WHEN METH'S BEEN AT HOME

Insurance May Not Cover Drug Cleanup, Even When The Homeowners Didn't Know

Marcia and Robert Ashbaugh were shocked to discover their son-in-law
was extracting the chemicals used to make meth in the basement of
their two-story Loveland home.

Their second unpleasant surprise came when they learned their
insurance company didn't want to pay the $30,000 claim to clean up
their contaminated property.

"They treat you like, 'Well, you had an illegal activity, so it's
your problem,' " said Marcia Ashbaugh.

Landlords and homeowners who host meth-making operations --
unwittingly or not -- are in for a tough fight when it comes to
insurance claims, said Brett Buchheit, a personal-injury attorney
with the Frankl Law Firm.

The Denver firm represented the Ashbaughs in their legal battle with
State Farm Fire & Casualty Co., which ultimately paid the claim as
part of a court-enforced settlement. The Frankl firm is trying to
carve out a niche practice in making insurance companies pay for
property damage due to drugs.

The notion of a methamphetamine lab suggests a sea of glassware,
flame burners and stores of chemicals. In fact, a lot of meth-making
happens on an extremely small scale, said Colleen Brisnehan, an
environmental specialist with the Colorado Department of Public
Health and Environment.

Apartments and rental homes are used for ongoing manufacture. For
cooking up quick micro-batches, motel rooms, rented panel trucks and
porta-potties can be occupied and then abandoned in just a few hours.

Anyone present around meth production is in danger, said John
Martyny, an associate professor of medicine at National Jewish Health
in Denver. He has written extensively and testified before Congress
about health effects related to methamphetamine.

Health symptoms in homes formerly used for meth production, even long
ago, may resemble those near an active lab. Usually the effects are
not life-threatening.

"Typically what we see with the drug is a pulmonary irritant. If
someone had asthma previously, for example, suddenly their symptoms
are out of control," said Martyny.

Brisnehan of the state health department helped develop a state
regulation for cleaning up meth sites such as detached homes.

Rooms must be sealed off individually as the air is sucked out
through a special filter. Technicians wear hazmat suits with a
breathing apparatus. A certified environmental hygienist must check
contamination levels before and after the cleanup. All porous
material including carpet and unpainted drywall must be carted away
in a sealed trash bin.

The $30,000 bill for the Ashbaugh home included $18,000 for testing
alone. Cleanup costs typically range from $40,000 to $80,000,
according to Buchheit. With the stakes so high, insurers try to dodge
legitimate claims, Buchheit alleges.

Homeowner policies typically specify coverage of damage stemming from
vandalism and malicious mischief, said Buchheit. But adjusters are
likely to state flatly that drug-related damage is excluded.

That was the case with the Ashbaughs. Without dispute, their policy
covered damage from vandalism and malicious mischief. But since that
sort of activity wasn't a direct cause of the contamination, argued
attorneys for State Farm, the resulting damage was excluded.

Buchheit countered that it was logically no different from fire or
water damage due to an insured event. The debate was reminiscent of
Hurricane Katrina, which led to flooding of homes in Louisiana.
Insurers there argued unsuccessfully that flood damage spawned by
extraneous events such as a hurricane was not covered.

Judge James Hiatt of the 8th Judicial District Court rejected the
insurer's argument.

"If the primary cause of the loss is covered, then even though the
loss to the rest of the house consists of a contamination loss, that
loss to the house is covered since the proximate and primary cause of
the loss is the vandalism and malicious mischief," wrote Hiatt in a
court order dated Feb. 5, 2008.

State Farm was represented in the case by attorney Jon Sands of the
Denver law firm of Fisher, Sweetbaum, Levin and Sands. He declined to
comment on the case or what's covered by any specific policy.

It depends on the contractual language, he said.

But when undeserving claims are paid, he said, "everyone pays." Added
costs stem from investigations, legal fees and higher premiums.

Though the Ashbaughs were successful in their case against State
Farm, others aren't necessarily guaranteed a similar outcome, and,
for landlords, the best protection is simply vigilance in preventing
such contamination from occurring.

"Insurance is meant to cover accidental catastrophic losses," said
Carole Walker, executive director of the Rocky Mountain Insurance
Industry Association. "Not everything in our society is covered by
insurance. But when a case gets into the court system, a judge can
rule otherwise."