Eastern NC CPCU I-day 2014:  Hot Topics in Insurance
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Eastern NC CPCU I-day 2014: Hot Topics in Insurance



My presentation at CPCU I-day on marijuana legalization

My presentation at CPCU I-day on marijuana legalization



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Eastern NC CPCU I-day 2014:  Hot Topics in Insurance Eastern NC CPCU I-day 2014: Hot Topics in Insurance Presentation Transcript

  • Guess Who? 1700’s • 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 THC content.
  • 1799? • Brought marijuana from Egypt to France.
  • 1840’s • Victorian times: used for muscle spasms, rheumatism, convulsions. • Queen Victoria is said to have used it for menstrual cramp relief. • French doctor studied it and found – Relieved headaches – Increased appetite – Aided sleep • Accepted in Western medicine!
  • 1850 • Marijuana was in United States Pharmacopeia an official public standards-setting authority for all prescription and over-the counter medicines – Treatment for numerous afflictions, including: neuralgia, tetanus, typhus, cholera, rabies, dysentery, alcoholism, opiate addiction, anthrax, leprosy, incontinence, gout, convulsive disorders, tonsillitis, insanity, excessive menstrual bleeding, and uterine bleeding, among others.
  • 1925 • Following a wave of prohibitionist tendencies: – No alcohol – No gambling • Not outlawed due to any problems caused by cannabis… just a general “sentiment” that future use should be prohibited. • League of Nations (“Second Opium Conference”) – Signs ban on cannabis against anything other than scientific or medical research.
  • 1936 • Aspirin and other analgesics are supplanting cannabis • “Reefer Madness” – a morality tale of how cannabis ruins the life of its young protagonist • All states have now outlawed it for anything other than prescribed medical purposes
  • 1970 • Federal Controlled Substances Act passed. • Declares cannabis a “Schedule 1” drug: – High potential for abuse – No recognized medical use – Lack of accepted safety
  • Let’s Reschedule… • 1972: Petition submitted to what is now the DEA to reschedule marijuana to Schedule II, enabling legal physician prescription. – Court battles ensue for 22 years. – 1994, US Court of appeals upholds the DEA’s decision not to reschedule. • 1995: Second petition filed to reschedule it. • 1997: NEJM publishes editorial calling for rescheduling.
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  • Our Friends in the High-er Latitudes • 2003: Canadian HIV-patient Jari Dvorak becomes the first Canadian patient to receive government-grown marijuana. – In response to an Ontario court order for the Canadian government to make a legal supply of marijuana available to authorized patients. – Qualified patients are approved through Health Canada, and the marijuana is distributed through the patients' physicians.
  • 21 States Allow Medical Marijuana • Alaska • Arizona • California • Colorado • Connecticut • D.C. • Delaware • Hawaii • Illinois • Maine • Massachusetts • Michigan • Montana • Nevada • New Hampshire • New Jersey • New Mexico • Oregon • Rhode Island • Vermont • Washington
  • Colorado Washington
  • A Favorable Climate? • 2009: Obama Administration instructed Federal prosecutors not to target medical marijuana dispensaries and users that were in compliance with their respective state laws (Barrett, 2009). • 2011: Canadian judge required the auto insurance system to fund medical marijuana for an man injured in a car accident….ordered the insurer to pay for the greenhouse, utilities, soil and plants… (Jones, 2011).
  • Today, still illegal at Federal Level, but… "It would not make sense for us to see a top priority as going after recreational users in states that have determined that it's legal…“ –President Barack Obama
  • TODAY’S INSURANCE ISSUES The Marijuana Exposure
  • 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 to under $20 a pound with full-blown legalization. Prohibitions & Wholesale Cost Consumption
  • How Do We Treat Other Vices?
  • The Problem for P&C Insurers • We know about 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 marijuana available to a third party • Potentially high concentrations of value in any one home.
  • The Current Medical Marijuana Insurance Market • 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 breached or stolen Source: Ceniceros (2010)
  • Today’s Property & Casualty Policies Property Coverages • Homeowner & Dwelling • Personal Auto • Farm • Businessowners • BPP Liability Coverages • Homeowner & Dwelling • Personal Auto • Personal Umbrella • Farm • Businessowners • CGL • Workers Compensation
  • HOMEOWNER FORMS An Analysis of Marijuana Exposure
  • HO Section I: Property Coverage • No exclusion for damage or destruction of contraband, including illegal marijuana. • But, we would not expect the courts to require the insurer to pay for something that is expressly forbidden by law, right? – What if it’s legal at the state level and illegal at the Federal level? – Insurance exempts itself from federal oversight....so one could argue that the state law should also prevail in these cases.
