Earlier this week, in Nationwide Mutual Fire Ins. Co. v. McDermott, the Sixth Circuit affirmed a district court’s determination that damages from a butane fire in a basement marijuana lab would not be covered by the homeowner’s insurance policy, but not for the reasons one might expect.
The Court’s holding was based on the homeowner’s failure to inform the insurance company of the change in use of the basement, which had previously been a laundry and storage area. Rejecting the claimant’s attempt to analogize the 28-plant operation to “buying a houseplant,” the Court pointed out that the insurer “would have declined coverage altogether” if it had known about the true use of the basement and concluded that requiring coverage “would make [the insurer] liable for a risk it did not assume.” By evaluating the marijuana operation in the same way as it would any other potentially hazardous use of a residence, the Court avoided any thorny questions about marijuana’s legal status (while the claimant was a licensed medical marijuana “caregiver” under Michigan law, marijuana remains illegal under federal law).
In addition to teaching a valuable lesson about the dangers of smoking near butane, this case underscores the importance of keeping an insurer up to date on any changes that may affect coverage.