New research linking cannabis consumption to a range of health risks could increase product liability exposure for the expanding industry.
Insurance coverage for the cannabis sector, which has grown significantly in recent years as more states legalized the drug, is expanding, experts say.
But policyholders should check their contract language to make sure potential exposures linked to health problems are covered, they say.
Some medical studies show a connection between cannabis use and increased risk of cardiovascular disease.
A study by researchers affiliated with Stanford University concluded that frequent, but not occasional, cannabis use was associated with an increased risk of coronary artery disease.
“Compared with never users, daily cannabis users had an increased chance of developing CAD,”; according to an abstract of the study presented at the American College of Cardiology’s annual scientific session held in conjunction with the World Congress of Cardiology.
“An important question is whether cannabis can trigger a serious cardiac or vascular event such as a serious cardiac arrhythmia, heart attack or stroke,” said Ian Stewart, chair of the national cannabis and hemp law practice at Wilson Elser Moskowitz Edelman & Dicker LLP in Los Angeles.
Further research may be needed before the true extent of any exposure is known in more detail, he said.
Most studies on the cardiovascular risk of cannabis use have been short-term, observational and retrospective, Stewart said. Long-term, prospective studies controlled with product and dose standardization would be more reliable, he said.
The liability insurance market for the cannabis sector is limited in large part due to concerns about insuring an industry that produces a product that is illegal under federal law. However, the insurance market is expanding and the demand for coverage is increasing.
Managing general underwriter CannGen Insurance Services LLC has seen an increase in coverage applications from operators such as edibles manufacturers as manufactured products continue to gain additional market share in the cannabis industry, said Charles Pyfrom, Livermore, Calif.-based chief marketing officer.
MGU offers limits up to $5 million for general liability and $10 million for product liability on a separate form, he said.
Coverage language is also changing to reflect newer consumption practices.
“In the product liability space, we’re seeing people take higher limits on insurance,” said Los Angeles-based Brad Rutt, senior vice president and national cannabis practice leader at Hub International Ltd.
Claims are also increasing, he said.
“We’re starting to see an increase in product liability claims. I’ve seen more product liability claims in the last 18 months” than in the previous five years, Mr. Rutt said.
Product liability coverage for cannabis companies varies widely in terms of contract language and often includes exclusions for conditions that develop over time, such as cancer or cardiovascular disease, he said.
The extent of coverage, wording and definitions vary among cannabis products liability policy forms, said Michael H. Sampson, a partner with Leech Tishman Fuscaldo & Lampl LLC, who leads the law firm’s insurance group.
A policyholder should find out if a policy includes a health risk exclusion, for example, even if it’s called by a different name, he said.
“If you’re not careful, you think you’re getting a policy with no health risk exclusion, but as it turns out, it’s just under a different name in the policy,” Mr. Sampson. Policyholders “must understand what they’re getting and what they’re not getting.”
Larger, sophisticated operators in the cannabis sector buy product liability insurance along with other standard policies, including property, auto liability and workers’ compensation, he said. An operator’s annual revenue, the number of states in which it operates and the number of facilities to be covered will all affect the limits, he said.