Nearly all Americans now live in a state where some form of cannabis is legal. Given that the cannabis industry is now valued in billions of dollars and has created hundreds of thousands of jobs across 39 of the 50 states, it requires the same range of insurance products that protect businesses in other sectors. This includes insurance for property owners that lease to tenants engaged in cannabis-related activities. Fortunately, common fact patterns have emerged that are instructive to cannabis businesses and property owners that wish to ensure they have effective coverage.
Where Liability Lies
It is not uncommon for a landlord to lease a property for a non-cannabis purpose, only to purportedly later learn that the tenant is using the property for an unpermitted cannabis operation. In such a case, the primary question is whether the landlord knew what the property was being used for and when. Mosley v. Pacific Specialty Ins. Co., 49 Cal. App. 5th 417 (2020) is instructive on this issue.
Mosley involved an action under a homeowners' insurance policy, wherein the trial court granted summary judgment to the insurer on the basis that coverage was excluded for a fire that occurred after a tenant rerouted the property's electrical system to steal power from a main utility line for a marijuana growing operation, causing a fuse to blow. The Court of Appeal reversed the judgment, finding that there was a triable issue as to whether the tenant's actions were within the owners'...
