Legally growing pot in Canada could void your home insurance

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A recent court ruling in British Columbia, Canada that focused on the "material change" clause in homeowners insurance policies could have the potential to shed a spotlight on the incompatibility of such a position with new federal cannabis laws. According to the Globe and Mail, The decision of Vancouver Supreme Court Justice Margot Fleming in February 2019 could very well have far-reaching effects for all homeowners in Canada who grow even a single marijuana plant inside their home.

Justice Fleming ruled in favor of Wawanesa Mutual Insurance Company after hearing evidence from the insurance company's underwriting expert, Liz Strocel, retained by Wawanesa, on the risks of growing cannabis. Based on her testimony, a cannabis grow operation on a homeowner's property constitutes a "material change" sufficient enough to void the insurance policy.

Strocel testified the company "did not and does not insure any property with a marijuana grow operation, whether or not it is legal, because of the inherent risk. She identified the risk as including drywall being susceptible to mold from the humidity, fire (for a number of reasons), the risk of robbery or a break in, and additional liability issues. She also testified that Wawanesa would void a homeowner policy if it learned the insured had a grow operation and refund the premiums."

Surprisingly, the underwriting expert also testified that she was “not aware of any general insurer in Canada that would take on the risk of any cannabis grow operation, or even the presence of a single marijuana plant.” This one line of testimony was emphasized in the judge's ruling.

The Schellenberg case

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The Schellenbergs had a fire in an outbuilding on their property in Chilliwack, British Columbia in 2014. The outbuilding was constructed in 2012, with Mr. Schellenberg notifying the insurance company he wanted the building added to his homeowner's policy. He apparently failed to mention he also had a legal cannabis grow license and the building in question housed the operation.

The failure of the Schellenbergs to tell their insurance company the building contained 310 marijuana plants was used by Wawanesa to void the homeowner's policy. Wawanesa claimed that the marijuana grow constituted a "material change"—a change to the property that would have led to either higher premiums or denial of coverage if it had been reported.

The insurance company's decision to void the insurance policy led to the Schellenberg's suing the company, claiming it did not have grounds to void the policy. With the court ruling in favor of the insurance company, it remains to be seen if we may hear of more court cases involving homeowner insurance claims.

It might be a good idea if homeowners growing marijuana on their property, even just one plant, check with their insurance companies - just to be sure of their coverage.

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