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Comp cover for medical marijuana dispensaries in question

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The conflict between federal and state laws on marijuana garnered attention recently after Hawaii’s largest workers compensation insurer cancelled insurance for seven medical marijuana dispensaries over legal concerns. 

Honolulu-based Hawaii Employers' Mutual Insurance Co. said its late-June decision came “following a thorough legal evaluation of state and federal law regarding the production and sale of medical marijuana in the State of Hawaii.” 

Medical marijuana was legalized in Hawaii in 2000, with dispensary licenses made available in 2016. The concern is the U.S. Food and Drug Administration has not changed marijuana’s status, continuing to label it a Schedule I drug alongside heroin and cocaine — meaning federal regulation says marijuana has no medicinal qualities. 

“The legal conflict raises serious questions about civil and criminal liability as well as risk management for insurers doing business with marijuana businesses,” said Robert Gordon, senior vice president, policy development research and international at Property Casualty Insurers Association of America in Washington.

HEMIC said in its June 28 statement that it collected legal opinions before making its controversial decision. “These legal opinions clearly acknowledge that HEMIC and its board of directors have potential exposure for criminal liability based on federal law applicable to marijuana businesses,” said the insurer’s Chief Executive Officer, Marty Welch, in a press statement.

Mr. Gordon said insurers have that right.

“While government policymakers are working through these questions, PCI strongly supports the rights of individual insurers to exercise their legal and business judgment in deciding whether to provide services to marijuana businesses,” he said. 

HEMIC officials, who said the policies would be cancelled in 30 days with premiums refunded, could not be reached for comment. The insurer declined to identify the seven companies or how much they will be refunded, according to media reports. 

It is also not clear whether these dispensaries will be able to open this summer, as planned. Hawaii’s Disability Compensation Division, which oversees workers comp for businesses in the state, did not return requests for comment. 

Jeffrey M. Adelson, managing partner and general counsel with Adelson, Testan, Brundo, Novell & Jimenez in Santa Ana, California, said insurers in states should follow California’s model: insure the medical marijuana industry because it is business. 

California legalized medical marijuana in 1996 and for recreational uses in 2016.

“Hawaii is overreacting,” he said. “A lot of major carriers have made exceptions (in other states). People will be selling it. There will be employees and these employees have to be protected under workers compensation.” 

One cause of uncertainty is the new presidential administration. Under Barack Obama, federal agencies had a hands-off approach to states legalizing marijuana for recreational and medical use, but President Donald Trump’s approach is still in question. Experts have long taken the wait-and-see approach.

Meanwhile, Mr. Adelson said one carrier cancelling will not likely change the course of medical marijuana, a $6.5 billion industry.  

“There are opportunities for (insurance) companies who specialize in it,” he said. “If you Google it, you will find brokers and insurers that specialize in it. If there is significant money involved in this and the industry accepts its responsibility (as) legitimate employers, there will be a market.”

In other medical marijuana news, Florida Gov. Rick Scott signed into law on June 23 new regulations for how the state will implement medical marijuana, one year after 71% of voters approved its use. 

Senate Bill 6-A provides guidelines for a medical marijuana registry and Senate Bill 8-A exempts medical marijuana from state sales taxes, provides a list of medical ailments that apply to legal use, and clears hurdles for medical marijuana testing laboratories, among other guidelines. 

SB 8A also gives employers the right to maintain a drug-free workplace: “This section does not limit the ability of an employer to establish, continue, or enforce a drug-free workplace program or policy. This section does not require an employer to accommodate the medical use of marijuana in any workplace or any employee working while under the influence of marijuana. This section does not create a cause of action against an employer for wrongful discharge or discrimination.”