





CITATION:
Pietrangelo
v. Gore Mutual Insurance
          Company, 2011 ONCA 162



DATE: 20110302



DOCKET: C51854



COURT OF APPEAL FOR ONTARIO



Laskin, MacPherson and LaForme JJ.A.



BETWEEN



Valentino Pietrangelo and Antoinette Pietrangelo



Appellants



and



Gore Mutual Insurance Company



Respondents



Edward
Posliff
, for the appellants



Pino Cianfarani, for the respondent



Heard: February 23, 2011



On appeal from the judgment of
          Justice E.W. Ducharme of the Superior Court of Justice, dated February 22,
          2010.



ENDORSEMENT



[1]

The appellants owned four residential properties
    in the Windsor area, three of which they used as rental properties.  The Mickle property was one of them.  Michael Arquette, along with his mother, rented
    this property from 2005 until the date of loss, January 30, 2006.  On this date, Arquette caused an explosion in
    the property resulting in total destruction of the house.

[2]

As a consequence of the explosion, Arquette
    subsequently pleaded guilty to: (i) intentionally or recklessly causing damage
    to a dwelling house; and, (ii) unlawfully producing cannabis resin contrary to
    the
Controlled Drugs and Substances Act
.

[3]

After the explosion, the appellants filed a
    proof of loss claim, under their policy of residential insurance.  The insurer, Gore Mutual Insurance Company,
    investigated the claim and denied the loss based on an exclusion clause in the
    policy.  The appellants commenced an
    action to enforce the fire loss claim under the policy.

[4]

The trial judge dismissed the appellants
    action.  He held that Gore Mutual was
    entitled to rely on the exclusion clause in the insurance policy, which reads:

We
    do not insure  nor do we insure direct or indirect loss or damage
.
to
dwellings
used
in  processing [or] manufacture
     of marijuana.  (Emphasis added)

[5]

The appellants appeal.

[6]

The appellants do not contest that the policy
    was subject to an exclusion clause, nor do they dispute that the explosion was
    caused by the illegal activities of Arquette.  However, they submit that the trial judges interpretation of the exclusion
    clause was in error in three respects:

1.      The word use in the clause is ambiguous
    and it should not apply to exclude the claim.  In part, they say it was an error to hold that the exclusion clause was
    intended to apply regardless of any knowledge or involvement of the
    insured.

2.      The exclusion clause was unjust or
    unreasonable and s. 151 of the
Insurance
    Act
should apply.  They say this for
    several reasons including: an insured should not be expected to pay for
    wreckage caused by the criminal acts of a third party; and the clause exacts a
    penalty on the innocent insureds.

3.      By accepting evidence of the draftsperson
    as to his intent; the trial judge ignored the clear language of the insurers
    Notice that the clause was in relation to marijuana grow houses.

[7]

We would reject each of these submissions.

[8]

First, the trial judge applied the correct law
    in the interpretation of the exclusion clause, namely,
Consolidated Bathurst Export Ltd. v. Mutual Boiler and Machinery
    Insurance Co
. [1980] 1 S.C.R. 888.  He rejected the appellants argument to define used through the
    technical approach; rather, he interpreted it in accordance with its ordinary,
    commonly understood, and literal meaning.  He committed no error in doing so.

[9]

Second, the appellants fundamental argument
    here is that the exclusion clause is unjust and that it operates to create
an unfairness
on them primarily because of their innocence,
    or their inability to prevent the events that caused the loss.  However, the trial judge correctly observed
    that the issue in this regard is not whether the clause creates unfairness to
    the insured, but whether there is a rational basis for its existence.

[10]

Indeed, it is in respect of this issue that the
    trial judge relied on the evidence of the draftsperson.  That is, the draftspersons evidence did not
    go to the interpretation of the clause; rather, it was in relation to the
    reason for the existence of such a clause.

[11]

The trial judge was of the view that s. 151 of
    the
Insurance Act
has no application
    in this case because the exclusion clause was neither unjust nor unreasonable
    and that its purpose was valid and legitimate.  Thus, whether or not s. 151 applied in the circumstances of this case,
    it has no impact on the critical finding of the trial judge that the clause was
    not unjust or unreasonable.

[12]

We agree with the trial judge, the exclusion
    clause in the circumstances of this case is neither "unjust or unreasonable".  There are certain
    risks, which insurers are entitled not to cover for legitimate business reasons
    relating to the ability to assess risk and set premiums.

[13]

For these reasons, the appeal must be dismissed.

John
    Laskin J.A.

J.C.
    MacPherson J.A.


H.S. LaForme J.A.


