Ontario Court of Appeal holds up marijuana exclusion clause

The Ontario Court of Appeal has upheld a marijuana exclusion clause when landlords tried to make a claim for damages arising from an explosion on their property caused by a tenant running a marijuana grow-up.
In Pietrangelo v. Gore Mutual Insurance Company, Valentino Pietrangelo and Antoinette Pietrangelo owned a rental property. The tenants of the property caused an explosion resulting in total destruction of the house.
As a consequence of the explosion, the tenant pleaded guilty to intentionally or recklessly causing damage to a dwelling house and unlawfully producing cannabis resin.
Following the explosion, the Pietrangelos filed a proof of loss claim under their home insurance. The insurer, Gore Mutual Insurance Company, denied the loss based on an exclusion clause in the policy that excluded coverage to properties directly or indirectly damaged while used in the processing or manufacture of marijuana.
The Pietrangelo’s appealed the use of the exclusion clause, arguing that:
• the word “use” in the clause is ambiguous, and that it was an error to hold that the exclusion clause was intended to apply regardless of any knowledge or involvement of the insured;
• the exclusion clause was unjust and unreasonable and s. 151 of the Insurance Act should apply because an insured should not be expected to pay for wreckage caused by the criminal acts of a third party;
• by accepting evidence of the draftsperson as to his intent, the trial judge ignored the clear language of the insurer’s Notice that the clause was in relation to ‘marijuana grow houses.’
The Court of Appeal upheld the lower court’s rejection of each of the submissions.
The reasonings are as follows:
• the trial judge was correct to interpret the word ‘use’ in accordance with its ordinary, commonly understood and literal meaning;
• the trial judge correctly observed that the issue is not whether the exclusion clause creates unfairness to the insured, but whether there is a rational basis for its existence. Since the trial judge determined it was valid and legitimate, s. 151 of the Insurance Act has no application; and
• the draftperson’s evidence did not go to the interpretation of the clause, rather, it was in relation to the reason for the existence of such a clause.
“We agree with the trial judge, the exclusion clause in the circumstances of this case is neither “unjust nor unreasonableness,” the panel of Court of Appeal Judges wrote. “There are certain risks, which insurers are entitled not to cover for legitimate business reasons relating to the ability to assess risk and set premiums.”