Exploring the legal, insurance complexities of Legalized Marijuana
Marijuana is projected to surpass alcohol in popularity in the coming 20-30 years, according to panelists at the 2024 Complex Claims and Litigation Forum.
More than two dozen leading insurance and litigation experts tackled numerous hot-button subjects this week during the 2024 Complex Claims & Litigation Forum in Las Vegas.
But perhaps the most intriguing portion of the three-day conference at Green Valley Ranch Resort was Wednesday’s panel discussion that focused on an emerging industry: legalized marijuana.
The intrigue stemmed not so much from the provocative topic itself but rather the reality that many complexities surrounding the young industry — both known and unknown — have created an entry barrier for insurance and legal professionals alike.
Complexities such as:
- While recreational marijuana use is legal in 24 states, with that number jumping to 38 states if you include medicinal marijuana, it remains very much illegal in the eyes of the federal government.
- Every state that has decriminalized marijuana has its own set of regulations, not only when it comes to distribution and use but also insurance and legal requirements and procedures.
- Because so many tentacles emanate from a controversial and complicated industry that is still very much in its infancy, it’s difficult for insurance companies to accurately assess the many risks associated with providing coverage.
All these issues (and many more) were addressed during Wednesday’s session titled “It’s Not Easy Being Green: Cannabis Claims in a Budding Industry.”
The overarching takeaway from the four-person panel: Challenges and complications abound throughout the vast marijuana industry. But so do financial opportunities for both professionals and corporations operating in the complex claims and litigation realm.
“The amount of money that’s pouring into this industry is incredible,” said panelist Adam Dolan, who deals with legal matters related to the cannabis industry as a partner in the Connecticut-based law firm Gfeller Laurie. “There’s a ton of growth [potential], so much so that marijuana likely will surpass alcohol in the next 20 to 30 years as the vice of choice for people.”
The key to partaking in and profiting from that inevitable growth? Knowledge.
That begins with learning what cannabis is (an agricultural product) and what it isn’t (something that’s manufactured, like booze). Beyond that, it’s important for insurers to understand all the components surrounding the cannabis industry — and how those components might be connected to any policy.
“It’s not just the dispensaries or farms that we’re talking about,” said panel moderator Chase Stoecker, who represents cannabis and cannabis-related clients as a partner for the New Orleans-based law firm McGlinchey Stafford. “There’s also processing, testing labs, trucking, lending and all the other ancillary businesses.”
A common misnomer about the recreational marijuana business is that it’s completely unlike any other big business, and as such, it has its own particular insurance coverage needs. In reality, it’s like any other large-scale corporation.
“Cannabis is an industry,” Dolan said. “It’s not trucking law, construction defects law, products law — it’s an industry. So if we approach it that way, we can employ a lot of the same techniques and analyses to this industry that we use in others, even though cannabis has its own uniqueness.”
Of course, a big reason why many in the insurance industry have been reluctant to pursue marijuana-related businesses is the lack of historical data. Simply put, carriers will struggle to quantify risk or produce accurate profit models until enough claims history has been accumulated.
“There’s a natural reluctance for standard carriers to want to jump too fast into this market because there just hasn’t been enough time to understand fully where the claims are going to materialize from,” said Michael Peters, who co-founded and leads the wholesale cannabis insurance division for PL Risk Advisor. “As we push forward and as the claims start to materialize, we’re going to gain a little more actuarial credibility and start to better understand the profitability and viability of this particular line.”