By Michael P. Tremoglie
The current tsunami of legalized marijuana in the US – both recreational and medical – as well as the Obama administration’s hands-off policy towards enforcing marijuana laws, presents opportunities for property and casualty producers but also creates some exposure for the industry.
The opportunities for increased revenue are the result of marijuana businesses which will need insurance. East Carolina University’s director of Risk Management and Insurance, Professor Brenda Wells, has studied the issue.
She wrote: “The insurance coverages available today for medical marijuana facilities include theft coverage for valuable crops, workers’ compensation coverage for employees of the facilities, and even auto liability coverage similar to that of pizza delivery drivers for employees who deliver marijuana directly to customer homes. Additionally, there are professional liability coverages for doctors who prescribe medical marijuana and product liability policies for the producers and growers of the products themselves. ...there are even electronic data policies for the dispensaries in case their client database is breached or stolen…”
She noted that as of now the courts have ruled in favor of the insurers when it comes to the several homeowners’ insurance claims made by marijuana growers.
One example she provided was Tracy v USAA in which a Hawaiian resident wanted her homeowner’s carrier, USAA, to pay over $45,000 for 12 marijuana plants, citing a clause for “trees, shrubs and other plants.” USAA contested and the courts ruled in favor of USAA.
Some businesses will not be affected.
“It is my understanding that ancillary businesses that provide services to marijuana businesses really don't have much to worry about. They are not touching or handling the product and as such are not liable for it,” said Wells.
“Generally, there are no exclusions for illegal activities in homeowners and auto policies – although this is generally speaking,” said Wells. “So if legal marijuana or hash oil is diverted from Colorado into Nebraska and it results in an auto accident or a house blowing up, under ISO standard forms, there are no exclusions and the claim will probably be paid.”
So while legalized marijuana presents some opportunities for producers to expand business it may come at a very real cost of expanding claims for insurers. How underwriters will react remains to be seen.
