Recently, AAIS Assistant Counsel Phil Skaggs participated in a webinar hosted by LexisNexis as part of their Emerging Issues series entitled “What Cannabis Lawyers Should Know to Prepare for 2022.” To watch a recap of the webinar, click here.
The Trend Toward Legalization Continues
Cannabis continues to permeate the political discourse across the country. While federal legalization is not as close as once thought (still some years, not months, away), the trend towards states legalizing cannabis in some form persists with wide-ranging ballot and legislative initiatives. Eighteen states plus D.C. and Guam have legalized adult use of cannabis, with 36 states, D.C., Puerto Rico, Guam and the U.S. Virgin Islands legalizing medical use. At the same time, acceptance of cannabis use by Americans grows. Sixty percent favor legalization both for medicinal and recreational use while 30% favor just medicinal use. All told, 90% of Americans believe cannabis should be legal for either adult or medical use, according to data shared by the Wilson Elser law firm during the webinar.
Subsequently, cannabis and the business surrounding it is becoming more legitimate, drawing interest from big tobacco and large alcohol companies. As a result, even as the market expands, the industry slowly contracts due to investments, mergers, and acquisitions.
Insuring cannabis touches every corner of business in the legal marketplace, from marketing and intellectual property to auto, cyber, directors and officers, and workers compensation. While product liability (PL) insurance continues to adapt, Ian Stewart, Partner at Wilson Elser, says the traditional liability cases related to injuries, allegations and civil lawsuits have not materialized. Instead, we’re seeing claims or litigation surrounding class action suits, label claims, and recalls. In fact, product contamination and mislabeling are the two most common product liability claims. Vulnerabilities exist because laboratory standards vary and there remain large trust gaps in the marketplace.
With the cannabis market still in its infancy, Mr. Stewart says there isn’t a good handle on the long-term exposures of cannabis. In 10 years from now, should unknown medical risks materialize, they will be largely uninsured.
AAIS…Helping Design Insurance for Cannabis
Mr. Skaggs laid out some of the challenges with insuring cannabis:
- Availability of insurance products
- No standardized products
- Lack of coverage for innovative approaches to the industry (e.g., on-site consumption and online selling)
That’s why AAIS created a standardized product, CannaBOP, which has been reviewed by regulators and provides benefits for all stakeholders including regulators, consumers, and carriers. It accounts for market nuances, variability, and risk. Both Mr. Skaggs and Mr. Stewart suggest that anyone buying or selling cannabis insurance should find a broker who is knowledgeable about the industry.
To contact Mr. Skaggs, or AAIS Commercial Line Product Manager Joe Jonas, click here.