2006 BCSC 1276 Lloyd's Underwriters v. Cominco Ltd. et al

Before: The Honourable Mr. Justice Davies

Reasons for Judgment

Counsel for the Plaintiffs in Action No. S056205, Lloyd's Underwriters:	G. Mew O.G. Jones
Counsel for the Defendants, Cominco Ltd., Teck Cominco Limited and Teck Cominco Metals Ltd., in both actions:	G.C. Weatherill C.A.B. Ferris C. Doherty
Counsel for the Defendant, Seaton Insurance Company:	G.M. Nijman
Counsel for the Plaintiff in Action No. S056374, Lombard General Insurance:	J.H. MacMaster C.A. Rhone
Dates and Place of Trial/Hearing:	May 3 – 5, May 15, and June 22, 2006 Vancouver, B.C
Written Submissions:	July 4 – 17, 2006

INTRODUCTION

[1] The two proceedings that are the subject of this judgment concern issues of forum non conveniens and the recently enacted provisions of the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 [“CJPTA”]. They concern disputed insurance coverage for claims made against the defendant Teck Cominco Metals Ltd. (“TCML”) in litigation brought in Washington State (the “U.S. Environmental Action”).

[2] In the U.S. Environmental Action the state of Washington and numerous private citizens of that state seek to hold TCML liable for the contamination of the Upper Columbia River and Lake Roosevelt in Washington State. The value of the claims being made against TCML in the U.S. Environmental Action is in the tens of millions of dollars and the exposure of TCML’s various insurers relating to those claims is in excess of $760 million.

[3] TCML is a federally incorporated company with a head office in Vancouver, British Columbia. It is in the business of mining and smelting of various metals on a worldwide basis. That business is conducted either directly by TCML or through corporate subsidiaries in various countries. At the heart of the allegations against TCML in the U.S. Environmental Action are discharges from its smelter in Trail, British Columbia, into the Columbia River.

[4] Among TCML’s wholly owned subsidiaries is Cominco American Incorporated (“Cominco American”) which operates in six American states, including Washington State where it was based. Cominco American is, however, not a party in the U.S. Environmental Action and TCML itself has never operated in Washington State.

ISSUES

[5] TCML has applied to have this Court decline jurisdiction over the insurance coverage issues raised in these proceedings in favour of proceedings commenced in the United States District Court for the Eastern District of Washington (the “U.S. Coverage Action”).

[6] In the U.S. Coverage Action, Judge Suko of the United States District Court for the Eastern District of Washington (the “District Court”) recently ruled (over the objections of the plaintiffs in these proceedings) that the District Court will accept jurisdiction over the parties and their insurance coverage disputes. See: Teck Cominco Metals Ltd. v. Seaton Insurance Company et al., May 1, 2006, Case No. 2:05-CV - 0411-LRS; 2006 U.S. Dist. Lexis 26834.

[7] Specifically at issue on this application is whether this Court (which admittedly is entitled to assert jurisdiction over the parties in these proceedings as well as over the subject matter of the disputes) should decline jurisdiction based upon principles of international comity when it is alleged that TCML has engaged in forum shopping and a “race to the courthouse” to obtain perceived juridical advantages over its insurers in the state of Washington.

[8] Although TCML denies allegations of forum shopping, it acknowledges that it will seek to have the laws of Washington State applied to the interpretation of the insurance policies at issue because TCML considers that law to be “more developed” than British Columbia law.

BACKGROUND

[9] Those jurisdictional issues make it necessary to review: the history of the relationship between TCML and its insurers; circumstances surrounding the formation of the various insurance policies in issues in these two proceedings; the background to the U.S. Environmental Action; the course that those proceedings have taken to date; and the steps that have been taken to date in both Washington State and British Columbia concerning the insurance coverage issues that are the subject of this application.

The Insurers

Lloyd’s Underwriters

[10] Lloyd’s Underwriters, the plaintiffs in the first named proceeding in this judgment (the “Lloyd’s Action”) are certain underwriters at Lloyd’s of London who are suing for themselves and as representatives of certain London market insurance companies located in London, England. For ease of reference, I will refer to Lloyd’s Underwriters and Lloyd’s of London as “Lloyd’s” unless there is some substantive reason to differentiate between them. I will refer to the policies of insurance placed by TCML through Lloyd’s as the “Lloyd’s Policies”.

Lombard General Insurance Company of Canada Inc.

[11] Lombard General Insurance Company of Canada Inc. (“Lombard”), the plaintiff in the second named proceeding in this judgment (the “Lombard Action”) was incorporated in 1994 and carries on business as an insurance company in Canada and is headquartered in Toronto, Ontario.

[12] In 1995, Lombard acquired the business of The Continental Insurance Company of Canada (“Continental Canada”) a subsidiary of The Continental Corporation (“Continental”), a United States insurance company based in Chicago, Illinois. Lombard (or its wholly owned subsidiary, Lombard Insurance Company) also acquired, by way of assignment from another United States subsidiary of Continental, the Continental Insurance Company (“CIC”), the policies of insurance (the “CIC/Lombard Policies”) that are at issue in the Lombard Action.

[13] In obtaining coverage in the 1970s under the policies that were assigned to Lombard in 1995, TCML had dealt with CIC’s Canadian division that was headquartered in Toronto and also had a Vancouver, British Columbia, branch office.

[14] TCML was not a party to any of the transactions under which Lombard acquired the CIC/Lombard Policies.

