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Insurance Industry Is Being Dragged Into Subsidizing Illegal Marijuana Grow Houses

A presentation during the Combined Claims Conference Wednesday summarized the strategy: “The Growing Problem of Marijuana Grow Houses: Why are Insurance Claims Paying to Build Them, and Then Repair Them for Resale?”

Special Agent Mike McKee with the National Insurance Crime Bureau said organized criminal organizations are purchasing homes, often through overseas straw buyers. They start a fire and file a claim for damages. Using fire repairs as cover, the growers send in a construction crew to gut the interior of the house and install grow lights, ventilation and irrigation. Usually, the contractor bypasses the meter to save on electricity costs. Typically, no one lives in the home: Only marijuana plants.

Insurers get dragged into the scheme when the owner of the “grow house” buys an insurance policy for a rental property. When it’s time to shut down, the criminal organization submits a claim for damages — often through a public adjuster — saying that a tenant illegally converted the property without the owner’s knowledge.

McKee said each of the three grow house claims that he has investigated amounted to more than $250,000.

“The exposure on these can be enormous,” said attorney Jon Coleman, who participated in the panel discussion.

Recreational marijuana is legal in California, but each household is limited to growing only six plants. Grow house owners bypass the legal market, where the plants are grown in commercial facilities.

McKee said grow houses are scattered in neighborhoods throughout Southern California. The tell-tale signs: Window shades are always drawn, the interior and exterior lights are always on and the lawn is brown. There’s no sign of life in the home, except from time to time a car pulls into the garage and pulls out a short while later. (Someone has to check on the crop.)

To Read The Rest Of This Article By Jim Sams on Insurance Journal

Published: March 11, 2020

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