Tag Archives: THC

Key Questions for Vaping Businesses

As vaping becomes increasingly popular across the U.S., more businesses are manufacturing, distributing and selling vaping products, including ones containing or intended for use with CBD or THC. The proliferation of vaping products is likely to lead, before long, to an increase in vaping-related litigation.

As such, vaping-related businesses will want to make sure – before litigation ever occurs – that they have the right insurance in place to respond. Given the variety of terms, conditions and particularly exclusions in commercial general liability (CGL) and product liability insurance policies, businesses cannot simply assume that they have the necessary coverage.

In determining whether it has the needed coverage, a vaping-related business will want to take into account a number of considerations, including:

  • Does its CGL insurance cover product-related claims, or it is necessary to obtain and maintain separate product liability insurance? Some CGL policies may specifically exclude coverage for “Products-Completed Operations.” As a result, such policies may not provide coverage if a consumer is injured by, for example, an exploding vape pen.
  • Is its CGL or product liability insurance written on a claims-made basis, or does it provide occurrence-based coverage? Basically, a claims-made insurance policy provides coverage for a claim made during the policy period, whereas an occurrence-based policy provides coverage for an accident that happens during the policy period (no matter when the claim is ultimately made). Therefore, occurrence-based coverage is generally more valuable to the policyholder, especially when facing risk of long-tail-exposure claims (such as many toxic-tort claims). However, at least for cannabis-related companies, it may be difficult, if not impossible, to purchase an insurance policy covering product claims that is written on an occurrence basis.
  • Does its CGL policy or its product liability policy specifically exclude coverage for vaping-related products or vaping-related injuries? There are different formulations of such exclusions being used by insurers today. For example, at least one insurer includes a complete exclusion for vaping equipment and components, which precludes coverage for “any claim arising out of the use, handling or ownership of vaporizing equipment or any part of the accessories attached or used with the vaporizing equipment including pens, cartridges, mouth pieces, batteries, chargers, coils and any miscellaneous products used with, or attached to, vaporizing equipment.” Another insurer only excludes coverage for claims “resulting from the use, sale or distribution of batteries manufactured by, or which are represented, marketed and/or sold as having been manufactured by” certain specified companies.
  • Do its CGL or product liability policies include other exclusions that may arguably defeat coverage for a vaping-related claim? Such exclusions may include, (i) a health hazard exclusion, (2) a marijuana/cannabis products exclusion and (iii) a carcinogen exclusion.

The insurance considerations only increase if the vaping products at issue include, or are intended for use with, THC (i.e., the chief psychoactive component in marijuana, which remains a Schedule I controlled substance in the U.S.) or even CBD. Because marijuana remains illegal in the U.S., there are still many insurance companies that will not write coverage for a cannabis-related business or agree to cover cannabis-related losses. There are also any number of insurance policy terms, conditions, or exclusions that arguably could defeat coverage for a THC/cannabis-vaping-related claim. As such, as companies that already have CGL or product liability insurance move into the THC vaping space, they should double-check with their insurer(s) and review their policy(ies) to make sure they still would have coverage for any claims arising out of THC vaping. They cannot just expect that the policies they historically have had will cover them in this new line of business.

See also: Legal Marijuana: An Insurance Perspective  

Finally, CBD-related vaping products may raise many of the same concerns. Although the 2018 federal farm bill opened the door for the legal production and sale of hemp and hemp-derived CBD in the U.S., it did not amend the federal Food, Drug, and Cosmetic Act or otherwise legalize the sale of CBD for oral consumption. Accordingly, insurance policy provisions that require compliance with all applicable laws or exclude coverage for illegal acts or substances may arguably still bar coverage for CBD-vaping-related claims.

While many of these considerations will apply to many businesses in the vaping industry, each business is also likely to have its own unique insurance needs and issues, and each business should carefully review its specific coverages carefully.

Drugged Driving Kills; Why Can’t We Stop?

DriversEd.com has released a new study on the awareness and prevalence of marijuana-impaired driving, finding that while an overwhelming number of Americans have an understanding that driving after smoking or ingesting marijuana is dangerous, one-fourth of them have admitted to doing so themselves.

According to DriversEd.com’s 2019 Cannabis and Cars Report, 58% of Americans believe that legalized recreational marijuana use leads to increased danger on roads, and 91% of Americans believe marijuana can impair a driver’s ability. Even so, 20% of drivers admit to driving after smoking marijuana, and 6% admit to driving after ingesting it.

