Cannabis Exclusion In Home Insurance Policies May Not Be Effective When Tenants’ Grow-Op Causes Loss

Article by Robert Gilroy

Despite the efforts of insurers to exclude coverage in habitational insurance policies for losses caused by cannabis cultivation or production, a recent Alberta case serves as a reminder that coverage may, nevertheless, apply where an insured’s tenant’s grow-op causes a loss.1 This is due to the existence of so-called “innocent insured” provisions in the Insurance Acts of Alberta, British Columbia and Manitoba.

Background

Home insurance policies have traditionally excluded coverage for losses caused by illegal activities. Many have also specifically excluded coverage for losses arising from illegal drug activity. With the Cannabis Act having come into force on October 17, 2018, Canadians may now legally cultivate up to four cannabis plants at a time in their dwelling-house.2 As such, some insurers have amended their policies to exclude losses caused by growing cannabis, regardless of its legality.

However, insurers in Alberta, British Columbia and Manitoba may still be at risk of cannabis-caused losses even with broad exclusions on the growing or production of cannabis in a dwelling.

The innocent insured provisions

The innocent insured provisions protect insureds who are not responsible for or complicit in intentional acts that cause damage. Specifically, exclusions barring coverage for losses caused by a criminal or intentional act or omission are of no effect vis- à-vis an insured person who does not:

  1. Cause the loss;
  2. Abet or collude in causing the loss; and
  3. Consent to the act or omission while knowing—or having ought to have known—that the act or omission would cause the loss.

The innocent insured provisions of the three provinces are all identical.3 British Columbia, Alberta and Manitoba brought their provisions into force in 2011, 2012 and 2014, respectively. Their enactment was a response to the Supreme Court of Canada’s (SCC) decision in Scott v. Wawanesa Mutual Insurance Co. [Scott].4 In Scott, the majority of the SCC held that, upon the insured plaintiff’s son intentionally setting fire to the plaintiff’s house, coverage was not available to the plaintiff, as the policy excluded coverage for loss caused by a criminal or wilful act of the insured.5

Recent cases

While the innocent insured provisions have received relatively little judicial consideration, the recent 2019 Alberta case of Lafferty v. Co-Operators General Insurance Co. [Lafferty] should serve as a reminder that an insurer in Alberta, British Columbia or Manitoba could be on the hook for damage caused by a tenant’s grow-up, notwithstanding a cannabis exclusion.6

In Lafferty, the insured plaintiffs owned a house in which their tenants were growing cannabis. The insureds had no knowledge of this. The grow-op caused damage to the house. After the insurer denied coverage based on an illegal drug operations exclusion, the insured sued for coverage. Ultimately, the Court held the innocent insured provision to be unavailable to these insureds, as the loss occurred in 2010, while the provision came into force in Alberta on July 1, 2012.7

Nevertheless, the Court in Lafferty commented that the innocent insured provision could have prevented the insurer from relying on the drug operations exclusion had the loss occurred after the provision came into force.8

One may contrast the Court’s comments in Lafferty with a recent decision out of Saskatchewan, a province that does not have an innocent insured provision in its provincial Insurance Act. In the 2018 case of Carteri v. Saskatchewan Mutual Insurance Co., the Court dismissed the insured plaintiffs’ claim for coverage after an explosion and fire severely damage their rental property.9 The explosion and fire evidently resulted from the tenants’ attempt to produce cannabis resin.10 The insurance policy contained an exclusion denying coverage for loss caused by the manufacturing of illicit drugs.11 The exclusion functioned to bar coverage, even though the insured property owners were arguably “innocent of any wrongdoing.”12

Rental properties are at a much higher risk

The innocent insured provisions afford protection to property owners when a tenant’s act or omission causes a loss, provided the insured is a natural person (as opposed to a corporation), and does not consent to or collude in such activity. This may prove problematic for insurers writing habitational policies in Alberta, British Columbia and Manitoba.

As rental properties already represent a higher risk exposure, insurers will want to underwrite such policies carefully, especially considering the increased likelihood of tenants seeking to grow marijuana plants in their dwellings legally, regardless of whether the property owner forbids it. Given that cannabis exclusions may not protect insurers in this situation, it is even more prudent that insurers require their insureds to conduct regular, periodic inspections of rental dwellings, in an effort to sniff out any cannabis production before it causes a loss.