The Dominion of Canada General Insurance Company, American Home Insurance Company, and ING Insurance Company of Canada

[15] The Dominion of Canada General Insurance Company As Successor To The Canadian Indemnity Company, and the American Home Assurance Company As Successor To New Hampshire Insurance Company were joined by Lloyd’s as defendants in the Lloyd’s Action. However, since that action was commenced, TCML has settled all existing and future claims related to damage to property caused by contamination that TCML had or could have under the insurance policies issued by either. They have no further interest in these proceedings and Lloyd’s has filed Notices of Discontinuance concerning claims previously advanced against them.

[16] Also, on May 2, 2006, TCML settled all its existing and future claims related to damage to property caused by contamination that it had or could have under policies issued by ING Insurance Company of Canada f/k/a The Halifax Insurance Company (“ING”) so that ING no longer has any interest in this proceeding. It is accordingly anticipated that Lloyd’s will also file a Notice of Discontinuance concerning its claims against ING as a defendant in the Lloyd’s Action.

Seaton Insurance Company

[17] Seaton Insurance Company (“Seaton”) is currently a corporation that is organized under the laws of Rhode Island, with its principal place of business in Cambridge, Massachusetts.

[18] Seaton was known as Unigard Mutual Insurance Company (“Unigard”) and Unigard Security Insurance Company but subsequently changed its name to Seaton. Unigard sold umbrella and excess liability policies to TCML and insured risks located, among other places, within the state of Washington, U.S.A. Unigard was domiciled in Washington State with its principal place of business in Seattle, Washington, when it issued policies of insurance (which I will refer to as the “Unigard/Seaton Policies”) to TCML. Seaton was domiciled in Washington State until at least 2003.

[19] Seaton has joined Lloyd’s and Lombard in their opposition to TCML’s forum non conveniens application. It also seeks to have all issues relating to its potential liability to TCML under any insurance policies issued by it or its predecessors determined by this Court in the Lloyd’s Action.

[20] I will in future refer to Lloyd’s, Lombard, and Seaton collectively as the “Insurers” and to the Lloyd’s Policies, the CIC/Lombard Policies, and the Unigard/Seaton Policies as the “Policies” unless it is necessary to differentiate amongst them.

The Insurance Policies

[21] Beginning in 1958 and ending in 1985, TCML purchased the Policies (which are general and excess liability insurance policies) from the Insurers. It also purchased similar insurance from other insurers.

[22] TCML submits that the intention of its global insurance program was to provide TCML with insurance coverage in any country where liability claims against it might arise, anywhere in the world.

[23] With minor variations, the Policies provide similar coverage, requiring each insurer either to defend and indemnify TCML or to indemnify only (including the reimbursement of defence costs) in case of any alleged liability resulting from an “occurrence” of property damage happening or taking place during the period of coverage anywhere in the world. Under each of the Policies, the various insurers agreed to cover “all sums” the insured becomes liable to pay as a result of such an “occurrence”.

[24] Significantly, coverage under the Policies is triggered even when a claim is asserted against TCML after the policy period has ended, so long as the claim arose from an “occurrence” in progress during the policy period. Thus, these coverage disputes relate to Policies that were all purchased by TCML at least twenty and up to thirty five years ago relating to alleged occurrences that allegedly occurred during that same time frame.

(a) The CIC/Lombard Policies

[25] The CIC/Lombard Policies provided $1 million primary comprehensive general liability coverage to TCML for the period August 29, 1969 to September 30, 1976.

[26] Although one policy (Policy 3-186898) under which TCML’s predecessor Cominco Ltd. and numerous subsidiaries were insured was extended for one month to October 30, 1976 in respect of Cominco Ltd.’s American operations, Cominco Ltd. itself was not named as an insured in that extension of coverage which was effected through a broker in Seattle, Washington.

[27] TCML submits that its established practice for primary insurance coverage was to fill out an application provided by its broker. In the case of the CIC policies, TCML’s local broker was Johnson & Higgins Ltd. of Vancouver (“J&H”). Upon receipt of the completed application, J&H would market the risk to various insurers who would provide to J&H the terms upon which the insurer was prepared to assume the risk.

[28] At the time the CIC/Lombard Policies were issued and throughout the relevant policy periods, CIC’s Canadian operations were not incorporated as a separate legal entity but rather operated as a division of CIC which was based in Chicago. TCML submits that CIC’s decision to accept the risk was made in Toronto and that CIC’s insurance policies were prepared and issued by CIC’s Toronto office.

[29] As noted above, on January 1, 1995, the CIC/Lombard policies were transferred either to Lombard or to its wholly owned subsidiary, Lombard Insurance Company, by way of assignment. Although TCML was not a party to the transfer, when it commenced the U.S. Coverage Action it named Lombard as a defendant. Subsequently, it also joined CIC as a defendant.

(b) The Unigard/Seaton Policies

[30] Unigard/Seaton policy No. GL-26-9659 provided umbrella liability coverage of $5 million excess to the $1 million primary CIC/Lombard Policies for the period August 29, 1972 to August 29, 1975. Unigard/Seaton policy No. 1-0556 provided an additional $15 million excess liability coverage for the period December 12, 1972 to December 12, 1975.

[31] The Unigard/Seaton Policies were all issued while that insurer was headquartered and domiciled in Seattle, Washington.

[32] Lloyd’s issued excess insurance policies to TCML between August 29, 1972 and June 30, 1985, with combined per occurrence limits totalling over $758 million. Between August 29, 1972 and October 30, 1976, the Lloyd’s Policies attached at $6 million (above the $1 million CIC/Lombard Policies and Unigard/Seaton’s $5 million umbrella policy). From October 30, 1976 through June 30, 1986, the Lloyd’s Policies were excess to other insurers’ umbrella and primary policies covering TCML’s world-wide operations.

[33] The first Lloyd’s policy issued to TCML initially provided coverage for the period August 29, 1972 through August 29, 1975, and was placed through the Seattle office of Cravens, Dargan & Company, a United States broker headquartered in San Francisco, California.

