The highest court in British Columbia has overturned an insurer’s denial of coverage for a fire loss, triggered after the insured’s legal marijuana cultivation operation came to light.
In Busato v. Gore Mutual, Busato’s house burned down in 2017 thanks to a classic kitchen fire. He filed a claim under his homeowner’s policy with Gore Mutual. During the investigation, Gore discovered that Busato had been growing 25 marijuana plants at home under a valid Health Canada license for medical use.
Gore denied the claim, relying on a policy exclusion that disqualified coverage for properties used in any way for marijuana cultivation—legal or not:
We do not insure direct or indirect loss or damage, in whole or in part: [. . .]
32 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.
The insured sued for coverage and lost. The judge held that if there’s weed, the exclusion applies. The insured’s coverage action went up in smoke.
The BC Court of Appeal disagreed and allowed the action. Firstly, the Court held that the exclusion rolled together a hybrid strain of legislation (i.e., the Controlled Drugs and Substances Act Narcotic Control Regulations) that might have sounded good on paper, but didn’t legally hold up because there was never a statute or regulation with this title:
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.
Accordingly, any reasonable insured reading the exclusion would be left dazed and confused. The ambiguity was resolved in the insured’s favour.
The Court also made a clear distinction between this case and an Ontario Court of Appeal case named Pietrangelo v Gore, which dealt with the same insurer, nearly the same policy, and the same exclusion. In Pietrangelo, a tenant blew up a house making cannabis resin illegally with butane. Busato, by contrast, was lawfully growing plants for medical use.
Finally, the Court also held that denying coverage in these circumstances would be unjust and unreasonable under section 32 of BC’s Insurance Act:
Unjust contract provisions
32 If a contract contains any term or condition, other than an exclusion prescribed by regulation for the purposes of section 33 (1) or established by section 34 (2) or (3), that is or may be material to the risk, including, but not restricted to, a provision in respect of the use, condition, location or maintenance of the insured property, the term or condition is not binding on the insured if it is held to be unjust or unreasonable by the court before which a question relating to it is tried.
Applying section 32, the Court of Appeal found that Busato was upfront, licensed, and didn’t hide anything or mislead his insurer. Further, the plants were not related to the cause of the fire.
Takeaways
If an insurer wishes to exclude coverage for losses at an insured premises where legal marijuana grows, the exclusion needs to be very clear. It might be time to review existing policies and update those exclusions before a judge vaporizes them.
See Busato v. Gore Mutual Insurance Company, 2025 BCCA 79 (CanLII)
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