The British Columbia Court of Appeal has ruled in favor of a homeowner whose fire insurance claim was denied due to a marijuana-related exclusion, finding the clause ambiguous and its application unreasonable under the circumstances, the Canadian Lawyer reported.
In the case of Busato v. Gore Mutual Insurance Company, the appellant challenged Gore Mutual’s refusal to pay out on a claim following an accidental kitchen fire that destroyed his home in 2017. At issue was a policy exclusion barring coverage for properties where marijuana is grown.
According to the report, the appellant held a valid Health Canada license allowing him to grow up to 73 plants for medical purposes. At the time of the fire, he had 25 plants growing in accordance with the license. He also had insured the property with Gore Mutual since 2014 and renewed the policy annually, the report added.
After investigating the loss, the insurer denied the claim, citing the exclusion, which referenced “Schedule (Section 2) of the Controlled Drugs and Substances Act Narcotic Control Regulations.” The homeowner filed a legal challenge, but the Supreme Court of British Columbia upheld the insurer’s decision in 2021. The judge found the exclusion unambiguous and declined to grant relief from forfeiture under section 32 of the Insurance Act.
On appeal, the BC Court of Appeal found that the lower court erred in its interpretation of the exclusion clause.
The panel determined the wording was unclear, noting it improperly combined references to different pieces of legislation. It also found that the exclusion failed to clearly define which substances or activities triggered coverage denial, according to the report.
The court distinguished the case from Pietrangelo v. Gore Mutual, a 2010 Ontario case involving unlicensed cannabis production and criminal charges. In contrast, the BC case involved legal cultivation for medical use, and the fire was unrelated to the plants, the report said.
The appeal court concluded that applying the exclusion in these circumstances would lead to an unjust and unreasonable result. It emphasized that ambiguous exclusions must be interpreted narrowly and in favor of the policyholder.
The decision sends the matter back for resolution in line with the appeal court’s findings, potentially impacting how insurers approach exclusions tied to legal cannabis use, the report said.
