
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.