ocaa news february 2016 email version news... · ocaa — february 2016 honor our career, the...

February 2016 www.oregoncasualtyadjusters.org | PO Box 87 • Dexter, OR 97431

Claims

Adjusters

Association

Oregon Providing

informational and educational resources to the

Insurance Claim Professional since 1935

Case Study

Case Study — See page 3

DCBS News — See page 7

Planning for this years Spring Symposium is under-way. Mark your calendar for Thursday, April 28, and plan to be at the Holiday Inn in Wilsonville for what is sure to be another great educational event.

Ever wonder why continuing education was not mandated by the Insurance Commissioner’s Office for the claims handlers in Oregon?

The answer is because in 1976-77, the Oregon Claims Adjusters Association (OCAA) led by then president, Dick Younge*, negotiated the issue with the Oregon State Insurance Division. In exchange for educational lunches and an annual educational symposium hosted by the OCAA, the Insurance Di-vision decided not to require mandatory continuing education courses nor licensing for insurance com-pany employed adjusters.

If the issue were to come before the Insurance Divi-sion again, we would like to show them healthy at-tendance rosters from the annual symposiums as well as our monthly luncheon meetings. Proving that still, after 39 years, OCAA and the insurance community continue to uphold our part of the agreement.

Education is just as important today as it was in 1977. When you get the announcement to register for the symposium, be the first to do so. When you get the monthly Info Share with information on the upcoming speaker at our luncheon meeting, submit your RSVP and attend. It’s the least we can do to

(See Message… continued on page 3)

Message from OCAA President Trevor Arnold, McLarens

— See page 11

NEWS from

Around the Web

In Memory of… — See page 3

Record Highs… — See page 13

Thank You Letters… — See page 21

OCAA — February 2016 - 2 -

Time 11:30am to 1:00pm Location Old Spaghetti Factory 715 SW Bancroft St, PDX Menu Choices $15 Fettuccine Alfredo, Italian Sausage w/Meat Sauce, or Chicken Caesar Salad Checks, cash or credit card accepted RSVP Requested www.oregoncasualtyadjusters.org

This newsletter is a publication of the Oregon Casualty Adjusters Association It is produced and distributed monthly by

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OCAA Vital Statistics 2015-16 PO Box 87, Dexter, OR 97431 Website: www.oregoncasualtyadjusters.org Email: [email protected]

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Next OCAA Meeting

March 8, 2016

OCAA — February 2016

honor our career, the industry that provides us em-ployment, and those who fought to keep mandatory CE out of the rule books.

The agenda and registration for the Spring Sympo-sium will be available soon. Plan to attend.

*Dick Younge, OCAA Past President (1976-77) passed away on December 24, 2015, at the age of 88. The 39th Annual 2016 Spring Symposium will be dedicated in his name. See his obituary below.

Message… (Continued from page 3)

First-Party UIM Claims at Trial: Can You Exclude Policy Limits? By Katie D. Buxman

Case Study

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Richard "Dick" Younge (1927-2015)

Younge, Richard 'Dick' 88 Nov. 17, 1927 Dec. 24, 2015 Richard was born near Val-entine, Neb., to Ruth and Burdette Younge. The Younge family moved to Sauvie Island in 1937 as Burdette looked for new opportunities in Portland. Rich-ards hard working Pioneer spirit served him well in business and his personal ac-complishments. Richard built trucks for

Freightliner as a young man. His success there led him to a career at Farmers Insurance as a claims specialist. Upon graduation from Benson High School, Richard attended Port-land State University and also was a graduate in claims ad-ministration. He was past president of The Honorable Order of the Blue Goose, International and the Oregon Claims Adjust-ers Association. Dick and Bev loved to play golf at their course at Outdoor Resorts in Palm Springs, Calif. A cold Co-ors Light was the perfect ending to a day of golf. In addition to Palm Springs, Dick and Bev traveled throughout the North-west in their motor coach. A highlight was a group trip to Alaska to witness the aurora borealis. Richard loved spending time with his family, water skiing on the Columbia River at Government Island with his classic black Sea Ray ski boat. A bluebird day snow skiing on the magic mile on Mount Hood at Timberline Lodge was a favorite sport. He also loved play-ing golf at Pebble Beach, Calif. Many a Friday afternoon, Richard enjoyed the Dover sole at Seasons & Regions Sea-food Grill.

