Bahniwal v. The Mutual Fire Insurance Company of British Columbia, 2016 BCSC 422

The plaintiff’s owned and operated a garden center in Oliver, BC, which was severely damaged by fire. The plaintiff’s also operated a residential rental suite on the property. In the course of responding to the fire it was discovered that the rental suite contained a marijuana grow-op conducted by the suite’s tenant.

There was no indication that the fire was at all related to the grow-op, though the cause of the fire was undetermined. The plaintiff’s insurer refused to cover the fire damage on the basis that they believed the plaintiff was aware of the grow-up, but failed to disclose it to the insurer. The insurer maintained that had the grow-up been disclosed they would have declined to renew the plaintiff’s insurance.

Statutory conditions 1 and 4 of fire insurance policies allow the insurer to void the insurance where there is a misrepresentation, or a failure  to disclose a material change to the risk to insured property.

The main issue was whether the evidence supported a finding that the plaintiff was aware of the grow-op either directly, or through her husband. The plaintiff denied any such knowledge.

While neither the plaintiff or her husband conducted period inspections of the suite, they had on one occasion attended to inspect the suite to determine whether it would be suitable for housing seasonal farm workers, and on other occasions attended to complete repairs and modifications to the suite. The evidence supported that the plaintiff’s husband attended the suite roughly every few months, and either entered the suite, or looked in through the window. The plaintiff and the defendant denied that anything ever appeared amiss.

The hydro bills for the suite went directly to the plaintiff’s husband, who then gave them to the tenant to pay. Some of these bills showed substantial fluctuations in the power used by the suite, which a police officer indicated was consistent with a grow-op existing many months before the fire. The husband testified that as the tenant always paid the bills he did not pay attention to the amounts.

Justice Joyce found the plaintiff and her husband to be credible, and accepted their testimony that they were not aware of the grow-op. As such, the insurer was required to honour their insurance contract.

The plaintiff sought punitive damage based, however they were not successful as Justice Joyce found that the insurer had not acted in bad faith, or with undue haste, and that based on the evidence they had a reasonable, though ultimately incorrect, basis for denying coverage.