy Perceptions and Management Mechanisms, published in Swainson, supra, note 73 at 143; and Dales J . Po l lu t ion Property and Prices (Toronto: University of Toronto Press, 1969) chapter 6. 75. Ca labres i , The Decision For Accidents: An Approach To Nonfault  A l locat ion of Costs, supra, note 63 at 719. 76. [1969] 2 W.L.R. 470 (H .L . ) ; [1969] 1 A l l E.R. 347. 77. Nemerson, S . , Criminal L i a b i l i t y Without Fault : A Phi losophical  Perspective (1975) 75 Columbia Law Review 1517, 1536. 78. Id at 1576. 79. See Lucas,Legal Techniques for Po l lu t ion Contro l , supra chapter 1, note 3. 80. See F .A . I , v. Powel1 [1966] V.R. 513 (F .C . ) . 81. J_d. 82. For a deta i led discussion of the defence, see Linden A. S t r i c t  L i a b i l i t y , Nuisance and Leg is la t i ve Authorizat ion (1966) 4 Osgoode Hall Law Journal 196. 83. See The Managers of the Metropolitan Asylum D i s t r i c t v. Hi!1 (1881) 6 A.C. 193 (H.L.) for a j u d i c i a l discussion of the statutory authority doctr ine. 84. City of Portage La P r a i r i e v. B.C. Pea Growers Ltd . (1966) 54 D.L.R. (2d) 503 (S .C .C . ) . 85. Stephens v. V i l lage of Richmond H i l l [1955] 4 D.L.R. 572 (Ont. H . C ) . 86. Himmelman v. Nova Construction Co. (1969) 5 D.L.R. (3d)56 ( N . S . S . C ) . 87. There are exceptions e .g . where the regulation or ins t ruc t ion i s breached by an employee without the knowledge of responsible o f f i c e r s in the employer organizat ion. 88. This assumes that the defence could be maintained in re la t ion to other common law claims as well as nuisance. 89. S .B .C . 1967. 90. Lucas, Wilson and Berger, supra, chapter 1, note 3 at 23-24; (See also the arguments out l ined by Elder in re la t ion to the Ontario Water Resources Act , supra, chapter 1 note 3 at 155S6) and Lucas A . , "Water Po l lu t ion Control Law i n B r i t i s h Columbia'.', supra, chapter 1 note 3 at 83-85. - 119 -91. Id. 92. The wr i ter i s unaware of any B r i t i s h Columbia case in which a Po l lu t ion Control Act Permit has been raised as a defence in a common law act ion . In a l e t t e r to the w r i t e r , the ass is tant d i rector of the B.C. Po l lu t ion Control Branch advised that he too was unaware of any such case. 93. I .C .E .L .N . No. 3 at 4 discussed in E s t r i n , supra, chapter 1, note 3 at 435-6; see also Tahsis Co. v. Canadian Forest Products (1968) 5 W.W.R. 641 ( B . C . S . C ) . 94. Venuto v. Owens - Corning Fiberglass Corp. (1971) 22 Ca l . App. (3d) 116, 99 C a l . Rptr. 350; People v. Reedly (1924) 66 Ca l . App. 409, 226 P 408. 95. Venuto v. Owens-Corning Fiberglass Corp. , supra, note 94. 96. American author i t ies have tended to require proof of negligence in order to support a nuisance claim (see McLaren, supra, chapter 1 note 3 and the cases c i ted in footnote 73 therein) and the Wagon  Mound No. 2 decision (1967) 1 A . C 617 marks a trend towards a conceptual merger of the negligence and nuisance act ions . 97. Dr. de Saventh.em considers i t "doubtful"whether the argument ( i . e . the defence based on "reasonableness") would succeed in warding o f f claims by those who have suffered damage due to po l lu t ion which was within the l i m i t s of appl icable control regulat ions" . He has also pointed out the great d i f f i c u l t y for insurers in conducting e f fec t i ve research in matters such as th is because of the d i f fe rent patterns followed by l e g i s l a t i o n in the d i f fe rent i n d u s t r i a l i z e d countries of the world: personal correspondence dated 31st November 1975. - 120 -CHAPTER VI INSURABILITY AND COVERAGE IN OTHER AREAS A. Economic Losses: In the past , th is has not been an area of pa r t i cu la r concern for l i a b i l i t y insurance because the common law has been slow to recognize a l i a b i l i t y for purely economic l o s s . . I t would be an overstatement to say that the at t i tude of the^courts on th is matter has changed e n t i r e l y , but there i s some authority which suggests that j u d i c i a l thinking i s s ta r t ing to take a new l i n e . This may have a special s ign i f i cance in the context of environmental l i a b i l i t i e s . Let us take, for example, the act ion in publ ic nuisance. An ind iv idual can act in connection with a publ ic nuisance only i f he or 1 she has suffered "special damage" stemming from a material i n t e r -ference with the "reasonable comfort and convenience of l i f e of a c lass 2 of Her Majesty's subjects" . What const i tutes "special damage" i s a vexed question. The view most widely accepted in the common law world i s that the damage sus-tained by the p l a i n t i f f must be d i f fe rent in kind from that which the 3 4 general publ ic s u f f e r s ; but an Austra l ian dec is ion , Walsh v. Ervin (Sholl J . , Supreme Court of V i c t o r i a ) , i s in the vanguard of a body of 5 6 opinion that a mere dif ference in degree i s s u f f i c i e n t ; and Fleming has noted a modern tendency to re jec t the "el'usive d i s t i n c t i o n " between dif ference in kind and degree, at least in the obstruction cases. - 121 -Whether mere economic loss w i l l const i tute special damage i s also 7 the subject of dispute. In Hickey v. E l e c t r i c Reduction Co. , Chief Just ice Furlong, of the Newfoundland Supreme Court* took the view that the pecuniary loss sustained by professional fishermen in the Placent ia Bay area, as a resul t of pol lut ion-caused f i s h k i l l s in the bay, did not const i tute "special damage" e n t i t l i n g an act ion against the p o l l u t e r . He thoughttthat the i r r ight to o u t f i t for the f ishery and the i r r ight to f i s h were enjoyed " in common with a l l Her Majesty's 8 subjects" and could be vindicated only by "an action by the attorney-general , e i ther with or without a r e l a t o r , in the common in te res t of 9 10 the p u b l i c . " Professor McLaren has pointed to "a t r i a d of Ontario 11 Appellate decis ions" which , he argues, evidence a countervai l ing 12 trend in Canadian jurisprudence, but, in the absence of j u d i c i a l dissent from Hickey's Case, the argument i s , d i f f i c u l t to susta in . The Hickey decision i s surpr is ing when one considers the boldness Canadian courts have displayed in al lowing recovery of purely economic loss in negligence 13 14 cases, notwithstanding weighty English authority to the contrary. Whilst American courts have endorsed the general proposit ion that a dif ference in kind and not merely degree i s necessary to support a 15 pr ivate act ion in publ ic nuisance, they have been far more sympathetic to the argument that purely pecuniary loss may const i tute that d i f -ference. The most recent i l l u s t r a t i o n i s a decision of the U.S. Court of Appeals 9th C i r c u i t in which the facts were s i m i l a r to those in 16 Hickey's Case. The case, Union Oi l Co. v. Oppen, arose out of the - 122 -1969 Santa Barbara d isaster . Although the action was framed in neg-l igence, there i s a c lear recognit ion that the f inanc ia l loss to com-mercial fishermen a r i s i n g from po l lu t ion i s recoverable in a nuisance 17 ac t ion . There i s Austra l ian author i ty , a l s o , for the recognit ion of 18 commercial losses as providing s u f f i c i e n t standing. In the Hiekey dec is ion , Furlong C . J . , having disposed of the "special damage" quest ion, adverted b r i e f l y to the issue of remoteness 19 of damage. His view seems to have been that , even i f the p l a i n t i f f s had had standing to sue, they would have been denied recovery because of the "consequential" nature of the i r purely economic loss . He r e l i e d for that view upon the English Court of Appeal decision of 20 S.C .M. (United Kingdom) v. W. J . Whittal & Son L td . which the Supreme 21 Court of Canada has subsequently declined to fo l low. He suggested that the p r inc ip le of remoteness of economic damage was equally a p p l i -cable i n negligence and nuisance. In the l i g h t of the Canadian 22 Supreme Court's decision in Rivtow Marine which, on one view at l e a s t , i s authority for the recovery of economic loss in negligence, Hickey's Case might have a d i f fe ren t resu l t today on th is point . Tradi t ional l i a b i l i t y insurance f a c i l i t i e s have been concerned with l i a b i l i t y for "bodi ly harm" and "property damage". Concepts such as these can be given narrow appl icat ion by the courts and i t i s probable, that they would not be interpreted to include purely pecuniary loss that i s not attached to personal i n ju r ies or property damage. Yet, in - 123 -cases such as Hickey, th i s i s the very loss for which a defendant might now be held l i a b l e and might reasonably seek indemnity. Economic loss i s r e a l l y only the most g lar ing example of a number of losses pecul iar to the environmental context which simply do not f i t neatly into the categories for which indemnity i s provided in the t r a d i t i o n a l f a c i l i t y . One thinks in p a r t i c u l a r of the emerging l i a b i l i t y theories which involve movement towards the recognit ion of new environmental r ights not necessar i ly anchored in notions of property or personal safety . These inev i tab ly must render the general l i a b i l i t y p o l i c y , as t r a d i t i o n a l l y structured* less and less relevant and su i table in . the sphere of environmental r i s k . The Environmental Protector Po l icy (E .P .P . ) makes no attempt to deal with th is inadequacy in the general cover. The narrow basic cover i s reasserted by reference to "personal in jury to our destruction 23 of tangible property". However, the Environmental Impairment L i a b i l i t y (E . I . L . ) Pol icy takes a fresh approach in extending i t s coverage to "impairment or diminution of or other interference with 24 any other r i gh t or amenity protected by ilaw." This wording c lea r l y would embrace an economic claim of the type urged in Hickey and now possibly compensable under the Rivtow Marine thes is . I t would seem also to be wide enough to cover such l i a b i l i t y developments as aesthet ic nuisance and breach of publ ic t r u s t , though, of course, the question whether "protected by law" includes legal p r inc ip le not current at the time of issue of the pol icy but subsequently gaining acceptance - 124 -during the pol icy per iod, must be determined according to the intent ion of the par t ies . B. Shutdown Losses: From an insurance standpoint, the main in terest l i e s not in the abstract notion of legal l i a b i l i t y per se but in the question of remedies, the nature of the sanction (actual or potent ia l ) against which an indemnity i s sought, The usual remedies in environmental l i t i g a t i o n are damages and/or in junct ion . Mercenary motives or sheer economic r e a l i t y w i l l sometimes over-bear an aggrieved property owner with the resu l t that he w i l l s e t t l e for a monetary payment as a d ispos i t ion of his c la im. But many p l a i n t i f f s , p a r t i c u l a r l y those who are motivated by a wider concern for the general environment, recognize the value of and e n t h u s i a s t i c a l l y pursue the in junct ive remedy: "In most instances, the purpose of environmental l i t i g a t i o n w i l l be to seek an improvement in the environment in which the p l a i n t i f f and his neighbours l i v e . The most sa t i s fac to ry way of achieving t h i s i s to persuade the court to res t ra in the defendant from conducting his operations in such a way as to cause p o l l u t i o n . By grant of a perpetual prohibi tory in junc t ion , d i rec t pressure i s brought upon the diffender to seek ways of obviating the po l lu t ion which he i s causing, and i f he f a i l s to comply his enterprise may be c u r t a i l e d e n t i r e l y " . (25) Thus, although the potent ial damages award from any major environmental d isaster i s enormous, and therefore of serious concern, i t i s c lear that shutdown orders with consequent loss of p r o f i t s also present an ever increasing r i sk for indus t r ia l enterpr ise . - 125 -Insurers are cognisant of the r i s k but, for the moment at l e a s t , are o f fe r ing no protect ive f a c i l i t y . P o l i c i e s current ly ava i lab le refer only to "sums which the insured sha l l become l e g a l l y l i a b l e to pay in respect of c l a i m s . . . " and c l e a r l y do not contemplate any 26 cover for loss of p r o f i t s a r i s i n g from a court-ordered shutdown. Dr. de Saventhem has wr i t ten : -"The p o s s i b i l i t y of providing loss of p r o f i t s cover fol lowing upon a court in junct ion requir ing shut-down of plant has indeed been considered. But we have so fa r found i t quite impossible to devise any form of rat ing basis for th is type of cover. Moreover, there i s the de f in i te l i k e l i h o o d that such an extension w i l l only be requested by firms who must fear such an in junct ion being made against them because they have v i r t u a l l y come to the end of the road as far as abatement i s concerned. In -surers would be faced with the worst type of a n t i -s e l e c t i o n . This in turn would make i t necessary to charge premiums of such magnitude that they are un l ike ly to be acceptable to any assured other than those for whom a shutdown in junct ion i s no longer a ' r i s k ' but a very serious p robab i l i t y . We do not th ink, therefore, that we are l i k e l y to venture into th is heavi ly mined area of coverage " (27) = In the l i g h t of the hard r e a l i t i e s re f lected in that statement, i t i s appropriate to examine the in junct ive remedy c lose ly with a view to obtaining a " r i sk perspective" i . e . an appreciation of the s ign i f i cance of the in junct ion as a " r i s k " in the insurance context. Injunctions may be mandatory or prohibi tory and may be directed at e x i s t i n g or apprehended harm. In the environmental f i e l d , the prohibi tory in junct ion i s the most common, and, more often than not, i t w i l l be associated with the cause of act ion of nuisance. Although the in junct ion i s a d iscret ionary remedy, a set of time-honoured - 126 -guidelines governing the exercise of the d iscret ion has evolved through the case law. The c l a s s i c statements of p r i n c i p l e appear . in the judgments of Smith and Lindlev L . J . J . indShelfer v. London E l e c t r i c 2 f Light ing Co. , a case involv ing a nuisance caused by machinery v i b -ra t ions . Lindley L . J . , having referred to the p l a i n t i f f ' s prima f a c i e r ight to an in junct ion upon a nuisance being proved, went on to say: "Without denying the j u r i s d i c t i o n to award damages instead of an in junc t ion , even in a case of con-t inuing actionable nuisance, such j u r i s d i c t i o n ought not to be exercised in such cases except under very exceptional circumstances. I w i l l not attempt to specify them, or lay down rules for the exercise of j u d i c i a l d i s c r e t i o n . I t i s s u f f i c i e n t to r e f e r , by way of example, to t r i v i a l and occasional nuisances: cases in which a p l a i n t i f f has shown that he only wants money; vexatious and oppressive cases; and cases where the p l a i n t i f f has so conducted himself as to render i t unjust to give him more than pecuniary r e l i e f . In a l l such cases as these, and in a l l others where an action for damages i s r e a l l y an adequate remedy - as where the acts complained of are already f in ished - an in junct ion can be properly refused." (29) In l i n e with th is approach, English courts have tended to give para-mountcy to the p r inc ip le of ind iv idual r ights in the i r del iberat ions about the grant of injunct ions and have demonstrated a d i s t i n c t r e -luctance to allow considerations of possible publ ic inconvenience or economic hardship on the defendant to derogate from that p r i n c i p l e . 