Insurer may deny home coverage to persons growing medicinal cannabis
The Ontario Superior Court of Justice has granted an insured’s request to amend his statement of claim by adding allegations of discrimination against his insurer.
The dispute in Nero v. Allstate Insurance Company, 2023 ONSC 4472, arose from a residential fire on a property that Ralph Nero owned. Neor lived at the property from 1990 to 2008. After he moved out, Nero obtained an all-risks policy with Allstate Insurance Company of Canada, and he began to rent out the property.
Nero rented the property to Jay Durie, who advised Nero that he had a licence for medical marijuana. Nero inspected the property four times per year according to the terms of his lease.
In 2019, a fire occurred at the property, sustaining substantial damage. A report issued to Allstate concluded the ignition of gaseous butane for an oil extraction process caused the fire. Allstate denied coverage to Nero according to an exclusion clause of the policy which excludes from coverage “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.”
Furthermore, Allstate produced its insurance underwriting guidelines allowing Allstate to deny home insurance to persons where that person or a tenant grows and cultivates marijuana for a medical purpose under a medical marijuana license issued by the government for reason of disability.
Nero argued that Allstate’s underwriting policy constitutes discrimination under the Human Rights Code. Nero requested the court to allow him to amend his statement of claim to add his allegations of discrimination.
Allstate refused to consent to the amendments, arguing that the court lacked jurisdiction, that the amendment raises new causes of action beyond the limitation period, and that it prejudices the defendant.
Within limitation period
The Ontario Superior Court of Justice explained that the amendment should be allowed so long as it presents a table cause of action and there is no prejudice that costs cannot compensate. The court noted that there is an independent cause of action for breach of contract insurance flowing from the same factual circumstances. Consequently, the amendment concerning the Human Rights Code can “piggyback” on Nero’s claim for breach of contract.
The court further observed that “there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought.” In this case, the proposed Code amendments seek declaratory relief only—that the Allstate practice violates the Human Rights Code. The court pointed out that no consequential relief flowed from the declaration sought. Accordingly, the limitation period does not apply.
Nonetheless, even if the limitation period applied, the court observed that the Code amendments were still within the two-year limitation period.
No prejudice
Under the Rules of Civil Procedure, the court shall grant leave to amend unless it would result in prejudice that cannot be compensated for by costs or an adjournment. The court noted that an expired limitation period creates a presumption of prejudice, but the limitation period, in this case, has not yet expired.
The court acknowledged that Nero demonstrated that he did not discover Allstate’s underwriting guidelines until after the examination for discovery, which was well within the limitation period. It was that discovery that led to Nero’s proposed amendments.
Accordingly, the court ruled that if a presumption of prejudice does exist, Nero has rebutted that presumption. The court ultimately granted leave to amend the statement of claim.