Richard is survived by his wife of 40 years, Beverly; son, Rick (David); daughter, Debbie; stepdaughter, Pam Ladd; brother, Bob (Madeline); stepson, Scott Sleeman; stepdaugh-ter, Taryn Felgar. His first wife Tricia, passed away in 2009.

A celebration of Richard's life will be held in the spring of 2016.

~ Welcome New Vendor Partner ~

From the desk of Katie D. Buxman: In the unlikely event that a first-party underinsured motor-ist (UIM) case goes to trial, it is often advantageous to make a motion before trial to exclude mention of insurance policies and policy limits. However, this strategy is not always available—as the following Oregon Court of Appeals case reveals.

Claims Pointer: In the following case, an insurer denied UIM coverage and the case went to trial. The trial court granted the insurer’s motion to ex-clude evidence of the policy limits and the jury re-turned a verdict for the insurer. The Court of Ap-peals reversed that ruling, however, because at the end of trial, the insurer would not stipulate that the responsible driver was underinsured. The takeaway from this case is that if you intend to exclude policy limits, you better be prepared to stipulate that there is an underinsured driver.

Thoens v. Safeco Insurance Co. of Oregon, 272 Or App 512 (July 22, 2015)

Susann Thoens (Thoens) was injured in an auto ac-cident with an underinsured driver. Thoens was

(See Case Study… continued on page 5)

In Memory of…


Safeco refused to stipulate that the responsible driver was underinsured. The Court observed that the jury was asked to determine whether the respon-sible driver was underinsured, but not allowed to view any evidence of what the policy limits were--which is the only information used to determine whether a driver is uninsured.

The Court reversed the trial court’s ruling excluding evidence of insurance limits and remanded the case back to the trial court. The Court also addressed two important evidentiary issues regarding biome-chanical experts that we will take up in our next case update.

— View the full case opinion at: http://www.publications.ojd.state.or.us/docs/A150983.pdf

— If you would like to be notified of these new cases, please send an email to: [email protected].

This article is to inform our clients and others about legal matters of current interest. It is not intended as legal advice. Readers should not act upon this information without seeking professional counsel.

Passing of a Friend… Friends of Kimberly Sue Smith would like others to know that Kimberly passed away January 10, 2016 in Lee’s Sum-mit, Missouri. Kimberly worked for USF&G handling major losses and catastrophes for companies such as St Paul’s Travelers and Farmers Insurance Group. She finished her claims career with Allstate Insurance after living in the Port-land area for 20 years; she spent the last six years living with her parents in Odessa, MO. A Celebration of Life will be held at the Buffalo Gap (6835 Macadam Ave, Portland) on Sunday, February 14, from 2:30 to 4:30pm. Everyone is encouraged to wear red that day as it was Kimberly’s favorite color. Memorials are suggested to the Cole Steelman Memorial Scholarship or the Collision Industry Foundation. Condo-lences for the family may be left at www.ralphojones.com. Her obituary may be viewed at: http://www.nadlerfullerfh.com/obituaries/Kimberly-Smith-6/#!/Obituary.

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treated by her husband (a chiropractor in the office in which she worked) and then later saw a number of doctors that led to surgery on four levels of her cervical spine. Thoens’ medical bills totaled more than $200,000.