30 In Redland Banks L td . v. Morris the House of Lords i m p l i c i t l y reaffirmed the Shelfer proposit ion w h i l s t , at the same time, d is t ingu ish ing between prohibi tory and mandatory in junct ions . An Austra l ian dec is ion , Owen 31 v. 0'Connor, a lso concerned with a mandatory in junc t ion , recognizes the e f f i cacy of She l fe r ' s Case in Austra l ian j u r i s d i c t i o n s . - 127 -American author i t ies on th is matter are of a d i f fe rent bent. The now preva i l ing approach i s one which has been described as a "balancing of the e q u i t i e s " . I t postulates that in junct ive r e l i e f should be refused " i f issuance of the in junct ion would cause the defendant or . society greater hardship than continuance of the nuisance would cause 32 the p l a i n t i f f . " A recent and forcefu l endorsement of th i s view was 33 made by the New York Court of Appeals in Boomer v. A t l a n t i c Cement Co. Though there was respectable ear ly authority in New York which was more in l i n e with the English doctr ine, Bergan J . , with Whose judgment Fuld C. J . , Burke and Sc i leppi J . J , concurred (Jason J . dissenting) was not prepared to order the closure of a cement plant in which the p l a i n t i f f had a $45,000,000 investment and at which over three hundred people were employed: "The ground for denial of in junc t ion , notwithstanding the f inding both that there i s a nuisance and that , p l a i n t i f f s have been damaged s u b s t a n t i a l l y , i s the large d i spar i t y in economic consequences of the nuisance and of the i n j u n c t i o n . " (34) Once again, Canadian courts seem to be torn between English and American trends. One of the c learest appl icat ions of the English 35 thinking occurs in the judgment of the Supreme Court in K.V.P. v. McKie. Although the relevance of publ ic in te res t and economic hardship had been argued, the court , in ordering an in junct ion concluded (Kerwin _J_. de l i ver ing the judgment) that : "Po l lu t ion has been shown to e x i s t , damages would not be a complete and adequate remedy and the courts ' d isc ret ion should not be exercised against the 'current of author i ty , which i s of many years s tand ing ' " . (36) - 128 -Support for the English doctrine may be found in other Canadian 37 38 dec is ions , too, but there i s a body of author i ty , which s i t s more comfortably with the American "balancing of the equ i t ies" cases. For 39 example, the judgment of Duff J , in Canada Paper Co. v. Brown, though wri t ten nearly f i f t y years e a r l i e r , has a d i s t i n c t Boomer v. A t l a n t i c Cement r ing about i t . "An in junct ion w i l l not be granted where, having regard to the circumstances, to grant i t would be unjust ; and the d ispar i t y between the advantages to the p l a i n t i f f to be gained by the granting of that remedy and the inconvenience and disadvantage which the defendant and others would suf fer in con-sequence thereof may be a s u f f i c i e n t ground for r e -fusing i t . " (40) More recent ly , the B r i t i s h Columbia Court of Appeal had occasion in 41 Rombough v. Crestbrook TimberLlbtd. to consider an award by a t r i a l judge of damages in l i e u of an in junct ion rest ra in ing burning operations at the defendant's sawmil l . However, since the p l a i n t i f f had volun-t a r i l y conceded that an absolute in junct ion would cause undue economic hardship and had inv i ted the t r i a l judge to order a l imi ted in junc t ion , the court was not ca l led upon to address the American-English dicho-tomy in e x p l i c i t terms. In the r e s u l t , the decision offers l i t t l e assistance. Professor McLaren suggests that the "English doctr ine" commands 42 "both more consistent and l o f t i e r support" than does the "balancing of the equ i t ies" doctrine in Canadian law. Moreover, he argues persuasively that t h i s , in p r i n c i p l e , i s as i t should be. I t perhaps should be added that , even within the Shelfer orthodoxies, there i s - 129 -some f l e x i b i l i t y , such that a judge who i s disposed to accord a higher p r i o r i t y to economics and commercial demands than to environmental i n t e g r i t y can mould his decision accordingly. He might, for example, regard a demand for an in junct ion as "vexatious and oppressive" where a s ingle p l a i n t i f f seeks to close down a major plant to increase his own comfort. I t i s not sought to make a great deal of th is po int , but simply to suggest that there i s considerable s ign i f i cance in the at t i tude of mind of the judges - how they view p r i o r i t i e s , and what they see as the courts ' ro le in re in forc ing them. Although the prohibi tory in junct ion sought as a remedy for nuisance i s the most common case, i t should be observed at th is point that there are some subt le t ies of di f ference from one cause of action to another. For example, in junct ive r e l i e f in nuisance may l i m i t a p a r t i -cular environmental degradation just s u f f i c i e n t l y to prevent i t from const i tu t ing a nuisance. In trespass on the other hand, the p l a i n t i f f ' s r ights continue to be v io lated as along as the trespassory invasion continues in any measure at a l l . Thus an absolute prohib i t ion rather 43 than a mere curtai lment would be ordered by the court . A s i m i l a r posi t ion obtains in the protect ion of r ipar ian r i g h t s . In most of the academic discussions of environmental remedies, scant attent ion i s paid to the inter locutory in junct ion . Yet, the grant of an inter locutory in junct ion can be a matter of the greatest s i g n i f i c a n c e . In the f i r s t p lace, many actions seeking in junct ive r e l i e f are se t t led in accordance with the terms of an inter locutory order. - 130 -Such an order i s not f i n a l , of course, but , espec ia l l y where a l l the evidence has been adduced (usually by a f f i d a v i t ) and the arguments have been f u l l y canvassed by Counsel, the inter locutory decision i s a r e l i a b l e ind icator of the l i k e l y t r i a l r e s u l t . With that r e a l i t y in mind, the part ies w i l l often negotiate a settlement rather than incur the further expense of a f u l l scale t r i a l . Secondly, i f a p l a i n t i f f obtains an inter locutory in junct ion against an indus t r ia l enterpr ise , then the issues might be purely academic by the time t r i a l i s reached. That i s to say, economic exigency might by then have determined as a pract ica l matter that the defendant must get out of business. This area of inter locutory injunct ions i s a l l the more in te res t ing because of the s t i l l uncertain impact of the House of Lords decision 44 in American Cyanamid Co. v. Ethicon Ltd. P r io r to th i s decision i t was se t t led in England that , courts considering an appl icat ion for an inter locutory in junct ion should adopt a "robust at t i tude" and "be guided by the apparentsit!nercg'.th or otherwise of the p l a i n t i f f ' s case as ~ 45 46 47 revealed by the a f f i d a v i t s " . Canadian and Austra l ian author i t ies held a s i m i l a r p o s i t i o n . Once s a t i s f i e d that the p l a i n t i f f had made out a prima fac ie case, the court would go on to consider whether the balance of convenience merited the granteof an in junct ion . In American Cyanamid, Lord Diplock, with whom the other Lords agreed, denied the existence of any rule requir ing the establishment of a prima fac ie case. The p l a i n t i f f , i t seems, must merely show that the claim i s not " f r i vo lous or vexatious", in other words "that there - 131 -48 i s a serious question to be t r i e d " . According to Lord Diplock: " . . . unless the material ava i lab le to the court at the hearing of the appl icat ion for an i n t e r -locutory in junct ion f a i l s to d isc lose that the p l a i n t i f f has any real prospect of succeeding in his claim for a permanent in junct ion at the t r i a l , the court should go on to consider whether the balance of convenience l i e s in favour of granting or refusing the inter locutory r e l i e f that i s sought". (49) The re la t i ve merits of the par t ies ' cases w i l l be taken into account only " i f the extent of the dwcompensatable disadvantage to each party 50 would not d i f f e r widely" . The House of Lords i n i t i a t i v e , although binding upon the Court of Appeal, has had a mixed reception in that Court. I t was followed 51 by the majority in Fe l l owes y . Fisher but Lord Denning, in a th in l y disguised circumvention of the p r i n c i p l e , characterized the case before him "as one of those ' ind iv idua l cases' in which the courts should go 52 by the p r inc ip les stated by the House of Lords in St rat ford v. Lindley rather than those stated By them in American Cvanamid Co ." . By 53 employing the same " ind iv idual cases" device in Hubbard v. P i t t , Lord Denning was again able to avoid applying the r u l e . Stamp and  Orr L . J . J , rejected the exception propounded by Lord Denning and i n -stead, l o y a l l y applied Lord Diplock's r u l i n g . Stamp L . J , referred in his judgment to another Court of Appeal dec is ion , Kwik Lok Corporation 54 v. HEW Engineers L t d . , in which the Court had followed the House of Lords lead. 55 The new rule already has received academic scrut iny and has been - 132 -found wanting in some respects , but i t i s c lea r l y author i tat ive and 56 binding in English j u r i s d i c t i o n s . Stephen J . in the Austra l ian case 57 of F r i th Industries v. Polyglas Engineering expressly decl ined to fol low American Cyanamid, holding himself instead to be bound by the High Court decision in Beecham Group L td . v. B r i s t o l Laboratories Pty. 58 Ltd. However, the English case has received some favourable academic 59 comment in A u s t r a l i a . In Canada i t has been followed in at leas t one case. This was the decision of Craig J . of the B r i t i s h Columbia Supreme Court in Thomas Lindsay Limited and 6.G.F. Investments Limited 60 v. Thomas Lindsay. The continued relevance of the "balance of convenience" considera-t ion may mean that , in many cases, the decision w i l l be the same under the new rule as under the o l d . But, i f American Cyanamid has any e f fec t at a l l , i t w i l l be to make inter locutory injunctions easier to obta in . I t i s s i g n i f i c a n t , in th i s context, that the majority appl icat ion o f . the rule in Hubbard v. P i t t resulted in the grant of an inter locutory in junct ion whereas, Lord Denning's appl icat ion of the old rule led him to the conclusion that no in junct ion should issue. I f a p l a i n t i f f no longer has to make out a prima fac ie case, then the r i sk of an i n t e r -locutory shutdown must be greater. For many defendants the struggle to keep t h e i r heads above the f inanc ia l waterl ine pending t r i a l would be a very serious one. I t i s en t i re l y possible that a court , having granted an inter locutory in junct ion on the "American Cyanamid t h e s i s " , would then decide at t r i a l that the s i tua t ion does not c a l l for a permanent in junct ion . For the uninsured defendant (and against th is - 133 -l i a b i l i t y a l l defendants are current ly uninsured) the reprieve may be too late and he may be l e f t to derive whatever comfort he can from the 61 p l a i n t i f f ' s undertaking as to damages. The absence of an insurance f a c i l i t y to cover shutdown losses gives r i se to another i n t e r e s t i n g , i f perhaps t o t a l l y academic question. Assume that a chemical plant i s insured " for sums which i t sha l l become l e g a l l y l i a b l e to pay in respect of c l a i m s . : . " but not, of course, fo r shutdown losses . The plant i s sued in nuisance for damages and/or an in junct ion by an adjacent property owner. Normally, the insurer would be e n t i t l e d under the terms of the pol icy to conduct the defence at i t s own d i s c r e t i o n . Could the insurer negotiate a consent in junc -t ion ( in l i e u of damages) with the p l a i n t i f f ? Such a so lut ion would doubtless leave the p l a i n t i f f and the insurer quite s a t i s f i e d but would be far from sat i s fac to ry for the defendant/insured. The answer i s c l e a r . F i r s t l y , from the point of view of insurance p r a c t i c e , most insurers would regard such a t a c t i c as unthinkable. Secondly, i t would represent a breach of the insurer ' s general duty of good f a i t h . Th i rd ly , the insurance po l icy probably could be interpreted to confine the insurer ' s powers to those areas in which i t was ac tua l l y providing indemnity; and, f i n a l l y , a court would probably require the defendant's personal consent to an order. There should be no publ ic pol icy objection to a shutdown coverage. The object of the court 's order i s not to punish the defendant but to put a stop to the offending a c t i v i t y . I f anything, insurance coverage - 134 -would be supportive of that object because i t removes whatever temp-tat ion there might have been for the defendant to breach the in junc t ion . By l i m i t i n g the period of time for which loss of p