The federal government’s Bill C-45, An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts (“the Cannabis Act”), has now passed its first reading in the Senate¹.  While the Cannabis Act is still subject to further debate, Parliamentary approval, and Royal Assent, the federal government maintains that it will make good on its 2015 election promise by providing a regulated and restricted legal regime for recreational cannabis by July 2018². 

In light of these legislative changes, the insurance industry needs to consider the obvious potential for an increase in the number of automobile accident claims.  A less obvious consequence is the increase in litigation with respect to insureds fighting impairment, intoxication or drug use exclusions in their insurance policies. Prudent insurers also need to be cognizant about their coverage clauses and their exclusion clauses in their property insurance policies, in order to reflect the new legal status of cannabis and its changing position in society.

The Proposed Law

In short, the Cannabis Act allows adults to possess up to 30 grams of cannabis in public and to grow up to four cannabis plants at home³.  Minors are prohibited from possessing more than 5 grams of cannabis to avoid criminal charges and are prohibited from growing cannabis plants⁴.   Unlawful importation and exportation of cannabis is of course prohibited, as is the sale of cannabis to minors and the unlawful sale of cannabis generally.  A system of administrative monetary penalties will be created under the new legislation, and the provinces will be left with considerable jurisdiction to enact their own complimentary cannabis regimes⁵.   In the proposed Ontario legislation, the minimum legal purchase and possession age will be 19 as opposed to age 18 federally⁶. The responsibility for overseeing the sale and distribution of recreational cannabis will be left to the Liquor Control Board of Ontario (LCBO) through a subsidiary corporation⁷. 

In addition to the Cannabis Act, Bill C-46 has recently passed the first reading in the Senate. Bill C-46, An Act to amend the Criminal Code (offences relating to conveyances) and to make consequential amendments to other Acts, importantly amends the law regarding drug-impaired driving⁸.  The amendments essentially treat cannabis impairment in the same manner as alcohol impairment, with the Governor in Council being authorized to make regulations prescribing the blood drug concentration for cannabis, as opposed to the more familiar blood alcohol concentration⁹.  As of December 2017, the allowable blood drug concentration is yet to be prescribed.  Perhaps more importantly, there is currently no “approved screening device” or road-side test to detect cannabis use in a way that allows conclusions to be drawn about one’s level of impairment, in stark contrast to the situation with breathalysers and their role in testing alcohol impairment¹⁰.  Consequently, we will likely see subjective measures of impairment and road-side sobriety tests come to the fore.

Automobile Insurance and Intoxication Implications

Venkataya v Insurance Corp of British Columbia, is a 2015 British Columbia Supreme Court first party insurance action for the recovery of the value of a vehicle that was written off in a single-vehicle accident¹¹.  The case illustrates the difficulty in proving intoxication or impairment when the Court has to rely on subjective descriptions as opposed to empirical results. The plaintiff had purchased optional collision/own damage coverage and was suing for the value of his vehicle as against his own insurer¹². 

The defendant insurer sought to deny coverage on two grounds.  Firstly, arguing that the plaintiff’s loss was excluded because he was intoxicated, and secondly, arguing that the plaintiff falsely represented that he had not taken any drugs or alcohol in the 12 hour period prior to the accident¹³. 

The plaintiff was a Fijian immigrant. On the evening of the collision, the plaintiff had been at a friend’s house drinking Kava¹⁴.  Kava is a tea like drink consumed across the South Pacific. It is a cultural staple that is drank at ceremonies and social gatherings, made from the roots of the Kava plant and is known for its euphoria inducing, anxiety relieving, and sleep inducing effects¹⁵.  Kava is not a regulated substance in Canada and the plaintiff did not consider it to be a drug¹⁶.  The Court thoroughly dismissed the scientific evidence that Kava is in fact a psychoactive drug put forward by the insurer for the primary reason that the expert retained to produce a report relied on various non-scientific, internet sources to support his opinion.  Unlike patentable drugs or drugs with long histories of use in the western-world, the impetus to study the pharmacological effects of Fiji’s national drink are fairly low. While the expert’s evidence was surely lacking, the fact remains that there, is admittedly thin, but voluminous evidence that Kava is psychoactive, with an anxiety reducing effect similar to benzodiazepines¹⁷. 

The collision occurred close to 2:00 a.m. The plaintiff left his friend’s house and drove back to his home along a route that he was very familiar with and had driven many times before. He maintained that he had no difficulty with his driving but admitted that he had no memory of the accident itself¹⁸.  Two police officers, however, did see the accident.  At the time of the accident, the officers were attending a routine traffic stop¹⁹.   The first indication of trouble was the sound of the plaintiff’s vehicle crashing into a median at the corner of two roads. The officers’ evidence was that the engine continued to rev while the vehicle’s spinning tires were raised above the ground as the vehicle was stuck on the median. The tires eventually made contact with the pavement and the vehicle accelerated past the officers, hitting several poles, street signs, trees, and a fire hydrant, before driving through a flower bed and ultimately coming to a rest once it hit the wall of a taco restaurant²⁰.   

