Reefer Brief: Insurer Wins Summary Judgment v. Marijuana Cultivator

Plaintiff Theraplant, LLC (Theraplant) cultivates marijuana. In February, 2020, a fire in its Flowering Room 2 destroyed nearly 1000 plants, and it took two months to repair the room, but in April Theraplant was able to transfer a new batch of plants to the room. Theraplant’s insurer, National Fire and Marine Insurance Company (National) paid around $500,000 to cover claims relating to Theraplant’s facility and equipment. It refused to cover claims relating to the lost plants. The policy excluded coverage for growing crops, including “cannabis, marijuana, and products infused with marijuana,” and Theraplant had no crop insurance.

However, Theraplant also claimed somewhere between $1.2 million and $1.35 million in business interruption losses. National refused to accept that characterization of its further losses, arguing that those losses were simply the value of the destroyed plants, a loss explicitly not covered by the policy. Theraplant brought suit and after discovery, the parties filed cross motions for summary judgment.

In Theraplant, LLC v. National Fire and Marine Insurance Company, the U.S. District Court for the District of Connecticut granted National’s motion and denied Theraplant’s. Theraplant’s losses did not result from a suspension of its operations, and so they were not covered under Theraplant’s business interruption insurance policy.

According to National, its policy requires a causal link between the insured’s loss of income and the suspension of the insured’s operations. Unfortunately, Theraplant could not establish that causal link. Its real loss was caused by the destruction of the plants in Flowering Room 2. While Theraplant claimed that it could have moved a new batch of plants (clones) into the room on April 6th, it provided no support for that claim. The Room was “restored to working order” on April 12th, but Theraplant only moved the new plants in on April 20th. Indeed, by Theraplant’s own admission, the new clones would not have been ready to be moved into Flowering Room 2 until April 12th. Why they were not moved in on that date is something of a mystery. 

In the end, the policy exclusions and various other arguments turned out to be irrelevant. Theraplant could not show a loss caused by business interruption, and so its claims were dismissed.