A Liberty Mutual unit can still seek to avoid defending an ongoing lawsuit against a manufacturer of cannabis products and others over a fatal gas leak explosion, an Oregon federal court ruled, rejecting the property owners' and manager's position that the claims they face fall outside the scope of a marijuana exclusion.

An Oregon federal judge said that Liberty Mutual subsidiary Ohio Security Insurance Co. may not have to defend an underlying lawsuit against a cannabis product maker and others over a fatal gas leak explosion in an industrial warehouse. (Photo Illustration by Sheldon Cooper/SOPA Images/LightRocket via Getty Images) Denying separate motions to dismiss from property manager CPM Real Estate Services Inc. and property owners Mary Laurent Leach and Randall Leach, U.S. District Judge Michael J. McShane noted Tuesday that "Oregon courts have held that the ordinary meaning of 'arising out of' is 'very broad.'"

The exclusion in the policy issued by the unit Ohio Security Insurance Co. not only barred coverage for bodily injury "arising out of" the "design, manufacture … use or possession of 'marijuana,'" but also if the injury was "attributable to" such actions, "whether whole or in part," he further highlighted.

"If the language of the marijuana exclusion as to the 'design' or 'manufacture' of marijuana is to be given effect within the policy, it must exclude the Eldridge complaint's claims from coverage," he said, referring to the underlying complaint filed by the estate of the decedent, Furious Talon Eldridge.

"To be sure, claims based on general property maintenance or workplace injury would not trigger the marijuana exclusion under similar circumstances — for instance, an ordinary gas leak on the property," Judge McShane continued. "However, the Eldridge complaint does not raise such claims."

According to court filings, the coverage dispute centers on an April 2024 lawsuit that Eldridge's estate representative Jessica Smith and Eldridge's minor child filed in state court over the explosion, which occurred in April 2021. Aside from the Leaches and CPM, they also sued Joseph Donahue III and his company, Primordial Mountain LLC, which allegedly leased the property from the Leaches in 2020. The underlying lawsuit remains pending.

Eldridge's estate alleged that Primordial and Donahue leased the property, an industrial warehouse, to manufacture concentrated cannabis products through a process that used butane gas to extract cannabinoids from raw cannabis, further hiring Eldridge to help design and operate their extraction system. Though the underlying plaintiffs said the process is common, they alleged that Donahue, Primordial and Eldridge did so without the required license, and that the property lacked certain safeguards, like fire suppression systems and proper ventilation.

The underlying complaint further alleged that after a component in Primordial's extraction system failed, butane started to leak in the building, igniting and causing an explosion that severely burned Eldridge. He died the following day.

Having issued a commercial general liability policy to Donahue and Primordial, Ohio Security agreed to defend them, the Leaches and CPM under a reservation of rights. It then kicked off the present coverage litigation this past April. The court has since entered a default against Donahue and Primordial for failure to appear, court records show.

In their separate motions to dismiss, the Leaches and CPM argued that the Eldridge's estate could still prevail on the three underlying claims they face — premises liability, negligence per se and negligence — without establishing any facts relating to the manufacture of marijuana.

However, Judge McShane said Tuesday that those three claims are "inseparable from the process of manufacturing marijuana extracts at the property," further noting that the Eldridge complaint did not allege an "an ordinary, independent gas leak."

Ohio Security therefore "plausibly establishes the policy does not cover any claims against the Leaches or CPM," he concluded, though without affirmatively granting relief to the insurer.

A representative of the Leaches declined to comment.

Representatives of CPM, the underlying plaintiffs and Ohio Security did not immediately respond to a request for comment Thursday.

Ohio Security is represented by Michael A. Guadagno of Kennedys CMK.

The underlying plaintiffs are represented by W. Blake Mikkelsen of Miller Insurance Law LLC, by Craig A. Nichols and Lee Ann Donaldson of Nichols Law Group, and by J. Randolph Pickett and Samantha N. Stanfill of Pickett Dummigan Weingart.

Mary Laurent Leach and Randall Leach are represented by Seth H. Row and Bradley Prowant of Stoel Rives LLP.

CPM is represented by Kyle A. Sturm and Nicholas A. Thede of Foreman Sturm & Thede LLP.

The case is Ohio Security Insurance Co. v. Smith et al., case number 3:25-cv-00647, in the U.S. District Court for the District of Oregon.