Will my homeowners insurance policy cover my Marijuana?

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By Nerd Wallet

If your marijuana is damaged in a fire, lost in a robbery, or otherwise destroyed, will it be covered under your homeowners insurance? The drug is legal for recreational or medicinal purposes in half of the country, but the insurance industry is still figuring out how to approach marijuana claims.

“There are still not clear-cut answers on legal marijuana, and insurance risk experience will evolve over time and as more states legalize it,” says Carole Walker, executive director of the Rocky Mountain Insurance Information Association in Greenwood Village, Colorado.

There’s a lot at stake here. The U.S. legal marijuana industry is valued at more than $1.5 billion, according to a report by ArcView Market Research, a San Francisco-based group that specializes in marijuana market data.

To help you weed through this convoluted issue, here are some factors that could affect whether or not your marijuana will be covered.

Location

The drug is currently legal recreationally in Colorado and Washington, and medicinally legal in 23 states and the District of Columbia. Insurers don’t cover illegal substances, so if you’re from one of the 25 other states, you’re out of luck.

“Implied in every policy is insurability of legal subject matter,” says Don Malecki, a principal of Malecki Deimling Nielander & Associates LLC in Erlanger, Kentucky. “If marijuana is not permitted, it will not be covered because it will be considered as not being legal subject matter.”

Amount

States that have legalized pot in some form have laws about how much can be held at once. If you have more than the legal amount, your stash won’t be covered.

“In Colorado you can possess no more than one ounce of marijuana for recreational use and grow up to six plants—three of them may be flowering—in an enclosed, locked location,” Walker says.

Additionally, most policies limit coverage to $500 per plant, Malecki says.

Insurer

Marijuana coverage under a homeowners policy ultimately depends on the insurer.

“There’s nothing in state law that prohibits insurers from covering marijuana losses,” says Kara Klotz, a spokesperson for the Washington State Office of the Insurance Commissioner. “However, it’s also legal for property and casualty insurers to exclude marijuana losses, as long as the exclusion isn’t discriminatory.”

Klotz adds that her office has received three complaints from consumers about homeowners policies not covering marijuana losses.

Allstate would cover marijuana losses in a state where the drug is legal, and would not exclude coverage of “lawfully possessed amounts of medical marijuana,” says Amy Allmon, an Allstate spokesperson.

“In Colorado, it would be covered on a homeowners policy for the same covered perils anything else in your home is covered for,” she says. “It would be treated just as any other personal property that someone has.”

Farmers Insurance Group evaluates marijuana claims on a case-by-case basis, says Trent Frager, a spokesperson for the company.

“Policyholders should be aware that any losses involving marijuana will be investigated taking into account a number of factors, including local, state and federal laws and regulations,” Frager says.

Federal conflict

Although standard homeowners insurance policies are written such that marijuana would be covered if legally held, it’s not always covered, says Brenda Wells, director of the risk management and insurance program at East Carolina University. Many insurers cite the federal illegality of the Schedule 1 drug to avoid actually covering it.

“Courts are allowing insurers to deny coverage of it because it’s still illegal at the federal level,” Wells says. “But you do have an inherent conflict between federal law and state law.”

There have been at least two court cases on this issue so far, Wells says. In both cases, courts sided with the insurers and the homeowners didn’t get coverage.

Covering your cannabis

A specific insurance market has emerged to cover growers, distributors and retailers in the marijuana industry. Insurers include Cannassure, based in Westlake, Ohio, and Cannarisk in Seattle. Various policies exist to cover everything from seed-stage plants to edible manufacturers and bakeries.

Since cannabis coverage under homeowners insurance is still unclear, consumers should consult their providers.

“Our advice to consumers who want to make sure losses of marijuana and marijuana plants are covered is to read their policy and talk to their agent or broker,” Klotz says.

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