Published In: Insurance Law Newsletter – 10.Sep.19 September 11, 2019

Case Summary: It does not help to have an “a-ha!” moment too late

The insured’s claim for property damage was excluded from coverage by the policy’s illegal drug operations exclusion.

Insurance law – Property insurance – Exclusions – Illegal acts – Landlord and tenant – Actions – Limitation of actions – Practice – Summary judgments

Lafferty v. Co-Operators General Insurance Co., [2019] A.J. No. 907, 2019 ABQB 515, Alberta Court of Queen’s Bench, July 9, 2019, Master J.T. Prowse

The insured’s property was damaged by tenants who used the property for an illegal cannabis grow-operation, unbeknownst to the insured. The policy had an exclusion clause for damage caused directly or indirectly by illegal drug operations. Although an insurance adjuster initially advised that the insurer could void the policy because of an unreported change in use, this was immaterial as less than a month later the insurer sent a denial letter validly relying on the illegal drug operations exclusion and not relying on the policy being voided for material change. Further, the action was time-barred as the claim was commenced more than six years after the insurer denied coverage.

This case was digested by Dionne H. Liu, 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 Dionne H. Liu at