Good to Know: Insurance Doesn't Cover Marijuana-Related Fires

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MODESTO, CA -- An insurer told a couple in California's Central Valley that "all risks" property insurance does not cover losses suffered when marijuana-growing equipment malfunctions and sets the house on fire, so the couple sued the insurer for breach of contract.

Muon and Montha Thach have a valid prescription for medical marijuana and are authorized by the state to grow pot for personal use, according to their complaint in Stanislaus County Court.

They challenge the denial of coverage from their insurers, Mid-Century Insurance and Farmers Group, who claimed "the loss occurred during the commission of a felony."

The denial put the Thaches out of joint.

The fire began in an upstairs bedroom. The electrical fire and smoke severely damaged their home in Ceres, south of Modesto.

Medical marijuana is legal with a prescription in California, but remains listed as a Schedule 1 drug by the federal government. A recent wave of federal prosecutions of medical marijuana co-ops in California has led to a slew of lawsuits throughout the state.

The Thachs say: "In denying coverage for the loss, defendants willfully and wrongfully ignored controlling California law to avoid complying with its contractual obligation to indemnify plaintiffs for a covered loss."

"Controlling California law" may not mean much, as the U.S. Supreme Court has twice upheld the federal criminality of marijuana under the Controlled Substances Act, in 2001 and again in 2005. Both cases, United States v. Oakland Cannabis Buyers' Cooperative and Gonzales v. Raich, cited California's medical marijuana law, which voters approved in 1996.

Since the fire, the Thachs say their lives have gone to pot. They say they "have been forced to live in substandard, deplorable conditions" because of the economic hardship forced upon them by Mid-Century and Farmers.

They want their losses covered, and punitive damages for unfair business practices, breach of faith and breach of contract.

They are represented by Denise Sze with the Merlin Law Group in Los Angeles.