ro f i t s would be pa id , the insurer could place a c e i l i n g on i t s own ultimate l i a b i l i t y and at the same time provide the insured with an incentive to perform the necessary remedial works (and thereby discharge the order) as expedi -t i ous l y as poss ib le . A useful soc ia l purpose might also be served, for i t seems to th is wr i te r that often the major d i f f i c u l t y for the defendant and for the community i s neither theppaucity of technological information nor the expense of remedial work per se , but the economic burden of shutt ing down, in whole or in par t , pending and during such work. This burden i s not confined to the offender, for a shutdown can also mean local or regional economic d i s l o c a t i o n . I f the insurer ca re fu l l y conducts theooriginal assessment and continuing inspection and improvement procedures, there seems to be no reason to ant ic ipate a p a r t i c u l a r l y unrewarding claims experience. As in a l l business interrupt ion underwrit ing, proper regard should be had at the outset to ex is t ing and projected p r o f i t and development. Provided th is has been done, i t should not be beyond the actuar ia l a b i l i t i e s of insurers to calculate possible losses , p a r t i c u l a r l y when s p e c i f i c time l imi ta t ions for the cover have been imposed. Nor should i t be inconceivable that th is c lass of business could be wr i t ten p ro f i tab l y without the prescr ipt ion of unattainable premium charges. Of course, i t would be somewhat out of character for a l i a b i l i t y po l icy - 135 -such as E . I .L . to be providing indemnity for the insured's own losses rather than his l i a b i l i t y for others' losses ; but that of i t s e l f i s hardly a reason to f a l t e r . Why should insurers balk at the creation of a hybrid l i a b i l i t y - business interrupt ion f a c i l i t y ? C. The Problem of Chronology: Because of the special character of environmental damage, there i s a special problem of chronology which must be borne in mind in the evaluation of the l i a b i l i t y insurance f a c i l i t i e s . The d i f f i c u l t y and importance of the problem were well stated by the Munich Reinsurance Company: "In the case of environmental damage, i t w i l l sometimes not be easy - s i m i l a r considerations apply to Products L i a b i l i t y c la ims, espec ia l l y where medicines are concerned, - to d is t ingu ish the en-suing loss events from each other and to determine the i r exact date of occurrence. This may, however, be of great importance where a decision must be made as to which sums insured and which conditions apply, and which insurers , reinsurers and r e t r o -cess ionaries have to indemnity the l o s s . " (62) Tffere are two questions. In the f i r s t p lace, a par t i cu la r environ-mental impairment may occasion damage to a number of d i f fe rent people at d i f fe rent times; the best example dts the emission of gaseous:3 d i s -charge which can have an e f f e c t , varying both as to time and sever i t y , upon adjacent property owners. Are the various claims of affected part ies to be regarded as one loss event for purposes of indemnity l i m i t s , or should they be regarded as a number of separate, ind iv idual actions? The t r a d i t i o n a l po l icy forms have provided no d e f i n i t i v e ass is tance, with the consequence that unexpanded expressions, such as - 136 -"any one accident" , "any one occurrence or catastrophe", "claims a r i s i n g from one accident" and so on, have been p r o l i f i c generators 63 of l i t i g a t i o n . A products l i a b i l i t y case, D i s t i l l e r s Co. Bio-Chemicals (Austra l ia ) 64 Pty. L td . v. Ajax Insurance Co. L t d . , i s ins t ruc t i ve on the problem. This was an action by the Austra l ian d is t r ibuto rs of thalidomide for a declarat ion as to the indemnity l i m i t s of the i r l i a b i l i t y po l i cy . The pol icy imposed a $100,000 indemnity l i m i t on compensation payable "to any claimant or number of claimants in respect of or a r i s i n g out of any one occurrence or in respect of or a r i s i n g out of a l l occurrences of a ser ies consequent on or a t t r ibutab le to any one source or o r i g i n a l cause". The p l a i n t i f f s argued that they were entitt ledtto indemnity of $100,000 for each claim made on behalf of deformed in fants . The defendant urged that a l i m i t of $100,000 was a tota l f igure for a l l c la ims. As Stephen J . put i t : "The debate has, as a r u l e , concerned the meaning of the pa r t i cu la r noun, usual ly 'accident ' or 'occurrence' , employed to describe that to which the l i m i t i s to apply, and whether i t refers to the mishap i t s e l f or to the in jury or death of each person involved in i t ; whether, in other words, i t looks at the matter from the viewpoint of the insured or the injured v i c t i m " , (65) His Honour (with whom Gibbs J . agreed) inc l ined to the view that the word "occurrence", in contrast to the word "acc ident" , referred to the o r ig ina l mishap and not i t s ult imate consequences. Thus, i f the relevant causal l i n k could be shown between the o r ig ina l act of the insured in d i s t r i b u t i n g the thalidomide product and the ult imate infant deformit ies , the compensation payable would be said to a r i se out of one - 137 -occurrence. In f a c t , the causal l i n k was too tenuous, but the further expression " a l l occurrences of a ser ies" was found to be broad enough to cover the case, regardless of whether "occurrence" was thought to re fer to the mishap or i t s consequences. The dec is ion , thus, favoured the insurer . The E . I .L . po l icy seeks to avert the d i f f i c u l t y in much the same way as did the insurer in P i s t i 1 1 e r s , by making provision for a ser ies of c la ims, and takes a further step towards c l a r i t y by avoiding the use of "accident" or "occurrence". The "Limits of Indemnity" section of the pol icy prescribes a l i m i t " for any one c l a i m " , "Claim" i s then defined in the d e f i n i t i o n section as comprising "any s ingle claim or any ser ies of claims resu l t ing from one and the same i s o l a t e d , repeated, or continuing Environmental Impairment". This would seem to embrace an indiv idual a c t i o n , a group of actions or a class act ion and perhaps the only remaining ambiguity rests in the words "repeated or continuing environmental impairment." Since environmental impairment, though coming from a s ingle source over a protracted t ime, does not commonly have a per fect ly consistent impact from one moment to the next (winds change, a new batch of fuel or raw material of a d i f fe ren t qua l i t y i s used e t c . ) , i t could be argued that the impairment i s neither "repeated" nor "continuing" but a fur ther , changed impairment. Thus,-property owner A suffers from one environmental impairment; his neighbour B suffers a few hours l a t e r from a marginally d i f f e r e n t , but d i f fe ren t nonetheless, environmental impairment. Would the i r respective nuisance actions const i tute claims for "repeated or continuing Environmental Impairment"? - 138 -The second aspect of the chronology problem concerns the question whether an "acc ident" , "occurrence", "damage", "c la im" or "impairment" must f a l l during the period of insurance in order to be the subject of a grant of indemnity. I t has been seen that , in most j u r i s d i c t i o n s , courts prefer to look at the character of the resul ts rather than the causes in determining whether damage is "caused by an accident" . To be consistent with th is ana lys i s , one ought to look at when the damage i s suffered in determining whether an accident has occurred during the pol icy period. I t i s poss ib le , fo r example, that po l lu t ion w i l l accumulate in a stream over some years before anyone sustains actionable damage. The relevant time in terms of the currency of the po l icy should be the time of damage to the complainant, not the time of po l lu t ion of the stream. The recent Canadian case of Pickford & Black 66 Ltd. v. Canadian General Insurance Co. adopts th is approach, though the question a r i s i n g there was whether an accident had happened with in the t e r r i t o r i a l l i m i t s rather than within the pol icy period. In 67 Robinson v. Evans the time of sustaining damage was assumed to be the operative one for determining whether the accident happened "during the period of insurance". At least some courts have taken a d i f fe rent view of things where an "occurrence" wording was used. In A l len v. London Guarantee & 68 Accident Co. L td . two men were injured in the same c o l l i s i o n s Phi l l imore J . concluded that there had been two "accidents" but only one "occurrence". Such an interpretat ion seems to have support in a 69 more recent English dec is ion , Forney v. Dominion Insurance Co. L td . - 139 -and in the D i s t i l l e r ' s case. These analyses would suggest that , where an occurrence wording i s used, i t would be necessary to show that the causes of the damage happened during the pol icy period. I t should be remembered that , in these cases, the p o l i c i e s did not carry de f in i t i ons of "accident" or "occurrence". The d e f i n i t i o n of "occurrence" which accompanied the 1966 American pol icy changes, however, serves only to compound the uncertainty , for i t defines "occurrence" as an "accident" (thus suggesting a " resu l t s " analysis) but refers to i t as including "continuous or repeated exposure to condit ions" (thus suggesting a "causes" a n a l y s i s ) . The uncertainty i s unfortunate, fo r i t seems that the insurers intended to focus upon the damage and not i t s cause: "The pol icy w i l l not depend upon the causative event or occurrence but w i l l be based upon i n -ju r ies or damages which resu l t from such event and which happened during the pol icy per iod. I t w i l l not be material whether the causative event happened during or before the pol icy per iod . " (70) In the sphere of environmental l i a b i l i t y insurance, th is question i s of only academic in te res t for the general l i a b i l i t y p o l i c y , because of i t s "sudden and acc identa l" r e s t r i c t i o n . L i a b i l i t y for damage occurring during a po l icy period as a resu l t of an exposure outside the pol icy per iod, because not sudden, would not be indemnif ied, in any event, and, therefore, there would be no need to consider the chronology problem. But in the case of E . P . P . , which appl ies "only to claims made for personal in jury or property damage occurrences which happen during the pol icy period and for which claim i s made during the pol icy per iod" , the foregoing discussion i s of importance. I f "occurrence" i s meant to refer to cause rather than r e s u l t , then the exposure, the damage, and the claim must a l l happen during the pol icy per iod. I f the - 140 -resu l t i s the relevant feature, then, the fact that an exposure out -side the pol icy period caused damage during the pol icy period would not preclude indemnity. The E . I .L . po l icy s t r i kes out in a rather d i f fe ren t d i rect ion by requir ing simply that a claim must have been made against the insured or other due notice received by him during the period of insurance. This avoids any need to show that the environmental impairment, from which the actionable damage i s u l t imately sustained, happened during the period of insurance. Strangely, the p o l i c y , on i t s face, does not , even require that the damage be sustained during that per iod , but merely that the claim be made or the notice received. Thus an as yet unclaimed for in jury sustained before the pol icy i s even taken out, could conceivably be the subject of indemnity. I t i s questionable whether the pol icy draughtsmen would have intended th is r e s u l t , but, the extent of p rac t i ca l hardship a r i s i n g from i t i s l i k e l y to be l i m i t e d . Obviously, i f , at the time of taking out the p o l i c y , the insured has knowledge of an actionable in jury for which someone could claim or give notice during the period of insurance, he must d i s -71 close i t . Only in those rare cases of pre -po l icy in jury unknown to the insured and undiscovered by the insurer in r i sk assessment, might the insurer be prejudiced. Nevertheless, in the in te res t of insurers , th i s defect ought to be remedied. At th is po int , mention should also be made of the ambiguity con-cealed in the expression "or other due not ice" in the E . I .L . po l i c y . - 141 -Does th is refer merely to knowledge in the insured that damage has occurred from which a claim could resu l t or does i t refer to notice from the injured party of an intent ion to claim? The requirement that the notice be "received" by the insured bears connotations which suggest the l a t t e r , ("unless "constructive not ice" can be implied in some way). The unfortunate consequence of such an i n t e r p r e t a t i o n , however, would be that the insured i s placed at the mercy of the claimant. I f the claimant chooses to delay commencement of his act ion or del ivery of notice to the insured, then the l a t t e r might f i n d himself "fresh out of indemnity" at the relevant time. Nor would i t be a simple matter for the insured to renew his po l icy un t i l the claim i s made, for no insurer would be anxious to accept the renewal in the face of an inev i tab le l o s s . I t would be contrary to the p l a i n t i f f ' s own in te res t de l iberate ly to prejudice the prospective defendant's insurance coverage but the p l a i n t i f f may be b l i s s f u l l y unaware of the consequences of h is delay. Any attempt by the insured to apprise him of the posi t ion could be a breach of the standard pol icy condit ion proh ib i t ing admissions, o f fers or promises of payment etc . I t i s impossible to imagine that e i ther of the part ies to an E . I .L . insurance contract would intend such an anomaly and the courts could be expected to perform whatever gymnastics are necessary to avoid i t s consequences. In the circumstances, a redraft ing to embrace know-ledge or constructive notice possessed or acquired by the insured, thoughrperhaps abundantly caut ious, would be nonetheless prudent, as would a cor re lat i ve c l a r i f i c a t i o n in Part 1 clause 3 of the s i tuat ion where clean-up costs are incurred prdspr to the cladim for compensation. - 142 -D. Gross Negligence: I t has been suggested (by some commentators that