Eastern NC CPCU I-day 2014: Hot Topics in Insurance
Guess Who? 1700’s
• Diaries show he grew hemp for 30 years.
• Especially interested in medicinal use of
• Diary entries also show he grew a marijuana
with a high THC content.
• Brought marijuana from Egypt to France.
• Victorian times: used for muscle spasms,
• Queen Victoria is said to have used it for menstrual
• French doctor studied it and found
– Relieved headaches
– Increased appetite
– Aided sleep
• Accepted in Western medicine!
• 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.
• 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.
• Aspirin and other
• “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
• Federal Controlled Substances Act passed.
• Declares cannabis a “Schedule 1” drug:
– High potential for abuse
– No recognized medical use
– Lack of accepted safety
• 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
Our Friends in the High-er Latitudes
• 2003: Canadian HIV-patient Jari
Dvorak becomes the first
Canadian patient to receive
– 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
21 States Allow Medical Marijuana
• New Hampshire
• New Jersey
• New Mexico
• Rhode Island
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
users in states that
have determined that
–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.
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
The Current Medical Marijuana
• Handled through excess & surplus lines markets
• Available Coverages Include:
– Theft coverage for valuable crops
– Workers compensation coverage for employees of the
– Auto liability for employees who deliver marijuana to
– 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
• Homeowner & Dwelling
• Personal Auto
• Homeowner & Dwelling
• Personal Auto
• Personal Umbrella
• Workers Compensation
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
– 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
– So, it seems
• no coverage whatsoever for business plants
• Limit of $500 per plant for recreational or medicinal plants
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
– 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
– “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
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
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.
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
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
• 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
• Liability for disciplining an employee over the use of
social media (which is technically employment
– But then again, how about liability to employees who feel
they are bullied by social media?
Social Media Liability Risks
• Section 7 Rights
– Forming or attempting to form a union among the employees of
– 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
• Employees sharing a grievance? Can’t really do anything
• A lone employee out complaining and groaning? Maybe
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
– 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
– Two coworkers doubted plaintiff's ability to be
effective in her role-- sufficient evidence of a
"substantial disruption" in their working
“Free Speech” has to be widely
• 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
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
• 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
• 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
• 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?
• CPCU Collegiate Studies Program
• National Alliance UACIC Program
• Involving students in industry functions,
– 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
– Bring them for a campus visit, too!