We have an insured with an HO3 policy and she has filed a theft claim for 350 pounds of hemp that she had stored in her home. She claims that the state 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 and 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 file a theft report with are the same ones that seized the property. Under coverage C – named perils and "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 a 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 was 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
You have a very interesting scenario. You're bumping up against policy language and existing laws regarding the type of property in question. The insured's beliefs as to whether or not she needs a license for the hemp product she once had a license for but no longer holds a license for has no bearing on whether or not she actually has coverage; beliefs are one thing, laws and policy language are another.
When a policy doesn't define a term, courts go to a standard desk reference as that is what is available to most people. Merriam Webster online defines theft as "the act of stealing", or "the felonious taking and removing of personal property with the intent to deprive the rightful owner of it", or "an unlawful taking of property". To steal is defined as "to take away by force or unjust means". We do not see the confiscation of the hemp as a theft, given that the insured was apparently in violation of state regulations.
Aside from that, the policy excludes governmental action which means the destruction, confiscation or seizure of property under Coverage A, B or C by order of any governmental or public authority. That is what has happened to your insured, regardless as to whether she thinks they were correct in their actions. Your insured needs an attorney to dispute the confiscation of the hemp; confiscation of any property, legal or not, is not covered under the policy unless it is to prevent the spread of fire, which is not the case here.