[34] With the exception of that first period of insurance, TCML obtained all of its Lloyd’s Policies though insurance brokers in Vancouver who, in turn, corresponded with affiliated brokers in London who met with the various underwriters who eventually agreed to subscribe to the various Lloyd’s Policies.

[35] In summary, therefore, at issue in these proceedings and in the U.S. Coverage Action are the following worldwide “occurrence” based property damage liability insurance Policies issued to TCML:

(1) CIC/Lombard Policies: primary coverage of $1 million from August 29, 1969 to September 30, 1976;

(2) Unigard/Seaton Policies: excess insurance of $5 million over the CIC/Lombard Policies’ primary coverage policies from August 29, 1972 to August 29, 1975, as well as an additional $15 million excess liability coverage from December 12, 1972 to December 12, 1975; and

(3) Lloyd’s Policies: excess insurance with combined per occurrence limits totalling over $758 million between August 29, 1972 and June 30, 1985.

The U.S. Environmental Action

[36] TCML has operated its lead and zinc smelter located in Trail, British Columbia, since 1906. The smelting process generated a by-product referred to as “barren slag” or “fuming slag”.

[37] From the 1920s until the mid-1990s, in accordance with what TCML says were standard industry practices and, at relevant times, pursuant to permits issued to it by federal and provincial regulatory authorities, barren slag was discharged from the Trail smelter into the Columbia River. TCML says that during that period it believed and still believes that the slag discharge from the Trail smelter was inert and not harmful to human health or the environment.

[38] In the late 1930s and early 1940s, the Grand Coulee Dam was constructed on the Columbia River in Washington State. The resulting reservoir that was created by the dam is known as Lake Roosevelt.

[39] TCML submits that it is generally understood that, after construction of the Grand Coulee Dam, slag from TCML’s Trail smelter operations (as well as by-products released from the mining, smelting and industrial operations of other companies adjacent to the Columbia River, in addition to municipal waste discharges from towns and cities above the dam in both Canada and the United States), began to accumulate in Lake Roosevelt.

[40] During 1991 and 1992, as part of the renewal process for TCML’s effluent discharge permits, discussions and meetings were held in Washington State with the United States Environmental Protection Agency (“EPA”), Washington State officials and various public bodies. They included a public meeting in the town of Colville, Washington, during which TCML’s slag discharges into the Columbia River were discussed.

[41] TCML says that although neither the EPA nor the Washington State authorities indicated to TCML that they were opposed to the continued discharge of slag into the river, the amended permit issued to TCML in late 1992 required that TCML terminate the discharge of slag into the river by the end of 1996.

[42] TCML says that the termination of slag discharge was accomplished by the installation of an interim slag collection system in mid-1995 and the installation of a new lead smelting technology in 1997.

[43] Notwithstanding those steps, various American agencies and third parties, including the EPA, the Washington State government and the Confederated Tribes of the Colville Reservation in Washington State (“Colville Tribes”) continued to assert claims against TCML for environmental property damage in Lake Roosevelt.

[44] In the early 2000s, the EPA attempted to negotiate a resolution of its concerns with TCML over the area which it termed the “Upper Columbia River Site”. When negotiations failed to produce a resolution of its concerns, the EPA sent TCML a “Special Notice Letter” dated October 10, 2003, demanding that TCML enter into an Administrative Order “On Consent” to conduct a remedial investigation feasibility study of the Upper Columbia River Site. The EPA established a 60-day formal negotiation period during which TCML was required to reach an agreement to conduct or finance remediation activities at the Upper Columbia River Site or face enforcement action.

[45] In response to that Special Notice Letter, TCML advised the EPA that:

… Teck Cominco Metals is a Canadian company and its Trail metallurgical operations, which are the subject of this action, are located entirely in the Province of British Columbia. Teck Cominco Metals’ Trail operations are regulated under the laws of the Province of British Columbia and the laws of Canada. Teck Cominco Metals and its Trail operations are not subject to CERCLA or the jurisdiction of the EPA. All of its relevant discharge permits are issued by Canadian regulatory authorities. In fact, Trail could not apply for, or receive, permits from any U.S. State or Federal regulatory authority – permits that would serve as a defence to CERCLA enforcement actions.

[46] On December 11, 2003, the EPA ended formal negotiations and issued a Unilateral Administrative Order (“UAO”) under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. (1997) § 9601 et seq. [“CERCLA”] that ordered TCML to investigate and remediate the Upper Columbia River Site.

[47] CERCLA is a strict liability statute that also allows environmentally affected parties to bring private civil actions for relief against environmental harm caused by polluters. On July 21, 2004, the members of the Confederated Tribes of the Colville Reservation filed the U.S. Environmental Action against TCML in the United States District Court for the Eastern District of Washington pursuant to those private law remedial provisions.

[48] In the U.S. Environmental Action which is formally styled Joseph A. Pakootas, an Individual and Enrolled Member of the Confederated Tribes of the Colville Reservation et al. v. Teck Cominco Metals Ltd., a Canadian corporation, the members of the Colville Tribes seek:

(1) a declaration that TCML has violated and continues to violate CERCLA;

(2) an order enforcing the UAO against TCML and compelling TCML to “correct its violations of the UAO”;

(3) payment of civil penalties for each day of TCML’s alleged violation of the UAO; and

(4) an award of costs and attorney’s fees incurred by the plaintiffs in the action.

[49] On September 29, 2004, the District Court granted Washington State’s motion to intervene as a plaintiff in the U.S. Environmental Action asserting claims identical to those of the other plaintiffs.

