Authored by Patrick Bracher.
A British Columbia Appeal Court held in September 2026 that the failure by the insured to disclose a marijuana grow operation in the outbuilding of a residential property was a failure to give notice in writing of a change that was material to the risk and that the insurer was justified in refusing to indemnify the insured.
The appeal court upheld the trial judge’s finding that: (1) the appellants established the marijuana grow operation in the outbuilding after they purchased the property; (2) the existence of the operation was a material risk for any reasonable insurer; (3) the insurer considered the operation a material risk and would not have insured the property had they been told of the operation; (4) the risk was the same whether the grow operation was in the main house or the outbuilding (the fire was in the main house); and (5) the insureds never disclosed the risk.
Those findings were held to be a complete answer to the claim. A further allegation that the outbuilding had been removed from coverage by notice to the broker before the fire was rejected on the facts including the fact that the insured continued to pay the same premium after the alleged removal of the outbuildings.
The findings as to what the insurer would have done was based on evidence from their underwriting manager and an underwriting expert that the insurer would not have insured the properties had they known the facts, that a homeowner policy is not designed nor priced for this type of risk, and that a request to remove the outbuildings from coverage would have been a red flag that required further investigation.
The trial judge had rejected the evidence that the insureds, who once had licences to grow marijuana, had never looked inside the outbuildings from the time they purchased the property in 2015 until the fire in 2018 as “nearly impossible” to accept.
The term that “the insured must promptly give notice in writing to the insurer or its agent of a change that is material to the risk and within the control and knowledge of the insured” is in the British Columbia Insurance Act as a statutory condition is deemed to be part of every insurance contract. The same term appears in most risk policies in South Africa and the same consequence would follow on similar evidence.
2026 BCCA 385 (CanLII) | Kallu v The Wawanesa Mutual Insurance Company | CanLII