Colorado Executive Order Allows Cannabis and Hemp Curbside Pickup
Governor Jared Polis has signed an executive order due to the impact of the coronavirus allowing medical and recreational stores to accept online, phone, and curbside pick up. The emergency rules are effective for the next 120 days.
Please read the rule changes in blue carefully.
Executive Order D 2020 11
Colorado Emergency Rule Adoption Response to COVID-19
43 Insurance Enforcement Actions Charged against Washington Licensees
The Gum Wall in Seattle Washington
State of Washington is Serious about Enforcement of Cannabis Insurance Laws
Enforcement of cannabis insurance laws was something we wanted to know was actually being performed in Washington. Sure enough, the State of Washington Liquor and Cannabis Control Board (“LCCB”) mandates by law cannabis licensees must procure insurance under statute cited in §WAC 314-55-082 Insurance Requirements. The State of Washington is one of the few states to include insurance as a condition of being a licensee. The regulations essentially states the purpose, guidelines, and meeting certain coverage limits to include naming the LCCB as a additional insured, etc…..
As a result, we were curious to know if any actions had been taken against licensees for failing to buy cannabis insurance by contacting the LCCB who promptly responded.
Since 2015, there have been 43 enforcement actions charged against various licensees for violating §WAC 314-55-082. Based on the report, it would appear most licensees are receiving a verbal warning. However, a certain number of licensees were given multiple warnings including written, suspension, and eventually fined.
There have been a total of 4r licensees who have been fined for failing to buy insurance in Washington. In 2015, there were a total of 18 insurance violations. The lowest number of citations was in 2017 with just 1.
Is the LCCB enforcing the purchase of product liability insurance?
This information was requested, but the report only indicates the licensee had violated §WAC 314-55-082.
This information would have been important to know if the LCCB was enforcing their interpretation of the statute to buy product liability coverage as it was reported here some confusion had previously existed on the interpretation of this statute.
Less than 1% chance of being cited, but not worth the risk
In our opinion, the State of Washington continues to demonstrate they have the most active and stringent cannabis laws of any state. The chance of being cited for operating without the proper insurance is low. With approximately 1,500 licenses, that chance is less than 1%.
However, the enforcement actions do indicate the LCCB will continue to punish those who operate without insurance.
This is a risk most licensees will want to avoid.
Source: Washington Liquor and Cannabis Control Board
Washington LCCB Appears Now to Require Product Liability Insurance for Cannabis Licensees
The Washington State Liquor and Cannabis Control Board (“LCCB”) seems to be reversing their initial opinion on whether product liability insurance was a requirement by statute (WAC 314-55-085) for its licensees. Internal communication by the department seems to indicate product liability insurance will be understood as a being part of the statute.
We have consulted with internal staff, and would like to take this opportunity to clarify that commercial general liability insurance is required for all licensees under WAC 314-55-082. This coverage would cover instances of product liability claims. More information is also available at the Office of Insurance Commissioner’s website, here: https://www.insurance.wa.gov/your-insurance/business-insurance/marijuana/. If you have questions about that, please reach out to OIC.
Source: Washington State LCCB Amanda Smith, Forms and Records Analyst 07-17-2018
Need to cover instances of product liability claims
While not clearly stated in the statute (WAC 314-55-085), this additional communication “This coverage would cover instances of product liability claims” (emphasis added) does appear the direction the LCCB is taking when defining the type of insurance they mandate upon their licensees.
WAC 314-55-085 does provide an indication of the intentions of those who wrote this section.
The intent of the required insurance is to protect the consumer should there be any claims, suits, actions, costs, damages or expenses arising from any negligent or intentional act or omission of the marijuana licensees.
However, the statute would have been less ambiguous by naming the coverage lines such as “products and completed operations” or “product liability.” The statute could be further interpreted to include “professional liability” based on the broad nature of protecting the consumer from “any claims.”
Another issue with this wording is “intentional acts” are typically not the types of claims covered by insurance. If someone is acting with intent to harm the consumer, then most claims of this nature are likely to be considered outside the scope of insurance due it be intentional as opposed to accidental. Intentional acts should be removed from the statute.
Lack of pesticide testing is good reason to transfer this type of risk to the insurance industry
In our opinion and clearly conjecture, the lack of any pesticide testing on cannabis products could be a strong reason the statutory opinion was astutely reversed to transfer any and all underlying risks to the insurance industry covering future product liability claims.
If you’re the LCCB, then protecting the regulatory agency from pesticide lawsuits would be prudent. These types of claims have not surfaced, but could be laying dormant for future insurance carriers to worry about. Furthermore, the statutes require the LCCB is named as an additional insured, primary and non-contributory, and waiver of subrogration. The LCCB will be protected by the insurance of their licensees.
