ArcView Group, which tracks the legal marijuana markets, recently estimated that legal U.S. pot sales could reach $6.7 billion in 2016. As the legal marijuana economy has grown, insurance coverage for this emerging industry has become a hot topic. The U.S. District Court for the District of Colorado in The Green Earth Wellness Center, LLC v. Atain Specialty Insurance Company, No. 13-cv-03452-MSK-NYW, 2016 WL 632357 (D. Colorado Feb. 17, 2016) was recently faced with determining the extent of coverage under a commercial property policy for damage sustained to marijuana plants at a growing facility and addressing whether legal marijuana was even insurable.

Green Earth operates a retail medical marijuana business and an adjacent growing facility in Colorado Springs, Colorado. Green Earth contended that smoke and ash from a wildfire overwhelmed its ventilation system and intruded into its growing operation, causing damage to Green Earth’s marijuana plants. Green Earth made a claim for the damage under a commercial property and general liability insurance policy issued by Atain, seeking more than $200,000 for damage to its grow operation, specifically its “mother plants” and “clones,” and approximately $40,000 in damage to buds and flowers that had been harvested and were being prepared for sale. Atain denied the claim and Green Earth filed suit. Read more ›

For years, property insurance policies that exclude rot damage have been called upon to cover rot because the policies extend coverage to “collapse”—an undefined term—caused by hidden decay, even if the structure remains standing and in use.

The Homeowners Association of the Queen Anne Park Condominium in Seattle discovered decay within the walls of its buildings in 2011. State Farm insured the Association with policies effective between 1992 and 1998. The policies excluded coverage for rot, but covered “collapse” caused by hidden decay. The Association argued that its buildings were in a state of collapse in or before 1998 and that State Farm covered the decay damage. State Farm denied the claim and the Association sued in federal court in Washington. The trial court granted summary judgment to State Farm and the Association appealed to the Ninth Circuit Court of Appeals.

Finding the meaning of “collapse” undefined in the policies and in Washington law, the Ninth Circuit certified the question of its meaning to the Washington Supreme Court. In Queen Anne Park Homeowners Ass’n v. State Farm Fire & Cas. Co., 183 Wn.2d 485, 352 P.3d 790 (2015), the Washington court held that “collapse” means a “substantial impairment of the structural integrity of a building or part of a building that renders such building or part of a building unfit for its function or unsafe.” The collapse must be “more than mere settling, cracking, shrinkage, bulging, or expansion.” 352 P.3d at 794. (See our Observer blog entry of June 23, 2015.) Read more ›

Missouri resident James Roller set fire to his garage in an attempt to commit suicide.  When smoke and fumes surrounded him he changed his mind, fled the garage, and alerted his wife of the fire.  Mrs. Roller called 911.  A sheriff’s deputy escorted Mr. Roller to “protective custody” and obtained a 96-hour mental health detention order from the court.  Mr. Roller was treated at a hospital.

The garage sustained severe fire damage.  Mrs. Roller notified the Rollers’ homeowners’ insurer, American Modern Home Insurance Company (AMHIC).  An independent adjuster inspected the damage, took photographs, obtained a statement from Mrs. Roller, and estimated the replacement cost of the garage to be $21,240.  AMHIC’s adjuster reserved the company’s rights and continued to investigate.  Over the course of eight months, AMHIC repeatedly requested that the Rollers submit to an examination under oath and provide certain documents.  The Rollers demanded that AMHIC produce documents to them.  The Rollers refused to appear at an examination under oath, and when AMHIC failed to provide the documents they requested, they commenced a declaratory judgment action in Missouri state court.

After a bench trial, the court entered judgment for the insurer, finding that the Rollers’ claim was not covered by their policy.  On appeal, the Rollers sought reversal and argued these reasons: Read more ›

In J & D Towing, LLC v. American Alternative Insurance Corporation, No. 14-0574, 2016 WL 91201 (Tex. Jan. 8, 2016), the Texas Supreme Court considered J & D Towing, LLC’s (“J & D”) claim for loss of use damages under its underinsured motorist insurance policy, after J & D’s only towing vehicle was totally destroyed in an accident.  After discussing decades of Texas case law limiting loss of use damages to cases involving partial destruction, the Court held that the owner of totally destroyed personal property may recover loss of use damages, in addition to the property’s fair market value immediately before the injury.  The Court’s holding reverses over 60 years of prior case law prohibiting recovery of loss of use damages in total destruction cases, and brings Texas in line with the majority of jurisdictions.

J & D is a vehicle towing company located in Huntsville, Texas. On December 29, 2011, an accident with a third party rendered J & D’s only truck a total loss.  J & D claimed the value of the truck exceeded $19,000, and also sought its loss of use damages based on its inability to conduct business.  Although the third party’s insurer offered to pay the truck’s value, the third party insurer refused to pay for any loss of use damages.  After nearly two months, J & D settled its claim for the third party’s policy limits of $25,000. Read more ›