Kanna Knowledge 

Your Source For News and Commentary on Cannabis
for the Insurance Industry

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by Michael B

In this 2021 year-end issue we’re pleased to bring you a foursome of opening articles … plus this special note to readers:

The Chicago Sun-Times has been covering cannabis industry developments in the city and Illinois for several years now. On December 12 they posted a six-page article about the quality of cannabis being sold in Chicago and Illinois. This is of note for insurers and sellers, because there were wide-spread discrepancies in what the vendors were offering and what was in the products. IF ANY READER WOULD LIKE A COPY PLEASE SEND YOUR REQUEST TO  [email protected] and I will send you one. This article is also online for subscribers.


Can You Smell That Smell?

The smell of cannabis is distinct and hard to forget. If one walks down a street in a legal state the odor is present without exception. It is skunk-like, pungent, sticks to clothes and is challenging to be rid of. In high rise apartments there have been thousands of complaints.

There is a new study by California scientists that have recognized the chemical compounds responsible for the insidious odor, which up until now has ben attributed to terpenes. Cannabis produces 150+ so it is quite expected that the smell would be unique with an unforgettable aroma.

Abstrax Tech in California has discovered a collection of compounds called prenylated volatile sulfur ingredients (VSCs) which are related to skunk spray. The company used a specially developed 2D chromatography system with several detectors to analyze cannabis flower from several varieties. They discovered that the odors are at their greatest and most concentrated at the end of the flowering stage. This product was most pungent in vaping products. Ironically, VSCs may be able to provide cardioprotective and anti-cancer benefits.

Why is this situation important for insurance? Well, if someone owned a food store or restaurant near a dispensary and there was weed being smoked on the street what effect would that have on customers? The answer is not clear, but it is safe to assume that a food emporium would be very unhappy and file a claim or lawsuit if the terpenes were discouraging customers to come in and buy/eat their food products.

While this scenario seems a stretch there are dispensary, restaurant and apartment building cases based on these grounds in California and elsewhere, which illustrates the increasingly common anti-cannabis zealots of the world causing trouble for even a licensed business and eventually its insurance carriers. Please be aware of this in insurance wordings and coverages.


Your (Ana)Log Is Lifting Me Higher

Kanna Knowledge has written extensively about psychoactive products being sold in dispensaries without proper consumer warnings being put on the packaging. That danger is ever present and Kanna Risk Management has a drawerful of these inadequately labeled products bought in-person at dispensaries and online.

Now we want to discuss HHC-O and cannabinoid acetates.

In short, THC-O is an analog of THC with similar chemical structures — but as we know from chemistry minor changes to a compound in a laboratory frequently result in substantial changes to the effect on a human brain. Acetate versions are synthetic and can only be manufactured in a laboratory often by a chemist. These acetates ARE NOT FOUND IN THE CANNABIS PLANT.

Often being sold HHC products are a simplified version of Delta-9 THC, the regular THC emanating from cannabis. The essential difference here is that HHC is hemp derived and so is legal in all 50 staes since the 2018 farm bill.

American scientist Serge Christov reports that his team has found an efficient way to manufacture THC-O. The product is distilled and subjected to SALLE (salting-out assisted liquid-liquid extractions) with hexane followed by SALLE with petroleum ether before being distilled again to obtain a refined THC-O-acetate product for commercial sales.

The value? These compounds are much stronger than their plant-derived relatives and will get users higher. At this juncture limited studies show that while HHC products are more intoxicating, claims made by retailers regarding its legality and where it comes from are misleading at best, if not outright lies.

In assessing the market value of these compounds, we must forget that potency is not the only issue. The overall effect on the user comes to the fore. One does get higher with these new compounds and unstable personalities might engage in dangerous activities like driving. Additionally, after use of these compounds it takes 1 to 5 days to be clean. Lastly, with drug testing these compounds appear instantly.

There are very few HHC-O dispensaries selling this product. But the word on the street and in newsletters is that vapes, edibles and tinctures are on the way for retail sales. Are these products listed in your client’s product list? Please check this out.


