Executive Summary: Key Legal and Evidentiary Issues

• The presence of an undisclosed marihuana grow operation in the outbuilding was found to be a material change in risk under the insurance policy.

• The plaintiffs’ credibility regarding their claimed ignorance of the grow operation was rejected by the court.

• Statutory conditions in the insurance policy, particularly concerning material change in risk, were central to the court’s decision.

• Wawanesa was found justified in voiding the policy due to the plaintiffs’ failure to disclose the material change.

• The plaintiffs did not provide sufficient evidence to prove their claimed damages or demonstrate mitigation of loss.

• The court dismissed the plaintiffs’ claim in its entirety and awarded costs to the defendant.

Background facts and outcome of the case

Facts of the case

Parveen Kallu and Gurvinder Kallu owned a property in Abbotsford, British Columbia. On March 1, 2018, a fire started by a prayer cabinet candle in the children’s room caused substantial damage to their family home. The property was insured by Wawanesa Mutual Insurance Company under a policy that covered both the home and an outbuilding. Kuldeep Cheema was initially a named insured but was removed and is no longer a party to the action.

After the fire, Wawanesa’s adjuster discovered an abandoned marihuana grow operation in the outbuilding, which was situated approximately 200 feet from the main house. The outbuilding contained hundreds of potted plants, specialized lighting, and ventilation equipment. Both Mr. and Mrs. Kallu had, at one time, held licences to grow marihuana. The plaintiffs denied knowledge of the grow operation and claimed to have sought to remove the outbuilding from policy coverage in June 2017, but Wawanesa never received or processed this request.

Wawanesa voided the policy on March 22, 2018, citing a material change of risk that was not disclosed prior to the fire. The plaintiffs’ total claim was in the range of $300,000–$400,000, including losses of personal property, compensation for cleaning and repairs, and costs associated with the loss of use of their home.

Discussion of policy terms and clauses at issue

The insurance policy included statutory conditions as required by the Insurance Act, R.S.B.C. 2012, c. 1. Statutory condition 4 required the insured to promptly give notice in writing to the insurer or its agent of any change that is material to the risk and within the control and knowledge of the insured. If not promptly notified, the contract is void as to the part affected by the change. Wawanesa’s evidence established that properties with a marihuana grow operation are not eligible for coverage under their standard homeowner policy and that such a risk is material.

The court found that the plaintiffs’ attempt to remove the outbuilding from coverage was not completed, as Wawanesa did not receive the request and would not have approved it if it had. The outbuilding remained covered under the policy at all relevant times.

Credibility and evidentiary findings

The court conducted a detailed assessment of the plaintiffs’ credibility, finding their evidence regarding the grow operation not believable. The court preferred the independent evidence of the realtor and the physical and photographic evidence of a large, well-established, albeit abandoned, grow operation in the outbuilding. The court found it implausible that the plaintiffs would not have inspected or known about the outbuilding’s use, given its proximity to the home and their prior marihuana licences.

Legal analysis and outcome

The court accepted the evidence of Wawanesa’s underwriter and an independent underwriting expert that the existence of a grow operation, even a non-operational one, is material to the risk for a property insurance insurer. The court found that the plaintiffs had knowledge of the change in risk, the change was within their control, and Wawanesa was not promptly notified. The court held that Wawanesa was justified in voiding the policy as of July 31, 2016, and did not breach the contract of insurance by denying coverage for the fire.

The court also noted that the plaintiffs’ evidence in support of their claims for contents, materials, and repair was sparse, poorly documented, and exaggerated. The plaintiffs failed to mitigate their loss by abandoning the property and contents for 18 months after the fire.

Conclusion

The Supreme Court of British Columbia dismissed the plaintiffs’ claims in full, finding in favour of Wawanesa Mutual Insurance Company. The plaintiffs’ claims were dismissed, with costs awarded to the defendant. No specific amount was awarded to the plaintiffs, as their claim was entirely denied.