Insured was held not to have known of the existence of a marijuana grow operation on her rented premises.
Insurance law – Property insurance – Fire insurance – Policies and insurance contracts – Statutory conditions – Void policy – Exclusions – Material non-disclosure – Misrepresentation in obtaining insurance – Material change in risk – Rights and duties of insured – Damages – Actual cost vs replacement cost
Bahniwal v. Mutual Fire Insurance Co. of British Columbia,  B.C.J. No. 494, 2016 BCSC 422, British Columbia Supreme Court, March 10, 2016, B.M. Joyce J.
The insured was the owner of a property from which she operated a greenhouse and garden supply business. The insured did not occupy the premises on the property but rather rented them to a tenant. A fire broke out in a storage facility completely destroying the building and its contents.
The insured was insured against fire by the insurer which, after the fire but before a proof of loss was submitted, notified the insured that it had elected to void the insurance pursuant to Statutory Conditions 1 and 4 on the basis of misrepresentation and a material change to the risk. Specifically, the insurer found out that at some point prior to the fire a marijuana grow operation had been set up in an attached suite. The insurer did not say that this was the cause of the fire but rather that if they had known of it, they would not have renewed the policy. The insured said that if there was a marijuana grow operation set up in the attached suite at some time, she had no knowledge of it.
The court found that there was evidence that a marijuana grow operation had been carried out in the attached suite previously but the insured was not aware of the existence of this grow operation.
The insured sought the replacement cost of the building including its contents on the basis of a replacement cost extension in the policy. The insurer argued that the insured had not replaced the property and therefore the extension did not apply. The court agreed with the insurer and found the insured was only entitled to recovery on the basis of actual cost.
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