The insured landlord appealed and contended that the purpose of her policy was
to insure from accidental loss to the rental
property, and as far as she was concerned,
the damage was accidental. Farmers argued that the damage was from mold,
which was excluded under the policy, and
not vandalism, which was covered under
the policy. The court determined that the
tenants’ acts constituted vandalism and
the insured landlord won the case. The
case is Bowers v. Farmers Ins. Exch. 99
Wash. App. 41, 991 P.2d 734 (2000).
In one of the most well-known marijuana and insurance law cases, Tracy
v. USAA Cas. Ins. Co., USAA issued a
homeowners policy to Barbara Tracy,
a medical marijuana patient permitted
under Hawaiian law to possess and grow
her own marijuana. After a thief stole
12 marijuana plants, valued at approximately $45,600 from Tracy’s property,
she filed a claim with USAA. USAA denied the claim, and Tracy sued them for
breach of contract.
USAA contended that Tracy did not
have an insurable interest in the plants.
Hawaiian law defined an insurable interest to be any “lawful and substantial
economic interest in the safety or preservation of the subject of the insurance.”
USAA argued that any interest in marijuana is not lawful, as Hawaii’s medical
marijuana law at the time did not legalize the use of marijuana, it simply provided an affirmative defense for marijua-na-related crimes.
USAA had a policy provision covering
theft of “trees, shrubs and other plants,”
which Tracy argued should also cover
her marijuana plants. USAA also argued
that it could not purchase medical marijuana using insurance proceeds, as that
violates federal law. The court agreed
with USAA, concluding that Tracy’s
possession and use of marijuana violated
federal law, despite compliance with the
state law. The court also stated that the
insurance policy that was supposed to
cover her marijuana was an unenforceable illegal contract. This case is Tracy v.
USAA Cas. Ins. Co., No. 11-00487 LEK-KSC, 2012 U.S. Dist. LEXIS 35913 (D.
Haw. Mar. 16, 2012)
Due to its illicit nature, marijuana historically has not been covered by insurance; therefore, few cases involving marijuana and insurance have made it to the
high levels of litigation. We can be sure
that with the growing legalization of the
drug, more court cases and insurance
disputes will soon follow.
Hannah Smith ( firstname.lastname@example.org) is an editor
with FC&S Online, the authority on insurance
coverage interpretation and analysis for
the P&C industry. It is the resource agents,
brokers, risk managers, underwriters, and
adjusters rely on to research commercial and
personal lines coverage issues.
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