Source: Mondaq

HUB International Names a Chief Sales Officer for Its Cannabis Insurance and Risk Services

Jay Virdi has been named Chief Sales Officer for HUB’s cannabis insurance and risk services in the U.S. and Canada.

PRESS RELEASE – HUB International (HUB) recently named Jay Virdi Chief Sales Officer for its cannabis insurance and risk services in the U.S. and Canada. Virdi most recently developed and managed the cannabis practice group for a North American specialty risks MGA. He has become a reputable leader in the advocacy for risk management and innovative insurance solutions in cannabis for clients, brokers and insurance providers.

As Chief Sales Officer, Virdi will focus on further developing and perpetuating deep expertise and resources across the U.S. and Canada, to provide medical and recreational cannabis producers, distributors and retailers proper protection and specialized solutions to reduce risks in all aspects of their operations.

Virdi has more than 15 years of experience in the insurance industry providing support for sales activities and operations, including the execution of strategic initiatives. He has experience advising on commercial lines insurance solutions and underwriting complex risks and commercial programs. Additionally, Virdi was a global sales consultant where he advised insurance carriers using big data analytics. His insightful recommendations resulted in the creation of innovative new products, identifying areas of opportunity for revenue generation and establishing meaningful key stakeholder engagement.

Virdi is a Chartered Insurance Professional (CIP) from the Insurance Institute of Canada. He holds an Honors Bachelors of Arts (Hon. BA) degree in Economics and Business Management from the University of Toronto and a Digital Certification in Communications, Culture and Information Technology (CCIT) from Sheridan College.

Mera Signs Cannabis Supply Agreement with German Distributor

Mera Cannabis Corp. (“Mera” or the “Company“), has entered into a binding and non-exclusive supply agreement (the “Supply Agreement“) with HM HerbaMedica GMBH (“HerbaMedica“), situated in Berlin, Germany, pursuant to which HerbaMedica has agreed to purchase up to 600 kg of dried cannabis per year from Mera for a term of two years, subject to certain increase rights.

As part of Mera’s international development strategy, its flagship facility in St. Thomas, Ontario has been designed to adhere to EU-GMP standards. As a result, Mera expects the majority of its outputs from its domestic facilities to be sold to growing international medical markets. With a population of over 83 million and wide-spread statutory health insurance, Germany is poised to be a European powerhouse for medical cannabis.

“With partners like HerbaMedica, Mera has the opportunity to capitalize on its experience and insights acquired through domestic operations and utilize that knowledge in the EU. This agreement marks a significant milestone for both parties and will help bridge the gap between supply and demand in Germany,” says Zubin Jasavala, Chief Executive Officer of Mera.

“We are excited to be one of the few businesses working with Canadian producers to bring Canadian medical cannabis products into Germany. Mera not only provides access to high quality product, but a long-term strategy for growth in the medical market in Germany and across Europe,” David Höhne, Chief Executive Officer of HerbaMedica.

The obligations of the parties pursuant to the Supply Agreement are conditional upon, among other things, each of the parties obtaining all necessary licenses and authorizations, including import/export permits and EU-GMP certification.

About Mera Cannabis Corp.

Mera is focused on producing consumer-driven, high-value cannabis products at its EU-GMP built cultivation and processing facility in St Thomas, Ontario. It has two additional facilities currently under Health Canada licensing review in St. Thomas (processing) and Kingsville, Ontario (up to 1.2M sq. ft. of greenhouse cultivation), where the Company’s efforts are focused on medical cannabis product innovation. Additionally, through its wholly-owned subsidiary, Mera operates CannaWay Clinic, a national network of clinics specializing in cannabis treatment programs. Mera has also signed a letter of intent with the Maltese economic development agency, Malta Enterprise, to initiate the development of a medical cannabis production facility in Malta as a primary entry point into European medical cannabis markets. For more information about Mera, please visit meracannabis.com.

Forward Looking Statements

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation which are based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs and views of future events. Forward-looking information can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may”, “would” or “will” happen, or by discussions of strategy. Forward-looking information include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact.

