Prior Litigation Can Impact Coverage in Future Disputes

KVG Properties said it was unaware its tenant was operating a cannabis growing operation.

SAN FRANCISCO—A 6th Circuit case decided last year demonstrates how positions taken by insureds in prior litigation can impact or foreclose coverage in subsequent disputes with insurers. In KVG Properties Inc. v. Westfield Ins. Co., KVG was unaware that its tenant was operating a cannabis growing operation, says Shanti Eagle of Farella Braun + Martel LLP.

Although Michigan allowed for limited legal marijuana cultivation, there was no evidence the tenant was in compliance with local law. After a DEA investigation resulted in a search warrant, KVG had the tenant evicted from the property. KVG then sought recovery from Westfield under its property policy for extensive damage done to the property by the tenant, including torn-out walls and damage to the HVAC, ductwork and roofing, GlobeSt.com learns.