According to Leafly, hemp refers to the non-intoxicating (less than 0.3% THC) varieties of Cannabis sativa L. (Photo: Lifestyle discover/Shutterstock)
Every claim is different, and some insurance policies can be difficult to interpret for unique situations. FC&S Expert Coverage Interpretation, the recognized authority on insurance coverage interpretation and analysis for the P&C industry, makes it simple to find credible answers to your complicated coverage questions. Analysis brought to you by our FC&S experts.
Editor's Note: An insured claims government agencies illegally seized the hemp she grew legally in this week's coverage Q&A.
Question: We have an insured with a homeowners insurance (HO3) policy, and she recently filed a theft claim for 350 pounds of hemp that she had stored in her home. She claims that the state's Department of Agriculture, state police, and the local sheriff conspired to steal her hemp worth a large amount of money that she had been growing to sell. She had previously held a hemp license in 2018 and 2019 when she grew this. However, she did not renew her license in 2020. She argues that she should not need a license and argues that federal law allows her to do this and that this seizure was illegal.
According to the state Dept. of Agriculture, as an unlicensed person, she no longer has the legal right to possess this property even if she did grow it while she was licensed and this was a government seizure/confiscation. The hemp has since been destroyed.
We asked her to submit a police report documenting her "theft," but she has been unable to obtain one for obvious reasons as the agencies she is trying to file a theft report with are the same ones that seized the property. Under named perils, "theft" is the only applicable one. We do not believe that the police or government seizure of property that the authorities say is illegal constitutes theft. This was taken by government entities who purport to have a legal right to seize and destroy the property and who allege that the insured had no legal right to possess the property. It was taken by a known entity and taken to a secure location, and held for evidence until it was destroyed. It appears to be no different than police seizure of illegal drugs like meth or cocaine. We would never consider paying an insured's claim for street value when the police "stole" his cocaine stash. We believe that this should be a denial of coverage.
Of course, even it were to be covered, it appears that it would be limited to $2,500 for property located on the insured premises that were used for a business purpose.
Do you agree that there is no coverage for this loss as this does not meet the definition of "theft"?
— Kentucky Subscriber
Analysis: Certain legal products require the grower/seller to have a license in order to grow, store and sell the product. Once an individual's license expires, that individual may find themselves in violation of state laws and may experience serious consequences. An insured's belief that federal law applies over state law has no bearing over the legitimate actions of local authorities regarding certain products. If authorities confiscate certain products, a number of various policy terms and exclusions will come into play if the insured files a claim under the belief that the authorities wrongly stole the property in question.
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