Lost in the weeds: Drafting clarity, fire losses, and marijuana exclusion clauses
The British Columbia Court of Appeal recently dealt with a marijuana exclusion in Busato v. Gore Mutual Insurance Company, 2025 BCCA 79.
Mr. Busato had a license from Health Canada to possess up to 450 grams of dried marijuana for medical purposes and had a permit that allowed him to grow up to 73 marijuana plants indoors.
His house was damaged by an accidental kitchen fire. The fire had nothing to do with his marijuana plants.
His homeowner’s insurance policy had a marijuana exclusion which said:
We do not insurance 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 insurer denied coverage. The Supreme Court of British Columbia ruled in the insurer’s favour, but the Court of Appeal reversed the decision. The Court of Appeal found that the words “Schedule (Section 2) of the Controlled Drugs and Substances Act Narcotic Control Regulations” created ambiguity in the exclusion.
This citation combined the titles of two different pieces of legislation, the Controlled Drugs and Substances Act and the Narcotic Control Regulations as if they formed a single piece of legislation.
The reference to “any other substance falling within Schedule (Section 2)” of the miscited legislation also created an ambiguity because the Controlled Drugs and Substances Act had eight schedules numbered with Roman numerals, while the Regulations had a single schedule using Arabic numerals.
The BC Supreme Court decision followed the Ontario Courts’ approach to the same exclusion clause and divided the clause into three parts. The BC Court of Appeal disagreed with this approach and held that the exclusion clause and the policy should be considered as a whole. The BC Court of Appeal specifically distinguished the Ontario cases, on the grounds that the Ontario cases dealt with illegal activity, not licensed marijuana growing.
The Court went on to hold that the policy was ambiguous because the text could support more than one interpretation. It could exclude any marijuana related activity or be aimed at illegal marijuana activity.
Since the court could not resolve this ambiguity using the rules of contractual interpretation, it resolved the ambiguity against the insurer because the insurer had the benefit of drafting the policy.
The Court went on to consider the power to grant relief from forfeiture. This is a power found in the various provincial Insurance Acts which allows a court to permit an insured to recover under a policy, notwithstanding a breach of that policy, if it would be unjust or unreasonable to apply the strict wording of the policy to the facts before the Court.
The BC Court of Appeal also ruled that it would be unjust or unreasonable to apply the condition, noting that the insured was growing the plants legally and that the cause of the fire had nothing to do with the marijuana plants.
The full text of this interesting case can be found here: Busato v. Gore Mutual Insurance Company.
This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact the author, Tipper McEwan. Tipper is a partner in Stewart McKelvey’s advocacy group who practices in the areas of insurance, commercial litigation and estate litigation.
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