Beware of Exploding Bathrooms and Other Lessons from Rentals

A family rents one of your rental properties. Decent interview, parents gainfully employed, and basically a model tenant.

Then your house blows up.

Such was the case in the decision of Carteri v Saskatchewan Mutual Insurance Company, 2018 SKQB 150 (CanLII). A property in Regina in 2009 was the scene of a fiery explosion. A man was injured by the flames and fled from the property. Upon investigation, it was determined that the explosion was a result of the tenants’ production of cannabis resin in the bathroom.

The landlord was seeking damages from either the insurance provider or the tenants for all losses incurred as a result of that explosion. They were likely more interested in a judgment from the insurance company, as the deep pockets of the insurer would ensure they got paid.

The landlords when through the process of submitting their insurance claim, but discovered that there was a exclusion that was put into place during a renewal which stated:“WE DO NOT INSURE PROPERTY USED FOR THE ILLEGAL CULTIVATING, HARVESTING, PROCESSING, MANUFACTURING, DISTRIBUTING OR SELLING OF MARIJUANA, OR ANY OTHER ILLEGAL SUBSTANCE FALLING UNDER THE CONTROLLED DRUGS AND SUBSTANCES ACT.”.

The case goes on to review the facts and law related to these types of actions. To paraphrase a bit, the court goes on to decide that the exclusion clause was properly implemented, and there was nothing unfair about its inclusion. The resulting analysis determined that the loss in this case was covered by that exclusion. Accordingly, the landlords claim against the insurer was dismissed (and they had to pay them court costs).

Despite concerns that the court had with the pleadings of the action and the evidence related to damages, it did find that the tenants would be found liable for the damages.
The judgment included the following heads of damages :
• Loss of house: $171,795.00;
• Demolition costs: $5,670.00;
• City of Regina (fire security costs): $685.00; and
• McGinn inspection and report: $893.00;

The court wanted some more information about the costs associated with the rental property during such time that the house would have been rebuilt. Following receipt of that information, the court would consider the amount of loss for the lost rental income.

What I found interesting is some of the comments from the court regarding the business of being a landlord.

At paragraph 102, the court notes “that landlords are not forced to remain in the business of renting out residential property. If they are not able or willing to bear the risk, they may need to reconsider their investment.” At paragraph 91, the court highlights another similar in fact decision from Ontario where it was stated “If the effect of this ruling is that, in the future, landlords will be at greater risk for a specified class of losses of which they are innocent, if it means that landlords must become more diligent still in winnowing out those potential tenants who are a threat to abuse their tenancies, then so it shall have to be.”

Curious – what do people find the likely outcome to be of statements like this from the court?