an exclusion of l i a b i l i t y coverage where there i s "gross negligence" i s to be added to 72 the United States form of the E . I .L . po l i c y . This , i t i s argued, w i l l be a retrograde step which i s bound to lead to in terpretat ional 73 d i f f i c u l t i e s . In the f i r s t place i t should be said that these commentators are apparently incorrect in the i r b e l i e f that the E . I .L . po l icy w i l l ex-clude "grossly negligent" environmental impairment". No exclusion wording of th i s type i s at present being used or contemplated for e i ther the U.S.A. or U.K. forms. I t would appear, in f a c t , that the commen-tators are intending to refer to exclusion 4 which, although not using the expression "gross negligence" or i t s l i k e in e i ther of the forms, does prohib i t cer ta in conduct which might amount to gross negligence. In any event, the d i f f i c u l t i e s are more imagined than r e a l . Given the se t t led j u d i c i a l at t i tudes to insurance pol icy construct ion , any future exclusions of "gross negligence" in general , o r , more s p e c i f i c a l l y , of par t i cu la r conduct of a reckless type, are l i k e l y to be interpreted as generously, from the insured's point of view, as the law and the wording of the pol icy w i l l a l low. I t w i l l be remembered that intent ional and, in most j u r i s d i c t i o n s , reckless conduct are i m p l i c i t l y beyond the scope of coverage, whether or not expressly dealt with in the po l i cy . Accordingly , those pol icy terms which seemingly narrow the ambit of protection by general or s p e c i f i c exclusion are - 143 -often l i t t l e more than expressions of underlying p r i n c i p l e . E. Jo int and Several L i a b i l i t i e s : 74 The E . I .L . exclusion 11 i s one which does not appear in standard l i a b i l i t y p o l i c i e s but rather i s t a i l o r e d s p e c i f i c a l l y for the environ-mental l i a b i l i t y s i t u a t i o n . I t i s therefore of special i n t e r e s t . Although the exclusion refers to " j o i n t and several l i a b i l i t y " , i t i s l i k e l y in the common law j u r i s d i c t i o n s , that any concurrent environ-mental l i a b i l i t y would be " s e v e r a l " , rather than" jo in t " . Cases 75 76 previously c i ted provide i l l u s t r a t i o n s . In Pride of Derby, for example, several defendants pol luted the same stream thereby causing a s ingle damage to the defendant. In no sense did the defendants act in concert with each other; indeed, they acted quite independently. Accordingly , they were not j o i n t tortfeasors but several concurrent tor t feasors . Nevertheless, several concurrent tortfeasors are each 77 l i a b l e in f u l l fo r the damage they concurrently caused and th is i s the real point for exclusion 11. An E . I .L . insured may be severa l ly l i a b l e for the whole of the damage occasioned to a defendant, though, perhaps, having contributed only 20% of the damage. The e f f e c t of exclusion 11 i s that the indemnity i s l imi ted to 20% even i f the judgment c red i tor were to enforce the whole of the judgment against the insured. The insured i s then l e f t to his own devices to recover 80% of the judgment from the co - to r t feasor . The insurer ' s reasoning in l i m i t i n g the coverage i s c l e a r ; by providing indemnity for the whole judgment, he would be underwriting the - 144 l i a b i l i t i e s not only of his own c l i e n t , but of another po l lu te r from whom he has received no premium and the e f f i c i e n c y and "c lean l iness" of whose operation he has had no opportunity to assess. The insured's answer would be that s i m i l a r d i f f i c u l t y i s surmounted in other areas (notably auto insurance), why not in the environmental f i e l d . The insured would further argue that the insurer , being better able to withstand f inanc ia l losses , ought to bear the r i sk that the other tor t feasor might be a man of straw against whom a judgment for indemnity or contr ibut ion would be worthless. The ind icat ion i s that insurers are not en t i re l y insens i t i ve to the insured's pos i t ion in respect of th is exc lus ion. In the E . I .L . form i t has been classed as one of those exclusions which can be "bought back" and there i s every reason to bel ieve that the current exclusionary posture w i l l be reviewed as experience accumulates. Dr. de Saventhem has wr i t ten : "In making i t possible to buy back exclusion 11, we were thinking pr imar i ly of countries l i k e Germany and France, in which j o i n t and several l i a b i l i t y of those who cause ident ica l po l lu t ion to one and the same body of water (mainly of course r i vers ) has been establ ished for many years . Insurers pro-v id ing cover for accidental po l lu t ion of waterways have thus been able to gain some experience with the economic consequences of th is extended form of l i a b i l i t y and have found them less sca r i f y ing than one might th ink. I t i s therefore not at a l l to be excluded that we might reverse the arrangement at a t l a t e r stage, providing f u l l cover even in respect of such j o i n t judgments, but I would expect that th is more generous approach would be r e s t r i c t e d to cer ta in countr ies . " (78) In the future , then, there i s every prospect that an insured held - 145 -several ly l i a b l e with others for po l lu t ion as in cases such as Pride  of Derby may be able to re ly upon his po l icy for indemnity against the whole of the judgment, whatever h is actual cont r ibut ion . The insurer would then be subrogated to his r ights against the other tor t feasor/s . F. "Packaging" of Environmental P o l i c i e s : One of the ways in which the E . I .L . po l icy has s i g n i f i c a n t l y ad-vanced environmental l i a b i l i t y insurance thinking i s by i t s movement away from the notion that an environmental l i a b i l i t y po l icy ought to be simply a "di f ference in condit ions" cover ( i . e . supplementary t o , but dependent upon the general l i a b i l i t y po l icy - a sor t of "stop gap" measure). Unfortunately, the E . I .L . po l icy has not moved far enough. I t works something of a compromise by excluding "sudden, unexpected and unintended happenings" (thereby tyiing in with the general l i a b i l i t y pol icy ) but al lowing the exclusion to be "bought back" in appropriate cases. Where the exclusion i s "bought back", the E . I .L . po l icy would then provide a tota l environmental l i a b i l i t y cover without dependence upon the general po l i cy . The reason for preferr ing th is l a t t e r form of cover i s that i t avoids the untidy patchwork that usually resu l ts from attempts to "package" d i f fe ren t coverages, plugging them i n , onea to the other. This i s not a mere matter of fas t id iousness , i t can have an important, i f unintended, e f f e c t upon the extent of coverage. Suppose, for example, that a pulp m i l l i s insured under an E . I .L . po l icy in - 146 -which the "acc identa l" exclusion i s in force i . e . the po l i cy i s t i e d in with the l im i ted environmental coverage offered by the general l i a b i l i t y po l i c y . The E. I .L . po l icy w i l l protect the pulp m i l l against l i a b i l i t y for a l l non-sudden accidental environmental impairment but the general po l icy does not complete the picture with coverage of a l l sudden accidental environmental impairment, because i t i s l imi ted in i t s terms to bodi ly in jury or property damage. The resu l t of the combination of these two p o l i c i e s i s that the pulp m i l l has no l i a b i l i t y coverage for sudden accidental damage which i s , say, pecuniary and not attachable to property or personal in ju ry . Since the E . I .L . po l icy otherwise recognizes that indemnity ought to go beyond the property damage and personal in jury s i t u a t i o n s , th is resu l t can only be viewed as the anomalous and unintended consequence of an attempted packaging with other coverages. - 147 -FOOTNOTES - CHAPTER VI 1. A pr ivate ind iv idual may persuade the attorney-general to bring an action in the publ ic in te res t and may be included in the action as a r e l a t o r . However, th is i s not common, and i s subject to the attorney-general 's d i s c r e t i o n : see Stroppa B . , supra, chapter 1, note 3 at 35. 2. Romer L . J . A-G v. P.Y.A. Quarries Ltd. [1957] 2 Q.B. 169, 184 (C .A . ) . 3. Hickey v. E l e c t r i c Reduction Co. of Canada, (1972) 21 D.L.R. (3d) 368 (Nfd. S . C ) ; Orde J .A . in Turt le v. C i ty of Toronto (1924) 56 0r0:..LJ.R.1. 252, 277;(S.C. App. D i v . ) ; P r o s s e r W . , Pr ivate Action for Publ ic Nuisance (1966) 52 V i r g i n i a Law Review 997; Jurgensmeyer J . , supra, chapter 1 note 3 at 217. 4. [1952] V.LR.R, 361 ( S . C ) . 5. Including Madden J . in Smith v. Wilson [1903] 2 I.R. 45; .64 (K.B.) ; Lord Penzance in Metropolitan Board of Works v. McCarthy (1874) L.R. 7 H.L. 243, 263 and Fleming J . , supra, chapter 5, note 5. 6. Fleming J . , supra, chapter 5 note 5 at 341. 7. Hickey v. E l e c t r i c Reduction Co. of Canada, (1972) 21 D.L.R. (3d) 368 (Nfd. S . C ) . 8. Id at 372. 9. J_d. 10. McLaren J . , supra, chapter 1, note 3 at 514. 11. Crandell v. Mooney (1878) 23 U.C.C.P. 212 (C .A . ) ; Rainy River  Navigation Co. v. Ontario & Minnesota Power Co. (1914) 26 O.W.R. 752 (C.A.) 17 D.L.R. 850; Rainy River Navigation Co. v. Watrous  Island Boom Co. (1914) 26 O.W.R. 456 (C .A . ) , 6 O.W.N. 537: 12. fhe decision is c r i t i c i z e d in Estey Publ ic Nuisance and Standing  to Sue (1972) 10 Osgoode Hall Law Journal 563. 13. See Seaway Hotels L t d . v. Consumers Gas Co. [1959] O.R. 177, 17 D.L.R. (2d) 292 a f f d . [1959] O.R. 581, 21 D.L.R. (2d) 264 in which the judgments regarded economic loss as forseeable though sustained by someone other than the owner of the cable pr imar i ly damaged; and Rivtown Marine v. Washington Iron Works et a l . [1973] 6 W.W.R. 692 ( S . C . C 4 . - 148 -14. E .g . , S .C.M. (United Kingdom) Ltd. v. W. J . Whittal & Son L td . (C.A.) [1971] 1 Q.B. 337 (C .A . ) ; Spartan Steel and Al loys Ltd . v. Martin & Co. (Contractors) L td . M973] 1 Q.B. 27 (C .A . ) . 15. There i s some sign of a marked l i b e r a l i z a t i o n in American "standing" requirements: see Save Sand Key Inc. v. United States  Steel 281 So. (2d) 572 (F la . App. 1973); appeal dismissed without opinion 286 So. (2d) 206 (1973); also Rothstein, M. , Pr ivate  Actions for Publ ic Nuisance: The Standing Problem 76 West V i r g i n i a Law Review 453, 458-9. 16. 501 F. 2d 558 (9th C i r . 1974). 17. For comments on the case, see (1974) 60 Iowa L.R. 315 and (1974) 88 Harvard L.R. 444. 18. Smith v. Warringah Shire Council [1962] N.S.W.R. 944; Fridman 6. The Def in i t ion of Pa r t i cu la r Damage in Nuisance (1953) 2 Univ. of W.A. L.R. 480 at 492-4; Bowden, supra, chapter 1 note 10 at 401. 19. Hickey v. E l e c t r i c Reduction Co. of Canada (1972) 21 D.L.R. (2d) 368 (Nfd. S . C ) . 20. [1971] 1 Q.B. 377 (C .A . ) . 21. Rivtow Marine v. Washington Iron Works et a l . [1973] 6 W.W.R. 692, 7UQH1T1- (S .C .C . ) . 22. Supra, note 21; for discussion of the case see Binchy W., Negligence and Economic Loss: The Canadian Tabula Rasa (1974) 90 Law Quarterly Review 181; Smith J . C l a r i f i c a t i o n of Duty -Remoteness Problems through a New Physiology of Negligence:  Economic Loss, A Test Case (1974) 9riUnii-'wei?si,t.v:of]British Co 1 umbia Law Review 213; and Case Note (1974) 9 Universi ty of B r i t i s h Columbia Law Review 170. 23. Supra, chapter 2 note 26 and accompanying text . 24. Supra, chapter 3 note 1 and accompanying tex t ; and appendix. 25. McLaren, supra, chapter 1, note 3 at 547. 26. Text books and a r t i c l e s on the general topics of Business Inter -ruption and Time Element insurance do not even advert to the p o s s i b i l i t y that such a loss might be insurable . See for e . g . : . Honour W. and Hickmott G. P r inc ip les and Pract ice of Interruption  Insurance (4th ed.,London, Butterworths; 1970); Ri ley D. Con-- 149 -26. (cont'd) sequential Loss Insurances and Claims (3rd ed. London, Sweet & Maxwell L td . 1967); Clarke G. Problem Claims Under r.: Business Interruption P o l i c i e s (1957) American Bar Associat ion Section of Insurance, Negligence and Compensation Baw 89; Teague J . , Recent opinions on Business Interruption (1968) American Bar iAssociat ion section of Insurance, Negligence and Compensation Law 622. 27. Personal correspondence dated 31st November, 1975. 28. [1895] 1 Ch. 287 (C.A.)'. 29. Id at 316-7. 30. [1970] A.C. 652. 31. [1964] N.S.W.R. 1312 ( S . C ) . 32. Hashim, supra, chapter 1 note 4 at 1175. 33. 257 N.E. Reptr. 2d 870 (N.Y .C .A . ) . 34. Id at 872. 35. [1949] 4 D.L.R. 497 (S .C .C . ) . 36. Id at 501. 37. e .g . Gauthiter v. Naneff [1971] 1 O.R. 97 ( H . C ) ; Stephens v. V i l lage of Richmond H i l l [1955] 8 O.R. 806 ( H . C ) ; Walker v. Pioneer Construction Co. (1967) Ltd. (1975) 8 O.R. 3 5 ( H . C ) . 38. e .g . Blackvv. Canadian Copper Co. [1917] O.W.N. 243 ( N . £ . ) ; Bottom v. Ontario Leaf Tobacco Co. [1935] 2 D.L.R. 699 (Ont. C .A . ) ; Rombough v. Crestbrook Timber Dtd. (1966) 55 W.W.R. 557 (B .C .C .A . ) . 39. (1922) 66 D.L.R. 287 (S .C .C . ) . 40. Id. at 292. 41. (1966) 55 W.W.R. 577 . (B.C.C.A. ) . 42. McLaren, supra, chapter 1 note 3 at 556. 43. See Burns, Franson, Matkin & S lutsky , supra, chapter 1, note 3 at 168-9. 44. [1975] 1 A l l E.R. 504 (H .L . ) . 45. Prescott P. Case Note (1975) 91 Law Quarterly Review 168, 169. - 150 -46. Terra Communications Ltd. v. Communicomp Data Ltd. (1974) 41 D.L.R. 350 (Ont. H.C.) Stein v. City of Winnipeg (1975) 48 D.L.R. 223 (Man. C .A . ) . 47. Dajon Investments Pty. Ltd . v. Talbot [1969] V.R. 603 ( S . C ) . 48. [1975] 1 A l l E.R. 504, 510 (H .L . ) . 49. Id. 50. Id at 511. 51. [1975] 2 A l l E.R. 829 (C .A . ) . 52. Id at 838. 53. [1975] 3 A l l E.R. 1 (C .A . ) . 54. (10th March, 1975) unreported (C .A . ) . 55. Prescot t , supra, note 24. Gore A. Interlocutory Injunctions -A Final Judgment? (1975) 38 Modern Law Review 672, Wilson A. Granting An Interlocutory Injunction 125 New Law Journal 302. 56. American Cyanamid was dist inguished by the Court of Appeal in Brynaston Finance v. de Vries [1976] 1 A l l E.R. 25 on the ground that i t was not intended to apply to "motions which, though i n t e r -locutory in form, seek r e l i e f which w i l l f i n a l l y determine the issue in the a c t i o n , and more p a r t i c u l a r l y , motions seeking to stop pro-ceedings in l i m i n e . " (S i r John Pennycuick at 38). 