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Emerging Risk: Meth Labs

While methamphetamine is not a new drug, law enforcement agencies have indicated that its use has increased dramatically in recent years. Consequently, the growing presence of production sites (meth labs) have created substantial exposures for landlords and property managers.
10/02/2015

While methamphetamine is not a new drug, law enforcement agencies have indicated that its use has increased dramatically in recent years. Consequently, the growing presence of production sites (meth labs) have created substantial exposures for landlords and property managers. The highly flammable and toxic nature of meth labs pose direct risks to properties and their income streams. Landlords and property managers also face significant exposure to potential third party suits arising from injuries to tenants and other individuals. This brief will focus on a sometimes overlooked aspect of meth labs, contamination.

In addition to the direct risk of fires and explosions damaging properties and resulting injuries to individuals, the production of methamphetamine uses extremely toxic, unstable and even carcinogenic chemicals. These chemicals create vapors which permeate porous materials like furniture, wood, carpets and drywall. For every pound of meth produced, five to six pounds of contaminated waste are created which the "cooks" are very unlikely to dispose of in an environmentally conscious manner. In other words, even if there is not a sudden event (i.e. fire) there can be substantial environmental damage, clean-up costs and long term health risks to exposed individuals.

Further, a public relations challenge exists as states have begun instituting registries in an effort to curb incidents and ensure prompt cleanup. These registries list the address, name the offenders and may even identify the property owner of a discovered meth facility. The information is posted publically regarding the status of the remediation, or lack thereof.

The insurance industry has taken steps to distance itself from covering cleanup costs. This is evidenced by recent coverage disputes and the new standard ISO property exclusion, "Exclusion of Loss Due to By-Products of Production or Processing Operations" (CP 10 34) that specifically and clearly excludes coverage for claims arising from the release of vapors and resulting contamination.

Instituting comprehensive staff training to identify signs of a possible production site, reporting procedures and clean-up protocols is critical. Various states have published a number of basic materials which may prove helpful in educating staff. Indiana is one such state, its educational resources can be found here.