1. BRENDA WELLS, PH.D., CPCU, AAIROBERT F. BIRD DISTINGUISHED SCHOLAR IN RISK & INSURANCEEAST CAROLINA UNIVERSITYPRESENTED TO IASA AUGUST 21, 2014

2. Journal ofInsurance Issueswww.insuranceissues.org 3. History ofMedicalMarijuana 4. How Long Have We Used It? a known medicine in2000 BC found a large stash ofcultivated cannabisbelonging to a shaman ofthe Gushi people in theGobi desert, dating from2700 BC. (CNN, 2008).Source:http://www.slatercenter.com/about-cannabis/about-history# 5. BANG! Shiva is said to havebrought cannabis to India. Shiva is also known as the'Lord of Bhang'. Bhang is a mild liquidrefreshment made withcannabis, spices, and milk.It has important religiousand social uses. 6. Guess Who? 1700s Diaries show he grew hemp for 30 years. Especially interested in medicinal use of marijuana. Diary entries also show he grew a marijuana with a high THCcontent. 7. 1799? Brought marijuana from Egypt to France. 8. 1840s Victorian times: muscle spasms, rheumatism, convulsions. Queen Victoria used it for menstrual cramp relief. French doctor found that it Relieved headaches Increased appetite Aided sleep Became accepted in Western medicine! 9. United StatesPharmacopeialOfficial public standards-settingauthority for allprescription and over-thecounter medicines 10. 1850 Marijuana put in United StatesPharmacopeial : Treatment for: neuralgia, tetanus,typhus, cholera, rabies, dysentery,alcoholism, opiate addiction,anthrax, leprosy, incontinence,gout, convulsive disorders,tonsillitis, insanity, excessivemenstrual bleeding, and uterinebleeding, among others. 11. 1890s Indian Hemp DrugsCommission cures dysentery and sunstroke,clears phlegm, quickensdigestion, sharpensappetitefreshens the intellect,and gives alertness to the bodyand gaiety to the mind. 12. MarijuanaIllegalization 13. 1925 Prohibition: No alcohol No gambling Just a general sentiment thatfuture use should be prohibited. League of Nations (Second OpiumConference) Signs ban on cannabis againstanything other than scientific ormedical research. 14. 1936 Aspirin and other analgesics aresupplanting cannabis Reefer Madness morality tale of how cannabis ruinsthe life of its young protagonist All states outlawed it for anythingother than prescribed medicalpurposes 15. 1937 Cannabis is made illegal in the U.S. via the Marijuana Tax Act Introduced by Rep. Robert L. Doughton of North Carolina Opposed by the American Medical Association Who was so anti-Hemp? 16. William Randolph HearstPAPER/TIMBER 17. Dupont FamilyNYLON 18. Andrew MellonINVESTED INDUPONT 19. 1970 Federal Controlled Substances Act passed. Declares cannabis a Schedule 1 drug: High potential for abuse No recognized medical use Lack of accepted safety Insufficient clinical trials to show benefits outweighrisks Inconsistency in levels of active ingredients fromone batch to another 20. ATTEMPTS TORE-LEGALIZE 21. Lets Reschedule 1972: Petition submitted to what is nowthe DEA to reschedule marijuana toSchedule II, enabling legal physicianprescription. Court battles ensue for 22 years. 1994, US Court of appeals upholds the DEAsdecision not to reschedule. 1995: Second petition filed to rescheduleit. 1997: NEJM publishes editorial calling forrescheduling. 22. Our Friends in the High-er Latitudes 2003: Canadian HIV-patient Jari Dvorak becomesthe first Canadian patient to receive government-grownmarijuana. In response to an Ontario court order for theCanadian government to make a legal supply ofmarijuana available to authorized patients. Qualified patients are approved through HealthCanada, and the marijuana is distributed through thepatients' physicians. 23. 24 States Allow Medical Marijuana Alaska Arizona California Colorado Connecticut D.C. Delaware Hawaii Illinois Maine Maryland Massachusetts Michigan Minnesota Montana Nevada New Hampshire New Jersey New Mexico New York Oregon Rhode Island Vermont WashingtonSource: http://medicalmarijuana.procon.org/view.resource.php?resourceID=000881 24. Colorado Washington 25. States with Pending Legislation toLegalize Medical Marijuana Florida North Carolina Ohio Pennsylvania(P.S several states have alsodecriminalized recreational marijuanapossession)Source:http://medicalmarijuana.procon.org/view.resource.php?resourceID=002481 26. A Favorable Climate? 2009: Obama Administration instructed Federal prosecutors not totarget medical marijuana dispensaries and users that were incompliance with their respective state laws (Barrett, 2009). 2011: Canadian judge required the auto insurance system to fundmedical marijuana for an man injured in a car accident.ordered theinsurer to pay for the greenhouse, utilities, soil and plants (Jones,2011). 27. Today, still illegal at Federal Level,but"It would not make sensefor us to see a top priorityas going after recreationalusers in states that havedetermined that it'slegalPresident Barack Obama 28. TodaysInsuranceIndustry 29. What Happens Now? Ceniceros (2010) estimates industry size is between $10 billion and$100 billion NOW. Caulkins, et.al. (2011) predict cost of production can go from $500 tounder $20 a pound with full-blown legalization.Prohibitions &Wholesale CostConsumption 30. How Does Insurance Treat OtherVices? 31. The Problem for P&C Insurers We know how many people smoke cigarettes and drink alcohol No way to accurately underwrite marijuana exposure just yet Potential liability exposure for any insured who makes marijuanaavailable to a third party Potentially high concentrations of value in any one structure. 