The damage to the plaintiff’s vehicle was immense, with the front axle broken and the tire of one of the front wheels being stripped from its rim²¹.  One of the officers described the plaintiff as having trouble standing and walking, being unable to speak clearly, and having difficulty comprehending what the officers were saying. The plaintiff was also vomiting profusely at both the scene of the accident and later at the police station²².   

The defendant argued that the plaintiff breached a condition of his insurance policy by operating a vehicle “while the insured is under the influence of intoxicating liquor or a drug or other intoxicating substance to such an extent that he is incapable of proper control of the vehicle.”²³

In making a finding the that Plaintiff was not under the influence of an intoxicating substance, Voith J. struggled with the lack of objective evidence, he had difficulties with the observations that the officers made of the plaintiff, and he struggled with whether those observations in fact showed intoxication sufficient to establish that the plaintiff was incapable of operating a motor vehicle as a result of his having consumed “a drug or intoxicating substance”.²⁴ 

Voith J. found that the plaintiff drank one or two bowls of Kava, but then made no inquiries into the concentration of Kava in those bowls, evidently because he knew knowing that the concentration would tell him little about the extent of intoxication.²⁵   There are many parallels between the issues that the British Columbia Superior Court struggled with in Venkataya and the situations that will likely arise in July 2018 and beyond. Absent an objective road-side test that can accurately record the extent of impairment, insurers will likely face repeated challenges to drug related exclusions.  This may be even more of a challenge for cannabis as the effects of same can be more subtle than the behavior the police officers observed in Venkataya. This case also demonstrates the importance of obtaining good experts in cases where insurers are relying on an intoxication exclusion. Insurers will have to give some serious thought to which experts they retain in these types of cases to ensure that they retain someone who is knowledgeable about cannabis and who has scientific evidence on the effects of cannabis in order to prove intoxication.

Cannabis on the Premises

The changes to the legality of the possession of cannabis, as well as the growth and possession of cannabis plants, requires insurers to revisit the coverage clauses and the exclusion clauses in property insurance policies.

In Stewart v TD General Insurance Co., the Ontario Divisional Court affirmed Ramsay J.’s decision on a motion that a loss due to theft of cannabis plants was excluded under the plaintiffs’ homeowners’ insurance policy.²⁶  One of the plaintiffs was authorized by Health Canada to possess and cultivate cannabis for his personal medical use as a result of disabilities following a motor vehicle accident.²⁷  He alleged that the 11 plants that were stolen from him should be considered personal property.²⁸   The coverage clause in question read:

We insure the contents of your dwelling and other personal property you own, wear or use while on your premises which is usual to the ownership or maintenance of a dwelling.

The insurer took the position that the cannabis plants were not personal property under the coverage clause, but admitted that the plants could be covered under the extended coverage clause for “landscaping”.²⁹  In contrast to the motions judge, Aston J. on appeal had no trouble finding that the plants growing outside could be considered personal property on the plaintiffs’ premises, however, he took issue with the qualifier in the coverage clause, that the personal property in question must be “usual to the ownership or maintenance of a dwelling.”³⁰  Aston J. found that while the plants were closer to real property than personal property while growing in the ground, the moment they were removed from the ground by the alleged thief, they became personal property.³¹  The Court found that there was a degree of generality needed in order for the plants to be covered under the policy: the question was not whether the property was usual to your dwelling, it was whether it was usual to a dwelling. In finding that cannabis plants could not be considered usual to the ownership and maintenance of a dwelling, Aston J. held:

Moreover, at the material times in this proceeding, fewer than one-third of one percent of the population of Canada were authorized to grow marijuana for their own medical purposes. It seems quite evident that marijuana plants in the backyard are not “usual to” the ownership or maintenance of a dwelling itself.³²

Given that in July 2018 we will witness the expansion of the population authorized to grow cannabis on their property to essentially every Canadian adult, it is arguable that the growing of cannabis plants would become “usual to the ownership of a dwelling” which is something that needs to be considered by insurers when drafting their property insurance policies. 

A more obvious change to insurance policies that may be required once the legislation comes into force is with respect to cannabis exclusions in property insurance. In Pietrangelo v Gore Mutual Life Insurance Co., the plaintiff’s rental property was entirely destroyed in a fire that resulted from a tenant’s failed attempt to make hashish.33   The policy exclusion introduced in 2003 read:

nor do we insure

to dwellings or e direct or indirect loss or damage, in whole or in part:

…

detached private structures or unscheduled personal property contained in them, used in whole or in part for the cultivation, harvesting, processing, manufacture, distribution or sale of marijuana or any product derived from or containing marijuana or …

…regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage. 