57. [1975] 6 A .L .R . 212 ( H . C ) . 58. [1968] A .L .R . 469 ( H . C ) . 59. (1975) 49 A . L . J . 255. 60. (November 6th 1975) unreported ( B . C . S . C ) . 61. For a discussion of r e t a l i a t o r y st rategies adopted by some defendants, see Counterclaim and Countersuit Harassment of Pr ivate Environmental  P l a i n t i f f s : The Problem, Its Implications and Proposed Solutions (1975) 74 Michigan Law Review 106. 62. The Signi f icance of Environmental Po l lu t ion for the Insurance  Industry a publ icat ion by the Munich Reinsurance Company 1972, 59. 63. See e .g . 55 Am. L.R. (2d) 1300. 64. [1974] 2 A .L .R . 321 ( H . C ) . - 151 -65. Id at 334. 66. (1975) 53 D.L.R. (3d) 277 (N.S.S.G. App. D i v . ) . 67. [1969] V.R. 88 ( S . C ) . 68. (1912) 28 T.L .R. 254 (K .B . ) . 69. [1969] 3 A l l E.R. 831 (Q.B. ) . 70. Obrist W. New Comprehensive General L i a b i l i t y Insurance Po l icy 1966, A coverage analysis published by The Defense Research Inst i tu te Inc. 5 , 6. 71. Note in th is context, apart from the general duty of d isclosure of material facts at the time of taking out a p o l i c y , Clause 2 of the "condit ions" section of the E . I .L . form (Part V) requires the insured to give immediate wri t ten notice to the insurer of any incident or c la im. 72. Clarkson A l t e r Environmental Risk Po l icy For Heavy U.S. Marketing  E f f o r t , supra, chapter 3 note 36; and Environmental Law Breeds  Insurer Woes, Business Insurance 8th September, 1975, 1, 44. 73. Environmental Law Breeds Insurer Woes, supra, note 72 at 1, 44. 74. Supra, chapter. 3 and appendix. 75. Lambton v. Mel l i sh supra; Pride of Derby supra. In both cases injunct ions were issued but the pr inc ip les apply to damages. Indeed, the matter of damages received some attent ion from Harman J . at f i r s t instance in Pride of Derby - see [1952] 1 A l l E.R. 1326. 76. [1953] 2 W.L.R. 58 (C .A . ) . 77. Will iams G. Jo int Torts and Contributory Negligence (London, Stevens & Sons L imited, 1951) 71. 78. Personal correspondence from Dr. de Saventhem dated 31st November, 1975. - 152 -SUMMARY - PART II I t may be h e l p f u l , before moving on to the f i n a l part of th is work, to summarize our conclusions about the nature, extent and value of the environmental l i a b i l i t y coverages: 1. Though unintentional environmental losses , and those which are the unintended consequences of intended acts are general ly i n -surable, t r a d i t i o n a l l i a b i l i t y f a c i l i t i e s have handled them in a negative and inadequate way. The E . I . L ' s introduction of the concept of "environmental impairment" and general extension of coverage i s a s i g n i f i c a n t advance on th is pos i t ion . 2. The i n s u r a b i l i t y of s ta tu te - re la ted damages claims may depend upon how they are character ized, but there should be no absolute ex-c lus ion of indemnity in the event of a breach of statute or statutory regulat ions. The common law has adequate f a c i l i t y to take account of breach of law where the en fo rceab i l i t y of a pol icy i s questioned. Moreover, the r e l i a n c e , instead, by insurers upon the i r r ights of entry and inspection and the i r powers to compel remedial works can be expected to give the needed momentum for an act ive loss-prevention campaign. 3. Insurers ought not to close the door to coverage for f ines . As we at present understand them, they are uninsurable but i f , as seems poss ib le , they assume the character of an administrat ive - 153 -levy or impost designed to f a c i l i t a t e some form of market adjust -ment to optimal po l lu t ion l e v e l s , then the provision of indemnity would not be out of order. 4. The general l i a b i l i t y f a c i l i t y i s unsuited to the special character of some environmental l i a b i l i t i e s , and l i k e l y to become more so i f the trends continue in the area of economic l o s s , aesthet ic nuisance etc . The E . I .L . pol icy seems much better equipped to handle these developments. 5. Insurers must turn the i r minds and resources to the development of a form of business interrupt ion coverage, l imi ted as to time, to protect the insured against the economic loss involved in in junct ion shutdown and to improve the chances of h is surv iv ing the period during which remedial measures are taken. 6. Because of the special nature of environmental damage and the l i k e l i h o o d that long-term in jur ious exposures w i l l be involved, there i s a need for great precis ion in po l icy wording to determine whether an indemnifiable event has occurred during the currency of the po l i cy . That precis ion i s lacking in the present environ-mental l i a b i l i t y p o l i c i e s . 7. There i s no need for an express exclusion of gross negligence in any po l icy dealing with environmental l i a b i l i t i e s . This can be dealt with by the mechanisms of the common law. - 154 -8. The l i m i t a t i o n of indemnity in " j o i n t and several l i a b i l i t y " cases to the insured's proportionate contr ibut ion leaves the insured open to a po tent ia l l y serious l o s s . Any comprehensive environmental l i a b i l i t y cover must forego th is l i m i t a t i o n . 9. q I t i s dangerous to view an environmental l i a b i l i t y po l icy as a mere supplement to the general po l i c y : the end "package" tends to be piecemeal and incomplete. The environment po l icy should be a separate and s e l f - s u f f i c i e n t e n t i t y . - 155 -THE INSURANCE OF ENVIRONMENTAL RISKS PART III A ROLE FOR INSURANCE - 155a-CHAPTER VII  A ROLE FOR INSURANCE As Fleming has noted, "From i t s incept ion , l i a b i l i t y insurance has had to contend with the argument that i t removes a potent deterrent to unlawful and in jur ious conduct by insu la t ing the in jurer against i t s f inanc ia l consequences." (1) Using th is hypothesis, i t might be argued that to provide insurance for pol luters i s to confer carte blanche freedom upon a group which already i s in to le rab ly i r respons ib le . But the argument i s i l l -considered, fo r there i s every reason to bel ieve not only that l i a b i l i t y insurance would not encourage delinquency but that i t would ac tua l l y play a pos i t ive ro le in the promotionoofaa healthful environment and of sound environmental values. I t i s submitted that th i s can be achieved in two ways - by prevention and mit igat ion of losses , and by judic ious use of economic pressures. A. Loss Prevention: The h istory of the insurance industry d isc loses an act ive p a r t i -c ipat ion in endeavours to reduce the loss r a t i o in almost every f i e l d into which i t has ventured. Some ins ights can be gained from an examination of industry performance in th i s regard. Workers' Compensation i s an area in which the insurance c o n t r i -bution to loss prevention has been s i g n i f i c a n t . When workers' compen-sation l e g i s l a t i o n was passed in the United States , insurers moved - 156 -quickly to involve themselves in indus t r ia l accident prevention. In Massachusetts, for example, the f i r s t person hired by the d i rectors of the new Massachusetts Employees' Insurance Associat ion was a d i s -2 t inguished safety engineer. In New York, twenty leading stock companies formed the Workmen's Compensation Service Bureau for the prevention of i ndus t r ia l accidents through s t a t i s t i c a l s tud ies , formu-l a t i o n of safety standards and l iason with employers and other interested 3 organizations such as the National Safety Counci l . Pr ivate insurance safety work has followed three main courses: (1) inspection and consultat ive services for employers;(2) research 4 and (3) in teract ion with indus t r ia l safety agencies. Some of the larger pr ivate car r ie rs maintain the i r own research laborator ies . For 5 others, research f a c i l i t i e s are provided by insurance assoc iat ions . Many insurers conduct safety c l i n i c s , seminars and the l i k e and, in the state of V i c t o r i a in A u s t r a l i a , there i s provision for reports by insurers to Parliament on the prevention of i n ju r ies and i n d u s t r i a l 6 disease. Of course, i t i s v i r t u a l l y impossible to show a d i rec t connection between insurance industry loss prevention a c t i v i t y and the undoubted improvement in indus t r ia l safety that has occurred over the l a s t f i f t y years. But i t .is eminently reasonable to suppose that insurance par t i c ipa t ion - and i t has been more energetic in some 7 countries than in others - has had an impact. I r o n i c a l l y , insurance industry loss prevention services have become so much a part of the workers' compensation system in the United States that there i s a move-ment towards the recongit ion of a l i a b i l i t y in insurers for any negligence - 157 -8 in the carrying out of safety inspect ions. Only the most naive would assert a purely a l t r u i s t i c motivation for insurance industry e f fo r ts in indus t r ia l safety o r , for that matter, in any area of loss prevention. As one insurance executive has s a i d : " A l t r u i s t i c a l l y speaking, insurers state that employees are benef ic ia r ies of safety inspect ions ; however, candor requires insurers to admit that safety inspections very much benef i t them by reducing and minimizing losses . " (9) But i f the insurance industry can play a helpful ro le in environmental management, no one demands that i t be founded in untainted a l t ru i sm. Perhaps the most spectacular loss prevention success has been achieved in Bo i le r Insurance. This was once a high premium-volume c lass of business because of i t s high loss ra t ios Bo i le r and pressure-vessel explosions were an everyday occurrence and the i r insurance a cost ly and dangerous business. Nowadays premium volume i s small and 10 the whole area i s r e l a t i v e l y l ow - r i sk . A major reason for th is turnabout i s that insurance industry inspection and safety services have reduced substant ia l l y the danger of explosion and thereby permitted premium cuts . So pervasive have been the insurance industry loss prevention programmes, for example, that the insurer ' s inspection c e r t i f i c a t e i s accepted by governments in the United States and the provinces of Canada as evidence of compliance with the o f f i c i a l l y pre-11 scr ibed standards as to construct ion, i n s t a l l a t i o n and operation. - 158 -Loss prevention a c t i v i t i e s have included a s s i s t i n g in the rev is ion of b o i l e r codes dealing with manufacturing standards and inspection of equipment when i n s t a l l e d ; the establishment of safe operating p rac t i ces ; supervision of repairs a f te r a loss;ga.theriiiiig and analysing facts a f te r a serious loss and promoting basic research in b o i l e r and machinery 12 loss prevention. Most impressive of a l l , i s that more of the premium do l la r i s now expended on loss-prevention services than on 13 payment of c la ims. I t would be an un jus t i f i ab le s i m p l i f i c a t i o n to suggest that the answer to the problem of environmental control rests so le l y in the development of the appropriate technology. Yet that i s surely a part of the so lu t ion . In th is respect, b o i l e r insurance provides an in terest ing and close p a r a l l e l , for i t shows what can be achieved in the technological area by appropriate funding and expert ise as well as the gains to be had from the caution and v ig i lance which stem from act ive loss prevention campaigning. In other areas, too, the insurance industry plays a not i n s i g -n i f i c a n t ro le in the promotion of safety and loss avoidance. Spencer 14 Kimbal l 's Book, "Insurance and Publ ic P o l i c y " , traces under the heading "The Prevention and Mit igat ion of Loss" , the involvement of the American insurance community in preventing losses , p a r t i c u l a r l y f i r e losses. I t points out that f i r e insurance companies were i n s t r u -mental in the f inanc ia l support of volunteer f i r e f ight ing services and that , in h i s t o r i c a l terms, i t was quite la te before these organizations - 159 -received publ ic funds. In modern times insurers remain deeply involved in f i r e loss prevention by way of d i rec t funding, inspection serv ices , promotion of the use of e f f i c i e n t spr ink le r and alarm systems, f i r e - p r o o f bu i ld ing materials and so on. Burglaryuunderwriters, through co-operation with pol ice forces and otherwise, are constantly engaged in attempts to control and reduce burglary losses. And insurance industry journals are replete with examples of loss prevention a c t i v i t y ranging from product safety seminars to f i r e research laborator ies . Perhaps the fol lowing extract from a risk-management-oriented industry journal best bespeaks the modern approach: "Today a s o l i d commitment to loss p revent ion . . . to property conservat ion . . . to safety engineering may be a must before an underwriter i s w i l l i n g to provide insurance at any reasonable p r i c e . " (15) The object of the foregoing has not been to extol the v i r tues of the insurance industry . On the contrary, i t has to be f rankly admitted that the industry has f a i l e d abysmally in some areas in which i t s immense power, resources and inf luence could have been appl ied in the making of an important soc ia l cont r ibut ion . Motor vehic le design 16 safety i s the most s t r i k i n g . The real point i s that the successes referred to above demonstrate not only the capacity but the eminent s u i t a b i l i t y of the insurance mechanism as a loss preventor or a loss c o n t r o l l e r . - 160 -Insurance involvement with environmental r i sks i s s t i l l very much in i t s infancy. I t i s no surpr i se , therefore, that environmental loss prevention programmes have not yet attained a p a r t i c u l a r l y sophist icated level of operation. There i s some promise, however, in the ear ly developments. Of in te res t in t h i s regard i s the environ-mental test ing laboratory establ ished by the Hartford Insurance Group and recently accredited by the American Industr ia l Hygiene Assoc iat ion . The laboratory was f i r s t opened by the Group's loss control department some three years ago to help indus t r ia l po l luters detect hazardous noise and a i r pol lutants in and near places of employment. The f a c i l i t y includes equipment for the analysis and measurement of noise , tox ic vapours, dust, l i g h t , r a d i a t i o n , heat, s