Thoens recovered $50,000 from the responsible driver. She then sought personal injury protection (PIP) benefits and UIM coverage from her insurer, Safeco Insurance Co. of Oregon (Safeco). Thoens had $500,000 in UIM coverage. Safeco initially paid Thoens her PIP benefits but cut off payment after an independent medical evaluation revealed that her treatment was unnecessary. Safeco denied UIM benefits altogether. The case went to trial and a jury awarded Thoens her PIP benefits but found for Safeco on the UIM claim. Thoens appealed.

Thoens first argued that the trial court should not have excluded evidence of insurance policy limits. At trial, Safeco made a motion to exclude any men-tion of either the responsible driver’s liability limit or Thoens’ UIM limit, arguing that the numbers would unfairly influence the jury to award a higher amount than it would if it was not aware of $500,000 limit. The trial court granted the motion.

During the trial, Safeco asserted that it did not owe UIM benefits because it was unaware of the respon-sible driver’s liability limit, which prevented a de-termination that the responsible driver was underin-sured. At the end of trial, the trial court proposed that it would instruct the jury that the responsible driver was negligent and that he was underinsured. Safeco refused to stipulate that the responsible driver was underinsured. The jury returned a verdict for Safeco.

The Court of Appeal held that the trial court’s ex-clusion of policy limits was error, but only because

Case Study… (Continued from page 3)


Recently Adopted Rule ID 01-2016: Limited license of Vehicle Rental Company as limited license for designated agent of rental company

The Oregon Insurance Division recently adopted the following rule:

ID 01-2016: Limited license of Vehicle Rental Company as limited license for designated agent of rental company

Adopt: OAR 836-071-0354

Amend: OAR 836-071-0355, 836-071-0370, 836-071-0380

Existing rules of the Department of Consumer and Business Services establish the steps that a rental company with a limited license to sell rental insur-ance must take to educate and monitor employees selling insurance under the limited license. Enrolled House Bill 2958 (2015 Legislative Session) allows a rental company to identify a "designated agent" to sell rental insurance under the limited license of the rental company, beginning January 1, 2016.

Adopted: January 20, 2016 Effective: January 20, 2016

Consumers alerted to potential scams

Salem - The Oregon Department of Consumer and Business Services (DCBS) urges consumers to pro-tect themselves from potential scams in light of the uncertainty caused by the financial troubles of Moda Health Plan Inc.

DCBS is aware of multiple incidents in which con-sumers worried about the status of their insurance with Moda receive calls from people who claim to be able to help them. The incidents involve callers who ask for personal information, including Social Security numbers, and who threaten to cut off con-sumers' coverage if they do not act immediately.

Consumers who receive any such calls about Moda should not provide any of their personal informa-

- 7 -

To submit an article to this publication contact Barb Tyler at [email protected] or 541/937-2611. Length of the article is not as

important as its content, which should be educational in nature.

DCBS News Release tion. It likely is a scam. Decisions have not been made about whether Moda customers will need to find new plans. Communications about such deci-sions will come from either Moda or the State of Ore-gon.

To protect consumers and ensure claims are paid, DCBS has assumed control of Moda's financial deci-sions. The department is working with Moda on a plan to improve its financial condition. Once the plan is finalized, more information will be released.

In the meantime, Moda customers can continue to access services and get their claims paid.

Moda Agreement Ensures No Changes to Coverage for Consumers

Salem — The Oregon Department of Consumer and Business Services issued a consent order today that outlines a plan for Moda Health Plan, Inc. (MHP) to stabilize its financial position and continue to serve its customers. As a result, the department has lifted the Jan. 27 order of supervision and MHP will re-sume selling and renewing policies to both individual and group customers in Oregon and Alaska.

The steps outlined in the order will generate more than $170 million for MHP, providing sufficient capi-tal and surplus to continue operations. That means all MHP policyholders – including those who have indi-vidual, group, Medicaid, and Medicare supplement plans – will be able to keep their plans. All premi-ums, cost-sharing, networks, and benefits will remain the same.

DCBS worked in close partnership with the Alaska Division of Insurance and the Washington State Of-fice of the Insurance Commissioner to achieve this outcome.

