Wading through the cannabis haze

Legalized cannabis issues. Legalized cannabis offers new opportunities for insurers, but there are multiple risks to be considered before offering coverage. (Photo: Shutterstock)

The legalization of marijuana is beginning to touch every line of insurance including property & casualty, commercial general liability, workers' compensation, directors & officers' liability, cyber, product liability, health and life insurance. Offering coverage for cannabis enterprises can provide a new business opportunity for insurers, but it also raises many questions as they navigate the conflicts between federal and state regulations.

Claims magazine, National Underwriter Property & Casualty and Propertycasualty360.com are sponsoring a free webinar on Tuesday, July 23 at 2 p.m. ET that will examine many of the issues insurers must address as they venture into this area. The webinar will examine the risks for insurers, marijuana-related businesses, and companies whose employees may use marijuana medically or recreationally. Providing their insights on the subject will be Teresa Bartlett, M.D., senior medical officer of Sedgwick; Patrick McManamon, CEO of Cannasure; and Ian Stewart, an attorney in the Los Angeles office of Wilson Elser Moskowitz Edelman & Dicker, LLP.

The uncertainties about the impact of legalized marijuana extend well beyond insurers. Employers are facing questions about zero tolerance drug policies and whether or not their workers' comp insurance must pay for medical marijuana. The answers are hazy at best.

"As the opioid crisis continues to rise, even globally as referenced by a recent United Nations report, physicians and employers wonder if cannabis is the best alternative," explains Teresa Bartlett, M.D. "Marijuana, despite the rush to legalize at the state level, has its drawbacks and side effects."

While many see marijuana as a panacea that can solve a host of health problems, it raises a number of concerns for medical personnel and insurers. "Even in the situations where a physician recommends a patient try marijuana, there is little known about dosing, route of administration and frequency," continues Bartlett. "This is often left up to the patient to figure out, which can be dangerous."

A number of scientific studies have examined the health effects of marijuana, and their findings show an increased risk for unborn babies whose mothers use marijuana late in their pregnancy. These infants are 82% more likely to be born at a low birth weight, are 79% more likely to be born early, and 43% more likely to spend time in a neonatal intensive care unit. In addition, the THC found in marijuana can be absorbed in a mother's breast milk and then passed onto a nursing infant.

Other studies show that teenagers who use cannabis on a regular basis may see an effect on their executive functions including attention and memory since their brains are still maturing. Further studies on the short-term and long-term effects of marijuana use are needed before its efficacy can be fully determined.

More information is also needed to determine how marijuana will affect different individuals, how long it stays in the system, types of impairment and how long it lasts. Driving, operating equipment or machinery, and other activities create risks for individuals trying to function under the influence of marijuana.

Coverage opportunities

Dozens of insurers have already ventured into this new area of coverage, and Patrick McManamon will be able to explain the types of coverage offered, how insurers can assess risk and other issues such as:

  • What are the coverage issues that marijuana-touching businesses face and how do they differ from other commercial enterprises?
  • What are the risks for insurers who decide to provide coverage to these businesses?
  • What legal issues could insurers encounter if they enter into this new market opportunity?
  • Are insurers obligated to pay for medical marijuana or cannabis products?

"The number of carriers and coverages available for cannabis insurance will continue to expand," says Ian Stewart. "Federal illegality of cannabis remains the primary barrier to entry, with reputational risk being a secondary though still relevant factor for most carriers."

He adds, "Cannabis will remain a highly regulated product even after federal legality. Claims professionals and the defense attorneys who handle cannabis-related claims — whether based on property, casualty or professional/specialized risks — must be familiar with state cannabis regulations, including highly specific requirements involving the chain of distribution, transportation, quality, control, testing, reporting, record keeping, labeling/warnings, advertising/marketing and disposal."

PropertyCasualty360.com, National Underwriter Property & Casualty, FC&S and Claims magazine are also offering a special report that addresses many of these issues surrounding legalized cannabis to webinar attendees. Register here for the webinar. Any questions should be directed to [email protected].