t r e s s , and p o t e n t i a l l y 17 explosive atmospheres. A novel and potent ia l l y useful loss control idea i s the Environ-mental Risk Improvement (E .R. I . ) c o n t r i b u t i o n proposed as part of the E . I .L . programme. A proportion of not more than 5% (the contemplated 18 range seems for the moment to be around 3%) of a l l premiums charged for E . I .L . cover w i l l be applied in the way of grants to organizations 19 engaged in technical supervision or research on environmental problems. The E .R. I , contr ibut ion does not represent a " loading" of the insured's gross premium in the s t r i c t sense. I t i s an allowance which the reinsurers have agreed to make from premiums which have been charged on the basis of already devised rat ing schedules. As Dr. de Saventhem puts i t : - 161 -"Only time w i l l t e l l whether, by making th is cont r ibut ion , reinsurers are merely d i s t r i -buting -a f rac t ion of the p ro f i t ss accruing from the wr i t ing of E . I .L . business, or whether they are dipping into the i r own pockets." (20) The contr ibut ion i s deducted from the net premium af te r i t i s ul t imately received by the pool but pr ior to i t s s d i s t r i b u t i o n and 21 c red i t ing to each par t i c ipa t ing pool member. The funds are then administered through a separate t rust account-created for the pur-22 pose. Since the contr ibut ion does not involve an addit ional charge to the insured (except, presumably, insofar as future rev is ions of rat ing schedules w i l l take into account past experience), the o b l i -gation to apply the funds for environmental improvement i s not add-ressed in the terms of the po l i cy . In fact i t ar ises from the relevant clauses of the agreement between Clarkson, Swiss Reinsurance Company and the other members of the pool . The project i s of very recent o r i g i n . This , together with the time lag between the c los ing of an E.I .LL pol icy and ultimate receipt 23 of the premium by pool members, means that - i t w i l l be some time before a body of pract ice has been developed upon which the pro jects ' success can be judged. However, Dr. de Saventhem c i t e s , as an example of the type of research endeavour which would be considered favourably for a grant of funds, a recent study at Durham Univers i ty , England, re la t ing to the development of degradable p l a s t i c s . Though the sum required was quite moderate, the study had been abandoned for lack 24 of f inance. - 162 -So much of the complaint by environmentalists i s that governments and responsible agencies, while mouthing c l iches about environmental degradation, are cur iously re luctant to advance the cold hard cash to do somethiiinggabout i t . Perhaps th is i s an avenue through which the insurance industry can estab l i sh i t s bona f ides and demonstrate that i t s statements of concern for environmental!quality are not mere pious po l l i t i ck ing . There are certain loss prevention measures b u i l t into the E . I .L . programme. Not the least of these i s the r i s k assessment procedure. The matters taken into account in the system developed by Environmental Resources Limited are the very matters of most s ign i f icance to anyone concerned about a healthful environment. The poorer the performance of a prospective insured in r e l a t i o n to these matters, the more remote his chances of obtaining insurance cover without f i r s t adopting measures calculated to reduce the r i sk of environmental impairment. I t i s not answer for the prospect to abandon the idea of obtaining insurance. The current and l i k e l y future r i sks of l i a b i l i t y are such as to render that less and less rat iona l as a so lut ion of the dilemma. He must, therefore, adopt the a l ternat ive of upgrading his "environmental per-formance". In addit ion to cthe r i s k assessment process, there i s a further contr ibut ion to the environmental bat t le inherent in the E.R.A.S. object ives . In p a r t i c u l a r , the c o l l e c t i o n and cor re lat ion of data w i l l provide a s t a t i s t i c a l and informational f a c i l i t y without which a comprehensive assault on the causes and aggravations of environ-mental impairment is impossible. - 163 -In th is w r i t e r ' s view, insurers can have a d i rec t and useful impact upon the att i tudes of industry and commerce to environmental qua l i t y by a tough but f a i r appl icat ion of the power of entry , inspec-t ion and suspension of cover. There i s power under the E . I .L . po l icy -and, obviously i t - would be a standard term of any po l icy providing environmental l i a b i l i t y cover - for the insurer or i t s representative to enter and inspect for dangers or defects and to suspend the cover while they are being corrected or minimized. I f the insurer were to carry out frequent random inspections and f i rmly but f a i r l y ava i l i t s e l f of i t s powers where there i s tardiness in the insured's correct ion of defects , there would be, in e f f e c t , a po l i c ing system of an e f f i c i e n c y surely superior to that at present offered by government and municipal agencies. B. Economic Influence: Undoubtedly tthere i s much the insurance community can do in the way of d i rec t loss prevention a c t i v i t y , but the most e f f i c i e n t way to control losses i s to control a t t i tudes . The c u l t i v a t i o n in insureds of an at t i tude of concern about environmental qua l i t y would have a profound influence for the better upon the conduct of industry and business consistent with environmental values. I t i s cynical but r e a l i s t i c c t o argue that the best way to cu l t i va te an at t i tude of con-cern i s to employ economic pressures. The most obvious of these i s the c la ims- re la ted premium. An insured for whom the cost of insurance w i l l r i s e in consequence of a - 164 -poor claims record can be motivated to do something about his record. I t i s specious, therefore, to argue that the insurance f a c i l i t y "frees him of his worries" and allows him to be i r respons ib le . Retrospective premiums might- be p a r t i c u l a r l y e f f e c t i v e . Thus the premium could take the form of a levy imposed at the conclusion of the coverage year according to performance in that year, there being scope for rewarding i n c i d e n t - f r e e , operation as wel l as for punishing sub-standard conduct from one insured to the next. "Quite obviously , the incentive of an insured to improve his standard of po l lu t ion control and to general ly meet his soc ia l r e s p o n s i b i l i t y towards minimizing the danger of environmental damage l i e s in the level of premium he pays for such insurance. A ' c lean ' plant and overa l l operation from an environmental viewpoint would natura l l y be recog-nized by a r e l a t i v e l y lower level of premium. As with any other c lass of insurance, the premium cost i s b a s i c a l l y contingent upon the degree of hazard envisaged by the underwriter." (25) In addit ion to careful adjustment of premiums according to performance, i n t e l l i g e n t use ought also to be made of large deductibles and compul-sory coinsurance requirements. In th i s way the insured avoids the p o s s i b i l i t y of ru inat ion by a substantial damages award but retains an involvement s u f f i c i e n t l y serious to give him more than aspassing in te res t in avoiding c la ims. I t i s impossible to consider th is matter of economic pressures adequately without returning, at least for a moment, to the "market so lu t ion" arguments adverted to b r i e f l y in Chapter V. The f i r s t point to note about them i s that none i s a panacea for a l l environmental i l l s . As Professor Roberts observes in his extensive - 165 -review of the economic rat ionale and p rac t i ca l merits of the various po l lu t ion control s t ra teg ies , "there i s no one ' r i g h t answer' that 26 transcends wide var iat ions in circumstances." Nevertheless, they expose some important truths which can be helpful in the present d i s -cussion. One of these i s that society has to make (to paraphrase 27 Calabresi) "a decision for p o l l u t i o n " . " . . . our society i s not - cannot sanely be -committed to preserving absolute and p r i s t i n e environmental ' pu r i t y ' no matter what the cost" (28) Economic r e a l i t y demands that there be some po l lu t ion and, so, the question becomes "how does society go about deciding how much po l lu t ion i t w i l l have?" The economists would argue that th is i s not a matter for c o l l e c t i v e dec is ion , but ought to be determined by market decis ions . This leads to the further point that the sufferers of environ-mental degradation must bear some of the cost , for they are also "consumers" and are constituents of "the market". I t i s altogether too s i m p l i s t i c to give industry a separate e x p l i c i t existence as the v i l l a i n in the piece and to forget that industry i s r e a l l y a function of consumer demand. This may appear to be s e l f - e v i d e n t , but i t s re i te ra t ion might serve to emphasize the point for those who would structure a "them versus us" scenario. F i n a l l y , i t i s c lear that economic theory in environmental regulation has important impl icat ions for l i a b i l i t y regimes. Generally speaking, those who favour an economic analysis are led to conclude that the t o r t - f a u l t regime at present employed i s an i n e f f i c i e n t and - 166 -30 inappropriate one. I t would be a major undertaking beyond the scope of the present discussion to canvass possible future l i a b i l i t y regimes. Suf f ice i t to say that , i f , at bottom, the aim is to in te rna l i ze po l lu t ion costs and to re ly upon market e f f i c i e n c y to achieve optimal regu lat ion , then the use of an insurance f a c i l i t y would not be i n -consistent with i t . Indeed, i t should enhance i n t e r n a l i z a t i o n by replacing an uncertain fortu i tous cost (even in a s t r i c t l i a b i l i t y regime, there remains an element of f o r t u i t y as to when, how often and how severely po l lu t ion incidents w i l l occur for any one insured) with a certa in share of the tota l po l lu t ion cost ( l i a b i l i t y fo r premiums.) A caveat must be added - i f an insurer makes up losses on environ-mental l i a b i l i t y business through his other l i n e s , such as auto i n -surance, p a r t i c u l a r l y i f he does so by increasing premiums in these other l i n e s , then he defeats the cost i n t e r n a l i z a t i o n aim (assuming that relevant environmental costs in these other l ines are already " in te rna l i zed" within the i r own sphere). In f a c t , i t i s un l ike ly that an insurer would seek to subsidize an unprofitable l i a b i l i t y port -f o l i o on any long term bas is . Any c lass of business which cannot pay i t s own way has a l imi ted l i f e expectancy. As a matter of good business, th i s i s obvious. Moreover, in those j u r i s d i c t i o n s which have insurance premium c o n t r o l , i t would be strange, to say the l e a s t , i f the author i t ies were prepared to allow a premium increase in one c lass of business merely to balance underwriting losses in another. - 167 -C. Reactions and Views: I t i s a sad comment upon the insurance industry that i t s immediate reaction when the environmental " f l a k " began to get heavy was to withdraw. Doubtless insurance companies owe i t to t h e i r shareholders to avoid reckless and imprudent underwriting. But, as corporate c i t i z e n s , they have certa in superimposed and wider duties of which they should not be unaware. Some insurers , such as the C.N.A. Insurance, have recognized these further ob l igat ions . The fol lowing statement by the then Vice-President of that company was refreshing but atypical for i t s time (1970): "We bel ieve the insurance industry has a moral r e s p o n s i b i l i t y to use i t s influence in f ind ing and e f fec t ing solut ions to th is serious national problem [po l lu t ion ] . " (31) The president of the company out l ined i t s aggressively responsive approach to the problem in the fol lowing way: "If a r i sk jus so i n d i f f e r e n t to i t s contr ibut ions to our: country's environmental problems as to refuse to take prompt and appropriate act ion to correct the offending condi t ions , then we are w i l l i n g to forego any potential p ro f i t s by r e -fusing to wri te l i a b i l i t y , property or surety coverages for th is insured." (32) The withholding of other insurances ( f i r e , storm and tempest, f l ood , burglary, business interrupt ion e tc . ) from those who are unwi l l ing to behave responsibly in re la t ion to the environment is a novel and potent ia l l y powerful weapon i f i t wereuWi^i'fWIiy adopted. Unfortunately i t smacks of a coercion which insurers and insureds a l i k e might f ind d i s tas te fu l and i s not l i k e l y to be the focus of any concerted insurance industry ac t ion . - 168 -The reluctance of insurers to "get involved" has stemmed in par t , of course, from the fear of underwriting losses . But there seems also to have been amongst some,-a kind of v iscera l reaction to what has been seen as moral reprehens ib i l i t y in providing insurance for po l lu te rs . This view has mellowed somewhat in recent times with the development of a wider appreciation of the pos i t ive inf luence insurers can exert . Nevertheless, the wariness remains. In cor res -pondence with th i s w r i t e r , the President of the Insurers' Advisory Organization of Canada wrote recent ly : " . . . at the time the C.U.A. Committee met to discuss environmental damage or p o l l u t i o n , the opinion expressed was that l i a b i l i t y resu l t ing from an accident i s an insurable r i sk but care must be exercised in underwriting r i sks to exclude from cover any process or operation known to contribute to p o l l u t i o n . Just as a cr iminal act i s uninsurable, i t would be morally wrong to provide insurance fo r the legal l i a b i l i t y a r i s i n g from a fau l t y operation or process and thereby condone something which i s detrimental to the publ ic at l a rge . " (33) Although th is view tends to overlook the many leve ls of subtlety between the purely accidental in jury and the purely intent ional one, and tends also to "close the door", so to speak, on insurance invo lve -ment for other than "acc idents" , the President has recognized elsewhere in his correspondence that there i