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Home marijuana growers present new challenges for insurance companies

People observe marijuana plants while visiting the “Expo Cannabis” forum in Montevideo, December 5, 2015. (Reuters)

The Liberal government’s recently tabled cannabis law will allow adults to grow up to four cannabis plants less than a meter in height per residence. But the bill, which had its first reading last week, is sure to raise some logistical questions when it comes to home insurance.

“There’s a whole host of potential issues especially with the growth of marijuana that we’ve seen across Canada,” says Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada. “Hopefully the legislation will set some (rules) out in terms of requirements and responsibilities as well.”

If the bill receives royal assent, he suspects insurers will need to “review and explore” the effects of growing marijuana plants in the home.

“A home is designed to be lived in, it’s not necessarily designed to have a grow-op created in it,” says Karageorgos. “You could have some structural damage (or) damage from the increase in moisture and humidity required from watering of plants – insurance is not typically designed to cover that kind of an operation… that’s the challenge that exists now.”

But Scott Wilkins, who as director of the Medical Marijuana and Cannabis Insurance Program with LMG Insurance Brokers Ltd. in Duncan, B.C., has been brokering insurance for the safe production of marijuana on residential and commercial properties, says the concern probably has less to do with the risks associated with growing the plants inside.

“What are the chances the equipment has been set up incorrectly to cause a fire – almost none,” explains the insurance broker. “Where (insurance companies) have an issue with the cannabis risks is they feel there’s a higher percentage of claims happening on that property because of the criminal element associated with cannabis.”

Currently, CSIO (Centre for Study of Insurance Operations), the standards organization for the insurance industry, has a spot for applicants to identify and disclose anything else associated with the property directly on the forms.

“At present that would be about the only place you would disclose (that you’re growing marijuana),” he says, adding that the forms are apt to be updated as the tabled legislation moves into law. “There will be a need for new standard forms with some new questions around the growing of cannabis at home – from there it will be down to proper risk selection, as it is now, not much different.”

To be on the safe side, Wilkins says he recommends full disclosure if you plan on growing your own marijuana, even if you’re renting.

“There are some landlord associations that offer web-based courses for landlords and how they should approach this and again for them it will boil down to education and risk appetite,” he says. “If you don’t want anyone growing cannabis at your rented property then so be it, it should be the property owner’s choice.”

He points out that while there’s going to be companies that won’t insure you based on your decision to grow cannabis, eventually, the insurance industry will adjust its appetite for risk.

“Hopefully new pro-cannabis endorsements and special coverages start to show up… like if you grow cannabis and have it in an outbuilding instead of the main home a discount would apply, alarm discounts etc., just like they do now,” he says. “We’re literally in a transition period, is that going to be six months, six years? I don’t know… but it’s going to be normal on the other side just like alcohol is now too.”