I asked his partner if they were smoking, and she (verbally) admitted they were smoking marijuana in there, but denied cigarettes.

If the authorities contact you, let them know that you are not the one denying access.As for the lease, you technically can't sign a new lease unless the current one has expired or you have consent from all the Tenants, including the one that left.

Your standard homeowners policy does not cover this space and they will deny the claim if you have one. 

If I feel uncomfortable about renting to him then I will deny.

So by denying them to me, I am cheating myself out of what I have been waiting for for the last 15 years or so.

Insurance could even deny, if there were a fire.

And after I reviewed the screening report, I had to deny them based on no proof of income in the local area (they were relocating), collections, delinquencies, could not verify some of the info submitted in the application, etc.His feedback on why this is taking so long is that people like the Unit but not the area.I am starting to get worried about how long is taking me to find a proper tenant.

I had primary owner's insurance, but since doing Airbnb and not switching over to renter's insurance, they denied my claim unfortunately.My question: If I were to sue the homeowner above me, can I recoup legal fees?

The 100k is based on the tax collectors @John @John Underwood yes, my wind policy does have rental loss coverage, but they immediately denied me because I had a roof exclusion due to it being a flat roof and the damage was mainly done by flood. 

Now, this is not to say you can't get unsecured loans (personal loans, SBA, etc) but you wouldn't want to tell them you're buying real estate with it as they would deny you