[50] TCML then filed a motion to dismiss the U.S. Environmental Action for lack of personal jurisdiction and lack of subject matter jurisdiction. On November 8, 2004, the District Court denied that motion after which TCML appealed the decision to the United States Court of Appeal for the Ninth Circuit. In prosecuting that appeal TCML secured the support of an amicus curiae brief of the Government of Canada which included the assertion that:

This case raises serious issues of comity, interference by United States Courts and agencies in the internal affairs of Canada, and compliance with the rule of national treatment applicable under customary international law.

[51] TCML and the Government of Canada argued in December of 2005, that since TCML is a Canadian company headquartered in British Columbia, and since the impugned actions of TCML took place completely within British Columbia, there was an insufficient connection between TCML and Washington State to enable the District Court to take jurisdiction.

[52] On July 3, 2006, after oral submissions concerning TCML’s applications in these proceedings had been completed on May 15, 2006, and my own judgment reserved, reasons for judgment dismissing TCML’s appeal in the U.S. Environmental Action were delivered by the panel of The United States Court of Appeals for the Ninth Circuit who heard that appeal. (See: Pakootas et al. v. Teck Cominco Metals Ltd. No. 05-35153 D.C. No. CV-04-00256-AAM; 2006 U.S. App Lexis 16684.)

[53] In its judgment the panel held that the U.S. Environmental Action involves a domestic rather than an extra-territorial application of CERCLA because “CERCLA liability is triggered by an actual or threatened release of hazardous substances, and because a release of hazardous substances took place within the United States” so that TCML may potentially be held liable as an “arranger” under the provisions of CERCLA.

[54] Subsequent to the release of that decision, I received written submissions concerning the applicability of those rulings to these proceedings. The Insurers took the position that the determination by the Ninth Circuit Court of Appeals is of no consequence to these applications because it was based upon the pleadings in the U.S. Environmental Action, the factual accuracy of which is seriously contradicted by the evidence adduced on this application. In response, TCML submitted that the appeal decision is of significance because it strongly connects insurance coverage issues to Washington State.

[55] After those submissions were received I was, by agreement of all counsel, provided with a copy of a “Petition for Panel Rehearing and Rehearing En Banc” that was filed by TCML in the United States Court of Appeal for the Ninth Circuit on July 17, 2006. In that petition TCML submits, among other things, that the panel that dismissed its appeal erred in determining that TCML could be an “arranger” under CERCLA and in finding that the alleged release of hazardous material into the Columbia River involves a “domestic application” of CERCLA. In making those arguments TCML continues to submit that any attempt to impose liability upon a Canadian corporation related to operations situated wholly within Canada is an impermissible extra-territorial application of CERCLA.

[56] In addition, after final oral argument in this matter was concluded, I was informed of developments related to the ongoing disputes between TCML and the EPA that may impact on not only the ongoing U.S. Environmental Action but also upon the issues raised in the U.S. Coverage Action and in these proceedings.

[57] When this application was first argued, TCML asserted that it had incurred more than US$3.3 million in defence costs and fees in the defence of the Lake Roosevelt environmental claims as well as in excess of US$1 million in consulting and related costs involved in investigating those claims. It estimated that the cost of further investigation alone would exceed US$10 million and that while TCML’s potential future liability to government agencies and third parties for remediation of the alleged contamination in Lake Roosevelt could not be estimated with assurance, the risk was significant.

[58] In mid-June 2006, I was informed by counsel for TCML that a settlement agreement had been reached between TCML and the EPA (the “EPA Settlement”) obligating TCML to undertake and fund (at whatever cost and secured by US$20 million to be placed in escrow in a U.S. bank) an investigation of the Lake Roosevelt contamination and to pay US$1.1 million annually to fund the costs of the Colville Tribes, the state of Washington and the United States Department of the Interior to participate in the investigation.

[59] As with issues concerning the decision of the United States Court of Appeal for the Ninth Circuit dismissing TCML’s jurisdiction appeal, I received extensive written submissions concerning the impact of the EPA Settlement on the issues to be decided by me.

[60] After considering those submissions I have concluded that the EPA Settlement is of some significance to these proceedings because it has the potential to reduce the scope of the U.S. Environmental Action.

[61] More importantly, however, the EPA Settlement is important to the issues raised by these applications because notwithstanding that settlement, TCML has not, except for certain very specific and limited purposes, attorned to the jurisdiction of the District Court, nor agreed to be directly liable for the costs of investigation. Rather, Cominco American (which is not a party in this proceeding or in the U.S. Coverage Action and which on the evidence before me was not in any way responsible for the discharge of any alleged pollutants into the Columbia River) has undertaken those obligations. Although TCML has guaranteed the performance of many of Cominco American’s obligations under the EPA Settlement, it has not otherwise attorned to the jurisdiction of the District Court. That position is consistent with that advanced before the District Court and the Ninth Circuit Court of Appeals in the U.S. Environmental Action and fundamentally different than jurisdictional submissions advanced by TCML in the U.S. Coverage Action and in these proceedings.

Insurance Coverage Issues

[62] It is TCML’s position that the alleged contamination of the Upper Columbia River Site for which the plaintiffs in the U.S. Environmental Action seek to hold TCML liable constitutes “property damage” within the meaning of the Policies and that such property damage “occurred” (for the purposes of insurance coverage) during policy periods covered by the Policies.

[63] TCML submits that the sums expended and to be expended by TCML constitute “damages”, “expenses”, or “ultimate net loss” on account of “property damage” within the meaning of the Policies and that while the full amount of the damages is unknown to TCML at this time, the damages claimed exceed, or soon will exceed, the limits underlying each of the Policies.

