Illegal cannabis farms are becoming an increasing issue for police forces in the UK. In July, police from across the country raided over 1,000 farms in a major operation seizing plants and equipment and arresting hundreds of people.
While people are becoming increasingly aware of this problem, what people might not be so familiar with is the effect on insurance claims these so-called farms have. That impact can be extensive, and clients must understand the risks if there is a chance that one of their unoccupied properties might be broken into and used to grow cannabis. These farms can be established in as little as a month.
It isn’t just the insured who may be affected. Neighbours also suffer. For example, in some cases, the farmers will tap a neighbouring electricity supply leading to very high bills for their unwitting victim.
In my experience as an adjuster, cannabis farms tend to be found in urban, residential houses in inner cities and occasionally substantial detached houses in more affluent areas. However, they can appear anywhere, and I have dealt with farms in a busy town centre and at a light industrial estate.
Associated claims can be significant – reaching between £100,000 to £750,000 and the farms create a variety of risks to property and people. In the worst-case scenario, the heat lamps used to grow the plants can cause fires capable of engulfing a property and spreading to neighbouring homes and businesses. These often spread via the roof space and cause significant danger to life. Due to the severity of the damage, even a forensic investigation won’t be able to identify the exact cause.
Even if a blaze is avoided, cannabis farmers still cause a lot of damage. Occupiers can connect to power in an unsafe fashion and make holes in walls, ceilings and even the roof of a property. The walls and floors are covered with thick plastic sheets and growing lights, aluminium reflectors and high-pressure sodium lamps are installed. The plants are grown in soil that is often loose laid on the floor covering with the area being encapsulated. The outcome is a lot of mess and damage for a property owner.
It all results in a variety of different claims including fire peril, if there is a blaze, but, beyond that they are dealt with as malicious or accidental damage depending on whether the claim is being considered under a peril or ‘all risks’ cover.
In terms of claims handling, the process seldom tends to be straightforward. Typically we see disclosure issues about building occupancy, while other problems include adequate inspection regimes that can be warranted and substantiation of the rent aspect as payments tend to be “cash-in-hand” as opposed to more traceable bank transfers.
The issue can be problematic for insurers. Often due to the severity of damage restatement costs are high, as are rental losses. It’s a thorny area and, as mentioned, disclosures are a problem. This can lead to a claim being declined or in some cases the policy being voided.
But there are things insurers can do to help their clients build resilience and manage this risk. Firstly, they should focus on ensuring they receive an accurate Statement of Fact from the customer. Questions should be carefully considered to ensure that the risk presented is accurate or if further terms and conditions need to be added to encourage good housekeeping.
It is also imperative that the responses are carefully checked, and any questions answered ‘no’ or with a vague response should be challenged. Insurers can also help clients to understand what the signs of a cannabis farm are and what action they should take if they suspect there is one on their property.
I recommend a stringent inspection regime led either by the property owner or managing agent. Clients should also keep a sharp eye on electricity bills and investigate any unexpected increases. We would also encourage the Association of Residential Managing Agents to push for monthly inspections for properties.
As an industry, we can’t stop criminals taking over properties to use as cannabis farms, but we can guide and support our clients to develop resilience against the threats and ensure they are protected if the worst happens.