Cannabis Transport:

More Than Meets The Eye

What are the liability exposures for cannabis in transit?

With legal reform picking up on a daily basis, licensees must transport marijuana by themselves. Most of theses companies have insurance coverage for damage or theft: CGL.

In most states licensed businesses are required to buy CGL from licensed carriers, of which there is a paucity. But many of these contracts exclude “in transit” product, so the manufacturers/sellers should have their own coverages and not rely on the transporters. One positive of this approach is that the sending company knows the actual retail value of its product. Many insurance carriers underwrite cargo-in-transit no matter who is delivering. This issue needs to be resolved at the underwriting stage.

Next on the watch is what do cannabis companies need to prepare for when mailing hemp product to legal jurisdictions where compliance is an issue. USPS, UPS, and FedEx are the major carriers in the United States. It is important that senders know the policy(ies) of these companies before sending packages to paid customers. Kanna Risk Management has had deliveries of samples stolen from the packages, informed that the delivery was returned to the sender with no reason and received letters saying this was an illegal activity: all for no justifiable cause. Is there a property claim here? Talk to your carriers.


Weather I’m Right
Or Weather I’m Wrong

The USDA requires that hemp be tested within 15 days of harvest but many states have objected to this as too narrow and  are asking for a 30 to 45 days’ time frame. The reason is that most, if not all states do not have enough capacity to do this nor even to implement the new state regulations for growing selling and regulating hemp/cannabis crops.

Inclement weather brought on by climate change has also affected plants and this also will have an effect on THC levels which spike the longer the hemp is in the dirt. In North Carolina for example, the harvest time is April through October and the non-compliance rate has been as high as 51%. There is a dire need for understanding the chemistry of the crop with more research, even though cannabis companies are plunging ahead into the market.

Ben Thomas, director of Montana’s Department of Agriculture, believes that a risk-based approach to sampling and testing would be fairer and more appropriate. Montana has a list of cultivars that tested well below the Federal threshold of .3% THC.  Thomas has stated that wheat is not tested for THC, and neither should be cannabis.

Tom Melton, a North Carolina State professor and chair of the N.C. Industrial Hemp Commission, says that without federal government resources, sampling of ALL THE CROPS IS IMPOSSIBLE. And with North Carolina now approaching 1,500 hemp growers in the state, a total regulatory framework is not in the cards.

Another issue facing growers is the paucity of available licensed testing facilities. The USDA requires ALL hemp to be tested at a laboratory registered with the U.S. Drug Enforcement Administration (DEA). Several labs across the United States have applied for certification but many regions and states do not even yet have ONE certified lab, let alone enough to handle their number of growers.

Bruce Kettler, the director of Indiana’s State Department of Agriculture, reports that plant stresses such as drought, flooding, extreme nutrient levels, heat, cold, etc. can all cause THC spikes. The National Association of State Departments of Agriculture (NASDA) has urged the    federal government to set the THC threshold at 1% and allow states to decide what to do with hemp that tests above .3% THC. Plants that are too high in THC could be used for biomass or non-human consumption, he says. The USDA has been intransigent on this issue and so the argument goes on.

These issues are all part of the gigantic puzzle of the Federal authorities still seeing all cannabis as a regulated narcotic: when this changes so will there be a relaxation of regulations.

I encourage our readers to examine, IN THIS ISSUE, a wrongful death suit recently filed that illustrates how complex the product content, advertising, labeling and usage factors are configured. Brokers…please be certain that your clients are using approved laboratories for putting their product on the market. Insurers will eventually get this and deny coverage for incorrectly-labeled products that might cause bodily harm and dangerous behavior.

In addition, here are 4 terrific books on cannabis for your holiday reading:

  • by Bruce Barcott
  • edited by Char Miller
  • by Lester Grinspoon M.D. (a pioneering early study of weed)
  • by Colin Felton (helping sellers avoid exaggeration when making claims)

See you in January….be safe and well….Michael B