Despite the legalization of med- ical marijuana use in 29 states plus the District of Colum- bia (D.C.), and the legality of
recreational use in D.C. and eight states,
marijuana remains a Schedule I banned
controlled substance under the federal
Controlled Substance Act of 1970. Even
in the states in which marijuana growth
and use are legal, there are stark inconsistencies in the state laws, which has led
to different legal outcomes in court decisions when the laws are tested.
Some insurers see the new marijuana
laws as an opportunity to pursue new
lines of coverage business in the bil-lion-dollar marijuana industry. Others,
however, are hesitant to take a foray into
the new market due to the lingering risk
of federal disapproval and uncertainty
with the legality of insuring marijuana.
Marijuana use and growth directly impact both personal property and real
property coverage issues that, due to a
lack of national uniformity in legal decisions by the courts, has left a haze over
appropriate policy drafting and claims
Marijuana’s legal status
The Department of Justice (“DOJ”) is
charged with enforcement of the marijuana industry. While the DOJ’s concern
lies mainly with preventing underage
consumption, impaired driving, and
thwarting interstate smuggling, many believe that the DOJ will take further steps
to enforce the federal prohibition of marijuana. Some believe that one such step
may be a crackdown on states that have
legalized recreational marijuana use.
Given the uncertainty over the federal
government’s intentions with respect to
state legalization laws, it is understandable that some insurance companies are
reluctant to make coverage available for
risks linked to recreational use, cultivation, sales and distribution of marijuana.
Although insurance contracts are interpreted by state law, some states are taking steps to try to eliminate any ambiguity
between the federal law and the enforcement of insurance policies at the state
level. For example, the Oregon legislature
enacted a law under which a policyholder’s marijuana use, possession, cultivation
or distribution cannot be used to deny an
insurance contract’s enforceability.
States such as Oregon, though, are
thus far in the minority in terms of states
taking proactive measures to address
contract enforceability issues. Marijuana
BY SETA ESKANIAN, ESQ. AND
JOHN GARDELLA, ESQ.
NAVIGATING THE HAZE
OF MARIJUANA COVERAGE
State legalization raises liability questions