  • Provisions for Harvested Marijuana • 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 business purposes • Appears to be no other limitation on recreational or medicinal supplies of marijuana
  • Provisions for Live Marijuana Plants • Additional coverages for trees/shrubs/plants limit coverage to selected perils, up to 5% of limit of liability, but no more than $500 per 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
  • Tracy v. USAA • Hawaii resident asked her homeowner’s carrier to pay over $45,000 for 12 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 arising therefrom shall be enforceable… except for the benefit of persons having an insurable interest…Insurable interest means any lawful and substantial economic interest…. – USAA also argued that because the plants were illegal under Federal law, to cover marijuana would be against public policy. • The court agreed with USAA and denied Tracy’s claim entirely.
  • 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 a Controlled Substance as defined by the Federal Food and Drug Law at 21 U.S.C.A. Sections 811 and 812. Controlled Substances include but are not limited to cocaine, LSD, marijuana and all narcotic drugs. However, this exclusion does not apply to the legitimate use of prescription drugs by a person following the lawful orders of a licensed health care professional.”
  • What Are Insurer Responsibilities? • No responsibility to cover any liability for damages caused out of the homeowner’s recreational possession or use of marijuana, whether it is legal or illegal in the state. • Possible (?) responsibility to cover liability arising out of the use of medical marijuana in a state where medical marijuana is legal.
  • Barnett v. State Farm • In 2007, a California man had his marijuana plants confiscated and destroyed by police officers. • He filed a claim with State Farm under his homeowners policy for theft of the $98,000 worth of plants, which had been prescribed for him by a doctor. • The carrier denied the claim, and its right to do so was upheld on appeal. WHY???
  • Medical Marijuana Coverage Challenge • The claim denial was based on the fact that the seizure by police did not meet the definition of “theft” – There was no criminal intent behind the seizure (Murphy, 2011)
  • 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 marijuana supplies, stock, and growing crops • The personal and commercial lines underwriting processes need refinement to evaluate and price for the exposure to loss
  • • Release of confidential information – Especially risky in healthcare and law • Legal and regulatory compliance violations – Law is always changing • Identify theft or high-jacking – Someone posing as you/your company, or, – Stealing confidential customer data and then committing identity theft • Liability for disciplining an employee over the use of social media (which is technically employment practices liability). – But then again, how about liability to employees who feel they are bullied by social media? Social Media Liability Risks 3/21/201
  • NLRA • Section 7 Rights – Forming or attempting to form a union among the employees of a company. – Joining a union whether the union is recognized by the employer or not. – Assisting a union to organize the employees of an employer. – Going out on strike to secure better working conditions. – Refraining from activity on behalf of a union. • Section 8(a)(1) forbids an employer from interfering with any of the Section 7 rights, so…. a violation of anything in Section 7 is pretty much a violation of 8(a)1.
  • • Use information found on social media to violate EEO laws and protected classes • Use private and password protected sites without permission (Konop vs. Hawaiian Airlines, 2002) • Prohibit employees from criticizing employer – Social media is the “new watercooler” according to the National Labor Relations Board. – Employee’s comments must be meant to improve working conditions, and not just the venting of individual grievances. • Employees sharing a grievance? Can’t really do anything • A lone employee out complaining and groaning? Maybe (Probably?) What Employers CANNOT Do
  • NLRB “Advice” Memo • Employee of Price Edwards & Co. posted this on her FB page: The next person who speaks to me as if I am somehow their servant, dumps an unlabeled cardboard box of files in my office, or directs me to do something that isn’t my goddamn job (have we heard of asking?) is going to wish very heartily that they had not. • Employer’s handbook contained this Electronic Communications policy: The facsimile machines, voice mail, e-mail and Internet systems are to be used primarily for business communications. Incidental brief personal use is permitted. Instant messaging with friends or surfing the net during working hours is not permitted. Price Ewards [sic] & Company prohibits any communications that are obscene, harassing, discriminatory or inflammatory. No salary information can be transmitted via e-mail. • Did the employer violate the NLRA by: – interrogating an employee about work-related complaints posted on her Facebook page? NO – instructing that employee not to access Facebook at work or post similar comments on Facebook at any time; and YES – maintaining an electronic communications policy which prohibits emails containing salary information, “inflammatory” communications, and instant messaging with friends or surfing the Internet during working hours? YES
  • Guevarra v. Seton Medical Ctr Nurse Guevarra posted: "Instead of spending my birthday celebrating, I will be working all night cleaning up feces. I hate loathe that effin heffer!!! Burn in hell you effed up spawn of satan. I curse you and wish you a lifetime of pain and suffering. That is not enough, right now I would give anything you smack you down and pound you to unconsciousness. Tang ina mo!!!!!"
