I have been in a haze recently due to marijuana. Granted, I do not smoke, toke, or even eat pot laden brownies—I truly never have. But each insurance conference I go to and each insurance journal I read, I find articles regarding cannabis. My clients are starting to ask me about coverage and employment issues regarding joints, pot plants, and cannabis candies. In my lifetime, marijuana has gone from being that substance that strange long haired guys with torn Jimmy Hendrix T-shirts smoked to being a multi-million dollar industry which now borders on being respectable. Being a “stoner girl” is no longer disreputable—in fact there is even a weekly YouTube program where two young women “stoners” review pot products and how to use them. (Who knew that there were marijuana pipes devices that would allow you to smoke and blow bubbles at the same time!)
So I am no longer surprised when I have a client call me up and ask me “Pat, what do you know about pot?” I am surprised at the exploding number of issues that marijuana now creates both for the insurance industry and employers. It seems now that we all need to consider how pot impacts our business and professional lives. There are now 28 states and the District of Columbia that have legalized marijuana in some form and at least eight states have legalized recreation use of the once forbidden drug. Despite this state trend, marijuana is still a defined, controlled substance under federal law—a Schedule 1 illegal drug under the Controlled Substance Act with supposedly a “high potential for abuse”. Thus, many states have a ‘go ahead and toke’ state approach and the federal government has an ‘its forbidden fruit’ approach.
So what are the insurance issues that are developing over marijuana? Here are a few:
- Homeowner’s Insurance: I smile when I wonder if the arson exclusion would apply to the intentional burning of marijuana leaves in a joint or bong. But more seriously, is there coverage for marijuana plants that are stolen in a home or does the “trees, shrubs, plant or lawn provisions” limit recovery? Would growing marijuana plants be covered under a ‘business pursuits’ exclusion if some part of the plants were sold or used to make a saleable product? Would harvested marijuana be treated like alcohol or tobacco? What happens when a live in stoner accidentally burns down a house while inhaling? What about a tenant who rents out a single room in the house? In my unhazed view, insurers need to clarify language of policies to deal with marijuana issues. And insurance producers need to consider whether they need to ask homeowners do you have marijuana in your home that needs to be protected from loss?
- Commercial Policies: The first thing that comes to mind for these policies is “how the heck are insurers going to do underwriting for this growing (pun intended) industry?” Will the industry require brokers to check out the operations and express their opinions as to whether it is a low-risk or high-risk pot operation? Will products be tested for quality by someone in risk management? And how will rates be set when I suspect that there is limited experience with cannabis operations? (Of course, there must be some actuaries somewhere that understand pot!) Insurers will need to struggle with whether the ‘contraband’ exclusion applies, particularly when the federal government’s approach to enforcement seems dazed and confused. There are also issues that arise under Employment Practices and Liability Insurance Policies and Worker’s Compensation Policies. Do employers have to give ‘reasonable accommodation’ to employees using medical marijuana? Can worker compensation claimants have insurers pay for their pot? The scope and breath of these commercial insurance issues are mind-blowing.
- Liability Policies: My concern here, from both a coverage and employment practices viewpoint, is how much pot is too much. Will insurers take a zero-tolerance approach to marijuana claims and attempt to use the intentional acts exclusion or provisions relating to illegal activities to deny coverage for some liability claims? And how will insurers defend liability claims where the insured had legal authorization to use marijuana for medical reasons? There will certainly be scientific concerns as to what constitutes being under the influence when using legal marijuana and legal challenges as to what ultimately is presented to a jury.
So what is an insurance professional to do with all these marijuana issues? Perhaps it is time to chill, listen to Jimmy Hendrix and wait to see what happens. For me, I am not that mellow and so I will be watching what happens.
Patricia McHugh Lambert has over 35 years of experience in handling complex commercial litigation and insurance matters. Ms. Lambert has worked on national class actions, significant litigation and regulatory matters for Fortune 500 companies. She has also assisted small and mid-sized companies and business executives with contract, real estate and commercial disputes that needed to be resolved quickly and efficiently. Ms. Lambert is best known as an attorney who knows the field of insurance. She has represented insurers, policyholders, and insurance producers in disputes both in court and before the Maryland Insurance Administration. Ms. Lambert can be contacted at 410-339-6759 and firstname.lastname@example.org.