29 July 2009
Brokers warned to check landlord clients are covered:
Brokers placing residential let property business need to double check policy wordings, terms and conditions to ensure their clients don't become casualties of the rising use of rented properties for cultivating cannabis, warns IGI Insurance product manager Mark Ellinor.
Ellinor says there remains a big discrepancy over insurers' positions on whether the damage caused by cannabis cultivation in let properties should be covered or not. IGI Insurance is writing to all of its brokers clarifying that its residential let property policy will cover the damage under a malicious damage clause.
Illegal cannabis farmers cause untold damage by modifying buildings to create ideal growing conditions. Windows are sealed, walls are damaged as electrical wiring is installed to accommodate the high-intensity lighting, heating and other equipment required, and vast amounts of fertiliser ruin flooring. In time, the excessive humidity leads to other problems such as rotting and mould. Some tenants have been known to booby-trap properties with doorknobs wired to mains electricity and spikes under window sills.
The Association of Chief Police Officers has acknowledged that the use of properties as cannabis farms is a growing problem. In 2007-08, the latest period for which there are records, police raided more than 3,000 farms countrywide. In June this year, The Guardian newspaper reported that in the space of a just few days, police discovered factories in locations from Sunderland, Wolverhampton, Nottingham and Middlesbrough to locations in Norfolk, Essex, and London.
Some insurers are now adding exclusions for illegal activities, which prevent landlords for making claims for damage related to this type of activity. Others have not clarified their positions on whether this activity is covered under a vandalism and malicious acts clause.
Mark Ellinor, product manager at IGI Insurance, says: "Landlords are facing some of the worst times yet with falling rents, negative equity, increasing red tape and less favourable mortgage deals. Discovering a cannabis growing operation in their property is yet another blow, but they won't thank their insurance broker if it turns out that they can't claim for the damage. Some of the biggest insurers writing large volumes of this business are now excluding illegal activities, leaving landlords high and dry if they're one of the unlucky ones to be targeted. I would urge brokers to double-check cover on behalf of their clients."