Busato v Gore Mutual Insurance Company, 2025 BCCA 79 is a recent interesting case from the British Columbia Court of Appeal pertaining to insurance policy exclusion clauses.
In Busato, an accidental kitchen fire destroyed the appellant’s home. He claimed the loss under his homeowner’s insurance policy with Gore Mutual Insurance Company (“Gore”). Gore denied the claim due to the fact that the appellant had grown approximately 25 marijuana plants. Of note, these had been grown pursuant to a valid license issued by Health Canada. Further, these plants did not cause or contribute to the fire. However, an exclusion clause contained within the policy prohibited marijuana cultivation on the property.
This clause read that Gore did not insure direct or indirect loss or damage, in whole or in part:
“to dwellings or detached private structures or unscheduled personal property contained in them, used in whole or in part for the cultivation, harvesting, processing, manufacture, distribution or sale of marijuana or any product derived from or containing marijuana or any other substance falling within Schedule (Section 2) of the Controlled Drugs and Substances Act Narcotic Control Regulations; regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage.”
Based on a plain reading of this clause, the trial judge concluded it applied to legal marijuana-related activity and was not unjust or unreasonable. The court at first instance therefore upheld the insurer’s denial of coverage.
However, the British Columbia Court of Appeal disagreed. They found that the exclusion clause was ambiguous and therefore should be interpreted narrowly and in favour of the insured. In reaching this conclusion, they held that the exclusion clause did not specifically address marijuana cultivation pursuant to a licensed medical purpose. The court distinguished Pietrangelo et al v. Gore Mutual Life Ins. Co. et al, 2010 ONSC 568, where a tenant who did not hold a license for marijuana cultivation or production caused an explosion (and total loss of a house) while making cannabis resin. In Pietrangelo, the tenant and his conduct were the subject of criminal charges, which was not the case in Busato.
The Court of Appeal also found the exclusion clause to be ambiguous because it “reflected poor drafting” when it combined the titles of the Controlled Drugs and Substances Act (“CDSA”) and the Narcotic Control Regulations as though, together, they formed one piece of legislation[1]. The court further emphasized the exclusion clause’s “faulty and confusing reference” to the CDSA and the Regulations, which contained “unclear, inaccurate wording”.[2]As a result, the Court of Appeal held that the policy had to be construed contra proferentem – with coverage provisions interpreted broadly against the insurer. The court interpreted the reasonable expectations of the parties to be that the exclusion clause was aimed at limiting the cultivation of illegal drugs. The court suggested to Gore that if they wished, they could have explicitly excluded properties used for any possession or cultivation of marijuana (licenced or illegal). This would have then properly informed the insured of the coverage without the confusion.
This case serves as a reminder for insurers to ensure their exclusion clauses are clear, with proper specificity and without ambiguity.
Silas Johnson
Student-at-Law
[1] Busato v Gore Mutual Insurance Company, 2025 BCCA 79 at para 53.
[2] Ibid at para 56.