In the future, the LCCB is likely to become vigilant with enforcing product liability insurance is not excluded, but a coverage line purchased by the licensee.
Need to buy product liability insurance in Washington?
Product liability insurance is available in the marketplace by a small number of insurance carriers making it expensive for many licensees particularly those just starting up. These are separate insurance policies from the primary commercial liability. The price for this type of insurance is based on revenue along with other factors such as the type of operation and product mix.
This additional expense is compounded by the fact the market price for cannabis is low in the State of Washington. Many 502 producers are hanging by thread and additional insurance is not affordable.
Colorado Flower and Trim Pesticide Testing Starts August 1st
Cultivators and Optional Premises Must Start Pesticide Testing
The Colorado marijuana industry is less than one month away from being required to pesticide test flower and trim starting on August 1, 2018. Medical and retail concentrates are not required to pesticide test due proficiency limits not being established.
What licensees are required in Colorado to test?
Medical Marijuana Optional Premises Cultivation
Retail Marijuana Cultivation Facilities
Six Colorado Labs Currently Certified for Testing Pesticides
As of now, there are currently six labs certified for testing pesticides.
AGRICOR LABORATORIES LLC
GOBI ANALYTICAL INC
NORDIC ANALYTICAL LABORATORIES LLC
PHYTATECH CO LLC
RM3 LABS COLORADO LLC
TERRA HEALTH CARE LABS INC
According to the Colorado Marijuana Enforcement Division, the purpose of pesticide testing is a matter of public health and safety.
Impact of Not Testing on your Product Liability Insurance Coverage
What does pesticide testing mean for companies with product liability insurance?
Be compliant and test for pesticides! Cannabis insurance companies offering product liability coverage will be particularly interested their customers are following the rules. A lawsuit by a cannabis consumer claiming damages for pesticides is most likely to result in a product liability insurance claim. If a lawsuit was to occur, the insurance carrier will verify if pesticide testing was being performed by their insurance customer with the mutual understanding no banned pesticides were used during cultivation accordingly.
If pesticide testing was not being followed, the insurance carrier will have a stronger position to deny the claim based on exclusions such as this one used by Knight Specialty Insurance Company:
to any Claim arising out of any Named Insured’s Products manufactured, handled, sold, developed, designed, created, tested, leased, licensed, rented, marketed, disposed of or distributed in knowing or willful violation of any State law, statute, ordinance or regulation;
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Colorado MED Bulletins on Licensees Making Recommendations for Pregnancy Related Morning Sickness
Colorado MED Bulletins for Packaging and Labeling
The Colorado Marijuana Enforcement Division has issued an updated bulletin to cannabis licensees who may be recommending cannabis to women who are pregnant. The first bulletin was issued on May 24, 2018. An updated bulletin was issued on June 4, 2018 reference language to be added to the warning label effective July 1, 2018.
Both of these bulletins essentially refer back to the original packaging and labeling bulletin issued on 02/16/2018.
Beginning July 1, 2018 – “There may be long term physical or mental health risks from use of marijuana including additional risks for women who are or may become pregnant or are breast feeding. Use of marijuana may impair your ability to drive a car or operate machinery.”
Warning labels are not only important for public safety, but protect the cannabis licensee from additional liabilities. If you’re concerned about additional protection, licensees may want to consider professional and product liability.
Updated Bulletin 18-06 Updated (06/04/2018)
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Original Bulletin 18-06 (05/24/2018):
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Packaging and Labeling Rules 18-03 (02/16/2018)
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Colorado Bulletin on 420: Be Safe and Don’t Lose Your License
With 4-20 just around the corner, the Colorado Marijuana Enforcement Division issues a bulletin reminding the industry of what you can and can’t do. For licensees participating in any 4/20 events, please be safe and obey the law. Losing your license just isn’t worth it.
Below are considered unlawful acts:
Buying, selling, transferring, or acquiring medical or retail marijuana in a manner not
permitted by the Colorado Medical Marijuana Code and Colorado Retail Marijuana
Offering for sale or soliciting an order for medical or retail marijuana except within
the Licensed Premises of the Medical Marijuana Business or Retail Marijuana
Establishment specifically designated for such sales;
Consuming or allowing the consumption of medical or retail marijuana on a Licensed
Providing public premises for the purpose of consumption of medical or retail
Displaying any signs that are inconsistent with local laws or regulations or using
advertising material that is misleading, deceptive, or false, or that is designed to
appeal to minors;
and Having on the licensed premises any medical or retail marijuana or marijuana
paraphernalia evidencing the consumption or use of the marijuana.
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