Busato v. Gore Mutual, 2025 BCCA 79
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By: Sarah Richard (Articled Clerk)
The British Columbia Court of Appeal considered whether an insurance policy exclusion for marijuana-related activities applied to a homeowner who was lawfully growing medical cannabis under a federal license. The case centered on the interpretation of Gore Mutual’s exclusion clause, which had previously been examined in the Ontario case Pietrangelo v. Gore Mutual, 2011 ONCA 162. The Court ultimately found that the trial judge had erred by relying too heavily on Pietrangelo and by failing to properly assess the context and language of the exclusion clause in this new situation.
In Pietrangelo, the insureds had rented a property to a tenant who illegally used butane gas to produce cannabis resin, causing an explosion that destroyed the house. The Ontario Court of Appeal upheld the marijuana exclusion, accepting the insurer’s position that the clause was designed to protect against illegal and dangerous activities. The exclusion was deliberately broad, meant to capture socially harmful or unlawful conduct such as illegal grow-ops.
However, the facts in Busato were significantly different. The appellant, Mr. Busato, had a legal authorization to grow medical marijuana for personal use and was in full compliance with Health Canada regulations. At the time of the fire, he had 25 plants; he was permitted to grow 73. Also, the fire was unrelated to the cultivation itself. Despite this, the trial judge applied the Pietrangelo precedent and upheld the insurer’s denial of coverage.
On appeal, it found that the exclusion clause was poorly drafted and ambiguous. Specifically, the clause referenced legislation in an unclear and inaccurate way, combining parts of the Controlled Drugs and Substances Act, S.C. 1996, c. 19 (CDSA) and its regulations without properly identifying which substances or activities were excluded. The Court noted that the clause was not separated into clear subcategories, as the trial judge had claimed, and that dividing the clause in this way essentially rewrote the contract to the disadvantage of the insured.
Applying well-established principles for interpreting insurance contracts, the Court held that the exclusion could not reasonably be read as applying to lawful, licensed cannabis cultivation. The average policyholder would not expect that an exclusion targeting illicit or illegal activity would also capture lawful medical use authorized by the government.
The Court also considered whether the exclusion clause was unjust or unreasonable under section 32 of the Insurance Act, RSBC 2012, c1, which allows a court to relieve an insured from the effects of a clause that produces an unfair result. While the trial judge had concluded that the exclusion was not unjust, the Court of Appeal found otherwise. It emphasized that insurance policies must be assessed based on their real-world impact, not just in the abstract. In this case, Mr. Busato had done nothing wrong; he was using medical marijuana to treat chronic pain following back surgery and had fully complied with legal requirements. There was no evidence he had misled the insurer or increased the risk of loss.
Ultimately, the Court concluded that applying the marijuana exclusion to Mr. Busato’s situation was both ambiguous and unjust. The wording of the exclusion did not clearly encompass lawful activity, and the insurer had not updated its policy language despite knowing about the drafting problems identified in the Pietrangelo decision years earlier. For these reasons, the appeal was allowed, and Mr. Busato was entitled to insurance coverage for the fire loss.
