B.C.’s Court of Appeal has poked a hole in a marijuana exclusion contained in a Gore Mutual home insurance policy, which denies coverage for home fires caused by marijuana, but it doesn’t clearly specify whether it applies to legal or illegal pot cultivation.
“In my view, the [insured] has shown an alternative reasonable interpretation of the policy that is supported by the text of the policy; that is, that the exclusion was aimed at limiting the risks associated with the cultivation of illegal drugs,” the B.C. Court of Appeal ruled Friday.
“Since the [claimant’s] cultivation was not illegal nor did it create unusual risks, [he] could reasonably expect the exclusion did not apply.
“I accept that the [claimant] did not give evidence about his expectations but it is reasonable for an insured party to expect that an exclusion, which is drafted in a way that targets illegal activity, would not apply to their legal use of property.”
The background
The property owner, Anthony Edward Busato, had five surgeries — including a shoulder replacement and surgeries to his lower back, spine and neck — between 2006 and 2013 — that caused him chronic and debilitating pain.
Health Canada authorized his possession of dried marijuana for medical purposes to a maximum of 450 grams in 2013, and permitted him to grow marijuana indoors for personal/medical use to a maximum of 73 plants. After 2014, the license did not have an expiry date.
Busato’s home was damaged by an accidental kitchen fire. There was no dispute the fire was caused by an insured risk and had nothing to do with his marijuana cultivation.
He sought insurance from Gore, but the insurer denied the claim, citing the following exclusion:
“We do not insure direct or indirect loss or damage, in whole or in part: [. . .]
“to dwellings or detached private structures or unscheduled personal property contained in them, used in whole or in part for the cultivation, harvesting, processing, manufacture, distribution or sale of marijuana or any product derived from or containing marijuana or any other substance falling within Schedule (Section 2) of the Controlled Drugs and Substances Act Narcotic Control Regulations;
“regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage.”
A lower court ruled against Busato, saying the policy exclusion was “clear and unambiguous” that it meant any possession of marijuana, whether legal or not.
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Appeal Court found ambiguity
But the Court of Appeal disagreed, noting Gore’s marijuana exclusion referred to two different marijuana laws under a single name.
“…The clause combines the titles of the Controlled Drugs and Substances Act and the Narcotic Control Regulations as though, together, they form one piece of legislation,” the Court of Appeal noted. “This improperly cited reference reflects poor drafting and creates ambiguity with respect to the relevant legislation and attached schedules that purport to inform the meaning of the exclusion.”
For example, the Appeal Court wrote, “there is no such thing as a ‘Schedule (Section 2),’ in the Controlled Drugs and Substances Act.”
Gore’s home insurance exclusion for marijuana possession had already been in the court because of the confusion it caused, the Appeal Court observed. In that case, a tenant caused an explosion and total loss of a house while making cannabis resin. That tenant did not hold a licence for marijuana cultivation, and his conduct was the subject of criminal charges.
“If an insurer wishes to narrow coverage, they are free to do so ‘… any way they wish, provided they do so clearly, explicitly, and in a manner that does not unfairly leave the insured uncertain or unaware of the extent of the coverage,’” the Court of Appeal wrote in Bastardo, citing a 2003 court decision in Martin v. American International Assurance Life Co.
“I note that it remained open to Gore — after this identical exclusion was at issue in Pietrangelo in 2010 and was found to be ‘unclear,’ ‘inaccurate,’ ‘confusing,’ and ‘faulty’ — to reword the exclusion to resolve potential ambiguity.
“Gore could have explicitly excluded from coverage properties used for any possession or cultivation of marijuana — illegal or licensed — to make certain the insured would be aware of the extent of the coverage. However, Gore declined to do so.”
Feature image courtesy of iStock.com/Tassii
