January 17, 2019 Articles

Budding Considerations: Cannabis-Related Insurance Issues

Coverage may hinge on whether there is evidence that any personal identifying information has actually been misused, as opposed to merely having been accessed

by Amy Elizabeth Stewart and Katie Glenn

Thirty states and the District of Columbia have legalized marijuana for medical purposes,[1] while recreational marijuana is legal in nine states and the District of Columbia.[2] Cannabis sales are skyrocketing, with an estimated $9.7 billion in legal marijuana sales last year in North America.[3] In June 2018, the U.S. Food and Drug Administration (FDA) approved a new drug for rare seizure disorders that contains a plant-derived, highly purified form of cannabidiol (or CBD),[4] the first FDA-approved drug derived from marijuana.[5] As of October 17, 2018, cannabis products are legal, although regulated, in Canada.[6]

However, under U.S. federal law, the cultivation, distribution, and possession of marijuana are prohibited by the Controlled Substances Act of 1970, which classifies the plant as a Schedule I substance and imposes criminal penalties for engaging in proscribed activities.[7] Businesses in the cannabis sector therefore face potential federal prosecution and exposure to criminal penalties. The resulting uncertainties present significant hurdles for the cannabis industry and contribute to a risk profile that insurers approach with caution or avoid altogether.

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