Cannabis Grower’s $1.3M Business Income Claim Denied After Fire Damages Crops (Claims Journal)

Cannabis Grower’s $1.3M Business Income Claim Denied After Fire Damages Crops

Friday, January 24th, 2025 Insurance Industry Litigation Property Risk Management

A federal court has ruled against cannabis grower Theraplant in its $1.3 million business income loss claim following a fire that damaged nearly 1,000 marijuana plants in one of its flowering rooms. The court sided with National Fire and Marine Insurance Co., determining that the policy did not cover the loss because it stemmed from uninsured damage to cannabis crops rather than a suspension of operations caused by property restoration.

The February 2020 fire, caused by a lamp explosion, destroyed crops and equipment and rendered one flowering room unusable for 68 days. While Theraplant argued the business income loss was tied to this suspension, the insurer contended the loss arose from the damaged plants, explicitly excluded from the policy. The judge agreed, stating that business interruption insurance is designed to cover income loss due to operational suspensions, not damage to specific property like the uninsured crops.

National Fire fulfilled its obligations by paying over $495,000 for damage to the building and business personal property. However, Theraplant’s attempt to claim additional business income losses failed, as the court found no causal link between the fire-damaged room’s downtime and the company’s overall production or income. The other six flowering rooms continued normal operations during the incident.

This ruling underscores the importance for businesses, especially in the cannabis industry, to carefully assess insurance coverage options, including crop-specific policies, to avoid coverage gaps.


External References & Further Reading
https://www.claimsjournal.com/news/national/2025/01/24/328592.htm
SOS Ladder AssistMid-America Catastrophe ServicesAspen Claims ServiceNationwide OverspraySupportive Insurance Services

  Recent Claims News

Legislation & Regulation Liability Risk Management
Fraud Insurance Industry Risk Management

  Recent Provider Listings

Serving California & Hawaii Statewide
California Hawaii Cause & Origin Fire Investigations
Texas Bathroom Remodeling Fence Contractors Fire & Water Damage Restoration
District Of Columbia Virginia Commercial Large Loss Restoration Fire & Water Damage Restoration Remodeling & Repair Building Contractors