Ontario Court of Appeal says that innocent persons amendment in Ontario’s Insurance Act does not have retroactive effect

Insurance law – Property law – Landlord and tenant – Criminal acts – Exclusions – Marijuana – Illegal activity – Interpretation of legislation – Retroactive application of legislation – Practice – Leave to appeal

Lin v. Weng, [2022] O.J. No. 2150, 2022 ONCA 367, Ontario Court of Appeal, May 9, 2022, K.N. Feldman, K.M. van Rensburg and S.A. Coroza JJ.A.

The insured’s tenants caused a fire and explosion in the basement of the insured’s rental home by using a butane lighter, a stove, and propane gas to extract marijuana resin.  The insured did not have knowledge of the tenants’ activities.

The insured sought coverage for the loss from their insurer.  The insurer denied coverage based on two exclusion clauses in the policy: a marijuana production exclusion clause and an illegal activity exclusion clause.

After the fire, and while the insured’s claim was outstanding, the legislature amended the Insurance Act, R.S.O. 1990, c. I.8 by adding a provision (s. 129.1) that limits the application of criminal and intentional activity exclusion clauses to the claim of a person who caused the loss or who knew about or consented to the activity that caused the loss.  The lower court held that s. 129.1 of the Insurance Act does not apply retrospectively to insurance policies entered into before the date of its enactment.  The insured appealed.

The appeal was dismissed. The insured was asking the court to apply the amendment to an existing policy in respect of an event that occurred before the amendment came into force (i.e. to apply it retroactively).  The Court held that if the legislature had intended the s. 129.1 amendment to apply to claims for losses that had already occurred, but for which the insurer had not yet paid the indemnity, it would have used clear language to so state.  It did not do so and therefore the strong legal presumption against retroactivity is not rebutted.

This case was digested by Kora V. Paciorek, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Kora V. Paciorek at [email protected].

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