[64] The Insurers deny that they are obligated to compensate TCML under the Policies. The position advanced by Lloyd’s in its argument is reflective of the position that is taken by all of the Insurers and informs some of the disputes that will ultimately have to be resolved concerning whether Lombard is obligated to provide coverage under the CIC/Lombard Policies for the defence of the U.S. Environmental Action and also whether the Policies obligate any or all of Lloyd’s, Lombard or Seaton to pay any damages or costs for which TCML may ultimately be held liable in that litigation.

[65] My understanding of counsel for Lloyd’s submissions is that for the following reasons (and such other reasons as may become relevant as these issues are further explored), Lloyds will be denying that there is coverage under the Lloyd’s Policies for the environmental claims made by TCML because:

(1) The pollution and other harm alleged to have been caused by TCML is not unexpected or unintended. Rather, it is the natural and certain result of mining and smelting operations and was entirely expected by TCML and is therefore not an accident, an occurrence or an insurable risk.

(2) The Policies contain pollution exclusions.

(3) Any costs claimed by TCML to remediate or address other injury resulting from operations at Trail (or any other location) are costs associated with the normal business of mining and smelting and are not the proper subject of liability insurance.

(4) The environmental claims now being advanced in the U.S. Environmental Action do not constitute covered “occurrences” as that term is defined in the Policies.

(5) Sufficient underlying insurance, deductibles and/or self-insured retentions exist to cover such losses as TCML may incur.

(6) TCML failed to provide its insurers with timely notice as required by the Policies.

(7) To the extent TCML is not an insured under the Policies, there has been no valid assignment of the Policies from Cominco Ltd. to TCML.

(8) Applicable statutes of limitation, the equitable doctrine of laches, and/or the doctrines of waiver and/or estoppel preclude the enforcement of any coverage which might otherwise have been available to TCML under the Policies.

(9) Some or all of any claimed expenses or costs are not related to “claims” and/or “suits”.

(10) To the extent that TCML seeks compensation and/or indemnification for losses which have not yet arisen or for amounts TCML has not yet paid or become legally obligated to pay as the result of a final judgment or settlement, such claims are not covered.

(11) To the extent the damages and/or claims related to the underlying matters were a known loss or loss in progress, there is no coverage.

(12) Some or all of the claims for which TCML seeks coverage are for equitable and injunctive relief for which no coverage is available under the meaning and intent of the Policies.

(13) To the extent TCML seeks coverage for restitutionary damages or the costs of undertaking prophylactic measures necessary to prevent further damages associated with the incidents giving rise to environmental claims, there is no coverage under the meaning and intent of the Policies.

(14) The sums that may be sought by TCML do not constitute sums TCML is obligated to pay as “damages” within the meaning and intent of the Policies.

(15) The acts or omissions giving rise to the environmental claims were in violation of law, governmental regulations or public policy for which no coverage is available under the meaning and intent of Policies, and/or to the extent TCML seeks indemnification for fines and/or penalties assessed or which may be assessed against TCML, no coverage is available.

(16) The expenses for which TCML may seek indemnity were incurred to clean up property owned by TCML or in its care, custody or control for which no coverage is available.

(17) To the extent any of the property damage or bodily injury claimed occurred prior to the inception of, or after the expiration of, the Policies, no coverage is available.

(18) To the extent TCML seeks indemnity in excess of the limits of liability set forth in the Policies, no coverage is available.

(19) TCML has voluntarily made payments or assumed obligations or incurred expenses for the environmental claims for which no coverage is available.

(20) During the process of applying for, negotiating, or renewing the Policies: TCML failed to disclose relevant and material facts which they were obligated to disclose and/or misrepresented relevant and material facts.

Chronology of the Insurance Disputes

[66] On or shortly before August 9, 2002, TCML communicated to Lloyds that it wished to discuss certain claims with them. A Standstill and Confidentiality Agreement was then entered into with Lloyd’s on August 9, 2002, after which TCML entered into a second Standstill and Confidentiality Agreement with Lombard. The particulars of the claims which TCML wished to discuss were only disclosed after the Standstill Agreements were signed.

[67] On August 25, 2003 and September 30, 2003 respectively, TCML gave notice to Lloyd’s Lombard and Seaton of the following potential claims:

(1) A potential lawsuit against it by the Tl’azt’en First Nation regarding allegations of health problems said to stem from the historic practices of TCML’s employees at its mercury mine at Pinchi Lake, British Columbia.

(2) Circumstances which might give rise to claims covered by the Lloyd’s Policies as a result of:

(a) an October 2002 assessment by the EPA of the contamination in the Upper Columbia River and Lake Roosevelt in which TCML’s lead and zinc smelter in Trail, British Columbia, was identified as a “primary source”; and

(b) a September 18, 2003 notice from the City of Vancouver relating to remediation of contamination allegedly arising out of the operations at 1428 Granville Street in Vancouver of a lead alloys production and fabrication facility.

[68] Lloyd’s and Lombard each allege that, in addition to those claims:

(1) Prior to entering into the Standstill Agreements, TCML was also aware of a claim against it by Weyerhaeuser Canada Ltd. arising out of TCML’s activities at a property owned and/or occupied by it at Port McNeill concerning which Lombard has denied coverage.

(2) It is a matter of public record that TCML operated the Sullivan Mine, southeast of Kimberley, British Columbia, and that according to Morrow Environmental Consultants who appear to have provided environmental consulting services to TCML in relation to the Sullivan Mine:

Regulatory officials required Teck Cominco to assess and remediate all site areas following closure of the site. Concentrations of water (groundwater, surface water) and in some areas soil were found to exceed regulatory standards under post closure conditions.

(3) TCML has also undertaken remedial work to substantially improve both the environmental and public safety aspects of its former mine site at Bluebell Mine, Riondel, British Columbia.

