Insurance may not cover drug cleanup, even when the homeowners didn't know
By Tom LaRocque
Marcia and Robert Ashbaugh were shocked to discover their son-in-law was extracting the chemicals used to make meth in the basement of their two-story Loveland home.
Their second unpleasant surprise came when they learned their insurance company didn't want to pay the $30,000 claim to clean up their contaminated property.
"They treat you like, 'Well, you had an illegal activity, so it's your problem,' " said Marcia Ashbaugh.
Landlords and homeowners who host meth-making operations — unwittingly or not — are in for a tough fight when it comes to insurance claims, said Brett Buchheit, a personal-injury attorney with the Frankl Law Firm.
The Denver firm represented the Ashbaugh's in their legal battle with State Farm Fire & Casualty Co., which ultimately paid the claim as part of a court-enforced settlement. The Frankl firm is trying to carve out a niche practice in making insurance companies pay for property damage due to drugs.
The notion of a methamphetamine lab suggests a sea of glassware, flame burners and stores of chemicals. In fact, a lot of meth-making happens on an extremely small scale, said Colleen Brisnehan, an environmental specialist with the Colorado Department of Public Health and Environment.
Apartments and rental homes are used for ongoing manufacture. For cooking up quick micro-batches, motel rooms, rented panel trucks and porta-potties can be occupied and then abandoned in just a few hours.
Anyone present around meth production is in danger, said John Martyny, an associate professor of medicine at National Jewish Health in Denver. He has written extensively and testified before Congress about health effects related to methamphetamine.
Health symptoms in homes formerly used for meth production, even long ago, may resemble those near an active lab. Usually the effects are not life-threatening.
"Typically what we see with the drug is a pulmonary irritant. If someone had asthma previously, for example, suddenly their symptoms are out of control," said Martyny.
Brisnehan of the state health department helped develop a state regulation for cleaning up meth sites such as detached homes.
Rooms must be sealed off individually as the air is sucked out through a special filter. Technicians wear hazmat suits with a breathing apparatus. A certified environmental hygienist must check contamination levels before and after the cleanup. All porous material including carpet and unpainted drywall must be carted away in a sealed trash bin.
The $30,000 bill for the Ashbaugh home included $18,000 for testing alone. Cleanup costs typically range from $40,000 to $80,000, according to Buchheit. With the stakes so high, insurers try to dodge legitimate claims, Buchheit alleges.
Homeowner policies typically specify coverage of damage stemming from vandalism and malicious mischief, said Buchheit. But adjusters are likely to state flatly that drug-related damage is excluded.
That was the case with the Ashbaughs. Without dispute, their policy covered damage from vandalism and malicious mischief. But since that sort of activity wasn't a direct cause of the contamination, argued attorneys for State Farm, the resulting damage was excluded.
Buchheit countered that it was logically no different from fire or water damage due to an insured event. The debate was reminiscent of Hurricane Katrina, which led to flooding of homes in Louisiana. Insurers there argued unsuccessfully that flood damage spawned by extraneous events such as a hurricane was not covered.
Judge James Hiatt of the 8th Judicial District Court rejected the insurer's argument.
"If the primary cause of the loss is covered, then even though the loss to the rest of the house consists of a contamination loss, that loss to the house is covered since the proximate and primary cause of the loss is the vandalism and malicious mischief," wrote Hiatt in a court order dated Feb. 5, 2008.
State Farm was represented in the case by attorney Jon Sands of the Denver law firm of Fisher, Sweetbaum, Levin and Sands. He declined to comment on the case or what's covered by any specific policy.
It depends on the contractual language, he said.
But when undeserving claims are paid, he said, "everyone pays." Added costs stem from investigations, legal fees and higher premiums.
Though the Ashbaughs were successful in their case against State Farm, others aren't necessarily guaranteed a similar outcome, and, for landlords, the best protection is simply vigilance in preventing such contamination from occurring.
"Insurance is meant to cover accidental catastrophic losses," said Carole Walker, executive director of the Rocky Mountain Insurance Industry Association. "Not everything in our society is covered by insurance. But when a case gets into the court system, a judge can rule otherwise."