Can environmental contamination claims be carved out of the general indemnity cap entirely?

Yes, and this is a common approach where environmental risk is a real concern, most often where the business includes owned real property or a history of industrial or similar use. Environmental contamination can be extremely costly to remediate, and Ontario environmental legislation can impose liability on a current property owner regardless of who actually caused the contamination in the first place, which makes this a materially different kind of risk than an ordinary operating issue covered by the general representations.

Because of that, buyers frequently negotiate a dedicated environmental indemnity that sits outside the general cap, either uncapped or subject to its own separate, often higher, cap, rather than folding environmental risk into the same limits that apply to general business representations. Whether a seller agrees to this depends on negotiation and on how real the environmental risk actually appears based on the property's history and any available environmental assessments. Given the potential severity of environmental liability, this is an area worth addressing specifically and early in due diligence rather than leaving it to the general indemnity structure.