"This course of action is the best option for consum-ers because it will not disrupt their current policies," said Patrick Allen, DCBS director. "These steps will provide a financial cushion so the company can make good on the commitments it has made to Orego-nians."

The requirements in the order include: Providing coverage and service to its individual

policyholders in Oregon and Alaska through Dec. 31, 2016.

(See DCBS News… continued on page 9)

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Establishing a bank deposit for the benefit of Alaska policyholders. Selling a portion of money owed to MHP by the

federal government. Providing additional, more frequent reporting to

DCBS and the Alaska Division of Insurance. Selling a combination of assets, including some

held by Moda, Inc., and making all proceeds available to MHP. These transactions, several involving third parties, will bring new capital to MHP. Obtaining DCBS approval from before awarding

executive salary increases or bonuses. Obtaining surplus notes, which are debt instru-

ments considered capital and surplus.

If Moda does not complete all the requirements as scheduled, the department retains the ability to take swift action.

"While we expect Moda to comply with the order, we will have the ability to take further steps, if needed," Allen said. "Our utmost concern is pro-tecting Oregon policyholders."

Today's announcement follows last month's order of supervision issued by DCBS to MHP because of concerns over its financial condition. The depart-ment issued the order because of MHP's excessive operating losses and inadequate capital and surplus. The supervision order prohibited MHP from issuing new policies, required it to raise adequate capital, and placed a state representative on site to oversee financial transactions. The order also required MHP to submit a business plan and secure sufficient capi-tal.

"Initially, we thought it might be prudent for MHP to exit the individual market, but the steps outlined in the consent order instead will allow consumers to continue their health coverage with no changes;" Allen said.

For all MHP policyholders, there should be no dis-ruption of services and consumers do not need to take action. If consumers have any problems or questions, they can call the department's consumer advocates at 1-888-877-4894 (toll-free).

DCBS News… (Continued from page 7)


told workers to bust out the restaurant’s windows, and they followed instructions.

Police said the call was a hoax, and that another Jack in the Box location received the same call, but didn’t follow through with the instructions to break windows.

Automatic Braking 40% Safer than Human Drivers: IIHS — By Dee-Ann Durbin © 2016 Chicago Tribune

Vehicles equipped with automatic braking or front-collision warning are less likely to cause a rear-end crash, according to a study released Thursday by the insurance industry.

The Insurance Institute for Highway Safety says automatic braking — which can bring the car to a stop if it senses an imminent collision — can reduce rear-end crashes by 40 percent. Front collision warning — which warns the driver but doesn't brake — cuts the risk of a rear-end crash by 23 per-cent.

The institute measured the systems' effectiveness by looking at police records for 7,490 rear-end crashes in 27 states. All of the crashes happened between 2010 and 2014. They only considered crashes caused by Acura, Honda, Subaru, Mercedes and

Volvo vehicles that offered optional automatic braking or forward-collision warning. Then they compared the performance of the vehicles that were equipped with the optional systems and those that weren't.

The institute said that if all vehicles were equipped with systems that worked as well as the ones stud-ied, there would have been 700,000 fewer rear-end crashes in 2013 alone.

(See News… continued on page 13)

Prank Calls Instruct Workers to Break Restaurant Windows — By Mary Beth Quirk Reprinted from www.consumerist.com.

If you work at a restaurant, or any other business with windows, take note: don’t listen to anyone who calls and tells you to break every window and door you can lay your hands on. We already heard about Burger King workers in California who fell prey to that prank recently, and now it seems the staff at both an Arizona Wendy’s and a Jack in the Box have played Simon Says, demolition version, as well.

The first incident happened on at a Phoenix Wendy’s on Jan. 30, even before that California Burger King hoax, reports ABC 15 News. Though it had the same results as the other fake emergency call, this time the stranger who called Wendy’s had a complicated plan, a mix of both the “testing a safety system” and the “break the windows” prank.