This may come as no surprise, as 34 states, District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands have approved a comprehensive, publicly available medical marijuana/cannabis program as of March 2019. Marijuana is more out in the open than it ever has been before, but its accessibility is preceding development of proper oversight. Without correct traffic safety measures in place, the prevalence of drugged driving is growing, as drivers likely believe they won’t get caught, aren’t noticeably driving dangerously or don’t consider marijuana’s side effects to be risky enough to stay out of the driver’s seat.

See also: Pledge to Put Your #phonedown  

According to the Brain Injury Society, significant cognitive impairment begins the moment marijuana is consumed. THC, or tetrahydrocannabinol, is the chemical responsible for most of marijuana’s psychological effects. It interferes with the natural communication of cannabinoids between neurons in the brain, especially in the cerebral cortex—which plays a huge role in how memory, thinking and consciousness are affected.

A 2018 Governors Highway Safety Association study, Drug-Impaired Driving: Marijuana and Opioids Raise Critical Issues for States, found that, in 2016, 44% of fatally injured drivers with known results tested positive for drugs, up from 28% just 10 years prior. More than half of these drivers had marijuana, opioids or a combination of the two in their system.

The best way to reduce drugged driving, according to Mothers Against Drunk Driving (MADD), is the use of standardized field sobriety testing (SFST), the foundation of impaired driving detection and enforcement for 800,000 law enforcement officials across the country. Some states, however, do not require SFST training for officers assigned to patrol functions.

As MADD says: Myths and misinformation are part of the problem. Get the facts—and share them with your loved ones, especially young adults. Why? More than one-third of teens mistakenly believe they drive better under the influence of marijuana.

The 2019 Cars and Cannabis survey was conducted online using Survey Monkey. One thousand and sixty-three participants were polled, spanning the U.S., with the U.S. driving population represented by the 997 respondents who, before completing the survey, answered that they have a driver’s license. The demographics of those polled represented a broad range of household income, geographic location, age and gender.

This article was originally published on DriversEd.com.

Effect of Cannabis on Workplace Accidents

One of the hottest topics is the legalization of marijuana for adult (recreational) use. As you are probably aware, medical marijuana use has been allowed in the state of California for quite some time. However, recreational marijuana use remained illegal until this year. On Nov. 8, 2016, voters passed an initiative that allows certain recreational marijuana use. That initiative went into effect on Jan. 1, 2018.

It allows adults age 21 and over to legally purchase and consume marijuana in the state without the need for a medical referral card. Adults 18-20 still need a medical referral card to legally purchase in the state. The locations where marijuana use is prohibited include public places, places where smoking or vaping is prohibited and workplaces that maintain a drug- and alcohol-free environment. The bill says the state government will: “Allow public and private employers to enact and enforce workplace policies pertaining to marijuana.” Additionally, marijuana remains an illegal Schedule I substance under federal law, which employers must follow. This potentially means that employers can still drug test their employees, may refuse to hire those who use marijuana and may terminate employees who use marijuana (in the workplace or out) if it violates company policy. Therefore, based on the stated language in the bill, as well as federal law, employers with drug- and alcohol-free workplace policies may continue to maintain and enforce them in California.

See also: Big Opioid Pharma = Big Tobacco?  

One issue, in particular, that has many clients concerned is the effect legalization will have on workplace accidents. To be clear, this law does not make it legal to drive, operate machinery or otherwise take part in dangerous activities while under the influence of marijuana. However, California has not yet adopted a standard measure for marijuana impairment analogous to blood alcohol testing. Currently, the tests for marijuana detect THC (the chemical compound found in cannabis responsible for a euphoric high) in a person’s system from anywhere from three days to three months. Employers face a dilemma if an employee legally consumes marijuana outside of work, is no longer “impaired” and then is involved in a workplace accident. The potential exists that a post-accident test could detect marijuana (THC) in the employee’s system without proving any actual impairment at the time of the accident. According to the law as written, the employer could terminate that employee for violation of an existing drug-free policy. Given the nature of the debate and the publicity that the legalization is receiving, it is reasonable to anticipate pushback and litigation from employees terminated in that type of scenario.

With these issues in mind, Heffernan Risk Management Division recommends that our clients regularly revisit and review their existing substance policy with a qualified labor and employment attorney to protect all their interests. If they do not have one, this is a great time to recommend that they enlist the services of an attorney to have them assist in drafting an adequate policy. Presumably, ancillary laws and standards will be developed by the state over the next few months that will direct employers how to deal with these new concerns a little more clearly. Until then, it is important for us to refer our clients to the experts most able to advise them during this time of uncertainty.

