Fortuity - Canadian Insurance News and Trends - July 2025

In McGregor v Wawanesa Mutual Insurance Company, 2025 ABKB 227, the Alberta Court of King’s Bench confirmed that the subjective intention of a criminal act was not required to trigger the criminal act exclusion clause within a homeowners insurance policy. Accordingly, the insurer was permitted to deny the insured defence and indemnity in an underlying civil action arising out of an explosion and fire caused by the insured’s production of cannabis oil. 

The Plaintiffs, Clifford and Katrina McGregor, were owners of a home with a detached garage and maintained a homeowners insurance policy (the “Policy”) with the Defendant, Wawanesa Mutual Insurance Company (“Wawanesa”). In October of 2017, Mr. McGregor was making cannabis oil in his garage with the use of butane cannisters, while two of Mr. McGregor’s friends, Mr. Coffin and Mr. McIntosh, were visiting the garage. At some point during the making of the cannabis oil, a spark caused by a lit cigarette ignited the evaporated butane in the garage, causing an explosion and fire (the “Incident”). The Incident damaged the garage, and caused Messrs. McGregor, Coffin and McIntosh various burns to their bodies.

At the time of the Incident, the production of cannabis oil was an unlawful offence in Canada. Mr. McGregor plead guilty to two criminal charges arising from the Incident.

Mr. Coffin sued the Plaintiffs for bodily injury arising from the Incident (the “Coffin Action”), and the Plaintiffs sought coverage from Wawanesa for defence and indemnity in the Coffin Action under the Policy. Wawanesa provided the Plaintiffs a defence in the Coffin Action under a reservation of rights.

Coverage dispute and summary trial

The Plaintiffs commenced a coverage action against Wawanesa seeking a declaration that they were entitled to a defence and indemnity under the Policy. Wawanesa sought summary dismissal of the coverage action, on the basis it had no duty to defend or indemnify.

The main issue at the summary trial was whether the Plaintiffs were entitled to liability coverage under Section II of the Policy. The relevant portion of the Policy read:

Section II

Exclusions

"We" do not insure claims arising from: ...

(6) "bodily injury" or "property damage" caused by any intentional or criminal act or failure to act by:

(I)          any person insured by this policy;

(II)         any other person at the direction of any person insured by this policy;

 

(the “Exclusion Clause’”)

 

The Court set out the general legal principles regarding the interpretation of insurance policies. Specifically, where the language of a policy is unambiguous, the courts should give effect to the clear language of a policy. Where the language of a policy is ambiguous, courts are to rely on general rules of contract construction, and the onus is on Wawanesa to establish that the Exclusion Clause applies.

It was undisputed that Mr. McGregor’s acts were criminal, but the parties disagreed as to whether the Exclusion Clause applied to an unintentional criminal act.

Court’s findings

The Court found the Exclusion Clause’s language of “any…criminal act” to be clear and unambiguous. Such wording falls within the established line of case law which does not require subjective intent for the clause to apply. The Court found that while the insured need not intend to cause the injury, the criminal act must still be the cause of the injury. This requirement was satisfied because Mr. McGregor admitted in his criminal proceedings that he caused the fire or explosion, which caused Mr. Coffin bodily harm, contrary to the Criminal Code.

The Court also commented on section 533(2) of Alberta’s Insurance Act, which states that a contravention of a criminal law itself will not render a claim for indemnity unenforceable except where the insured intends to commit that contravention. However, the same provision allows a contract of insurance to provide otherwise, and this is exactly what the Policy provided by virtue of the Exclusion Clause, which was unambiguous and did not require the criminal act to also be intentional.

The Court ultimately dismissed the Plaintiffs’ claim, finding that the Exclusion Clause applied and the Plaintiffs’ were not entitled to liability coverage under the Policy.

Takeaways

McGregor provides the following valuable insights to underwriters and claims professionals adjusting or examining claims involving criminal acts:

• Criminal act exclusions that contain the “any criminal act” wording have consistently been interpreted as not requiring subjective intent of the insured in order to apply; however, the criminal act must still be the cause of the injury for the exclusion to relieve the insurer from its obligation to indemnify the insured.
• While section 533(2) of the Alberta Insurance Act protects an insured’s ability to obtain indemnity where their criminal act was unintentional, this same provision allows an insurer, in the wording of the policy, to exclude claims for coverage caused by “any criminal act”.