Blowing Smoke: Legal Risks Of Cannabis

Cannabis laws in Canada, the United Kingdom and the US vary significantly and insurers must be aware of the nuances.

Cannabis. Marijuana. Pot. Not only is it known by a wide variety of names, but it's also subject to an equally wide variety of regulations, which vary significantly from one region to another. With legislation surrounding its production, distribution, sale and possession changing rapidly, insurers have the difficult task of assessing not only the physical and business-related risks of cannabis-associated underwriting but also the legal implications. Following, we examine the current legal environment — and associated insurance implications — in Canada, the US and UK, to see what the laws currently state, and how the insurance industry is responding accordingly.

Canada

The Cannabis Act, which came into force on October 17, 2018, is Canadian federal legislation which legalizes the recreational use of cannabis in every province in Canada. It put into place a new, strict framework for controlling the production, distribution, sale and possession of cannabis in Canada.

Each province and territory has its own rules for cannabis, including determining how cannabis is distributed and sold within its jurisdiction. The provinces make law with regard to legal minimum age, where stores are located and how stores are operated, where adults can buy it, where adults can use it, and how much adults can possess.

At this time, it is unlawful to sell cannabis-infused products such as beverages and edibles. However, it is anticipated that the sale of cannabis-infused beverages and edibles will become legal in late-2019. Beverage companies are already in the midst of discussions with Canadian cannabis producers to develop beverages that are infused with cannabidiol, commonly referred to as "CBD".

There are a number of issues to note when insuring cannabis risks in Canada. For example, with respect to personal lines insurance, will cannabis plants be considered "personal property" or will claims for plant theft and damage fall under the "tree, shrub, and plant" portions of a homeowners policy? Personal cultivation is a peril that is currently excluded in a standard homeowners policy and can no longer be covered by the "criminal activity" exclusion. In-home cannabis production comes with inherent risks, which can result in increased water consumption or damage, mold and fire damage claims.

Cannabis products present interesting product-liability...