Most typical insurance policies will provide coverage for meth lab cleanup. When you call your agent to file a claim they may verbally tell you there is no coverage, but don’t get mad or accept their quick denial over the phone. Instead, this is where you may need to educate yourself about the coverage that is available to you under your policy. Many times the insurance company will quickly deny your claim due to crime exclusions or no covered perils. Even if these are true, neither of these exhausts other coverage that is available in most typical insurance policies.
Typically, when the property owner was the one directly involved in cooking or smoking meth that has contaminated the dwelling, or the property owner had knowledge of another family member living in the dwelling who had an operational meth lab, the property owner’s insurance policy is NOT going to cover any of the costs under property coverage; because the damage to the property was caused directly by the acts of the property owner or what the policy will list as “crime exclusion”. In the case of rental property or residential property where the owner had no knowledge or direct involvement in the operational meth lab in their dwelling, there could be coverage available under the Property Coverage portion of their policy because for the “crime exclusion” to be used for denial of the claim, the property owner would have to have been directly involved in the operation of the illegal meth lab.
“Named Perils” -vs- “Open Perils”
So you can better understand how typical insurance policies work, I am going to explain the difference between a “Named Perils” policy and an “Open Perils” policy. A peril, as referred to in an insurance policy, is a cause of loss, such as fire or theft. Coverage can be provided on an “all perils” basis, or a “named perils” basis. Named Perils policies list exactly what is covered by the policy, while Open Perils (or All Perils) policies will list what is excluded from coverage. Named Perils policies are generally more restrictive. A dwelling policy usually provides coverage for both the dwelling and contents on a named perils basis, while a homeowner’s policy usually provides coverage for the dwelling on an all perils basis, and for the contents on a named perils basis.
“Vandalism” – Covered Peril
Vandalism is typically defined as when a person knowingly causes serious physical damage to a structure or its contents. Depending on the type of insurance policy you have on the dwelling, most policies usually cover vandalism. It will either be listed as a named peril or in an open perils policy it won’t be listed as exclusion. You will need to read your policy or ask your insurance agent whom you purchased the policy from, if vandalism is covered. If you have coverage for vandalism, and depending on the circumstances involved in the illegal operational lab in the dwelling, your insurance company should pay for all of the pre and post testing, loss rent or use, cleaning costs as well as any necessary repairs following the completion of the decontamination process.
Rental Property and Vandalism
If you are a rental property owner and the tenant or anyone visiting the tenant was the one who without your knowledge had an operational meth lab in the dwelling that caused the damage to the property, I recommend filing a claim with your insurance company for vandalism. Remember the definition of vandalism – when a person knowingly causes physical damage to a structure or its contents. You need to firmly argue this point with the insurance company.
I would not specially list the claim as meth lab, but file the claim under vandalism or malicious mischief (as listed in some polices). The damage caused from the cooking of an illegal meth lab in your rental property has caused serious physical damage to your structure and contents (if it was a furnished apartment) making it uninhabitable.
“Smoke Damage” – covered peril
Smoke from a fire causes a film, soot or odor in the dwelling on the structure of the ceilings, walls and floors and the personal contents which are usually covered by a typical property insurance policy. The hazardous smoke and fumes from a cooking meth lab will leave a similar, although invisible residue in the structure and on the contents rendering them in need of decontamination or replacement as would be covered under smoke damage from a fire.
When our company in Indiana submits an estimate for testing and decontamination to our client’s insurance company, I typically list the cause of loss as “vandalism/smoke damage”.
Homeowners and Vandalism
When it’s not a rental property, it is harder to prove vandalism. When the property owner has no knowledge of either a family member or any other person operating an illegal meth lab on the property, especially if it was being done while the property owner was gone from the dwelling, (such as vacation or extended period of time) this should still be covered under vandalism. It’s the knowledge or involvement of the property owner, that determines if the damage is classified as vandalism or not.
Liability Coverage for meth labs
Let’s say your policy doesn’t have coverage for vandalism or smoke damage under the property coverage of your policy. Remember you also have “Liability Coverage” with your policy. Just because there might not be coverage under one area of your policy such as “Property Coverage” doesn’t mean there isn’t available coverage in the other areas of your insurance policy. For example: In January, 2010 our company had almost $15,000 stolen from our bank account while doing online banking through “key stroking.” While that type of loss was listed as exclusion in our policy, we also had $10,000 stolen cash coverage in another section of our policy that paid us back $10,000 of the $15,000 we had stolen. Just because there might be an exclusion for coverage in one section of your policy, always consider looking for coverage in the other sections of your policy.
Pollution Exclusion Provision
Almost all insurance policies will have a “pollution exclusion” listed under the liability coverage section. Most coverage for meth lab cleanup is covered under the first party property damage such as the vandalism or smoke damage, as I mentioned above. However, if you don’t have vandalism or smoke damage coverage under the property coverage section of your policy and you are fortunate enough to live in Indiana, you can then look to the liability coverage section of your policy. The insurance agent may tell you that you have a pollution exclusion and therefore, meth labs are not covered. This is not the case particularly in Indiana. An Indiana attorney interpreting your policy will explain that for a pollution exclusion to be valid, the exclusion listed in the policy must “clearly and unmistakably” bring the condition within its scope to be effective. It is very unusual for a policy to have a “clear and unmistakable” exclusion for methamphetamine laboratory damage. The pollution exclusion may be valid in other states, but not so in Indiana. However, even if the pollution exclusion is valid in other states, most property owners should still find coverage under vandalism or smoke damage under the first party property section of their policy. Although, as more and more insurance companies find themselves paying for damages as a result of meth labs, look for it to become more customary in the future.
Caution on time limits & notice
Suit Provisions in most insurance policies will give the policyholder one year from the date of loss to file a suit or claim. Date of loss typically is the date the meth lab was discovered or busted by the state or local law enforcement agency. You should get a written copy of the report from the local or state police agency who busted the meth lab which will have the date the meth lab was busted. You want to notify your insurance company of your claim as soon as you have received the letter from your local law enforcement agency or local health department. Typically, insurance companies will not reimburse the policyholder for any costs incurred or paid out before the date of notice was given to the insurance company. Therefore, before you hire a company to do any testing or decontamination work, you should provide notice of your claim to your insurance company first.
The Meth Solution
For complete details on insurance coverage for meth lab testing and cleanup, order the book “The Meth Solution,” where in Chapter 3 Donetta J. Held interviewed attorney Tonya Bond of Plews Shadley Racher & Braun, who specializes in meth lab insurance coverage.