[69] It is Lloyd’s and Lombard’s position that the existence of pollution related claims or possible claims against TCML in British Columbia which may give rise to claims under the Policies is a significant jurisdictional factor. They say that TCML now seeks to avoid British Columbia claims that may require interpretation of the Policies by limiting the coverage issues it wishes to have determined to those arising under the U.S. Environmental Action.

[70] In response, TCML submits that Lloyd’s and Lombard have raised the issues of coverage concerning Port McNeill, Pinchi Lake, Trail and 1428 Granville Street as “a tactical manoeuvre” in an effort to try and broaden the controversy to include a British Columbia component in circumstances where, in TCML’s submission, no controversy exists with respect to those potential claims.

[71] Although TCML acknowledges it had previously requested coverage from Lombard in respect of an environmental claim made against it in 1999 by Weyerhaeuser Company Limited in respect of the site at Port McNeill (for which claim Lombard denied coverage in August 2002 over the objections of TCML), it submits that there was no further communication about that coverage.

[72] TCML also relies on the fact that on April 13, 2006, (shortly before the hearing of this application and after argument had been delivered on the jurisdiction question in the U. S. Coverage Action), it informed Lombard that since the Port McNeill claim was made, it had conducted and paid for a remediation of the Port McNeill site and that “any liability issues have been resolved to TCML’s satisfaction”. It said further that:

… TCML does not intend to continue with, and hereby irrevocably withdraws, the claim for defence coverage and indemnity under the Continental Insurance Company policies in respect of the Port McNeill site set out in the January 2, 2002 letter.

[73] In addition, while TCML acknowledges that it did provide notice to Lombard and Lloyd’s of circumstances that might give rise to claims under the Policies in respect of allegations of mercury poisoning at Pinchi Lake and of an allegedly contaminated site formerly owned in part by TCML at 1428 Granville Street in Vancouver, it submits that no claim for indemnity or a defence was ever made by TCML in respect of those sites. Further, in response to the pleadings by Lloyd’s and Lombard concerning those sites filed in these proceedings, TCML wrote to each stating that it:

… has not made and is not now making any claim or request for coverage under any contracts of insurance in its favour issued by [Lloyd’s and Lombard] with respect to any of the ‘Environmental Claims’ referred to in the Statement of Claim, with the exception of claims arising out of the alleged contamination of the Upper Columbia River and Lake Roosevelt in Washington State in respect of which TCML is currently being sued in Washington State.

[74] TCML submits that in the result, the only coverage issues that exist are those relating to the claims in Washington State so that the issues in these proceedings are identical to the issues raised in the U.S. Environmental Action.

[75] I do, however, note that when Ms. Anne Chalmers, TCML’s Director of Risk Security and Insurance, was cross-examined about TCML’s position concerning the British Columbia sites after the foregoing correspondence had been delivered by TCML’s counsel, she testified that:

Q And you will appreciate that the insurers, having being [sic] put on notice of a number of different claims, wish to resolve them all in one lawsuit? You understand that?

A I do understand that from you, yes.

Q And for reasons which I think are obvious, your company seeks to isolate one claim, the Lake Roosevelt claim. My question to you is, in making that election in seeking to isolate the Lake Roosevelt claim, are you abandoning all of the other claims?

A No, we are not abandoning all of the other claims.

[76] For the purposes of this application, I am satisfied that the Lloyd’s Action and the Lombard Action raise broader issues of insurance coverage than does the U.S. Coverage Action. While it is obvious that the Insurers have sought to maximize the import of the claims and potential claims concerning the British Columbia sites and equally obvious that TCML has sought to distance itself from them, the fact remains that issues concerning the British Columbia sites have been and still are the subject of pleadings in these proceedings that have not been fully resolved.

The “Race to the Courthouse”

[77] On November 9, 2005, TCML delivered notice to Lombard and Lloyd’s of the termination of the Standstill Agreements effective November 23, 2005.

[78] On November 23, 2005, Lloyd’s commenced the Lloyd’s Action in this Court seeking declaratory orders with respect to their obligation (or lack thereof) to defend or indemnify TCML arising from the environmental claims described in its statement of claim.

[79] On that same date, TCML commenced the U.S. Coverage Action in the Superior Court for Washington State in and for Grant County seeking a declaratory judgment regarding its rights to insurance coverage under the Policies.

[80] Although both actions were commenced on the same date, somewhat unusually, the claim brought by TCML in the Washington State Superior Court (a State Court) was commenced at one second past midnight Pacific Time on November 23, 2005, by delivery of the originating process to a judge of that Court at his home. The Lloyd’s Action was filed in this Court approximately nine hours later when the Vancouver Registry office of this Court opened for business at the usual time.

[81] On November 28, 2005, TCML filed materials in the Washington State Superior Court in support of a motion for a Temporary Restraining Order and Request for Preliminary Injunction (“TRO Motion”) requesting that the Washington State Superior Court “prohibit the defendants from proceeding in some other forum until this Court can hear the arguments of the parties and determine that Washington is the proper forum to resolve this dispute.” In its materials in support of its TRO Motion, TCML argued, inter alia, that, under what it termed the ”first-to-file rule” that:

When TCML’s complaint was filed, this [the Washington State] Court gained jurisdiction and control of all subsequent proceedings. … Thus, “no court of coordinate authority is at liberty to interfere with its action.”

[82] Lloyd’s became aware of TCML’s TRO Motion before it was served and, as a result of enquiries made of the Washington State Court office in Ephrata, Washington, on November 30, 2005, learned that an appointment had been made to have that Court hear the TRO Motion at 3:00 p.m. that same afternoon.

[83] Before TCML’s TRO Motion could be heard that afternoon, Lloyd’s applied for and obtained an order from me in Vancouver as the presiding chambers judge temporarily enjoining TCML from prosecuting the TRO Motion in Washington State.