An unknown person told the manager on the phone that they were with the fire department and needed to conduct a diagnostic test on the fire system, po-lice said. The manager followed instructions and turned on the restaurant’s fire suppression system. The caller then said what the manager had done had caused a gas leak, so everyone had to evacuate the restaurant and the employee was told to break all the windows to avoid an explosion.

Wendy’s employees complied and smashed every single window, while waiting for the fire depart-ment to show up. Once officials arrived, they con-firmed the call was a hoax.

Then on Tuesday in Tucson, workers at a Jack in the Box heard from a caller who convinced workers to break the windows, after claiming to be from a fire-suppression company, reports KGUN.

The call came in at 1:25 a.m. Tuesday morning, with the voice on the other end telling workers that gas levels were high and the building should be evacuated, Tucson police said. Again, the caller

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NEWS from

Around the Web


Record Highs How marijuana’s rapid growth is affecting insurance coverage By Jason M. Taylor, Jeremy S. Macklin, Nan Meyer Reprinted from www.claims-management.theclm.org.

"As this technology becomes more widespread, we can expect to see noticeably fewer rear-end crashes," said David Zuby, the institute's chief re-search officer.

Forty percent of vehicles sold in the U.S. currently offer automatic braking, while 61 percent offer for-ward-collision warning, the institute says. They can be expensive options, however. Subaru offers it on the Impreza sedan, for example, but it's part of a $2,895 safety package.

But the technology will soon be more widely avail-able. Last fall, 10 automakers agreed to make auto-matic braking a standard feature on all of their cars. A deadline hasn't yet been set for that to happen, but it will likely be in the next few years.

Meanwhile, the systems are getting cheaper as they appear on more cars and the cost of sensors and other technology comes down. Toyota plans to of-fer automatic braking for a few hundred dollars in some vehicles starting this year.

News… (Continued from page 11)

One of the more controversial social and political issues affecting the country is the legalization of medical and recreational marijuana. A Gallup Poll released in October 2015 shows 58 percent of American adults think that marijuana should be le-gal, up from 51 percent a year ago. The U.S. market for legal cannabis grew 74 percent in 2014 to $2.7 billion, up from $1.5 billion in 2013. Public percep-tion of the medicinal and recreational use of the drug has changed over the last decade as 23 states and the District of Columbia have now approved the lawful use of marijuana for certain medical pur-poses, either by statute or ballot measure.

The use of medical marijuana in each of these states is limited in several ways, including frequency of

(See Record Highs… continued on page 15)


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use and amount of possession. Various state statutes legalizing the use of medical marijuana contain ex-press statements limiting the scope of the statute as it affects third parties, including employers and cer-tain insurance providers. Four states—Colorado, Washington, Alaska, and Oregon—and the District of Columbia have legalized the use of recreational marijuana. At least 10 more states are considering legalizing recreational marijuana in the next two years through ballot measures or state legislatures. If the trend holds true, the potential overall market worth could be close to $11 billion annually by 2019.

Record Highs… (Continued from page 13) Notwithstanding these state laws and the growth of the cannabis industry in general, the possession, use, and distribution of marijuana, for whatever purpose, is illegal under federal law. This dichot-omy between federal and state laws has given rise to various legal challenges including, not surpris-ingly, significant effects on the insurance industry. Activities stemming from the legalization of mari-juana, whether medical or recreational, raise a host of coverage questions under traditional employ-ment-related, property, or liability insurance poli-cies that should be considered when evaluating claims arising out of marijuana-related activities.

State Versus Federal One threshold question relating to insurance cover-age for marijuana-related activities is whether an insurance policy can provide coverage for activities that are illegal under federal law. While various states have enacted laws decriminalizing medical and/or recreational use and possession of marijuana or marijuana plants, the U.S. Supreme Court in Gonzales v. Raich established that the possession and cultivation of marijuana for medical use is ille-gal under federal law, even when it is permitted un-der state law. In Gonzales, the Supreme Court held that the federal Controlled Substances Act (CSA), which designates marijuana as a Schedule I drug and as contraband “for any purpose,” prevails over state laws with which it conflicts.

