The Court of Appeal for Ontario in Pietrangelo v Gore Mutual Insurance Company, 2011 ONCA 162 dismissed the plaintiffs’ appeal of the decision of the trial judge holding that an explosion which resulted in the total destruction of the plaintiffs’ house which was caused by the unknown (to the plaintiffs / insureds) use by the plaintiffs’ tenants of the plaintiffs’ house to “unlawfully produce cannabis resin” was excluded from the coverage in the plaintiffs’ policy of residential insurance they had placed with the defendant insurers. 

The insurers successfully relied upon the exclusion clause in the insurance policy “We do not insure…nor do we insure direct or indirect loss or damage…to dwellings…used in… processing [or] manufacture…of marijuana”.

The plaintiffs had submitted that the trial judge’s interpretation of the exclusion was in error because the word “use” (sic) in the clause was ambiguous and was not intended to apply, regardless of no knowledge and no involvement of the insureds; that the exclusion clause was “unjust or unreasonable” and section 151 of the Insurance Act should apply (that the clause exacts a penalty on the innocent insureds); and that the trial judge ignored the insurers’ Notice that the clause was in relation to “marijuana grow houses”. 

The Ontario Court of Appeal agreed with the trial judge that the exclusion clause was neither unjust or unreasonable; and whether or not the clause creates unfairness to the insured, there was a rational basis for its existence, including the legitimate business reasons relating to the ability to assess risk and set premiums. 

David Keith Alderson LL.B, LL.M

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