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Tuesday, May 8, 2012

Material change in premises - Suit against Insurance Brokers

It is in fact a plant variety put to various uses – but more known for it use as recreational drug around the world, only behind alcohol, caffeine and tobacco. In the United States alone, it is believed that over 100 million Americans have tried  this  !!  

Fire Policy is prominent one in Property Insurance.  Underwriters carefully seek to analyse the details of subject matter offered for insurance, and decide on whether to insure, if so – the insuring terms and conditions and then the rate of premium to be charged for coverage of that particular risk.  It is a condition of the Policy that ‘the insurance would cease to attach …… if the trade or manufacture carried on be altered or if the nature of occupation of other circumstances affecting the building insured or containing the insured property be changed’…….  In effect there is insurance coverage as long as the insured property remains in similar condition as it was proposed for insurance, any material change will have to be intimated to the Insurers and their consent obtained.  The Insurers may agree to continue coverage at existing rates, or at enhanced rates or revise the terms and conditions of coverage or even deny coverage by cancelling the existing policy. 

The plant described at the start of this post is ‘Cannabis’ -  a genus of flowering plants that includes three putative varieties, Cannabis sativa,Cannabis indica, and Cannabis ruderalis. Cannabis has long been used for fibre (hemp), for seed and seed oils, for medicinal purposes, and as a recreational drug.

There was a property, a greenhouse, proposed and accepted for Insurance, was damaged – hence the policy holders preferred a claim.  Claim was repudiated by the Insurers on the grounds that there was material change in the occupation which was never intimated to them.  The owners are reportedly now suing their brokers for not passing on the information to the Insurers and obtaining their consent. 

In US, in the year 2011, Federal Agents raided a large medical marijuana operation in the former Montana State Nursery in Helena reportedly causing  at least $75,000 in damage to the building. The building owner had rented out the premises to another premises who were in medical marijuana business.  It is claimed that the owners did inform of their action of renting out to their Insurance brokers, who failed to pass on the information to the Insurers.

When a claim was preferred for damage, the Insurers naturally denied claim stating change in the risk profile.   After the raid, the business had to be shut down and the operations  left visible damage to the building and its electrical and heating equipment.  The present law suit is sought to be against the Insurance brokers reportedly for their wrong communication of assured continuance of insurance coverage.   It is contended that if the information of the marijuana-growing had been duly conveyed to the Insurers, either they would have accepted and continued to be on risk or if they had conveyed declinature, the same could have been proposed for insurance with material fact with some other Insurer. 

The suit reportedly is against the Brokers – the Insurers and Federal Govt are not named as defendants in the suit.

With regards – S. Sampathkumar

Though this link contains details of parties, only basic information is reproduced with my inputs.


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