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Home Insurance Coverage Update – Be Careful of the Pot Growing in Your Basement

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Home Insurance Coverage Update – Be Careful of the Pot Growing in Your Basement

March 10, 2015

By: John R. Liber, Partner, Thrasher, Dinsmore & Dolan, a Legal Professional Association, Cleveland, Ohio

For most people, there would not be much concern about their house catching fire because one’s husband was performing a procedure known as “butane extraction” on marijuana he was legally growing in the basement.  In the case of Casey McDermott, this is exactly what happened.  But the challenges they faced due to the damage done by the fire was nothing compared to the fight they encountered with their homeowner’s insurance company, who declined the claim.

In the recent case of Nationwide Mut. Fire Ins. Co. v. McDermott, the U.S. Court of Appeals for the  Sixth Circuit  upheld the lower court’s ruling in favor of the insurance company’s rejection of coverage.  Although the marijuana operation was perfectly legal (McDermott’s husband was a licensed medical marijuana patient who operated an approved, high-tech laboratory), the court held that it constituted a material deviation from the routine uses of the premises.   Since, under normal circumstances, a homeowner’s insurance company would not anticipate that a residential basement would be used as a marijuana laboratory where natural gas – fired experimentation would be performed, the insurance company was not required to cover the loss.  The court specifically observed that the McDermotts’ marijuana lab was not related to common activities such as growing indoor plants or smoking.

This is somewhat of a departure from the evolving law in Ohio for enforcement and interpretation of insurance policies.  Previously, it was well settled that unless there was an ambiguity in the terms of the policy, the plain meaning of the words in the policy are given effect.  If a material term can be reasonably considered to have more than one meaning, the language is construed in favor of coverage for the policy holder.  With the McDermott decision, the court has departed from this standard, and instead looked into the mind of the insurance company to determine if it ever meant to provide coverage for a particular casualty.

The moral of the story:  (1) if damage to your property is caused by anything somewhat out of the norm, be prepared for the insurance company to decline coverage and force you to fight in court for the coverage for which you paid; and (2) if you engage in any activity that may be considered remotely unconventional, you should contact your insurance company and verify coverage.  On this point, the word of your sales agent is not enough.  Get it in writing, preferably from a coverage adjuster at the home office, or an attorney such as the capable lawyers at Thrasher, Dinsmore & Dolan, who can review the policy and the applicable law, and advise if you have a coverage issue.

Many people spend a lifetime paying expensive premiums for insurance for everything from homeowners to auto and disability coverage, only to find that when they reach a ripe old age and they no longer need it, they never made a claim.  Don’t expect your insurance company to send you a big fat check for the decades of premiums you paid unnecessarily.

For those who are faced with a claim, be prepared for a challenging experience for anything that does not fit squarely within the insurance companies’ set framework for allowable claims and damages.  Many cases like McDermott demonstrate extreme examples that do not fit the norm.  But one must wonder if it would have made any difference if Mr. McDermott were growing hydroponic vegetables when a heat lamp caught fire and burned the house down as opposed to his perfectly legal marijuana garden.

If you have any questions, or would like to have an in-depth review of your insurance coverage, feel free to contact John at 216-255-5431, or by e-mail; jliber@tddlaw.com.