In Tracy v. USAA Cas. Ins. Co., for example, the U.S. District Court for Hawaii, following Gonzales, found that the cultivation of marijuana—even for state-authorized medical use—violated federal law and rendered the insurance policy at issue unen-forceable. In Tracy, the insured sought to recover for the theft of several marijuana plants under her homeowners’ policy’s “trees, shrubs, and other plants” coverage, which she claimed she lawfully possessed under Hawaii’s medical marijuana law. Although the court found that the insured possessed an economic and lawful “insurable interest” in the plants (a requirement of all insurance policies), it found that the insured’s activities were in violation of federal law and policy. Therefore, the policy could not be enforced.

Notwithstanding the Tracy decision, the U.S. De-partment of Justice has softened its stance on medi-cal marijuana. In August 2013, Deputy Attorney General James M. Cole issued a memorandum to all



Employment Practices Liability Insurance A typical grant of coverage in an employment prac-tices liability policy provides coverage in connec-tion with “wrongful employment practices,” which include the wrongful termination of an employee in violation of law or public policy. Several recent de-cisions have addressed employment termination based on an employee’s lawful use of marijuana according to state law.

In Coats v. Dish Network, Coats was discharged from his employment after he failed a drug test re-lated to his use of medical marijuana at home dur-ing nonworking hours. Coats argued that his dis-charge violated Colorado’s “lawful activities” stat-ute prohibiting an employer from discharging an employee for “lawful” outside-of-work activities. The Colorado Supreme Court disagreed, reasoning that a lawful activity is that which complies with applicable law, including both state and federal laws. As the use of marijuana remains unlawful un-der federal law, Coats’ use of medical marijuana was not lawful and the employer’s termination was permissible.

The court in Roe v. TeleTech Customer Care Mgmt. (Colo.) LLC reached a similar decision on different grounds. In Roe, the court found that the Washington statute providing for the lawful use of medical marijuana does not prohibit private em-ployers from maintaining a drug-free workplace and terminating employees who use medical mari-juana. Similar decisions have been rendered in Cali-fornia, Michigan, and Montana.

While these cases do not discuss employment prac-tices liability coverage directly, they bear, at least indirectly, on potential exposure for employers and their insurance carriers in states with medical and recreational marijuana statutes. In states such as Colorado and Washington, marijuana-related termi-nations may be legal, at least for now. It is critical, however, to closely examine a particular state’s medical marijuana statute to determine whether ter-minating a qualifying medical marijuana patient for a positive drug test is prohibited where that em-ployee was not otherwise impaired on the job. In states where the use of marijuana is legal, a com-pany’s drug policy and how it enforces it takes on increased importance when it comes to underwrit-ing employment practices liability insurance and


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U.S. attorneys (referred to as the “Cole Memo”) providing guidance on marijuana enforcement in light of state ballot initiatives legalizing marijuana under state law. Although the Cole Memo affirmed that marijuana remains illegal under the CSA, it identified eight areas of enforcement priority that do not include medical marijuana. Beyond those priorities, the Department of Justice generally will defer to state and local authorities in regulating medical marijuana under state law.

Workers’ Compensation Insurance Since the legalization of medicinal marijuana, em-ployers and workers’ compensation carriers have struggled with their obligations to reimburse an in-jured worker’s expenses associated with the pur-chase of medical marijuana. A workers’ compensa-tion policy typically provides reimbursement to in-jured workers for “reasonable and necessary” costs of medical care. This threshold requirement often is difficult for carriers to assess given the continued illegality of medical marijuana at the federal level, lack of Federal Drug Administration (FDA) ap-proval, lack of large-scale randomized studies of effectiveness, and inconsistent guidelines for medi-cal marijuana’s use as a treatment for particular conditions. Nevertheless, even if the reasonable and necessary requirement is met, statutes in states—including Michigan, Oregon, and California—contain limitations exempting certain entities or workers’ compensation carriers from mandatory reimbursement of such costs.

