## Facts

- Barbara Tracy purchased a homeowners insurance policy from USAA covering her residence in the Puna District of Hawaiʻi.
- Tracy cultivated marijuana plants at the residence, alleging compliance with Hawaiʻi’s medical-marijuana law.
- On or about July 30, 2010, twelve marijuana plants were stolen from the property (nine mature and three less mature).
- Tracy submitted a claim seeking coverage for the value of the stolen plants.
- USAA made a partial payment but then refused further payment and denied full coverage.
- Tracy sued for breach of contract and bad-faith denial, seeking payment for the stolen plants, including replacement.
- USAA asserted that paying for the loss (especially replacement) would violate federal law and federal public policy because marijuana remains illegal under the Controlled Substances Act (CSA).

## Issues

1. Whether a federal court may enforce a homeowners policy to require payment for the value or replacement of marijuana plants cultivated under state medical-marijuana law, given the CSA’s prohibition.
2. Whether enforcing such coverage is barred as contrary to federal law and public policy.

## Decision

- The U.S. District Court for the District of Hawaiʻi granted USAA’s motion for summary judgment.
- The court held that cultivation of marijuana, even for state-authorized medical use, violates federal law.
- The court concluded that compelling insurance proceeds for the value and replacement of the plants would be contrary to federal law and public policy.
- Judgment was entered for USAA, disposing of Tracy’s coverage-based claims.

## Legal Principles

- Federal courts may decline to enforce private contractual obligations when enforcement would require conduct contrary to federal statutes or clearly expressed federal public policy.
- Under the CSA, marijuana is illegal under federal law notwithstanding state medical-marijuana authorization.
- An insurance obligation that would effectively indemnify or facilitate ongoing federally unlawful marijuana cultivation (including “replacement” of plants) is unenforceable as contrary to federal public policy in federal court.

## Conclusion

The court refused to enforce homeowners insurance coverage for stolen medical marijuana plants because payment for their value or replacement would conflict with the CSA and federal public policy, warranting summary judgment for the insurer.


Tracy v. USAA Cas. Ins. Co., No. 11-00487 LEK-KSC, 2012 WL 928186 (D. Haw. Mar. 16, 2012)