Rise in cannabis legalization raises liability concerns

MIAMI — Captive insurance owners need to be ready for cannabis as the industry takes off and a growing number of states legalize it for medicinal or recreational use, experts say.

Businesses are hiring increasing numbers of employees who may be using marijuana, which opens up a range of potential liability exposures, said Arthur G. Koritzinsky, managing director, captive solutions at Marsh in New York.

“Everybody is hiring employees that are going to test positive (for marijuana use) and what happens if there’s a workers compensation claim, or an auto claim or a general liability claim? There are lots of questions but not a lot of answers,” Mr. Koritzinsky said.

The sharing economy also raises risk concerns in the area of auto liability, for example if a delivery driver who is positive for THC gets in an auto accident, “who is responsible for that accident?” he said.

“Let your imaginations wander, for those of you that have captives, or your clients have captives. Your captive had better be ready for it, because it’s here,” Mr. Koritzinsky said.

He was speaking Tuesday during a session at the World Captive Forum in Miami, which is sponsored by Business Insurance.

While marijuana remains illegal at the federal level in the United States, global regulations are changing rapidly, experts said.

Steven Schain, Philadelphia-based senior counsel, Hoban Law Group, said, “Marijuana investing has two forms. Either irrational exuberance or panic, and the world has followed us.”

“A lot of stuff is happening across the world,” he said.

Mr. Schain noted that legalization and use of cannabis are expanding across Central and South America, and in Europe in the United Kingdom and Germany. Adult use was legalized in 2018 in Canada.

“Over the world we’re seeing huge developments,” Mr. Schain said. “Right now, Africa is supposed to be the next hot spot. What happens is different governments pass it. People view marijuana as being a panacea to their economy.”

However, export regulations prohibit marijuana from being exported between countries and states, he said.

The different regulatory approaches at federal, state, municipal and country level on the global stage creates confusion for businesses, experts said.

Matthew Ryan, director of government affairs at Cresco Labs, a cannabis and medical marijuana company based in Chicago, said: “While you have this big world view,” and federal and country laws, “this game is being played at the state level and everything is local.”

“We like regulation. It helps us in a lot of ways, not just financial but from the consumer protection perspective. It keeps the product very safe,” he said.

While legalization of marijuana for medical use typically takes hold in a state first, the applications can be very narrow, Mr. Ryan said.

“Then you’ll start to see those conditions expand. Maybe we should be doing this for chronic pain or opioid use disorders,” he said.