s scope for an act ive par t i c ipa t ion by the insurance industry in pos i t i ve so lut ions . "I also consider i t feas ib le that the insurance industry can make a pos i t ive contr ibut ion to the solut ion of the environmental problem. Loss con-t ro l advice and premium levels geared to the degree of hazard are two ways which-immediately come to mind. In f a c t , the ult imate c o n t r o l , l i e s in r e -fusing to provide coverage on r i sks with inadequate controls or i r responsib le management." (34) - 169 -This wr i ter has found, in recent correspondence with insurers , a general optimism of th i s type about the ro le the insurance industry might play in environmental c o n t r o l . But the correspondence also gives the impression that most insurers are s t i l l s i t t i n g on the fence, wait ing to see the outcome of ear ly ventures in the environmental l i a b i l i t y f i e l d before themselves o f fer ing any comprehensive f a c i l i t y . Whether they w i l l then t ranslate the i r optimism into pos i t i ve act ion remains to be seen. The importance thatythey do so i s best a r t i cu la ted in th i s extract of correspondence from an insurer who, paradoxical ly , was quite scept ica l about insurance involvement: "Any means of protecting pol luters from the obvious and immediate consequences of the i r ac t ions , which i s not an integra l part of an e f fec t i ve program to end p o l l u t i o n , perpetuates and aggravates both the immediate and long range problems. Such pro-tect ion would be not only f i n a n c i a l l y i m p r a c t i c a l , but s o c i a l l y i r respons ib le . " (36) D. Assessment: The fol lowing i s an extract from a l e t t e r wr i t ten by an executive in the Canadian Insurance industry : "I do not think i t i s at a l l feasibilee that the Insurance Industry can make any contr ibut ion what-soever, much less a pos i t ive cont r ibut ion , to the environmental problem. I t i s impossible to control at t i tudes by ra tes , or by premiums when you are ta lk ing of a voluntary coverage. I f the rates get too high, the big corporations that would require th is coverage would simply put the amount of money into a pool for themselves and s e l f i n s u r e . Certa in ly th is has been the h istory in the past with coverage considerably more urgently required for corporations than environmental l i a b i l i t y coverage." (37) - 170 -This passage encapsulates the major obstacles to e f fec t i ve insurance industry par t i c ipa t ion in the f i e l d of environmental l i a b i l i t y . The f i r s t i s the problem of voluntary coverage. The insurer doubtless would wield more power and to more t e l l i n g e f fec t i f the insured were l e g a l l y bound to carry environmental l i a b i l i t y insurance. This i s a p o s s i b i l i t y towards which l e g i s l a t i v e minds ought to turn . But the idea that the insurance industry can play a pos i t ive role does not hinge upon a compulsory insurance scheme. I t i s submitted that there i s ample evidence of the wide, and widening, r i sks courted by the un-insured, and some form of l i a b i l i t y cover i s already "compulsory", in a business sense, for a l l but the most reckless of entrepreneurs. Therefore, i t i s not a r e a l i s t i c response by an insured to "pressure" ( for loss prevention) from the insurer , to simply forego the coverage. Nor i s i t an easy matter to switch to a new insurer . I f insurers take the i r r e s p o n s i b i l i t i e s se r ious l y , one i s not l i k e l y to be s i g n i -f i c a n t l y more indulgent than another. Moreover, the very fact of re ject ion by an insurance company i s an inev i tab le "black mark" in the assessment by any other prospective insurer to whom a proposal i s put. Next, there i s the "problem" of se l f - insurance . Frankly, the wr i te r does not see th is as a problem. A se l f - insurance pool i s simply another form of insurance company. I t has to carry and manage the same r i s k s , adopt the same economic p o l i c i e s i f i t i s to remain " a l i v e " , and reinsure in the same t r a d i t i o n a l markets. The good sense and urgency of sound loss prevention programmes should be no less apparent, indeed, probably more so, because of the more d i rec t involvement of the - 171 -insured corporations. A l l that has been said in re la t ion to the pr ivate insurance industry i s equally v a l i d when applied to these mutual or reciprocal insurance f a c i l i t i e s . This paper has not greatly emphasized the usefulness of insurance in guaranteeing compensation of v ict ims who can estab l ish an e n t i t l e -ment. The omission has been de l iberate , part ly because th is i s an obvious benef i t of the insurance mechanism and needs l i t t l e e laborat ion , and par t l y because, in terms of environmental c o n t r o l , i t i s a rather negative benef i t , being curative rather than preventative in i t s e f f e c t . Suf f ice i t to say that , for a l l the attempts to control and l i m i t environmental degradation, some people are s t i l l going to suf fer i n j u r y , whether personal or property. Of course, those people w i l l be anxious to stop the offending a c t i v i t y . They also w i l l want and should be assured of compensation fo r the i r l o s s . Insurance provides a solvent defendant from whom to obtain i t . The potent ia l for a useful contr ibut ion from the insurance industry i s there. Quite apart from i t s ro le in the provision of compensation, i t has the power and resources to operate inspection and po l i c ing systems, consultat ive services and research f a c i l i t i e s . I t has the inf luence through which to develop and maintain, in the i n d u s t r i a l and commercial communities, a sense of concern about what happens to the environment. Most of a l l , i t has the f i n a n c i a l where-withal to make a p laus ib le attack upon the environmental problem. The only thing i t lacks i s motivat ion. The most l i k e l y motivating force i s - 172 -the prospect of economic gain. I f insurers are convinced that they can wri te environmental l i a b i l i t y business p ro f i tab ly and that i t i s in the interests of prof i t -making to prevent losses , they w i l l do i t . In th is context, i t may be assumed that the eyes of the insurance world w i l l watch c lose ly the experience of the E . I .L . i n i t i a t i v e . These remarks are not intended to be c y n i c a l . I t i s neither surpr is ing nor, on free enterprise p r i n c i p l e s , alarming that insurance companies should be motivated by the quest for p r o f i t . But, perhaps i t i s unfai r to a t t r ibute e n t i r e l y mercenary motives to the insurance industry . A l -though i t i s a fact of commercial l i f e that the industry does not ex i s t as a char i table publ ic service organizat ion, nevertheless i t i s c lear that an "overlay" of soc ia l consciousness has influenced industry thinking about the environment and the st ructur ing of programmes such as the E . I .L . Assuming that the insurance industry can be appropriately motivated whether by commercial expediency, or by l o f t i e r considerat ions, the end resu l t i s l i k e l y to be to the substantial good of the environment. We could expect to see an a l l i a n c e between two very strange bedfellows -the insurance industry and the environmental movement - whose aims would be i d e n t i c a l , though motives perhaps quite disparate. - 173 -FOOTNOTES - CHAPTER VII 1. Fleming, supra chapters note23. at 176-77. 2. St . C l a i r A. The Case for Pr ivate Insurance of Workmen's  Compensation (1959) 31 Rocky Mt. L.R. 397, 407. 3. Id. 4. Id. 2 5 . Id at 407-8. 6. Report of the National Committee of Inquiry on Compensation and  Rehabi l i ta t ion in Aus t ra l ia 1974, Volume 1 at 89. 7. J_d - the Woodhouse Committee which compiled the report referred to in note 6 was unenthusiastic about the qua l i t y and extent of Austra l ian insurers ' contr ibut ion to indus t r ia l safety . 8. See Boynton S. and Evans H. What Pr ice L i a b i l i t y for Insurance  Carr iers who Undertake Voluntary Safety Inspections (1967)~4~3 Notre Dame Lawyer 193; and Blan 0. Safety Inspections - Safe  or Unsafe (1970) 6 Forum 232. 9. B lan, supra note 7 at 234. 10. Kulp C. and Hall J . Casualty Insurance (4th ed; New York; The Ronald Press Company, 1968) 688. 11. Id at 688-9. 12. Heubner S . , Black K. and Cline R. Property and L i a b i l i t y Insurance (New York; Appleton - Century - C ro f ts , 1968) 272. 13. Id at 273. 14. Kimball S. Insurance and Publ ic Po l icy (Madison, Universi ty of Wisconsin Press, 1960) 288 et seq. 15. The John Liner Letter Vo l . 6 No. 2 January 1969 2. 16. See Nader R. Unsafe At Any Speed (New York; Grossman Publ ishers , 1965) 248-257. Nader attacks the auto insurers for the i r f a i l u r e s to act on the matter of vehicle design safety . But he also recog-nizes insurance industry successes in other f i e l d s and the general v i a b i l i t y of the insurance mechanism as a loss preventor. - 174 -17. See Environmental Testing Lab. Is Accredited, Business Insurance 11th August 1975, 28. 18. Personal correspondence from Dr. de Saventhem dated 8th January, 1976. 19. Environmental Impairment L i a b i l i t y Insurance: A New I n i t i a t i v e a booklet d is t r ibuted by H. Clarkson (Overseas) Ltd . Ibex House, Minor ies, London EC3N 1H5. 20. Personal correspondence from Dr. de Saventhem dated 8th January, 1976. 21. Id. 22. Id. 23. k[ : The delay may vary between s i x months and one year, large ly because accounting within the insurance industry i s almost t o t a l l y computerized and works in a quarter ly rhythimr, on a system of net balances. 24. Id. 25. Personal correspondence dated 26th January 1976 writtenn on behalf of the Insurance Bureau of Canada in response to the w r i t e r ' s inqui r i e s . 26. Roberts, supra, chapter V note 73 at 220. 27. Ca labres i , The Decision For Accidents: An Approach to Nonfault  A l locat ion of Costs, supra, chapter 5 note 63. 28. Michel man, supra, chapter 5 note 59 at 667. 29. Calabresi has argued i t in the context of motor vehic le accidents (see supra, chapter 5 note 63)and i t i s i m p l i c i t in the cost i n t e r -na l i za t ion argument. 30. Ca labres i , supra chater 5 note 63; Michelman, supra chapter 5 note 59; Roberts, supra, chapter 5 note 73 at 207-8. 31. McDonnel G. : remarks made at a news conference reported in the Journal of Commerce October 27, 1970, 10 and quoted in Anderson D. What Role Wi l l the Insurance Industry Play in the Fight  Against Po l lut ion? C.P.C.U. Annals March 1972, 25. 32. Id. 33. Personal correspondence from the President , Insurers' Advisory  Organization of Canada dated 26th January, 1976. 34. Id. - 175 -35. Although no survey was attempted, the wr i te r has corresponded with and/or conversed with insurers and insurance brokers in Canada, United States , United Kingdom and Aus t ra l ia in connection herewith. 36. Personal correspondence from the senior Underwriter Aetna L i f e  and Casualty, dated 16th February, 1976. 37. Personal correspondence dated 22nd January 1976 from the Super-intendent I nil arid Marine & Casualty of The Hal i fax Insurance  Company of Canada. - 176 -CONCLUSION " . . . t h e p u b l i c . . . has been progressively sens i t i zed by environmentalists and the news media ito the serious nature of the b l i g h t of p o l l u t i o n . Accord-i n g l y , c i t i z e n s , both i n d i v i d u a l l y and c o l l e c t i v e l y , are more and more s o l i c i t o u s of exp lo i t ing ex i s t ing avenues for remedial a c t i o n . " There can be no doubt that the environmental l i a b i l i t y r i sks are suf -f i c i e n t l y real to give r i s e to a need fo r l i a b i l i t y insurance. Some of them ( e x i s t i n g , and l i k e l y future) are pecul iar to the environ-mental context and, in consequence, they are not well accommodated by the t rad i t i ona l machinery designed with other r i sks in mind. Th is , coupled with the large scale "withdrawal" of l i a b i l i t y insurers from other than the "sudden and acc identa l" sphere, has l e f t a considerable area of uninsured r i s k . Stop-gap measures, wedded to the old notions of "accident" and "occurrence" and steeped in the terminology of t r a d i t i o n a l p o l i c i e s already shown to be inadequate, are a most unsatisfactory way of dealing with the problem. Of the pioneer programmes, the E . I .L . would seem to be the most promising. Its wider conception of what const i tutes environmental damage, i t s higher indemnity l i m i t s , pro-v is ion for recovery of survey costs , f a c i l i t y for to ta l cover ("buying back", the sudden and accidental exclusion) and comprehensive under-wr i t ing arrangements make i t a s i g n i f i c a n t breakthrough in the f i e l d . I t i s probable that other, perhaps improved programmes w i l l be launched i f and when the current experiments prove successfu l . In th is w r i t e r ' s - 177 -view, the most important contr ibut ion for those future endeavours to have emerged from the E . I .L . experiment i s i t s concept of "env i ron -mental impairment". The subst i tut ion of th is concept for the old and confused notions of "accident" and "occurrence" i s r e a l l y a log ica l fol low-on from the widening general consciousness of the environment. I t i s part of the f i r s t comprehensive recognit ion by insurers of the frequency, d i ve rs i t y and seriousness of environmental damage and l i a b i l i t i e s and of the p o s s i b i l i t y that the insurance industry has a useful ro le to play in the i r regulat ion. But a l l of th is i s an empty exercise i f a ro le for insurance in the environment cannot be j u s t i f i e d in some "ph i losophica l " sense. I t i s not enough that po l luters w i l l be protected from economic hazard, nor that insurers w i l l make p r o f i t s , nor even that sufferers w i l l be compensated. The insurance industry must contribute something pos i t i ve i f i t i s to play the game at a l l . 