A decision of Young CJ in Equity in Forbes Shire Council v AG Australia Holdings⁵ , helpfully sets out some principles which inform the analysis⁶ .

It was recognised in that case⁷ that there is a question as to “… whether the [frequently encountered] words “discharge, dispersal, release or escape” mean that the pollutant must depart from the insured’s land for some other land, or whether it is sufficient that the seepage is into the insured’s own land”.

As to the meaning of those words, his Honour⁸ quoted from Derrington & Ashton:

“The various expressions, discharge, dispersal, seepage, migration, release or escape of pollutants, obviously have different applications that are intended to apply to a wide range of modes of dissemination. Whether one or more will operate in a particular case will depend on the court’s willingness to circumscribe their operation by their strict or limited construction, or by recourse to a finding of ambiguity. “Discharge” is a flowing or issuing out. A “release” is an act or instance of liberating or freeing. And “escape” is an act or instance of escaping. “Dispersal” is the process of spreading by liquid substances from one place to another which in some instances may involve a gradual quality”. 

And then⁹:

“Ordinarily if one is talking about “escape” as a general word, one is talking about escape from A’s land to B’s land or at least something leaving A’s land …. this view has been taken involving similar exclusion clauses dealing with pollution in the United States”. 

And then¹⁰ :

“Exclusion 15 notes that the discharge etc must be ‘into or onto land or any vegetation or building thereon, any water course or body of water, or into the atmosphere or ether’. Were it not for the reference of escape of smoke and vapours into the atmosphere, these words would, to my mind, confirm the construction that the pollutant must leave the land. However, it seems to me that smoke into the atmosphere must mean smoke into the atmosphere above the height which could reasonably be used by the occupant; CJ Kelsen v Imperial Tobacco Co Ltd [1957] 2 QB 334”.

In QBE Insurance (Australia) v MCM Chemical Handling Pty Ltd¹¹, the factual scenario was that the interior of the insured’s factory had been severely damaged by an aggressive corrosive substance. In that case Bonjiorno J said¹²:

“The phrase ‘into and upon land’ … is apt to describe the land environment … outside the factory. It is not apt to describe the floor of the factory … Equally the word ‘atmosphere’, striking as it does in the middle of the exclusory phase, is not apt to describe the air inside the factory and it refers to the air environment outside the factory”.

It has been recognised repeatedly in the United States that those terms (i.e “discharge, dispersal, release, and escape”) are “terms of art in environmental law which are generally used with reference to damage or injury caused by improper disposal or containment of hazardous waste”.

It has been said in the context of the court construing an ”absolute pollution-exclusion clause” that the terms generally relate only to industrial pollution and contamination and/or environmental pollution¹³.

The Court in Porterfield v Audubon Indemnity Co¹⁴ made a number of instructive observations drawing on other US authorities, such as:

“… in determining whether there has been a discharge, dispersal, release or escape, it is necessary to assess the specific form of movement in question”. 

“… the terms “discharge, dispersal, release or escape” ordinarily implied an active or clearly perceived physical event…”

“… a ‘discharge’ (a flowing or issuing out), a ‘release’ (the act or an instance of liberating or freeing), or an escape (an act or instance of escaping) …’dispersal’ (the process … of spreading… from one place to another’)”. 

US Courts have also had regard to dictionary definitions in relation to the threshold question of whether something qualifies as a “contaminant” or “pollutant”. In the Court of Appeals of Maryland¹⁵ in Sullins v Allstate Insurance Company¹⁶ regard was had by the Court to the definition from Webster’s Dictionary of ‘contaminant’ being “something that contaminates” and ‘contaminate’ as ‘to soil, stain, corrupt, or infect by contact or association” or “make inferior or impure by mixture”, and a ‘pollutant’ as “something that pollutes” and ‘pollute’ as “to make physically impure or unclean”.

Some of the policies which might be called upon to respond to liability for environmental losses have an “Occurrence” or “Event” trigger (which can be relevant not just to indemnity under the insurance policy but also the number of potentially applicable deductibles). In Marketform Managing Agency v Amashaw Pty Ltd¹⁷ the New South Wales Court of Appeal¹⁸ affirmed the primary judge’s finding that the relevant “event” for the purposes of liability was the release of petrol into the groundwater between the periods of March, April and May 2013, such release having occurred by the spontaneous failure of a check valve, underground and adjacent to a ULP 98 petrol pump.

The definition of “Occurrence” frequently involves consideration of the words “neither expected nor intended”.

