Ontario Court of Appeal Decides “Innocent Insured” Legislation Does Not Apply Retroactively

Ontario Court of Appeal Decides “Innocent Insured” Legislation Does Not Apply Retroactively

By: Grace Murdoch

The Ontario Court of Appeal decided in a 3-0 decision that the newly enacted s.129.1 of the Insurance Act[1] does not apply retroactively to cover claims that were brought before the legislation came into force.

s.129.1 of the Insurance Act

On April 30, 2018, s.129.1 of the Insurance Act came into force, providing that:

129.1 (1) if a contract contains a term or condition excluding coverage for loss or damage to property caused by a criminal or intentional act or omission of an insured or any other person, the exclusion applies only to the claim of a person,

(a) whose act or omission caused the loss or damage;

(b) who abetted or colluded in the act or omission;

(c) who,

(i) consented to the act or omission, and

(ii) who knew or ought to have known that the act or omission would cause the loss or damage; or

(d) who is in a class prescribed by the regulations.

In effect, this means that where a criminal act caused a loss or property damage, a criminal or intentional act exclusion clause will not preclude an innocent insured from coverage under the policy.

Facts of the Case

The case of Lin v Weng[2] dealt with a landlord arguing for the applicability of s.129.1 after being denied insurance coverage for damage caused by the criminal acts of his tenants. The issue was that s.129.1 was not in existence when he first made the insurance claim.

Beginning in 2015, Jian Lin rented a bedroom of his home to two tenants, Qi An and Xiuqin Weng. When Lin purchased the home in 2014, he insured it with RBC General Insurance Company which was later acquired by Aviva.

The Wengs had defaulted on their rent and were asked by Lin to leave. A scheduled move out date had been set for March 15, 2016.

On March 15, 2016, while Lin was out of the home, his tenants caused an explosion which set fire to, and burned down the house. The explosion was caused by butane gas used by the Wengs in an attempt to extract resin from marijuana.

The Wengs pleaded guilty to the criminal offences that they were charged with. While charges were also laid against Lin, these were eventually withdrawn given his lack of knowledge of the criminal activity.

Lin made a claim under his property policy for the damage caused. Aviva denied the claim grounding its decision in two policy exclusions:

1. One exclusion (“the illegal activities exclusion”) applies where the loss was caused by the insured’s criminal acts, intentional acts, willful acts, or failure to act or the criminal acts, intentional acts, willful acts, or failure to act of any person under the insured’s direction. Even where the criminal act, intentional act, willful act, or failure to act is only by one or more persons, the exclusion applies to all persons insured under the policy

2. The second exclusion (“the marijuana exclusion”) applied to the “growing, cultivation, harvesting, processing, manufacturing, distribution, storage or sale of marijuana or any product derived from or containing marijuana or any other drug, narcotic or illegal substance falling within the schedules of the Controlled Drugs and Substances Act.”

Lin sued Aviva on March 9, 2018, after it denied his claim. However, on April 30, 2018, in the midst of litigation, s.129.1 was passed.

In light of the enactment of the new legislation, Lin amended his statement of claim to plead and rely on it. Aviva and RBC (whom Aviva had filed a joint statement of defence with) did not amend their statement of defence.

Motion for Summary Judgment

The action proceeded before the court first by way of Motion for Summary Judgment.

Aviva argued that s.129.1 should not be applied retrospectively and that s.129.2 does not apply to the marijuana exclusion.

However, because Aviva did not rely on s.129.1 in its statement of defence, Lin argued that Aviva was not able to make arguments about its applicability.

The motion judge ruled in favour of Aviva, finding that: 1) Aviva was able to challenge the applicability of s.129.1 regardless of the fact that it was not in its statement of defence, 2) s.129.1 does not apply retrospectively, and 3) s.129.1 does not apply to the marijuana exclusion clause.

The Ontario Court of Appeal’s Analysis

Lin appealed the summary judgment decision arguing that the motion judge had erred in law with all three findings.

The Ontario Court of Appeal reviewed the findings on a standard of correctness and decided not to interfere with motion judge’s conclusions.

