Marijuana liability

Pot’s Legalization Will Test Liability Standards

By: | March 3, 2014

Roberto Ceniceros is a retired senior editor of Risk & Insurance® and the former chair of the National Workers' Compensation and Disability Conference® & Expo. Read more of his columns and features.

Marijuana’s legalization will require a risk management response for a range of liability-related issues, from workers’ compensation defense to commercial general liability policy exclusions.

That is becoming clear in Colorado, one of two states that are now experimentation centers for how the nation — and the insurance industry along with it — will adapt to legalized pot.


With the Risk and Insurance Management Society soon headed to Denver for its annual conference, there is a lot of joking across the property/casualty industry about the legal access to marijuana in Colorado.

But by the time conference attendees arrive there they will find their industry is already in the midst of serious consideration over the range of marijuana-related insurance considerations.

Certain Colorado hotels, for instance, want to move into the bourgeoning marijuana tourism business and like other companies they need CGL policies. But some underwriters are looking to exclude “marijuana related activities” from their general liability coverage, said Vance O. Knapp, an attorney at Sherman & Howard L.L.C. in Denver.

Knapp, who represents hotels among other clients, is known for his expertise on marijuana and employer liability, and will be among speakers on the topic at the RIMS conference.

The property/casualty industry already has some expertise in underwriting marijuana business. I recall in 2010 writing about London insurers providing various policies for medical marijuana growers and retailers in California and other states.

But with pot recently legal in Colorado, Washington, and probably more states in the future, laws on related liability issues are just emerging.

One of the most closely watched cases on the topic so far involves Brandon Coats, a Colorado quadriplegic and licensed medical marijuana user fired in 2010 by Dish Network L.L.C. after he tested positive for use of the drug in violation of the employer’s policy.

In an April 2013 ruling, the Colorado Court of Appeals upheld Coats’ firing.

That case is now before Colorado’s Supreme Court.

Colorado’s high court will likely uphold that finding, Knapp says. But if the Supreme Court overturns the lower court ruling it would undermine employers’ zero-tolerance drug policies.

Those policies impact everything from worker safety and workers’ comp claims defense to employers’ third party liability.

Another threat comes from Colorado plaintiff attorneys’ desire for the state’s lawmakers to adopt a law so that employees can only be terminated or disciplined if their employer can show the employee is actually impaired or under the influence.

Impairment is a substantially different standard than testing positive for the drug’s use.

Knapp says there is potential for that issue to appear before Colorado’s legislature in the future because marijuana proponents are “very vocal” and it would be a “cash cow” for plaintiff attorneys bringing unlawful-termination lawsuits.

That too would impact a range of business liability exposures and is just one example of legal issues still to be settled, although some courts have already weighed the difference between being impaired by marijuana and merely testing positive for its presence in the body.

On February 27, for instance, the Supreme Court of Arkansas overturned lower court findings that two men who tested positive for marijuana use after a workplace accident could not pursue workers’ comp claims.


Flames engulfed the men using an acetylene torch to cut the top off a barrel that exploded. Testimony in the case focused on their pot use away from work and whether they appeared intoxicated on the job.

The Supreme Court eventually found that while the two tested positive for marijuana use they showed the accident was not occasioned by that use.

I suspect more states will either legalize marijuana for recreational consumption or adopt medical use laws that essentially make pot semi-legal. As that happens expect to see more courts tackle the extent of employer liability.

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