[84] After I made that temporary restraining order, the parties reached agreement on December 2, 2005, that, in future, jurisdictional issues would be addressed only on notice to potentially affected parties.

[85] Amongst other things, that agreement provided that TCML and Lloyd’s would file motions in the U.S. Coverage Action and in the Lloyd’s Action respectively, no later than January 31, 2006, seeking orders dismissing and/or staying those proceedings by reason of their respective jurisdictional challenges.

[86] One early step in the jurisdictional jockeying that continued during the period from December 2, 2005 to January 31, 2006, was a successful application by Icarom plc, one of the Underwriters of the Lloyd’s Policies brought by it under the Foreign Sovereign Immunities Act, 28 U.S.C. (1997) §§1602-11 to remove the U.S. Coverage Action that had been commenced in the Superior Court of Washington State for Grant County to the federal District Court for the District of Eastern Washington.

[87] The effect of Icarom plc’s application was the continuation of the U.S. Coverage Action in the District Court in Yakima, Washington.

[88] On this application, TCML sought to characterize Icarom plc’s action in removing the U.S. Coverage Action from the Washington State court system to the United States Federal Court system as a “seeking out” by Lloyd’s of the District Court as an appropriate forum for the resolution of the U.S. Coverage Action. I am, however, satisfied that Icarom plc’s actions simply constituted the legitimate refusal of a foreign corporation to submit to the jurisdiction of an American state court rather than a United States’ federal court under United States’ law so that there is no merit to TCML’s “attornment” or “seeking out” submissions.

[89] I will not further review in detail the various steps taken by the parties to obtain jurisdictional rulings in the court which each favoured before some issues could be heard and decided in the other court. However, as a consequence of the procedural advantages taken, scheduling conflicts of counsel, the time required for the production of relevant documentation by TCML and third party insurance brokers, the time required for cross-examination on affidavits filed in the Lloyd’s Action, and the differences in the procedures for the setting and hearing of applications in this Court and in the District Court, the insurers’ applications to dismiss TCML’s claims against them in the U.S. Coverage Action for want of jurisdiction was set for hearing in Washington before TCML’s application in these proceedings was set.

[90] Also, on May 1, 2006, three days before the hearing of this application commenced, Judge Suko dismissed Lloyd’s and Lombard’s applications to dismiss TCML’s claims against them both for want of personal jurisdiction and on the basis of forum non conveniens.

[91] Against that background I turn to my consideration of whether the Lloyd’s Action and the Lombard Action should be stayed by this Court.

ANALYSIS AND DISCUSSION

[92] TCML does not contest that this court has jurisdiction over it and the Policies. The primary position advanced by TCML is that, as a matter of comity, this Court ought to decline jurisdiction in favour of the District Court.

[93] The Insurers submit that TCML has engaged in forum shopping in an attempt to avoid interpretation of the Policies in accordance with the laws of British Columbia.

[94] The determination of those issues requires consideration of the common law principles relating to such jurisdictional issues as they have been enunciated in both the Supreme Court of Canada and the British Columbia Court of Appeal in recent years. It also requires an analysis of the extent to which, if any, those common law principles have been affected by the CJPTA which was proclaimed in force on May 4, 2006 while argument was underway in these proceedings.

[95] The CJPTA is the product of the Uniform Law Conference of Canada (the “Conference”).

[96] The Conference stated that the purposes of its model Court Jurisdiction and Proceedings Transfer Act included:

(1) replacement of the widely different jurisdictional rules currently used in Canadian courts with a uniform set of standards for determining jurisdiction; and

(2) bringing Canadian jurisdictional rules into line with the principles laid down by the Supreme Court of Canada in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, 52 B.C.L.R. (2d) 160 [Morguard], and Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897, 77 B.C.L.R. (2d) 62 [Amchem].

[97] It is not necessary, nor would it be appropriate in this case, to consider the impact of the CJPTA upon jurisdictional issues concerning jurisdiction simpliciter or “territorial competence” as it is referred to in the CJPTA because TCML has acknowledged that this Court has territorial competence and jurisdiction over it as a Canadian corporation with offices and undertakings in British Columbia as well as jurisdiction over the subject matter of the Policies.

[98] The provisions of the CJPTA that must, however, be considered on this application are found in s. 11 which establishes the statutory criteria for the consideration of principles that were previously the subject of forum non conveniens inquiries. Section 11 provides that:

11(1) After considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding.

(2) A court, in deciding the question of whether it or a court outside British Columbia is the more appropriate forum in which to hear a proceeding, must consider the circumstances relevant to the proceeding, including

(a) the comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the court or in any alternative forum,

(b) the law to be applied to issues in the proceeding,

(d) the desirability of avoiding conflicting decisions in different courts,

(e) the enforcement of an eventual judgment, and

(f) the fair and efficient working of the Canadian legal system as a whole.

[99] It is noteworthy that the model Court Jurisdiction and Proceedings Transfer Act proposed by the Conference in 1994 was not adopted by the legislature of British Columbia until May 5, 2003, and that once passed, the CJPTA did not come into force by order of the Lieutenant Governor in Council until May 4, 2006. During that period of more than ten years, the courts of this province and other jurisdictions in Canada have considered and applied the principles enunciated in Morguard and Amchem to a myriad of factual circumstances. Following the usual course of the common law, those principles evolved and developed over time.

[100] Importantly, however, s. 2(2) of the CJPTA provides that:

The territorial competence of a court is to be determined solely by reference to this Part.

[101] Section 11 is found in Part 2 of the CJPTA and it is thus specifically subject to that constraint.