In the Weeds on Marijuana and WC

It’s a topic that gets much buzz – how will the cloud of legislation surrounding recreational and medical marijuana use affect businesses, specifically when it comes to compensability for workers’ compensation? I am sure you have all caught up on news about additional states voting to legalize marijuana for medical use and adult recreational use during the November 2016 election. Let’s take a look at those changes, as well as what action they may prompt to shake up the state and federal status quo.

After receiving certified results of a state recount, 2016 closed with Maine Gov. Paul LePage issuing a proclamation of the Referendum Question 1 vote that allows recreational use of marijuana by those at least 21 years of age. Maine joins Alaska, California, Colorado, Massachusetts, Nevada, Oregon, Washington and the District of Columbia in voting to legalize marijuana for adult recreational use. Arizona was the only state where voters rejected a legalization measure during the November election.

With the passage of ballot initiatives in Arkansas, Florida and North Dakota, medical marijuana is now legal in 28 states and the District of Columbia, Guam and Puerto Rico.

An additional 17 states have laws that only allow the use of “low THC, high cannabidiol (CBD)” products for specified medical conditions. The National Conference of State Legislatures provides a summary of those state laws here.

Stickiness in the states

Despite the increase in the number of states that have legalized the medicinal use of marijuana, the impact on workers’ compensation claims was limited until about three years ago.

In 2014, New Mexico became the first state to have a state appellate court order a workers’ compensation insurance carrier to provide reimbursement to an injured worker for medical marijuana. The New Mexico Workers’ Compensation Administration began requiring employers and insurers to reimburse injured workers when the state’s healthcare provider fee schedule took effect Jan. 1, 2016. The trend continues.

In two recent decisions, the Appellate Division of the Maine Workers’ Compensation Board affirmed two different administrative law judge (ALJ) awards reimbursing workers for their medical marijuana expenses, Bourgoin v. Twin Rivers Paper Co. and Noll v. Lepage Bakeries.

See also: Marijuana and Workers’ Comp  

On Dec. 15, 2016, an administrative law judge in New Jersey issued an order in Watson v. 84 Lumber requiring reimbursement of an injured worker for medical marijuana payment. It should be noted that this is a division level case, so this decision is not binding on other New Jersey courts. The case is not being appealed.

It is noteworthy that in each of the above cases:

  • Marijuana was recommended by physicians only after other treatment regimens for chronic pain were attempted without success, and
  • These judges were not persuaded by the fact that marijuana remains illegal under federal law.

Federal haze

While there has been some activity on the federal side over the past year, it has not changed the fact that marijuana, even for medicinal use, violates federal law.

Marijuana remains illegal under federal law because it is listed under Schedule I in the Controlled Substances Act (CSA), along with other drugs such as heroin. Schedule I substances are illegal to distribute, prescribe, purchase or use outside of medical research due to “a high potential for abuse” and “no currently accepted medical use in treatment in the U.S.” As a result of this status, physicians recommend the use of marijuana instead of prescribing it.

On July 19, 2016, the Drug Enforcement Administration (DEA) denied two petitions to reclassify marijuana, concluding that it continues to meet the criteria for control under Schedule I because:

  • Marijuana has a high potential for abuse. This is based on the Department of Health and Human Services (HHS) evaluation and additional data gathered by DEA.
  • Marijuana has no currently accepted medical use in treatment in the U.S. Using an established five-part test, it was determined that marijuana has no “currently accepted medical use” because, as detailed in HHS evaluation, the drug’s chemistry is not known and reproducible; there are no adequate safety studies; there are no adequate and well-controlled studies proving its effectiveness; the drug is not accepted by qualified experts; and the scientific evidence is not widely available.
  • Marijuana lacks accepted safety for use under medical supervision. At present, there are no U.S. Food and Drug Administration (FDA)-approved marijuana products, nor is marijuana under a New Drug Application (NDA) evaluation at the FDA for any indication.

Interestingly, the DEA noted that marijuana could not be placed in a schedule less restrictive than Schedule II in view of U.S. obligations under international drug control treaties.

Although marijuana is not being reclassified at this time, on Aug. 11, 2016 the DEA announced a policy change meant to increase research by expanding the number of DEA-registered facilities allowed to grow and distribute marijuana for FDA-authorized research purposes.

Currently, the U.S. Department of Justice (DOJ) marijuana enforcement policy is to allow states to create their own “strong, state-based enforcement efforts,” but DOJ reserves its right to challenge the states’ legalization laws at any time necessary.

Congress passed the Consolidated Appropriations Act (CAA) of 2016 that in Section 542 restricts federal law enforcement activity in states that allow medical marijuana cultivation, distribution and use. Now that voters in half of the states have voted for legalization of medical marijuana, will Congress take action to change its scheduling?

