UPDATE ON MARIJUANA LAW: WHAT IS THE 6 MONTH DELAY? SHOULD CONDOMINIUMS AT LEAST BAN GROWING? DOES GROWING MARIJUANA POSE AN INSURANCE RISK?

Last month, I advised all Massachusetts condominiums to adopt master deed amendments banning the smoking, growing and/or distribution (if your condominium contains commercial units) of marijuana. Since, then you may have heard that the Massachusetts Legislature voted to delay the “marijuana bill” an additional 6 months.  What does this mean? The legislative delay only impacts the licensure of recreational marijuana dispensaries. Basically, the legislature decided that it needed more time to propose and implement regulations for how these recreational marijuana dispensaries will be licensed.  The new regulations will address issues for “pot shops”, including security, insurance and criminal background checks, among other things.  Some towns, including the City of Boston are scrambling to amend their zoning ordinances to limit where the licensed “pot shops” can be located.  This delay is favorable to condominiums containing commercial units as it gives them more time to consider adopting amendments prohibiting the operation of recreational “pot shops” in their condominium buildings. While, there will be a 6 month delay on the licensing and approval of recreational pot shops, the delay has no impact on the use and growing of marijuana in the home and/or condominium units.  Since, my last article, I have heard from some managers and condominium trustees that they really do not want to get involved in the banning of smoking marijuana in units.  Smoking is certainly a personal choice (whether its cigarettes, cigars or marijuana) and its regulation or prohibition in units has always been a hot topic.  However, smoking is just one aspect of the new law.  I think people do not realize the potential impact that legalized growing of marijuana can have inside of units. Growing 6-12 marijuana plants is an undertaking. It requires substantial amounts of water and electricity and the use of heat lamps.  It often involves placement of plastic and/or foil heat retaining insulation (to generate heat and humidity in the unit) to encourage the plant growth.  Heat lamps and humidity create additional concerns (i.e. fire, mold, insurance).  Furthermore, what many people do not understand is that the actual growing of the plants puts off a larger more powerful odor than occasional smoking.  I know of a couple of condominiums that have dealt with the issue in the medical context and they thought that there was a dead skunk in a unit or in the walls. It is not the equivalent of a lilac plant in a unit. Below are photos of two different rooms in units that were converted to “grow areas”.  A picture tells a thousand words.  In the photos you can clearly see what appears to be a hanging garden hose, numerous mature plants, heat lamps and heat retaining insulation on the walls. [insert photos] While some condominiums might be hesitant to ban smoking of marijuana in units, these photographs evidence why every condominium should seriously consider banning the growing of marijuana in units. Some condominium trustees and managers have reached out and indicated that they are unlikely to be able to obtain passage of a marijuana amendment, whether its growing or retail use, so why bother? My advice is put the vote to the people, just like question 4 was passed, let the community decide. I suspect that marijuana growing and use in condominiums is going to generate a substantial amount of nuisance (second hand smoke, smells) type litigation going forward and the target of those lawsuits will be the condominium associations.  While it might not be a perfect defense, it goes a long way in a court of law to say that the condominium association proposed the amendment and it failed.  Furthermore, I suspect that unit owners that might like to indulge once in a while, are more likely to vote for bans on growing or “pot shops” in their buildings because of the security, insurance, fire and environmental hazards posed thereby.  Most homeowners want to preserve the value of their homes.  Marijuana users are not just hippies anymore. Lastly and perhaps most importantly, condominiums may want to ban growing because fire and/or property damage caused thereby may not be covered claims under the Associations insurance policy. Most insurance policies pay for claims that are accidental in nature.  Many policies exclude claims based on “illegal acts”.  While marijuana is now legal in Massachusetts, it is still a Schedule 1 substance under Federal Controlled Substances Act.  However, the McCarren-Ferguson Act of 1945, puts the regulation of insurance under the states and supersedes federal law for insurance purposes.  Accordingly, the Federal Controlled Substances Act would not support an “Illegal Act” exclusion under a Massachusetts Insurance policy.  However Associations still need to be careful.  If a unit owner has more than the permissible number of marijuana plants under state law, the “Illegal Acts” exclusion would apply to a marijuana related claim.  Also, many insurance policies upon renewal or during the policy period require them to update the insurer about any “increased hazards” under policy.  Growing operations depending on their size and extent could be a new risk that if not disclosed could account for claim denials.  This exact scenario recently played out in the Michigan courts, where the Michigan Appeals Court held that a homeowner’s failure to inform insurer of a basement growing operation voided the insurance policy.  The case is Nationwide Mutual Fire Insurance Company v. McDermott, 603 Fed. Appx 374 6th Cir (2015). [click here for Decision]If Condominiums are not going to amend their documents to ban marijuana growing, they might want to consult with their insurance professionals to understand insurance risks and obligations.If you or your condominium wants to ban (1) smoking or marijuana, (2) “pot shops” in commercial units or (3) growing of marijuana in units (or all of the above).