[102] I am accordingly satisfied that the provisions of s. 11 of the CJPTA should be considered to be part of a comprehensive remedial statutory scheme that is intended to codify the determination of jurisdictional issues in British Columbia. As such the provisions of s. 11 should be interpreted as being informed by but neither dictated nor constrained by the existing case law. Expression must be given to the statutory provisions by means of a fair, large and liberal construction and interpretation that best ensures that the objects of the legislation are attained. See: s. 8 of the Interpretation Act, R.S.B.C. 1996, c. 238.

[103] In that regard, I note that when introducing the CJPTA, the Hon. G. Plant referred to its reformative intent when he said, among other things:

I'm pleased to introduce the Court Jurisdiction and Proceedings Transfer Act. This statute is based on a uniform act prepared by the Uniform Law Conference of Canada at the request of the provincial and territorial ministers responsible for justice. The purpose of the bill and the uniform act upon which it is based is to establish clear and harmonized statutory rules to accord with the principle enunciated by the Supreme Court of Canada respecting the basis upon which a court in a province or territory may properly hear and determine a matter upon which its decision is sought. …

This bill is an important part of our continuing commitment to law reform and the modernization of law and procedure in a way that I believe is consistent with access to justice and the building of a strong economy. ...

[Emphasis added.]

See: British Columbia, Legislative Assembly, Hansard, 2003, Vol.14 No. 4 (8 April 2003) at 6123 to 6124.

[104] It is also significant to note that in Cresbury Screen Entertainment Ltd. v. Canadian Imperial Bank of Commerce, 2006 BCCA 270 at ¶ 43, the Court of Appeal stated, after considering an appeal (argued and decided under forum non conveniens principles but decided after the CJPTA came into force) that:

The forum conveniens analysis in future cases will be shaped by the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28, which came into effect 4 May 2006: B.C. Reg. 117/06, and which contains in s. 11 a list of factors that the court must consider when deciding whether it or a court outside British Columbia is the more appropriate forum.

[105] Given the obvious importance of the common law principles of forum non conveniens that underlie s. 11 of the CJPTA as well as the fact that the arguments of the parties were based upon those principles until the CJPTA was proclaimed in force just prior to the last day of argument, I intend to proceed by:

(1) considering the arguments advanced by the parties relating to the issues of alleged forum shopping and comity that are at the heart of this application by reference to the decided case law prior to the enactment of the CJPTA;

(2) determining whether, and if so to what extent, the provisions of s. 11 of the CJPTA affect those submissions or any other aspects of the common law doctrine of forum non conveniens that would otherwise be applicable in this case; and

(3) applying the provisions of s. 11 of the CJPTA as informed by that analysis in determining whether this Court should decline to exercise its acknowledged territorial competence in favour of the District Court as a more appropriate forum in which to hear these proceedings.

[106] Prior to the coming into force of the CJPTA, the competing factors at play in a forum non conveniens analysis in this province centered upon an analysis of a non-exhaustive and un-weighted list of factors set out by Low J. (as he then was) at ¶ 62 in Stern v. Dove Audio, Inc., [1994] B.C.J. No. 863 (S.C.) [Stern], being:

(1) Where each party resides.

(2) Where each party carries on business.

(3) Where the cause of action arose.

(4) Where the loss or damage occurred.

(5) Any juridical advantage to the plaintiff in this jurisdiction.

(6) Any juridical disadvantage to the defendant in this jurisdiction.

(7) Convenience or inconvenience to potential witness.

(8) Cost of conducting the litigation in this jurisdiction.

(9) Applicable substantive law.

(10) Difficulty and cost of proving foreign law, if necessary.

(11) Whether there are parallel proceedings in any other jurisdiction. ("Forum shopping" is to be discouraged.)

[107] Similar non-exhaustive lists of factors to be considered have been developed and consistently applied in other Canadian jurisdictions. See for example: Camco International (Canada) Ltd. v. Porodo (1997), 211 A.R. 71 (Q.B.) in Alberta and Lexus Maritime Inc. v. Oppenheim Forfait GmbH, [1998] Q.J. No. 2059 (QL) (C.A.) in Quebec.

[108] While the statutory considerations listed in s. 11(2) are cast in different language and enumerate fewer categories than those suggested by Stern, the content is in many respects the same. That is not surprising given that the statutory factors were drawn from circumstances that were expressly or implicitly considered by courts before the model Court Jurisdiction and Proceedings Transfer Act was proposed by the Conference in 1994.

[109] I now turn to my consideration of the competing jurisdictional interests of the parties by reference to the provisions of s. 11(2) of the CJPTA in determining whether to grant the stay of proceeding sought by TCML.

Section 11(2)(a): The comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the court or in any alternative forum

[110] Corresponding common law factors from Stern would include: where each party resides; where each party carries on business; the convenience or inconvenience to potential witness; and the cost of conducting the litigation in this jurisdiction.

[111] Aside from the existence of the U.S. Environmental Action as a proceeding requiring the attendance of TCML in the District Court in Washington State, all factors that comprise the comparative convenience analysis required by s. 11(2)(a) point to British Columbia as the more convenient forum in which to resolve the insurance issues that are the subject of these proceedings and of the U.S. Coverage Action.

[112] TCML is a federally incorporated company with its head office in Vancouver and its Trail smelter, which is at the centre of this controversy, is located in British Columbia. Significantly, TCML does not operate in Washington State although its subsidiary Cominco American has a presence there. The fact that Cominco American is the principal party to the EPA Settlement while TCML is basically only a financial guarantor of its corporate subsidiaries’ obligations thereunder reinforces the lack of any re

Citation:	*Lloyd's Underwriters v. Cominco Ltd. et al.,*
	2006 BCSC 1276