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Wheeler, J . , "Caused by Accident" as Used in Comprehensive L i a b i l i t y  P o l i c i e s (1956) Insurance Law Journal 87. Wi l l iams, G. , The Ef fect of Penal Leg is lat ion in the Law of Tort (1960) 23 Modern Law Review 233. Wi l l iams, N . , Consumer Class Actions - Some Proposals For Reform (1975) 13 Osgoode Hall Law Journal 1. Wi l l iams, N . , I nsurab i l i t y of the Water Po l lu t ion Risk and Current Industry Pract ices in Meeting This Exposure (1973) March C.P.C.U. Annals. Wi l l iams, N . , I nsurab i l i t y of The Water Po l lu t ion Risk: Publ ic Po l icy  Questions and Methods of Accomplishment (1973) 26 C.P.C.U. Annals no. 3. Wilmarth, H. , Outl ine of Insurance Developments (1971) 21 Federation of Insurance Counsel Quarter ly .23. Wilson, A . , Granting An Interlocutory Injunction (1975) 125 New Law Journal 302. Woodhead, F., Insurance Against The Consequences of Wi l fu l Acts (1948) Insurance Law Journal 867. 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(1947) 2 D.L.R. 840 (Ont. H.C.) Northdown Drywall and Construction Ltd . v. Austin Co. (1975) 52 D.L.R. (3d) 351 (Ont. H . C ) ; varied (1976) 8 O.R. 691 (C .A . ) , (1976) 59 D.L.R. (3d) 55. O'Connor v. S. P. Bray Ltd . (1937) 56 C.L.R. 464. O'Hearn v. Yorkshire Insurance Co. [1921] 50 O.L.R. 377 ( H . C ) , [1921] 51 O.L.R. 130 (App. Div.) Overseas Tankship (U.K.) L td . v. M i l l e r Steamship Co. (1967) 1 A.C. 617 (P.C.) Owen v. O'Connor [1964] N.S.W.R. 1312. Parksburg Bui lders Material Co. v. Barrack 191 S . E . 368 (S.C. o f App. W. Va.) People v. Reedlv (1924) 66 Ca l . App. 409, 226 P. 408. - 192 -P ickford & Black L td . v. Canadian General Insurance Co. (1975) 53 D.L.R. (3d) 277 (N.S.S.C. App. Div. ) Pont y. Perth Mutual Fire Insurance Company (1967) 59 W.W.R. 550 (B.C.C.C.) Pride of Derby and Derbyshire Angling Associat ion v. B r i t i s h Celanese Ltd . [19531 2 W.L.R. 58 (C.A.) Prince George White Truck Sales L td . v. Canadian Indemnity Co. [1973] 6 W.W.R. 365 ( B . 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Ct. 505 (1973) - 195 -APPENDIX Environmental Impairment liability insurance The schedule  The Insured Name Address The Business The Territorial Limits The Limits of Indemnity For any one Claim For any one Period of Insurance The Deductibles The Insured shall in respect of any one claim bear: a) the first and b) per cent of the amount exceeding the sum stated in (a) above but not more than The Period of Insurance a) From the to the both dates inclusive b) Any subsequent period for which the Insured shall pay and the Insurers shall agree to accept a renewal premium The first Premium Annual Premium The Insurers Signed Examined - 196 Environmenta! impairment liability insurance Form EIL (UK) 474 Insuring agreement 1. In consideration of :.'ie Premium and subject to the Limits of Indemnity herein expressed the Insurers agree to indsmnify the Insured against all sums which the Insured shall become legally liable to pay m respect of claims made against the Insured for compensation in the event of (a) Bodily iniury and/or illness (fatal or non-fatal) to persons (b) Loss of use of or loss or Impairment of or damage to property (c) Impairment or diminution of or other interference with any other right or amenity protected by law happening within the Territorial Limits and caused by Environmental Impairment in connection with the Business and in respect of which a claim has been made against or other due notice has been received by the Insured during the Period of Insurance. 2. Insurers shall in addition be liable for all costs and expenses of litigation recovered by the claimant against the Insured and/or all costs and/or expenses of litigation incurred by the Insured with the written consent of Insurers in the defence of any claim against the Insured for compensation as herein defined. 3. Insurers shall further reimburse costs and expenses for removing nullifying or cleaning-up of any substance . which had caused Environmental Impairment or which could cause Environmental Impairment if not so removed nullified or cleaned up to the extent that such costs and expenses have been incurred or have become payable by the Insured as a result of a legal obligation or in the endeavour to avert a loss covered under this Policy. If an occurrence leads to costs or expenses as here referred to being incurred by the Insured and if in consequence of that same occurrence compensation as referred to in 1. above shall be subsequently claimed from the Insured within a period not exceeding 12 months from the date of the occurrence concerned then that date shall be deemed to be the date on which due notice as referred to in 1. . above has been received by the Insured. 4. The following shall be indemnified as if a separate policy had been issued to each PROVIDED ALWAYS that the aggregate liability of the Insurers shall not hereby be increased beyond the Limits of indemnity stated in the Schedule: (a) the personal representatives of the Insured in respect of liability incurred by the Insured (b) if the Insured so requests (t) any principal for whom the Insured is carrying out work in connection with the Business (ii) any Director or Employee of the Insured in respect of liability for which the Insured would have been entitled to indemnity under this Poficyif the claim had been made against the Insured the officers committees and members of the Insured's canteen social sports and welfare organisations and first aid fire and ambulance services in their respective capacities as such (iii) each of which shall as though the Insured be subioct to the terms of this Policy so far as they can apply. 4. Exclusions The Insurance expressed in this Policy shall not apply to or include: 1. Lijfcility arising from any consequence of war civil wur invasion . id of foreign t'nomy hostilities (whether w.ir he declared or not) civil rebellion revolution insurrection or military or usurped power. Liability in respect of any legal liability of whatsoever nature directly or indirectly caused by or contributed to by or arising from: (a) ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel (b) the radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof. Liability for bodily injury or illness to any person under a contract of service or apprenticeship with the Insured whilst working for the Insured in connection with the'Business. Liability arising from Environmental Impairment in respect of which any executive Director or any Officer of the Insured or any employee with specific responsibility for Environmental control (a) was aware of such Environmental Impairment being caused or aggravated by unlawful non-compliance with any regulation or instruction issued by competent authority and designed to prevent or minimize such Environmental Impairment (b) was aware or should reasonably have been aware i. that permitted levels of emission were being exceeded either repeatedly or continuously ii. that any devices or processes or other means designed to prevent or minimize Environmental Impairment were in such need of repair improvement • adaptation or replacement as to render them incapable of fulfilling their design purpose until such repair improvement adaptation or replacement had been effected iii. that any fuel raw material or other substances used in the Business were of a kind to cause permitted levels of emission to be exceeded either repeatedly or continuously PROVIDED ALWAYS that this exclusion shall cease to apply upon the initiation of such remedial measures as could reasonably be deemed appropriate in the circumstances and that in respect of the individual concerned this exclusion shall cease to apply as soon as he or she has taken such action in respect of the facts listed in (a) and (b) above as he or she could reasonably deem appropriate in the circumstances to initiate the remedial measures referred to above. Liability arising from the ownership possession or use by or on behalf of the Insured of (a) any mechanically propelled vehicle licensed for road use or for which compulsory insurance or security is required by any road traffic legislation \b) any vessel or craft (other than hand-prop<?'ted bo<*tsl mjde or intended to ' ' float on or in or travel through water or air o r space (C) drilling platforms. - 197 -6. Liability arising from the ownership possession or operation of airports. 7. Liability for Environmental Impairment arising from any commodity article or thing supplied installed erected repaired altered or treated by the Insured end happening elsewhere than at the Insured's premises alter the Insured has ceased to exercise physical control over that commodity article or thing supplied installed erected repaired altered or treated. ' 8. Liability arising from Environmental Impairment due tb a sudden unintended and unexpected happening. 9. liability arising from genetic damage. 10. Liability in respect of damage to any property whilst in the Insured's care custody or control other than personal effects (including vehicles and their contents) while temporarily on or about the Insured's premises. V. 11. Liability arising as a result of the Insured being held responsible under the concept of "joint and several" liability for Environmental Impairment caused or , contributed to by others in which case the Insurance expressed in this Policy shall only apply to that part ot any claim which corresponds to the Insured's j ascertained contribution to such Environmental ! Impairment. 12. Any amount which the Insured may have to pay for fines. NOTE: Where cover in respect of any of the liabilities excluded above under Items 5. to 11. inclusive is required, such cover may be granted upon reasonable additional information being supplied and subject to an appropriate additional premium. III. Definitions For the purpose of this Policy 1. Environmental Impairment is defined as: (a) the emission discharge dispersal disposal seepage release or escape of any liquid solid gaseous or thermal irritant contaminant or pollutant into or upon land the atmosphere or any watercourse or body of water (b) the generation of smell noises vibrations light electricity radiation changes temperature or any other sensory phenomena arising out of or in the course of the Insured's operations installations or premises all as designated in the Schedule. 2. Business shall include the provision and management of canteens social sports and welfare organisations for the benefit of the Insured's employees and first aid fire and ambulance services: 3. The word "Claim" comprises any single claim or • any series of claims resulting from one and the same isolated, repeated, or continuing Environmental Impairment. IV. Interpretations 1. With regard to the indemnity provided for in I. 2. and 3. above it is expressly noted and agreed as follows: (a) Such indemnity shall not apply to any such costs and expenses incurred in respect of Environmental Impairment for which i. claims are excluded in Section IKhereof ii. claims covered by this Policy .ire combined with any claims excluded under Section llhereot (hor.jm.ilter referred to as "combined claims"). (b) In respect of any combined claims the Insurers shall (subject to proof of loss and the Limits of Indemnity) reimburse the Insured for that portion of the costs and expenses here referred to which may be allocated to the claims covered by this Policy-(c) Nothing herein shall override nuclear or other exclusions applying under this Policy. 2. In applyir.g the Limits of Indemnity any amounts payable by the Insurers in respect of the indemnity provided in I. 2. and 3. above shall be included and the amounts borne by the Insured in respect of the Deductibles shall be excluded from the calculation. 3. The Deductibles shall be applied to the total amount paid or payable by the Insured for compensation costs and/or expenses as referred to in 1 . 1 . . 2. and 3.- above in respect of any one claim. Conditions T. This Policy and the Schedule shall be read together as one contract and any word or expression to I which a specific meaning has been attached in any | part of this Policy or of the Schedule shall bear such specific meaning wherever it may appear. 2. The Insured shall give written notice to the Insurers of any incident or claim or proceedings relating to ' the Insurance herein expressed immediately the same shall have come to the knowledge of the Insured or his legal representative. 3. The Insured shall not without the consent in ' writing of the Insurers repudiate liability negotiate or make any admission offer promise or payment in connection with any incident or claim related to the Insurance herein expressed and the Insurers shall be entitled if they so desire to take over and conduct in the name of the Insured the defence of any claim • or to prosecute in the name of the Insured at their own expense and for their own benefit any claim for indemnity or damages or otherwise against any persons and shall have full discretion in the conduct of any proceedings and in the settlement of any claim and the Insured shall give all such information and assistance as the Insurers may reasonably | require. i 4. If the Premium for this Policy has been calculated ( on any estimates furnished by the Insured the Insured shall keep an accurate record containing all particulars relative thereto and shall at all times allow the Insurers to inspect such records. The Insured shall within one month from the expiry of each Period of Insurance furnish to the Insurers . such particulars and information as the Insurers may require. The premium for such period shall thereupon be adjusted and the difference paid by or allowed to the Insured as the case may be. 5. This Policy shall not be called upon in contribution . i and no liability shall attach hereunder for any injury , loss damage costs or expenses recoverable under any other insurances insuring to the benefit of the Insured except as regards any excess over and above the amounts collectible under such other . I insurances provided always that this clause shall i not apply to any policy that is specifically arranged by the Insured to cover limits in excess of those stated in this Policy. . ' : 6. If at any time or from time to time any change shall occur materially varying any of the facts existing at the date of the proposal the Insured shall within 30days give notice in writing to the Insurers and • shall pay such additional premium as the Insurers may .require. 7. The Insurers or their representative shall at all reasonable times have free access to inspect any property and in the event of any delect or danger being apparent to the Insurers which the Insured can reasonably he expected to correct or minimize the Insurers without preiudice to the provisions of II. 4. above may give notice in wilting to the Insured and thereupon all liability of the Insurers in iiispect of such defect or danger or arising therefrom shaN be suspended until th-i same be corrected or minimised to the satisfaction of the Insurers. 60/S86 3/75 

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