Associate Justice Ronna Brott recently considered a motion to amend a Statement of Claim in Nero v. Allstate Insurance Company.[1] This action arises from a fire at a home owned by the plaintiff, Nero, which he had rented out for years prior to the fire. 

An expert concluded in March 2019 that the fire was caused by the ignition of gaseous butane as part of a butane honey oil extraction process (a process for extracting a higher THC concentration and creating an oil).[2]  The tenant had a medical marijuana license and had disclosed this and provided Nero with the documentation.[3]

As a result of the expert opinion, Allstate denied coverage based on exclusion 23 of the policy:

We do not insure:

            23)     loss or damage resulting from any illegal activities within your knowledge or control; or due to any legal or illegal activities relating to either the growing, cultivation, harvesting, manufacture, distribution, or sale of any non-prescription controlled substance or substances enumerated in Schedule (Section 2) of the federal Controlled Drugs and Substances Act Narcotic Control Regulations, C.R.C., c. 1041 (as amended from time to time, whether you are aware of such activity or not).

After the examination for discovery, the defendant produced the insurance underwriting guidelines which revealed that the insurer may deny home insurance if a person or tenant grows and cultivates marijuana for medical purposes pursuant to a license for reason of disability.

After receiving these productions, the plaintiff delivered a draft Amended Statement of Claim which sought to add allegations that the underwriting policy constituted discrimination under the Human Rights Code (“the Code”)[4] as well as clarify and plead provisions of the Insurance Act.[5]

The only issue for the motion was whether the Code amendments ought to be granted. Associate Justice Brott reviewed the law on whether the civil court had the jurisdiction to hear the matter. After reviewing s. 46.1 of the Code, Associate Justice Brott concluded that as there was an independent cause of action for breach of contract, the Code amendments could “piggy-back” onto the claim. [6]

The Court further noted that as long as the proposed amendment is a tenable cause of action and there is no prejudice that cannot be compensated by costs, it should be allowed.[7] In determining whether there was prejudice, the Court considered the expiry of limitation periods.  Associate Justice Brott noted that pursuant to s. 16(1)(a) of the Limitation Acts, there is no limitation period when seeking a declaration if no consequential relief is being sought. In this case, the plaintiff was only seeking declaratory relief that the practice violated the Code with no consequential relief flowing from the declaration sought.  As such, there would be no limitation period.[8]

In any case, the Court found that even if the 2 year limitation period applied, the plaintiff could rely on the discoverability. They only became aware of the practice in or about March 2021.[9] Associate Justice Brott further concluded that if a presumption of prejudice existed, Nero had rebutted same.[10] Justice Brott granted leave to amend the Statement of Claim.[11]

However, the central question of whether an insurer can rely on the language in the exclusion remains a live issue for the trial judge. In particular, whether marijuana and its derivatives are a “non-prescription controlled substance” that would fall under the inclusion.[12] It was not raised in the decision but it is interesting to note that the fire occurred on January 14, 2019 after the Cannabis Act legalized recreational cannabis use in October 2018.[13]  

Shannon Wood is the author of this blog and Chair of our Cannabis claims practice group. If you have a question about this decision or a similar file, please contact Shannon at 647-427-3362.

[1] 2023 ONSC 4472 [Nero]

[2] Ibid at 4

[3] Ibid at 3

[4] Human Rights Code, RSO 1990, c H.19

[5] Insurance Act, RSO 1990, c I.8

[6] Nero at 10-12

[7] Ibid at 12

[8] Ibid at 14

[9] Ibid at 19

[10] Ibid at 21

[11] Ibid at 23

[12] Ibid at 16

[13] Cannabis Act, SC 2018, c 16