Cannabis coverage conundrum: Was this property claim doomed?

The U.S. Court of Appeals for the Sixth Circuit recently upheld dismissal of KVG Properties Inc.’s claims under a first-party property policy arising from damage to KVG’s office spaces due to tenants’ use of cannabis-growing operations. [K.V.G. Properties, Inc. v. Westfield Insurance Co. (No. 17-2421, 6th Cir. Aug. 21, 2018)]

We have been tracking the KVG case closely and previously reported on KVG’s initial appeal and Westfield’s retort on why the district court correctly dismissed the claims. Although there was no coverage for KVG under the particular facts of this case, the Sixth Circuit’s decision raises several important insurance issues for policyholders to consider and previews likely battlegrounds for future cannabis coverage disputes, many of which are precipitated by the variances in federal and state cannabis law.