Kallu v. The Wawanesa Mutual Insurance Company, 2025 BCSC 1724
Reading time: 5 minutes (approx.)
By: Hayley Gardner (Articled Clerk)
In 2015, Mr. And Mrs. Kallu purchased a several-acre parcel of land in Abbotsford, British Columbia, which contained a family home and one small outbuilding. They subsequently obtained a homeowner’s insurance policy issued by Wawanesa Mutual Insurance, which provided coverage for all buildings on the property.
On March 1, 2018, the Kallus suffered an unfortunate fire damage loss when a prayer cabinet candle caused an uncontrolled fire in their family home. They notified their broker of the loss, and an adjuster attended the home the following day. Upon touring the property, the adjuster noticed a cannabis grow operation in the basement of the outbuilding.
On March 15, 2018, after learning of the grow operation, Wawanesa notified the Kallus that their insurance policy had been voided due to a failure to disclose a material change in risk. Therefore, there was no coverage for the fire damage loss to their home.
The Kallus brought an action against Wawanesa, seeking to be indemnified for the loss. Wawanesa’s defence sought to prove that the policy had been voided as a result of the Kallu’s failure to notify their insurer that there had been a change to the insured property which was material to the risk and was in the knowledge and control of the policyholders.
There was no dispute at trial about the fact that the outbuilding contained cannabis plants on the date of the fire. Wawanesa had issued a Notice to Admit on July 26, 2019, pursuant to B.C.’s Supreme Court Civil Rules, seeking admission of such fact and the Kalus failed to submit a response, which meant that the fact was deemed to be admitted as true.
The realtor who had previously sold the property to the Kallus testified that he had toured the property before listing it in 2015, and there was no grow operation in the basement of the outbuilding at that time. This confirmed that there had been a change to the insured property since the policy was issued.
Wawanesa’s internal policies and practices indicated that the insurer would never agree to insure a property that contained an active cannabis grow operation. In fact, it would not insure a property with even a former grow operation unless additional risk assessment reports had been completed. A qualified underwriting expert also testified that, objectively, a cannabis grow operation at a residential property would be material to any reasonable underwriter. The change that had occurred was thus subjectively and objectively material to the risk.
Turning to whether the material risk had been within the knowledge and control of the Kallus, the couple testified that neither of them had stepped foot in the outbuilding once in the three years between their purchase of the property and the fire loss. However, the court found their evidence to be unconvincing in this regard.
In addition, both Mr. and Mrs. Kallu had, at some point before the loss, been in possession of licenses to grow cannabis plants. Mr. Kallu testified that he had made a request in 2017 to remove the outbuilding from his insurance coverage, allegedly to reduce his premiums. This request was ultimately never received by Wawanesa, for unknown reasons. Regardless, the court found that the timing of the request only raised further suspicions regarding Mr. Kallu’s knowledge of the grow operation in the outbuilding at that time.
Finally, the Kallus also attempted to argue that the existence of the grow operation in the outbuilding ought not to be considered a material risk, given the fact that the fire occurred in the house. However, the court confirmed that there is no requirement for a material change in risk to be casually connected to a loss in order for an insurer to rely on said material change to void the policy.
Wawanesa was found to be justified in voiding the policy due to the Kallus’ failure to inform the insurer of a material change in risk, and the claim was dismissed.