32. Medical Marijuana Insurance Handled through excess & surplus lines markets Available Coverages Include: Theft coverage for valuable crops Workers compensation coverage for employees of the facilities, Auto liability for employees who deliver marijuana to customer homes Professional liability coverages for doctors that prescribe it Product liability policies for the producers and growers Electronic data policies for the dispensaries in case their client database is breachedor stolenSource: Ceniceros (2010) 33. Todays Property & CasualtyPoliciesProperty Coverages Homeowner & Dwelling Personal Auto Farm Businessowners BPPLiability Coverages Homeowner & Dwelling Personal Auto Personal Umbrella Farm Businessowners CGL Workers Compensation 34. Example:HomeownerPolicies 35. HO Section I: Property Coverage No exclusion for damage or destruction of contraband, includingillegal marijuana. But, we would not expect the courts to require the insurer to pay forsomething that is expressly forbidden by law, right? What if its legal at the state level and illegal at the Federal level? Insurance exempts itself from federal oversight....so one could argue thatthe state law should also prevail in these cases. 36. Provisions for HarvestedMarijuana Business Personal Property limitation of $1,500 off premises and$2,500 on premises Would apply to a quantity of harvested marijuana if kept for businesspurposes Appears to be no other limitation on recreational or medicinalsupplies of marijuana 37. Provisions for Live MarijuanaPlants Additional coverages for trees/shrubs/plants limit coverage toselected perils, up to 5% of limit of liability, but no more than $500per tree or plant. No clarification if they must be indoor or outdoor Specific exclusion for items grown for business purposes. So, it seems No coverage whatsoever for business plants Limit of $500 per plant for recreational or medicinal plants where legal 38. Barnett v. State Farm In 2007, a California man had marijuana plants confiscated anddestroyed by police officers. He filed a claim with State Farm Theft of the $98,000 worth of plants Plants were prescribed by a physician The carrier denied the claim, and its right to do so was upheld onappeal. WHY??? 39. Medical Marijuana CoverageChallenge Claim denial was based on the fact that the police seizure by did notmeet the definition of theft There was no criminal intent behind the seizure (Murphy, 2011) 40. Tracy v. USAA Hawaii resident asked her homeowners carrier to pay over $45,000 for12 marijuana plants. Initially, USAA offered to settle with her for approximately $8,800. Tracy demanded more money, plus bad faith damages. USAA asserted there was no valid insurable interest in the plants,because of Haw. Rev. Stat. 431:10E-101, which states: No contract of insurance on property or of any interest therein or arisingtherefrom shall be enforceable except for the benefit of persons having aninsurable interestInsurable interest means any lawful andsubstantial economic interest. USAA also argued that because the plants were illegal under Federal law, tocover marijuana would be against public policy. The court agreed with USAA and denied Tracys claim entirely. 41. Section II: Liability Coverage Business pursuits exclusion Bodily injury" or "property damage" arising out of the use, sale,manufacture, delivery, transfer or possession by any person of aControlled Substance as defined by the Federal Food and Drug Lawat 21 U.S.C.A. Sections 811 and 812. Controlled Substances includebut are not limited to cocaine, LSD, marijuana and all narcotic drugs.However, this exclusion does not apply to the legitimate use ofprescription drugs by a person following the lawful orders of alicensed health care professional. 42. Section II: Insurer Responsibilities No responsibility to cover any liability for damages caused out of thehomeowners recreational possession or use of marijuana, whether itis legal or illegal in the state. Possible (?) responsibility to cover liability arising out of the use ofmedical marijuana in a state where medical marijuana is legal. 43. Conclusions and Trends As states legalize marijuana Claims adjusters will see more claims and challenges in this arena ISO standard forms need modification to preclude coverage for marijuanasupplies, stock, and growing crops The personal and commercial lines underwriting processes needrefinement to evaluate the exposure to loss 44. WorkplaceIssues 45. Issues with Use Limited research on side effects and long-term use effects No quality control or grading standards in place No established medical guidelines 46. Potential Side-Effects Respiratory damage/cancer Memory loss Impaired judgment Inability to focus Loss of coordination Loss of balance Depression Anxiety Decreased motivation 47. Employer Concerns Must we provide medical marijuana as a w.c. benefit? Workers are asking for it more frequently Absence of a National Drug Code (NDC) makes reimbursement a problem Is marijuana addictive or harmful to employees? Possible liability for future rehab treatments Delays in return to work What if an employee has a safety-sensitive job? Impossible through urine testing to quantify how much is beingused: Impossible to set a safe or acceptable level of consumption Impossible to determine if employee is intoxicated 48. Today No states allow employees to use in the workplace or require employersto allow its use on the job. An employee who can legally use medical marijuana while off duty maystill face consequences (i.e., possible termination) for arriving at workwith detectible amounts of marijuana in his/her system (marijuanaingredient THC could be in the system of a user as long as three months) Rulings in California, Michigan, Oregon and Washington upheld the firing ofmedical marijuana users who test positive. Some states have introduced legislation preventing employee termination foroff duty medical marijuana use Many patients experience lingering side effects which may impactperformance of regular work duties 49. New Mexico (2014) Court ruled that worker'scompensation insurance policiesin the state must cover medicalmarijuana 50. Americans with Disabilities Act Must make reasonable accommodation. Worker must still be able to do the job We would not let a crane operator work under the influence of oxycontin, but what about a retail sales clerk? what about a computer programmer? If marijuana is reclassified as Schedule 2, will we have to accommodateworkers who are prescribed marijuana? 51. Now who is ready to feel REALLYold???? 52. Questions?FOR COPIES OF THIS PRESENTATION AND/ORFOR BOOKING INFORMATION:BRENDA@RISKNERDS.COMFACEBOOK.COM/INSURANCENERDWWW.ECURMI.COM