Case Summary: Don’t keep your grow-op a secret from your home insurer
A medical marijuana grow operation was a material change in risk under a standard homeowner’s insurance policy.
Insurance law – Homeowner’s insurance – Void policy – Material change in risk – Practice – Appeals
Schellenberg v. Wawanesa Mutual Insurance Co.,  B.C.J. No. 72, 2020 BCCA 22, British Columbia Court of Appeal, January 22, 2020, M.V. Newbury, G.B. Butler and P. Abrioux JJ.A.
An outbuilding located on a property owned by the insureds was damaged by fire. The property was insured under a homeowners’ policy. The insurer voided the policy based on the insureds’ failure to notify it of a material change in risk; namely, the existence of a licensed marijuana grow operation.
The insureds brought an action for damages against the insurer for voiding the policy. They also brought an action against the broker for breach of contract and negligence on the basis that it had failed to ensure they had adequate insurance coverage.
At trial, the action was dismissed. The insureds appealed.
In dismissing the appeal, the court rejected the insureds’ argument that there should be coverage because the fire was not caused by the grow operation. The authorities clearly provided that it is not necessary for a statutory breach to be causally connected to a loss. The court also declined to apply s. 32 of the Insurance Act, that there were unjust contract provisions, on the basis that it would be contrary to the principles of good faith. The deliberate concealment by the insureds from the insurer of material changes to the risk do not justify what, at its core, is equitable relief.
The court found that the trial judge did not err in concluding that the claims against the broker should be dismissed, and that expert evidence was required to provide the evidentiary basis for the content of the brokers’ standard of care. Even if expert evidence was not required, the trial judge made a finding of fact that the insureds would not have disclosed the existence of the grow operation even if the broker had made inquiries.
This case was digested by Kora V. Paciorek, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Kora V. Paciorek at firstname.lastname@example.org.