  • • Guevarra filed for unemployment – Denied on myriad grounds, including that the Facebook post undermined workforce morale and violated Seton's policy prohibiting harassment and the use of abusive language or behavior. • Guevarra sued for violation of First Amendment right to free speech, breach of contract, etc. – Lost on mostly procedural grounds
  • Shepherd v. McGee • First Amendment affords greater free speech protections for government employees relative to those in the private sector, BUT…. – Courts will balance the interest a governmental entity may have in regulating speech versus the constitutional rights of the speaker. • The plaintiff, a CPS worker, sued her former employer under a theory of First Amendment retaliation. – Plaintiff said firing was a result of derogatory Facebook comments she made about individuals on public assistance – On multiple occasions, the plaintiff posted to her Facebook derogatory remarks about individuals on public assistance, including a suggestion of sterilization for individuals who have previously had their parental rights terminated. – After an investigation, she was fired
  • • The court agreed that the state had adequate justification for firing her: – her posts irreparably impaired her ability to perform her duties, since every time she appeared in court to testify on a CPS matter, she would immediately be impeached by the defense attorney. – Two coworkers doubted plaintiff's ability to be effective in her role-- sufficient evidence of a "substantial disruption" in their working relationships.
  • “Free Speech” has to be widely disseminated • Speech protections are greater when the speech in question is at the core of First Amendment or is disseminated to a wider audience. – plaintiff admitted they were meant to be humorous and ironic, and therefore the posts did not constitute "speech intended to help the public actually evaluate the performance of a public agency." – plaintiff had customized her Facebook settings to allow only her designated Facebook friends to view her posts, so they were not intended for a wider audience.
  • Patterson v. Grant • Grant was passenger on Southwest. – Bought business class ticket – Tried to board early with her 4 year old child who did not have a business class ticket. – She proceeded to tweet unkind things about the flight attendant. • Flight attendant sued Grant for defamation and portraying her in a false light. – Charges dismissed by trial court – Tennessee appeals court upheld the false light charge
  • • Federal judge in the Eastern District of Virginia dismissed the lawsuit, ruling that – Merely “liking” a page was insufficient speech to merit constitutional protection. • Appellate court ultimately reversed decision allowing the lawsuit to proceed again. • Sheriff in Hampton, Virginia – Fired six of his workers when one of them ‘liked’ the Facebook page of an individual running for election against the Sheriff. – The employees sued.
  • • Court’s justification: – “Carter’s clicking on the ‘like’ button also caused an announcement that Carter liked the Campaign Page to appear in the news feeds of Carter’s friends. And it caused Carter’s name and his profile photo to be added to the Campaign Page’s ‘People *Who+ Like This’ list... it becomes apparent that his conduct qualifies as speech.” – “That a user may use a single mouse click to produce that message that he likes the page instead of typing the same message with several individual key strokes is of no constitutional significance… it is the Internet equivalent of displaying a political sign in one’s front yard, which the Supreme Court has held is substantive speech.”
  • • Need to fill 400,000 jobs by 2020 • Baby boomers retiring faster than new people can enter the market • Generation gaps present challenges How Bad Is It? 3/21/201
  • Best Practices • CPCU Collegiate Studies Program • National Alliance UACIC Program • Involving students in industry functions, including – Having free or low-cost student memberships – Monthly meetings – Good works projects – National conventions
  • What ARRRGH We Doing? • Advisory board formed last Spring (2013) – Curriculum committee worked over the summer to revise entire curriculum • Launched CPCU Collegiate program Fall 2013 • Launched UACIC program Fall 2011 • Encouraging CPCU on independent study • Formed Gamma Iota Sigma Chapter
  • How You Can Help • Serve as a mentor/resource person • Let someone shadow you for the day • Hire a student intern • Call us FIRST when you have entry-level jobs • Spread the word about our program • Remind your kids and grandkids that this is an exciting business – Bring them for a campus visit, too!
  • Please sponsor! Visit us at www.ecurmi.com
  • Now… who is ready to feel REALLY old????