The Cultivation Of Cannabis Can Lead To The Forfeiture Of The Right To An Indemnity Under A Home Insurance Policy

Article by Charles A. Foucreault

Despite the legalization of cannabis by the federal government on October 17, 2018, not all cannabis-related activities have become legal. In an insurance context, illegal acts can lead to the cancellation of a policy or to the forfeiture of the right to an insurance indemnity, as seen in the decision rendered by the Superior Court of Quebec on April 15, 2019, in Vo v. Compagnie d’assurances Desjardins (Desjardins, Groupe d’assurances générales).1

In this case, the Superior Court rejected the insured’s claim, who were seeking an indemnity under a home insurance policy following a fire in their building. The tribunal held that the insurer satisfied the burden of proving the general exclusion clause against illegal or criminal activities applied. Indeed, because of their possession of cannabis plants, an illegal activity, the plaintiffs could not benefit from the indemnity payable under the insurance policy

The facts

The plaintiffs were the owners of a quadruplex that was insured under a home insurance policy. In 2013, a high intensity discharge lamp used in the plaintiffs’ at-home cannabis operation started a fire in the building.

The insurer refused to cover the loss because the policy excluded any loss resulting from illegal or criminal activities, which included (and still includes) cultivating and manufacturing cannabis. The plaintiffs sued the insurer for the amount of the loss under the policy.

The Superior Court decision

The burden rested with the insurer to establish that the plaintiffs were engaging in illegal or criminal activities and, accordingly, the exclusion clause applied. However, the insurer did not need to prove in this case that illegal activities caused the damage because the plaintiffs admitted that their cannabis cultivation in apartment #4 caused the fire.3 The plaintiffs lived in apartment #3 of the building, whereas apartments #1, #2, and #4 were vacant, uninhabitable, and used exclusively for cultivating cannabis.

According to the plaintiffs, apartments #1, #2, and #4 were occupied by three different tenants. However, the evidence demonstrated that there were no personal belongings in those apartments and the apartments were uninhabitable.4 Additionally, the evidence showed that the existence of the alleged tenants was highly doubtful, since none of the tenants who had allegedly lived in the apartments could be traced.5 Moreover, the plaintiffs were paying the costly electricity bills of the three other apartments and at the very least, knew that there were cannabis plants in the building.

The court found that the insurer satisfied the burden of proving that the exclusion clause pertaining to illegal and criminal activities applied in this case.6 In addition to the evidence put forward by the insurer, the judge also considered the serious gaps in the plaintiffs’ evidence and their unconvincing testimonies.7 As a result, the plaintiffs’ claim was rejected by the court.

Conclusion

The legalization of cannabis has certainly had an impact on some exclusion clauses pertaining to illegal or criminal activities, particularly in matters of insurance of persons. Nevertheless, some cannabis-related activities remain illegal, such as the possession of cannabis plants in Quebec.8 Therefore, policyholders who engage in prohibited activities may forfeit their right to an insurance indemnity.

Footnotes

1. Vo v. Compagnie d’assurances Desjardins (Desjardins, Groupe d’assurances générales), 2019 QCCS 1382 [Vo v. Desjardins].

2. Ibid at para 24; 2803 CCQ; See also Levesque c. Compagnie d’Assurance Desjardins, 2013 QCCS 1552, at paras 59—60.

3. Vo v. Desjardins, supra note 1 at para 10.

4. Ibid at paras 23—24.

5. Ibid at para 41.

6. Ibid at para 62.

7. Ibid at paras 57 and 61.

8. An Act to constitute the Société québécoise du cannabis, to enact the Cannabis Regulation Act and to amend various highway safety related provisions, LQ 2018, c 19, adopted on June 12th, 2018, art. 5.


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Source: Mondaq

Newfoundland & Labrador – Glen L.C. Noel, Q.C., in insurance law is now a judge

Cox & Palmer is proud to share that Glen L.C. Noel, Q.C., has been appointed a Judge of the Supreme Court of Newfoundland and Labrador and a Judge ex officio of the Court of Appeal of Newfoundland and Labrador.

Since 1990, Glen has worked exclusively with Cox & Palmer (and its predecessor firms), building an extensive practice for almost 30 years in insurance law, commercial insurance litigation, and personal injury law. Consistently recognized as a leading practitioner, Glen’s dedication to the legal profession, commitment to his clients and professional integrity have been paramount to the success of Cox & Palmer.

Albeit managing a demanding practice, Glen has an innate ability to approach every situation with sound judgement and definitive resolve. Steadily encouraging fairness, inclusion and comradery, Glen’s positive influence inspires all those around him. A true leader, Glen always makes time for his colleagues and has been an exceptional mentor and friend to the entire team at Cox & Palmer.

We are honoured to have him serve the Province of Newfoundland and Labrador as Justice Noel, and we are tremendously proud to congratulate him on this well-deserved achievement.

Read the media release from the Government of Canada.

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