We continue our series exploring emerging risks and their potential impact on property/casualty insurers with an in-depth look at the complex issues raised by legalized marijuana. Be sure to also read the other articles in the series. You'll learn about potential risks posed by two other quickly emerging trends: the increasingly popular e-cigarette (also called vapes), and 3D printing technology.
Conflicting marijuana laws raise challenges
The liability environment surrounding marijuana is hazier than an Amsterdam coffee shop. More than half of the states now permit medical marijuana use in some form. Successful ballot initiatives this past election bumped the number of states that allow recreational marijuana up to eight.
But on the federal level, marijuana is still illegal. The federal government treats marijuana as a Schedule 1 controlled substance, the most dangerous category-worse than cocaine or opioids.
The contradictory laws reflect the dual nature of marijuana itself. It contains THC, which produces the "high," but also non-intoxicating cannabinoids, which have been shown-sometimes in combination with THC-to treat symptoms of multiple medical conditions. From epileptics to people battling cancer, patients have found relief in marijuana-based products.
The patchwork of state laws and their conflicts with federal law have proven a challenge for insurers considering writing coverage for marijuana-related enterprises. Below are a few considerations to keep in mind concerning marijuana and insurance.
- Marijuana businesses have so far struggled to obtain banking and payroll services because most financial institutions find it cumbersome-even with safe-harbor provisions-to work with enterprises that technically violate federal drug and possibly racketeering laws. This has pushed marijuana businesses into an all-cash model, resulting in the logistical complications and theft exposures that arise from holding large stockpiles of currency. Some property policies limit on-site storage of cash and securities. Policies also may contain provisions addressing contraband, which could lead to questions about how marijuana, a Schedule 1 drug, would be treated in states whose laws contradict federal statutes.
- Marijuana is a product liability minefield; it's still a nascent industry, and there is more research to be done in areas such as what pesticide regimens are safe for growing the crop. A number of states prescribe product testing, but there remain uncertainties, such as when a pesticide that may be safe for edible marijuana products can become toxic if burned in a marijuana cigarette.
- Advertising claims as to marijuana's health benefits could become problematic, as the Food and Drug Administration hasn't approved cannabis for any of its purported medical uses.
- Driving under the influence of marijuana is still an unsettled issue. Many states have limits on THC levels in the bloodstream when operating a vehicle, but field tests for the presence of cannabis are still experimental, and it's not clear how much THC, if any, could be safe while driving.
- Workers' compensation law is complicated when it comes to marijuana. Workers' comp insurers may resist paying for prescribed marijuana, but in at least one case this was overruled in court because marijuana was legal in the state where it was prescribed.
- Proper employment practices related to marijuana use are subject to a number of variables. For example, the firing of one medical marijuana user was upheld because the employer, while operating is a state where marijuana is legal, had federal contracts that require a drug-free workplace as defined under federal law. Many states allow employers to maintain workplace drug policies that address marijuana.
Businesses operating a marijuana dispensary or retail store could be sized like a Businessowners risk, which tend to be more lightly underwritten then their larger risk counterparts. But insurers may have to pay extra -attention to these risks, because as long as marijuana remains a Schedule 1 drug, insurers will struggle through a thicket of contradictory laws and tricky business issues.
William (Billy) Mauro is director of Commercial Casualty Product Development at ISO, a business unit of Verisk Insurance Solutions. He can be contacted at William.Mauro@verisk.com.