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Follow-up information

Insurers agreed to pay for related damages.

William S Cook

Public Adjuster

What do you have to do / wear for your own protection to avoid getting affected by the meth lab? Mask?

In my valuation practice, I have been involved in one hotel assignment wherein a customer rented a room for use as a meth lab on a one-off basis. The impact on value was significant. It was not just a cost to cure but also an issue of stigma (future risk related to marketability after the fact about the meth lab is disclosed, etc.). This is somewhat like the terrorist guy in Denver who was making bombs in an extended stay place, but I do not think that would create as much stigma as a meth / PCP lab. Leland, I'm looking forward to see if you think there is coverage and if the claim is capped at the cost to cure.

I agree about stigma... not covered in terms of the adjusting world. It is a huge deal in the somewhat parallel valuation world, especially for issues like the PCP/meth example, the Jon Benet Ramsey house, contaminated land, asbestos, etc. In these cases, the war is about the market value of the stigma because the cost to cure does not end the diminution of value. Fortunately, in the insurance world such risks are non-covered. I briefly was wondering if the DIC policies would cover this since it seemed to be a difference in condition, but Steve E. clarified that issue, just as you have here.

The nice thing about the claims business is that the coverages issues, while still open to lots of interpretation here and there, are largely procedural. Give the insurance industry kudos for being pretty explicit contractually as to what is covered vs. not covered. The industry does have some explaining to do in my mind about some long term declines in coverages especially in FL (exterior paint now not covered in wind policies, screen enclosure coverage is much more limited now, roof tiles now need to be broken, etc.), but it was either reduce coverages contractually like this or really jack up the rates to account for these large and common areas of loss. I'd guess the end result was a balancing act.

When your claim is done, I'd be curious to know if you learn the difference between a PCP clean up vs. a meth lab clean up. I also gather that this is a rental property (DP1) or this would be a non-issue.

There are some good nuances about a stigma premium... Would Neverland Ranch sell for a premium? Would the Dallas book bindery building where JFK was shot sell for a premium if it had not been raised... not insurance claims issues but still interesting to ponder. When I watch the Jay Leno show about what is bought on Ebay, it never ceases to amaze about what people will buy, so I'd not be surprised to see examples of a stigma premium.

This is a good topic that has other branchs. Contingency business interruption is an insurable peril under inland marine coverage. I had one recently on  a summer camp that cancelled the third week of camp for an out break of H1N1, this was not covered as the health department did not demand the camp be closed, but it could be any reason of loss of income if the policy was a pure manuscript form. Rain insirance on a out door concert comes to mind. An accident in a gas gathering plant for natural gas causes it to be shurt down for several days and all the gas from the wells has to be shut in for seversal days resulting in loss income. Crude oil in the Missippi shuts down Budweiser for 3 days for lack of water quality to make Bud. On and on.

My opinion as an agent that sold commercial insurance policies is that if an owner has a property management company managing the property while he or she is some place else then the "non knowing what is going with the property" aka unaware of the crazy stuff happening at the home is a valid excuse.  However, if the policy clearly EXCLUDES ILLEGAL ACTIVITIES then the coverage should be excluded?  Again though the policy will have to exclude illegal activities.  For example: Say you have a Fort Lauderdale 500 unit apartment complex and one of your tenants is a drug user and/or dealer.  The police come to the tenant's apartment [your property] and smash in the rear window, front door and probably do a lot of damage if they also throw in a bang grenade that starts a small fire in the apartment. Well if illegal activities is excluded then you have no coverage (maybe) as is the illegal activities exclusion applicable to the proeprty owner or the property tenants?  Or both?  I have heard that some apartments actually require their tenants to have an HO4 renters policy to accept all liability that occurs in their apartment.  Which would mean that if something were excluded under their CP1030 Special Form Policy such as illegal activity  that they are gonna have to HOPE illegal activity is not specifically excluded by the HO4 policy.  Anyway...  I am interested in all replies.

Leland these court cases are pretty good. Where did you find this info?