legalized marijuana | hb emerging complex claims

Legalized Marijuana What A Long, Strange Trip It’s Been Emerging and Complex Insurance Claims Forum 2016 February 25-26, 2016 Los Angeles, CA

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Meet the Speakers –  Stephen Henning, Partner, Wood, Smith, Henning

& Berman LLP –  Julia Manganaro, Sr. Claims Specialist, Navigators –  Linda Pierce, Vice President, Western Region

Claims and Loss Control, Gallagher –  Dean Rocco, Partner, Wilson Elser Moskowitz

Edelman & Dicker LLP

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ü  Why this is the hottest emerging risk nationally? ü  How did this trend start? ü  What areas of the law are impacted? ü  How claims and case law will change in coming years?

Issues To Discuss Today

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• Legalized Marijuana Issues Directly Impact: ü Professional Liability ü Transportation ü Employment ü Premises ü Hospitality ü Landlord-Tenant ü Life and Health ü And More…

• Marijuana Insurance Industry – “How High Can it Go?” – Currently markets are more comfortable with medical marijuana –  Insurance industry standards being created – Some insurers offering claims made coverage for recreational facilities and occurrence policies for medicinal facilities

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GROWING USAGE & ACCEPTANCE – U.S. is largest per capita marijuana consumer (WHO), and use is on

the upswing. 18.9 million current (past-month) users – Marijuana arrests still comprise almost ½ of all drug arrests reported

in the U.S. – Public opinion is changing •  58% of Americans think cannabis should be legal, the first majority to

express that sentiment • Up from only 12% in 1969

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EXPANDING CANNABIS DELIVERY METHODS –  Smoking –  Vaporizing –  Oral ingestion –  Transdermal patch –  Intravenous injection –  Sublingual absorption

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•  Hundreds of thousands of dollars in Edible sales, one month in Washington •  Effects begin more slowly than smoking, and tend to last longer

•  Confusion about recommended dose •  Edibles linked to at least two deaths and an increase in ER visits

Cannabis-Infused Edibles

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New Genre of Lawsuits Created – Hershey Chocolate litigation – Class action on edibles – Co. pot grower sued over pesticide use

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Packaging and Warnings

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The Economics of Cannabis

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•  Legal U.S. pot sales were $5.4 billion in 2015. Increase of 17.4% from $4.6 billion in 2014. (ArcView)

•  IRS does not allow businesses to deduct cost of cannabis as it would for other goods sold.

•  Competition remains, as there is an illicit market with which to compete.

Where is Big Pharma in the Green Rush?

•  Controlled Substances Act •  Patent issues •  Competition with existing drugs •  Partnership for a

Drug-Free America

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•  Perceived lower risk of cannabis use in the U.S. has led to increase in use

• What is the current evidence of risk? – Data is conflicPng

•  Remains off-‐limits under age 21 •  Health concerns for youth

What Are The Risks of Usage?

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•  Controlled Substances Act of 1970 –  Schedule I Drug = “High potential for abuse and no acceptable medical use”

•  U.S. Supreme Court Decisions –  U.S. v. Oakland Cannabis Buyers Cooperative (2001) and Gonzales v. Raich (2005) (Federal

government has right to regulate and criminalize cannabis) •  DOJ’s “Ogden Memo” (2009), “Cole Memo” (2011), “Cole II Memo” (August 28, 2013) •  New Attorney General •  45th President

Federal Law – A Move To Schedule II?

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State Law – Puff, Puff, Pass Legislation

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Professional Liability: Lawyers •  Rules of Professional Conduct

–  Prohibit lawyer from counseling client to engage in crime or assisting client engaged in crime

–  Colorado and Washington Supreme Courts allow lawyer to assist clients if conduct lawful under state law

•  How does a Carrier Underwrite LPL Risks? –  Evaluate on individual basis? –  Is lawyer properly vetting his/her clients?

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•  AICPA has recommended that CPA’s ask themselves a series of questions: –  What is the position of my state Board of Accountancy? –  What are the legal risks of providing these services in my state? –  Is there a risk of prosecution to a business that provides services to marijuana-

related businesses? –  What is the likelihood that the DEA or DOJ would prosecute this business? –  How are CPAs in my state offering services to state-recognized marijuana

businesses? –  How will the services affect my professional liability insurance? –  What is the likelihood that I may be disciplined or lose my license?

Professional Liability: Accountants

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Professional Liability Health Professionals

•  Individual Reactions to MMJ •  Quality Control / Proper Dosage Control •  No testing required for medical marijuana

in many states –  e.g., Colorado now requires testing for

recreational edibles and licensed cultivation centers but not MMJ caregivers

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•  Asking About Marijuana ConvicPons During ApplicaPon Process

•  Drug TesPng

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Employment Law Issues

•  DiscriminaPon Claims •  Responding To Use During Employment

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•  Reasonable AccommodaPons and Medical Leave Rights

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•  Reimbursements for Medical Marijuana by Injured Workers

•  Denying Claims Based On Impairment During Accident

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Indemnity and Additional Insured Issues

•  Is an indemnity agreement with a business engaged in the marijuana industry legally enforceable in a state that has not yet legalized marijuana?

•  Are there problems caused by naming out-of-state production and supply chain partners as additional insureds?

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Questions?

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Thank You

Stephen Henning Founding / Senior Partner Wood, Smith, Henning & Berman LLP [email protected]

Linda Pierce Area Senior Vice President Arthur J. Gallagher [email protected]

Dean Rocco Attorney Wilson Elser Moskowitz Edelman & Dicker LLP [email protected]

Julia Manganaro Senior Claims Specialist Navigators Insurance Company [email protected]

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