Cannabis is now fully legal in ten states plus the District of Columbia, and medical marijuana is legal in 23 states. Despite growing acceptance among states, cannabis remains illegal federally under the Controlled Substances Act of 1970 as a Schedule 1 substance, which has made oversight and regulation of the industry decentralized and in some instances non-existent. The psychoactive effects of cannabis, coupled with limited regulation, imposes increased risk of product liability claims. To mitigate this risk, industry members should take steps to self-regulate.
Like Bob Dylan, marijuana has gone from symbol of 1960s counter-culture to mainstream appeal. It is telling that Lloyd’s of London (which reportedly insures Mr. Dylan’s vocal chords) has also recently announced that that it will underwrite cannabis-related insurance in Canada, issuing policies to businesses who legally produce, distribute and sell marijuana. In the United States, an increasing number of states have legalized marijuana for medicinal and recreational uses, and others will be voting on the issue in the near future (as Michigan will this November). Federal illegality—whose days may be numbered—has become less and less of an obstacle to obtaining coverage “from seed to sale” for businesses in the legal cannabis space. This is demonstrated by two recent developments since our previous blog post on insurance for the marijuana industry.
We’ve come a long way since the days of Timothy Leary—both in terms of marijuana legalization, and in the diversity of business insurance products that have reached the market to insure marijuana-related risks. As of this blog post, more than 20 states have legalized marijuana for medical use, including eight states that have also legalized it recreationally. At the federal level, however, marijuana continues to be a Schedule I controlled substance, making it illegal for any purpose. Whether and to what extent the federal prohibition will be enforced by the Trump administration is not yet known. As the legal marijuana industry continues to grow apace, industry participants would do well to consider the insurance products available to them and potential pitfalls for the unwary.