In the decision of The Owners Strata Plan No 91086 v Fairview Architectural Pty Ltd (No 3)¹⁹, Wigney J commented in respect of the definition of ‘Occurrence’ in the Policy which responded to “Property Damage”:

“the words “neither expected nor intended” refer to the “property damage”, not the “event”.  That was the construction given to a similarly worded clause in Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 314; [2018] NSWCA 100 at [103]. That construction of the definitional clause followed “[a]s a purely semantic matter” because the “word ‘which’ obviously refers back to ‘event’, so that an essential characteristic of the relevant ‘event’ is that it ‘results in’ Property Damage” and “[i]f it were intended that another essential characteristic of the ‘event’ should be that it was not expected or intended by the insured, the words ‘and which is’ (or, at least, ‘and is’) would necessarily appear before ‘neither expected nor intended by You’”: Weir at [103]. The clause in question in this case includes the words “that is” before the word “neither”, but does not include the word “and”. It follows that the reasoning in Weir applies equally to the wording of the clause in this matter. 

Pollution Liability exclusions often have a write-back of cover where the Pollution condition (eg the release or dispersal of pollutants out of factories) is “sudden or accidental or unintended”.

The phrase “sudden and accidental” as it related to property damage was considered in the decision of Visy Packaging Pty Ltd v Siegwerk Australia Pty Ltd.²⁰ The Court said:

It is clear that these words are intended to have their ordinary meanings when used in the policy. They are not technical terms. The Macquarie Dictionary provides two alternative meanings of the word “sudden”, being “happening, coming, made, or done quickly, without warning or unexpectedly” or “sharp; abrupt”. In construing the meaning of the word “sudden” in an insurance policy in Sun Alliance & London Insurance Group v North West Iron Co Ltd (1974) 2 NSWLR 625 at 631–633, Sheppard J adopted the “unforeseen and unexpected” meaning of the word. The Macquarie Dictionary defines “accidental” as “happening by chance or accident, or unexpectedly”. Again, in an insurance context, the High Court in Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 adopted the meaning of “accident” involving its unintended and unforeseen elements. At 527, Wilson, Deane and Dawson JJ said:

As a matter of ordinary language in this country, an “accident” (from the Latin accidens) means very much what the etymologist would expect. It is something which happens without intention or design. When used with reference to something which causes injury, it means an unexpected and unintended mishap.

The decision of Thompson v NSW Land and Housing Corporation (No 2)²¹ considered similar wording in relation to “dispersal”. Significantly, the Court commented:

“There is no place for that concept in this case as on each occasion Pestkil attended the property and dispersed the relevant chemical for its intended purpose over a period of time. Unlike Australia Paper Manufacturers Limited v American International Underwriters [1994] 1 VR 685 where the Victorian Court of Appeal found that the adjectives accidental, unexpected and unintended qualified only the particular “happening” in relation to the subject policy, the words “sudden” and “accidental” qualified the words “discharge”, “dispersal”, “release” or “escape”. There is no relevant analogy with the APM decision. Nothing in the conduct of the Pestkil operations was thus characterised; the toxic chemical was dispersed intentionally and deliberately in a controlled manner.”

It will come as no surprise that these types of insurance policies commonly contain exclusions relating to “Intentional and Illegal Acts” excluding “Loss arising from any dishonest, criminal, fraudulent, malicious, intentional or illegal act or omission of any responsible insured”.

The meaning of “dishonest” was considered in Bolitho v Banksia Securities Ltd (No 18)²²:

“Dishonesty encompasses recklessness … a dishonest state of mind may be inferred from wilful blindness or from dishonest of deliberate ignorance … a failure to make enquiry may sustain an inference of knowledge of the actual or likely existence of the relevant matter …”

In Vero Insurance Limited v Power Technologies Pty Ltd²³ the court observed as follows:

“The taking of measures known to be inadequate to deal with the danger which is itself known involves making a deliberate decision to court the danger”.

Another common exclusion for Non-Compliance may also operate:

“Loss arising from any Responsible Insured’s intentional, wilful or deliberate non-compliance with any statute ….”.

In Beresford v Royal Ins Co Ltd²⁴ Lord Atkin stated that:

“On ordinary principles of insurance law, an assured cannot by his own deliberate act cause the event upon which the insurance money is payable”.

In Clayton v Mutual Community General Insurance Pty Ltd²⁵, King CJ suggested that the likelihood of loss arising from the insured’s act may be so high as to be treated as being caused deliberately.