With respect to the second finding (that s.129.1 does not apply retrospectively), the Court of Appeal took time to review the terms “retrospective” and “retroactive” and clarify distinction between them.

A retroactive law “is one that applies a new law to an event that happened in the past and to which the old law applied before the new law was enacted”.[3]

A retrospective law “is one that has an effect for the future on a set of facts that occurred in the past”.[4]

Up until this point in the litigation, the action had been argued using the term “retrospective”. However, upon its consideration of the two terms, the Ontario Court of Appeal found that what Lin was actually asking for was a retroactive application of s.129.1 and focused its own analysis of this issue on the question of retroactivity.

There exists a presumption that legislation is not to apply retroactively unless the legislature intends for it to. Such an intention could be found to exist where the wording of the law makes the intention clear or where the law takes effect on a date in the past.[5] Reviewing the wording of s.129.1, the Court found that neither of these indications were evident. This finding, however, did not end the Court’s analysis on the question of intention.

Lin argued that because his claim was still outstanding (neither paid nor successful denied) when s.129.1 came into force, his claim exists in the present and is covered by s.129.1. In assessing the merit of this argument, the Court had to resolve the meaning of the term “claim”. Though “claim” is not defined in the Insurance Act, the Court was able to look to the definition of the term “adjuster” and derive an interpretation based on its use of the word “claim”. What it found was that in a temporal sense, an “insured’s claim for indemnity has the same meaning and therefore the same temporal component as the insured’s entitlement to indemnity”.[6] Thus, the relevant date that applies to a claim is the date of loss. This means that a claim is to be interpreted as an “event, rather than a status”.[7] The Court resolved this point stating that if the legislature had intended for the meaning of the term “claim” within s.129.1 to be a different than the ordinary meaning within the Insurance Act, it would have clearly stated this. Because no such language was included, the Court found there was no legislative intent for s.129.1 to be applied in the manner which Lin argued it should be.

Lin also relied on the decision of Brosseau v. Alberta Securities Commission[8] to support his other argument, that the presumption against retrospectivity should not apply to statutes that confer a benefit. The Court of Appeal rejected this argument given that the proposition in Brosseau was only in made in obiter[9] and given that the Supreme Court of Canada has stated that this exception “is only triggered where the design of the penalty itself signals that Parliament has weighed the benefits of retrospectivity against its potential for unfairness[10]. Regardless, Brosseau was decided in a different context where the “benefit” was a benefit to the protect the public (unlike the case hand, where the benefit is only to one party to a contract). Again, the Court of Appeal found no clear legislative intent for the presumption to be rebutted in this scenario.

Because the Court concluded that s.129.1 could not apply retroactively, it found that there was no need to consider whether the motion judge erred on the question of the marijuana exclusion applied.


Lin v Weng confirmed the important role that legislative intent plays in the role of statutory interpretation. There is a strong presumption that legislation does not apply retroactively, and it is unlikely that the presumption can be rebutted absent clear language or intent.

This case also provides helpful commentary on the legal meaning of the terms “retrospective” and “retroactive” and how those terms affect the analysis of whether a law is applicable to past events. As well, this case provides authority from the Ontario Court of Appeal on how the term “claim” is to be interpreted within the Insurance Act. Specifically, a claim is not a status, it is an event related to the date of loss.

Finally, it should be noted that the motion judge’s reasons still stand insofar as he found that the “innocent insured” provisions of s. 129.1 of the Insurance Act do not apply to the Marijuana Exclusion clause. This remains to date the only judicial consideration of the issue in Canada and under the doctrine of horizontal stare decisis likely binds other Ontario Superior Court judges.

[1] RSO 1990, c I.8.

[2] 2022 ONCA 367.

[3] Ibid at para 26.

[4] Ibid at para 27.

[5] Ibid at para 29.

[6] Ibid at para 37.

[7] Ibid.

[8] 1989 CanLII 121 (SCC).

[9] Lin at para 40; R v Bengy, 2015 ONCA 397.

[10] Tran v Canada (Public Safety and Emergency Preparedness)2017 SCC 50 at para 50.

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