The new administration may change the broad leeway states have been given to regulate marijuana usage and sales.

  • President Trump has expressed varying views regarding medical and recreational marijuana over the years.
  • Attorney General nominee Sen. Jeff Sessions, a former federal prosecutor, has expressed opposition to medical and recreational marijuana.
  • Tom Price, a physician and nominee for Health and Human Services Secretary, has also been a vocal opponent of legalization.

If the conflict between federal and state law is not resolved politically, the U.S. Supreme Court may have the last word. The high court last weighed in on marijuana in 2005. In an unsigned opinion issued March 2016, the high court refused to hear a request from Nebraska and Oklahoma to declare Colorado’s legalization of marijuana unconstitutional because it is against federal law and therefore violates the Constitution’s supremacy clause, which states federal law trumps state laws. Justices Alito and Thomas dissented. Will President Trump’s nominee to the U.S. Supreme Court make a difference?

See also: How to Think About Marijuana and Work  

Yes, the future of federal marijuana policy and enforcement remains hazy. What is clear is that employers contending with this complex and rapidly changing issue must understand the laws and relevant legal decisions pertaining to marijuana in each of the states where their business operates.

In such an uncertain time, we will continue to provide updates and perspective. We recommend seeking legal assistance to develop a sound company policy addressing the use and reimbursement of medical marijuana for on-the-job injuries.


Medical Marijuana’s Growing Pains

Since California led the way in 1996, 23 states and the District of Columbia have legalized medical or recreational marijuana sale and use. In 2016, several states are considering bills that would legalize medical marijuana, reduce jail time or fines for possession and amend existing marijuana laws. In 2014, Congress even put its support toward medical marijuana and hemp growers in the omnibus bill.

As the medical marijuana (MMJ) industry grows beyond infancy, so does the scrutiny of its business liabilities. It seems every week brings a new growing pain for the industry. Here are three important liability concerns that you and your clients should be considering.

Product Liability

Product liability insurance is typically excluded from general liability policies for MMJ dispensaries and grow operations. This is for a couple of reasons: (1) the illegality of the product on a federal level and (2) lack of FDA approval for marijuana for consumption.

Product liability is an essential coverage for MMJ operations as it protects them in the event of claims because of illness or injury from cannabis products. These claims are on the rise as more individuals are exposed to MMJ, particularly when those individuals experiment with various ways of consuming THC.

A class action filed in Colorado in 2014 (Coombs v. Beyond Broadway) alleges that people became ill after eating THC-infused chocolate samples at an event. The class action is open to all attendees who may have been served at the event, so the demand and settlement could be dramatic.

This claim would be handled under the product liability policy. This coverage is available as a stand-alone product, though some carriers may be willing to package it back in with the general liability and rate it separately.

Product Recall

In the Wild West that is the cannabis industry right now, a trend is emerging: product recall.

Cannabis products are being recalled at an alarming rate. Denver alone has recalled 13 products in 13 weeks, including a vape pen oil containing a dangerous, banned pesticide. In October 2015, a number of products were recalled because of banned pesticide content.

Product recall is expensive, and none of those expenses are covered by product liability insurance. In fact, in nearly all of the product recall cases in Denver, no one was sickened by the pesticide-laden products. Cannabis purchased to make the products was independently tested by the manufacturer and voluntarily recalled.

Independent third-party testing is important for quality control, especially in the marijuana industry. When every media outlet and government organization has their eyes on your clients, they need to be one step ahead, so testing product before shipment or sale should be part of any risk management plan.

Product recall insurance is becoming essential. This coverage is written on a manuscript basis to fit the needs of your client and can cover everything from retrieval and shipping costs to destruction costs and even provide public relations help to rebuild and maintain the insured’s reputation.

Professional Liability

With medical cannabis, the dispensary takes on the responsibility of a highly regulated pharmacy. Insureds may be compliant with all state and local rules and regulations, but mistakes do occur. The most common are:

  • Failing to give the correct product to the patient or an authorized caregiver.
  • Failing to confirm the identity of the patient or caregiver before dispensing.
  • Failing to protect patient privacy.

All of the above and more can be covered with a properly written professional liability or E&O policy. Protecting patient privacy can also fall under cyber liability, which your clients should also be concerned about.

MMJ business owners have the same concerns as any other business: profitability, legality, providing a valuable service to the community. As insurance professionals, not only must we look beyond the nature of the business to see the similarities, but also the industry-specific concerns.