Landlords lose bid to make insurance pay for drug fire

Nine years after a “honey hash oil” operation sent a fire ripping through a Princess Street home, an insurance company has escaped liability for the damages.

In a ruling this month, a Regina judge instead ordered the tenants to compensate their former landlords for at least $179,000.

The dispute dates back to an explosion and fire that decimated much of the Albert Park-area house on March 31, 2009. A neighbour heard a loud bang and saw an injured man, who suffered burns, rush from the house.

Investigators found the blaze had started in the bathroom and spread to an adjacent bedroom, burning through to the roof shingles above both rooms.

They spotted drug-production equipment in and around the bathtub, including a pot with yellowish residue and a butane tank. The residue tested positive for THC, the psychoactive ingredient in marijuana, and investigators concluded that attempts to heat cannabis resin had triggered the explosion.

“Several other items were recovered from the property that are consistent with the premises being used as a clandestine drug laboratory for the manufacture of hash honey oil,” an expert consultant wrote in a report cited by the court.

A tenant, Justin Hoffart, was treated for serious burns and eventually pleaded guilty to traffickingrelated charges.

In the meantime, the landlords — Giuseppe and Rosa Carteri — attempted to collect on their $175,000 policy with Saskatchewan Mutual Insurance. But the insurer cited the evidence of drug production to deny coverage for their loss.

The company pointed to a 2003 notice posted in a renewal package that stated simply: “We do not insure property used for the illegal cultivating, harvesting, processing, manufacturing, distributing or selling of marijuana.”

The Carteris, described in the judgment as an elderly Italian immigrant couple with some language barriers, countered that the change was not clearly pointed out when they renewed their policy. They said they weren’t aware of the change, which they also held to be “unjust.”

The couple said they took all reasonable steps to screen Hoffart and his partner, who had children and were otherwise “model tenants.” There was simply no way for them to know the tenants were surreptitiously running an illegal drug operation in the home, they argued.

But Court of Queen’s Bench Justice Richard Elson rejected those arguments. He said changes to the policy were hardly “buried.” They came highlighted in a special box on the front page of the renewal form. Further, he noted that renting always carries an element of uncertainty — and landlords should be prepared for the worst.

“Landlords are not forced to remain in the business of renting out residential property,” Elson wrote. “If they are not able or willing to bear the risk, they may need to reconsider their investment.”

But the judge came down even harder on the tenants. He noted that they admitted the details of the fire, but denied they were negligent. However, they produced “no material facts or particulars” to support their case.

Elson agreed with the landlords that the pair were in breach of their tenancy obligations.

The Carteris were asking for $408,468. They factored in the cost of the property — including the land and an unaffected garage — as well as years of lost rental payments.

But Elson was far more moderate. He ordered the tenants to pay $171,795 for the house, as well as about $7,200 in demolition costs and fees.

They will also have to compensate the Carteris for 13 months of lost rental income, with the precise amount to be determined.