Not surprisingly, the policy exclusion applied absolutely and recovery was denied. With an almost certain increase in the number of homes containing four legal cannabis plants as a consequence of the new legislation, either a lot more claims will be denied under similar exclusion policies, or consumer demand will force a modification to cannabis exclusions.

Conclusion

In light of the foregoing, it is clear that the legislative changes will require a reworking of exclusion and coverage clauses throughout various sectors of the insurance industry and while increased litigation on these novel questions may occur, it may also offer new opportunities to pool risks. If the strict exclusion clauses resembling the one in Pietrangelo remain in place, there may be an opportunity to offer extended coverage to those who intend to cultivate cannabis on their property. Considering the decision in Stewart, underwriters should consider the increased risk of theft that cannabis plants may present. While the concern regarding proving impairment raised in Venkataya is a harder issue to address, the insurance industry would be wise to think outside the box to tackle this issue. Partnering with impaired driving advocacy organizations to educate the public about the risks of impaired driving or creating partnerships with academic and scientific organizations to help in the search for a reliable road-side test for cannabis impairment may be ways that insurers can tackle this issue. This will surely help the insurers’ chances of proving intoxication should the need arise in future litigation.

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Jennifer Therrien

Hamish Mills-McEwan, Articling Student

1. Bill C-45, An Act respecting cannabis and to amend the Controlled Drugs and Substances Act the Criminal Code and other Acts, 1st Sess, 42 Parl, 2017 [Cannabis Act].
2. “Introduction of the Cannabis Act: Questions and Answers” (April 19, 2017), online: <https://www.canada.ca/en/services/health/campaigns/introduction-cannabis-act-questions-answers.html> .
3. Supra note 1 at cl 8(1)(a),8(1)(e). 
4. Supra note 1 at cl 8(1)(c), 12(7).
5. Supra note 1 at Part 10, cl 59.
6. Bill 174, An Act to enact the Cannabis Act, 2017, the Ontario Cannabis Retail Corporation Act, 2017 and the Smoke-Free Ontario Act, 2017,to repeal two Acts and to make amendments to the Highway Traffic Act respecting alcohol, drugs and other matters, 2d Sess, 41 Parl, cl 7, 2017 [Ontario Cannabis Act].
7. “Cannabis legalization” (November 2, 2017), online: <https://www.ontario.ca/page/cannabis-legalization> .
8. Bill C-46, An Act to amend the Criminal Code (offences relating to conveyances) and to make consequential amendments to other Acts, 1st Sess, 42 Parl, 2017.
9. Ibid, at cl 2.
10. Criminal Code, RSC 1985, c C-46, s 254(1); Approved Screening Devices Order, SI/85-200.
11. Venkataya v Insurance Corp of British Columbia, 2015 BCSC 1583, 257 ACWS (3d) 699 at para 1 [Venkataya].
12. Ibid at para 2.
13. Ibid at para 3.
14. Ibid at para 7.
15. See: Long Doan Dinh et. al, “Interaction of Various Piper methysticum Cultivars with CNS Receptors in vitro”, DOI: 10.1055/s-2001-14334; Siedy SällströmBaum et. al, “Effect of Kava extract and individual Kavapyrones on neurotransmitter levels in the nucleus accumbens of rats”, DOI:10.1016/S0278-5846(98)00062-1; Kennon M. Garrett et. al; “Extracts of Kava (Piper methysticum) induce acute anxiolytic-like behavioral changes in mice”, DOI: 10.1007/s00213-003-1520-0
16. Venkataya, supra note 11, at para 8.
17. Ibid. 
18. Ibid, at paras 17-18
19. Ibid at para 22
20. Ibid at para 23
21. Ibid at para 24
22. Ibid at para 26
23. Ibid at para 105
24. Ibid
25. Ibid at para 97.
26. Stewart v TD General Insurance Co., 2014 ONSC 854, 238 ACWS (3d) 213 at paras 1-3 (Div Ct) [Stewart].
27. Ibid at para 4.
28. Ibid at para 6.
29. Stuart, supra note 26, at para 2.
30. Ibid at paras 13-14.
31. Ibid at para 12.
32. Ibid, at para 15.
33. Pietrangelo v Gore Mutual Life Insurance Co., 2010 ONSC 568, 198 ACWS (3d) 1120 at para 1 [Pietrangelo]; affirmed in 2011 ONCA 162.
34. Ibid at para 20.