Recently, in Lewis v. Am. Gen. Media, the Court of Appeals of the State of New Mexico held that a workers’ compensation insurer was required to re-imburse an injured worker for costs of medical marijuana prescribed pursuant to the state’s statute. The court rejected the carrier’s argument that reim-bursement was precluded by federal law and public policy. In citing the Cole Memo, the court found that the carrier’s concern that it would violate the law by reimbursing medical marijuana expenses “speculative” in light of the “equivocal” Depart-ment of Justice and federal public policy. As such, reimbursement for medical marijuana costs was re-quired. As long as there is a dichotomy between federal and state laws, insurers may face inconsis-tent rulings as to their coverage obligations.

Record Highs… (Continued from page 15)


responding to employee claims of termination or discrimination. Insurers also should carefully con-sider those employers that choose to accommodate medical marijuana in the workplace given the po-tential increased exposure for liability to others, workers’ compensation claims, and even potential discrimination claims from employees using non-medical marijuana.

“First Party” Coverages Medical and recreational marijuana also may affect traditional first-party policies, such as homeowners’ and commercial property insurance. In Nationwide Mut. Fire Ins. Co. v. McDermott, the 6th Circuit addressed whether an insured was entitled to cover-age under her homeowners’ policy when her then-husband (a licensed medical marijuana patient) ac-

cidentally started a fire while manufacturing and smoking marijuana in their basement and destroyed their home. The homeowners’ policy provided cov-erage for “accidental direct physical loss to prop-erty,” but excluded losses caused by intentional acts or those caused by “increased hazards” within the control of the insured. Further, the policy required the insured to notify the insurer “as soon as possible of any change that may affect the premium risk” under the policy including, “changes...in the occu-pancy or use of the residence premises.”

In McDermott, after learning that the husband’s marijuana lab caused the fire, Nationwide chal-lenged its liability through a declaratory action. Na-tionwide raised numerous grounds for denying cov-erage, including that the insured failed to report a change in the use of the residence as required by the policy. The 6th Circuit held that Nationwide cor-rectly denied coverage, relying on the fact that the insured failed to notify Nationwide of the change in use of her basement from an area “simply used for

Record Highs… (Cont. from page 17)

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storage and [their] washer and dryer to an area where [the husband was] manufacturing and proc-essing marijuana.”

Coverage may, however, exist where the home-owner does not use the home to grow or cultivate marijuana. In Bowers v. Farmers Ins. Exch., the court found that a tenant’s growing operations were covered under a landlord’s protection policy where the tenant’s marijuana growing operations caused damage to the home as a covered act of “vandalism.” These published cases demonstrate that coverage for marijuana-related activities under property policies depends on the facts giving rise to the loss and the nuances of the coverage provided.

Liability Coverages Liability policies and certain homeowners’ policies typically provide coverage for bodily injury or property damage to others caused by an “occurrence” or “accident.” Such claims could manifest themselves in an employee’s use of mari-juana—legally obtained and consumed—that causes or contributes to an accident at work or, similarly, to liability arising out of the insured’s supplying or distribution of marijuana beyond what is permissible under state law.

Although there is little case law addressing mari-juana-related occurrences under liability policies, courts may draw from rulings related to third-party claims involving alcohol and other drug use. Some jurisdictions have held that the voluntary use of an intoxicating substance may affect the insured’s ca-pacity to form intent such that an occurrence may not exist so as to trigger an insurer’s coverage obli-gations. Marijuana-related claims also may require special attention to certain policy exclusions, such as the “intentional or expected injury” exclusion and the “criminal acts” exclusion. These are just a



marijuana plants under state law. States also have ostensibly anticipated potential insurable interest or illegality concerns in the insurance context by pre-emptively stating that contracts related to state-regulated marijuana activities are valid and enforce-able. Oregon Measure 91, for example, provides that “[n]o contract shall be unenforceable on the basis that manufacturing, distributing, dispensing, possessing, or using marijuana is prohibited by fed-eral law.” Other states have or are primed to follow suit.

