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We recently discussed issues around the uniqueness of worker’s compensation claims for cannabis businesses. All states require worker’s comp coverage to be purchased for employees, which is intended to cover injuries, medical expenses, lost wages (although not 100%), and death benefits, with no fault attribution. And there is legal remediation for contested cases. Let’s start out with some history.

Modern European worker’s comp protections first developed in the 1800’s and spread to the states during the industrial revolution. But ancient Sumeria, Greece, Rome and China had laws that originated in 2050 B.C. Pirate ships, which were well organized enterprises, suffered from bad weather, used manual labor and often had ship mates using hand to hand combat to settle disputes while on long-seaward journeys. There is a story that Captain Morgan granted different pieces of eight for arms and legs that were injured or lost.

In the early years of United States industrialization, workers often had to file cases against their employers and many times did not receive adequate benefits. Factory safety was nascent and hygiene conditions were in many situations deplorable. The early statutes were all found unconstitutional, but President Taft in 1908 signed the Federal Employers Liability Act which was the beginning of our now more equitable system.

Many workers were not covered though, including farm workers, domestics, certain railroad people, and employers with 3-5 employees. The new cannabis industry is paying for comp which is a comprehensive benefit package. BUT…the raw and packaged material in a THC facility or dispensary might be the cause of injury if an employee uses that product being produced and sold. This creates an entirely new arena for plaintiff lawyers who represent injured insureds. In 2021, the number of disputed cases is rapidly growing. Employers must develop new ways to test, verify, and perhaps challenge worker’s comp claims and lawsuits.

In early United States worker’s comp programs, employers had to determine and prove whether there was Contributory Risk, Assumption of Risk by the employee, and/or if the “fellow servant” rule applied —whether a co-worker caused the injury. With the publishing of The Jungle by Upton Sinclair in 1906, revealing the toxic work conditions in Chicago’s stockyards, situations began to change and new laws were enacted beginning with Wisconsin in 1911. However, it took until 1948 for all states to pass protection laws for workers.

So what are the hazards with operating a cannabis business? Some are familiar, but many are new and cannabis brokers, insurers and employees need to be able to verify that an injured employee was or was not complicit in an injury produced by the utilization of THC-infused product. In addition, carriers must establish guidelines for accepting coverage in cannabis businesses. It is possible that policy wordings need to be changed along with the behavior of the state’s commissions that hear contested cases. The final rules are not being worked on as of yet, but they will be soon. So brokers … be certain that your cannabis businesses are alerted to these issues and their coverage will be responsive. The usual rules of “duty to defend” may be in play.

See you next time …

Michael B