Any forward-looking information speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. Such factors (including, an inability of the parties to obtain the necessary authorizations and licenses or to otherwise meet the conditions precedent contained in the Supply Agreement) could cause actual events or results to differ materially from those described in any forward-looking information.

SOURCE Mera Cannabis Corp.

Cheech And Chong Get Into A Car Accident

Cheech And Chong Get Into A Car Accident

Article by Christopher Macaulay

“Do my insurance benefits cover my medical marijuana costs?”

It’s a question that claimants are increasingly asking of their first-party healthcare insurers, and one that is not always easily answered.

On one hand, the use of cannabis as a legitimate treatment option has grown exponentially in recent years. On the other, the associated medical literature is in somewhat of a nascent stage, and it is not always clear whether marijuana will aid an injured party with their recovery (at least in any clinically verifiable sense).

In the recent LAT case of F.F. and Aviva Insurance Canada,1 the Tribunal was faced with the question of whether a treatment plan for medical marijuana was reasonable or necessary to treat a claimant’s anxiety and depression.

Facts

The insurer denied the treatment plan on the basis of a psychiatric expert report. The psychiatrist did not recommend cannabis as a form of treatment for the claimant’s psychological impairments. He highlighted the fact that there was limited clinical research to support the use of marijuana in treatment of anxiety symptoms.

Despite referencing the psychiatrist’s view of the clinical research, the Tribunal did not delve into what this research actually says. It is unclear whether any medical literature was put before the hearing Adjudicator.

The claimant relied predominantly on the opinion of his family doctor for his evidence. The family doctor’s records confirmed that the claimant had reported little relief from traditional psychiatric medication and psychotherapy. However, he had shown a marked improvement in both his psychological and physical well-being with the use of medical marijuana. He had also noticed an improvement in his sleep quality while using the drug.

In light of these results, the claimant’s family doctor was supportive of medical marijuana as a viable treatment option. This opinion was corroborated by a letter from a treating nurse who had also noticed the claimant’s improvements when he began to use marijuana.

Decision

The Tribunal preferred the claimant’s evidence and ordered the treatment plan payable in its entirety. The Decision highlighted the fact that the insurer’s expert psychiatric report failed to consider relevant details about the claimant’s treatment course; for instance, that the claimant had already tried traditional psychiatric medication and psychotherapy with little to no improvement before submitting his treatment plan for medical marijuana.

Interestingly, the Decision also ordered the insurer to fund a related treatment plan for a medical marijuana assessment. The Tribunal held that such an assessment would be reasonable “to determine what would be an appropriate marijuana product” for the claimant.

Questions Raised

The Decision was undoubtedly a resounding win for the involved claimant. However, the Tribunal’s underlying reasoning raises the question of whether a claimant who turns straight to medical marijuana, without first attempting more traditional pharmacological interventions, would have the same level of success.

On a separate note, if the Decision’s findings with respect to the marijuana assessment are left to stand, this seems to open the door for cannabis clinics to submit similar assessment costs for nearly every claimant with a medical marijuana prescription. Will a cottage industry of quasi-medical “personalized cannabis evaluations” spring up? Time will tell.

Lessons Learned

One clear takeaway from the Decision is that a blanket reliance on (a lack of) medical literature will not suffice as a primary reason to deny a medical marijuana treatment plan. The Decision implicitly follows the standard set by prior SABS case law that there is no requirement for a claimant to prove to a medical certainty that a treatment will be therapeutic.2

In a broader sense, the Decision presents another example of the ever-increasing role that the cannabis industry is beginning to play within personal injury litigation. In years past, both FSCO and the LAT grappled with the idea of marijuana as a treatment modality by contrasting the illegality of recreational cannabis with its purely clinical uses.3 This distinction has since been blurred through federal legalization of the drug for recreational use. Both first and third party insurers can expect to see an increase in claims factoring medical marijuana into treatment and future care costs as a result.

  1. 18-002994/AABS.
  2. Pacquette and Certas Direct Insurance Company, FSCO A05-000934.
  3. See: Biro v. Unica Insurance Inc., FSCO A109-001753; M.J. and Pembridge Insurance Company, 16-000583/AABS.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

Cannabis-infused foods, beverages set to become legal as of December

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