An increasing majority of the population is in sup-port of legalizing medical marijuana at the national level when it is provided but subject to physician oversight. Recent efforts in Congress to defund fed-eral actions aimed at preventing implementation of state medical marijuana laws and to reclassify mari-juana under the CSA from a Schedule I to a Sched-ule II drug also suggest that medical marijuana may soon enjoy wider acceptance and usage. Until then, however, insurers and insureds must continue to evaluate the ever-changing landscape of medical and recreational marijuana as well as the judicial system’s reaction to the increased effect on insur-ance coverage across the market.

few of the issues that insurers should be aware of when adjusting marijuana-related liability claims.

Where Do We Go From Here? Given the rapid expansion of medical and recrea-tional marijuana laws across the nation and lack of clear protection or guidance for such activities un-der traditional insurance policies, some in the insur-ance industry have begun to offer products to fill the gap. When providing coverage to those directly involved in the cannabis industry, however, a whole new set of considerations emerges.

In addition to those considerations previously ad-dressed, professional liability insurers and their in-sureds face dispensary and physician risks impli-cated with the sale and certification for use of medi-cal marijuana to patients. Insurers and businesses also must be cognizant of premises liability, includ-ing security for dispensaries and cultivation centers that still must operate primarily as cash businesses. Similarly, employee theft and fidelity risk are sig-nificant concerns given the portability of medical marijuana and robust black market for the drug.

Finally, the use of marijuana and increased con-sumption of “edibles” raise product liability con-cerns related to accurate testing and labelling of products. Many of these risks are interrelated, and must be carefully examined before coverage can be provided.

The availability of insurance coverage for those di-rectly involved in the marijuana industry is still de-veloping. Despite marijuana’s illegality under the CSA, recent guidance from the Department of Jus-tice—not to mention specific state enactments an-ticipating challenges to the marijuana insurance market—should ease some of the anxiety faced by insureds and insurers alike. The McCarran-Ferguson Act of 1945 reserves the regulation of in-surance to the states, not the federal government. As the CSA does not specifically relate to the busi-ness of insurance, arguably, any state law governing or approving industry-specific insurance policies would escape a blanket cancellation of specific marijuana-related insurance policies where ap-proved and regulated by state law.

Moreover, the decision in Tracy specifically recog-nized an insured’s “insurable interest” in medical

Record Highs… (Continued from page 19)

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OCAA Meeting Minutes of 1/12/16 Past Presidents in attendance were Mike Meadows and Margaret DeFrancisco. There were no guests. Report of Treasurer: $16,097.38 in general account. $0 in scholarship account + $29 added today = $29 Report of Pres. Elect: None Committee Reports: Symposium — Working on dates in late April. Unfinished Business: None. New Business: Proceeds from Oregon Claims Manager Association $841.91 donated in previous month. General Discussion: None. Speaker: Enrique E. Andrade with Oregon Certified Interpreter’s Network, lnc (OCIN). OCIN spoke on how to work effectively with an interpreter. Scholarship Winners: 2 scholarship recipients for $500 each, Makayla Cohan (daughter of Barb Cohan) will attend U of O or OSU, and plans to be a physician; and Brittany Nelson (daughter of Tammi McEnaney) who plans on attending Concorde University and studying to be a Certified Surgical Technician. Member Drawing: No winner. $200 up for grabs next month. Raffle Winner: Rick Sutton won a cheese & cracker platter courtesy of Oregon Certified Interpreter’s Network, lnc.


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