Page 17 - May2017

Ultimate “In Colorado, lawfully possessed, For instance, Wells points out that Connecticut allows for

the possession of up to 2.5 ounces of “useable marijuana”
processed marijuana is not excluded and
for medicinal purposes.
is limited to the personal property limit of
the homeowners policy,” Allstate said in a
Guide to statement that year. “Whether it is medical “If 2.5 ounces were stolen or lost in a fire, the value of that
or non-medical is not relevant to coverage.
loss would probably be less than $1,000,” Wells says. “And
Fire is a covered peril, and coverage of an
an insurance company isn’t going to go to the mat over
accidental fire would not be impacted by
such a small claim.”
Marijuana whether or not it was started in connection Nonetheless, there is a lot of money at stake here on the
to lawful marijuana use.”
whole. According to Forbes, the legal U.S. marijuana

market exceeded $6.5 billion in sales in 2016, and that
They added that marijuana plants grown
number is only projected to climb in the coming years.
with a state license - and not exceeding
the legal state limit - would be “limited
to the perils and limits under additional “First and foremost, the insurance industry needs to figure
out whether or not they want to cover marijuana losses,
protection for trees, shrubs, plants and
Use & lawns.” and if they do they need to be prepared to pay claims.
Insurance more perplexing problem of marijuana’s exclude it,” Wells says. “But that still doesn’t solve the
But, says Wells, this does not address the
If not, they need to change their contracts to expressly
monetary value and conflicts between state
bigger problem of how to value the plants. What is a fully-
and federal laws.
grown marijuana plant worth? No one has an answer to
that yet.”
By Nick DiUlio “Even if insurers are writing policies in line
with state laws, there’s the critical problem Marijuana and Life Insurance
of valuation,” says Wells, who is currently
working on an update to her seminal As more and more Americans legally smoke cannabis for
2014 paper title Marijuana Legalization: recreational and medicinal use, life insurance providers
Implications for Property/Casualty have had to grapple with its impact on the application and
Insurance. “It’s incredibly hard to establish underwriting process.
a market value for marijuana across the
board, and how this is handled is going to According to insurance specialist Michael Quinn, life
vary from state to state.” insurance providers are wrestling with whether or not
smoking marijuana carries the same health risks as smoking
For instance, a federal court in Hawaii cigarettes.
ruled in 2012 that a homeowners policy
did not cover the theft of her marijuana “Regular smokers are charged tobacco rates, which are
plants grown for medicinal use. often four times higher than those for non-tobacco users,”
Quinn says. “But some insurers are deciding to treat
The homeowner, Barbara Tracy, was marijuana differently.”
allowed to grow and possess marijuana
for her own medical use, and after 12 plants were stolen For instance, Prudential tends to offer some of the lowest
she submitted a claim to USAA for $45,600. USAA initially life insurance rates for medical marijuana users because
agreed to pay Tracy $8,801 for the claim, but Tracy sued, they do not place them in the same risk pool as cigarette
claiming the plants had a far greater value. smokers.

USAA argued that because marijuana is federally classified “Based on your marijuana use alone, there is no telling
as an illegal Schedule I substance (akin to heroin, what kind of rates you will be offered. You could
morphine, and LSD) they were under no obligation to technically get rates anywhere from substandard to
cover the loss at all. The court ultimately agreed with preferred plus,” Quinn says. “However, Prudential looks
USAA, stating that even though Hawaii law permits the at the reason behind your medical marijuana use, and this
use of marijuana for medicinal use it is illegal under the means that your rates will be based on the severity of your
Controlled Substances Act and therefore not subject to health condition.”
homeowners’ insurance coverage.
For instance, let’s say a hypothetical man named Jim
Some states are pre-emptively combatting these types of smokes medical marijuana to help with insomnia. As a
conflicts by including language in marijuana legalization 50-year-old in otherwise perfect health, Prudential would
laws that prevents insurers from denying claims like offer him a preferred plus non-tobacco rate.
Tracy’s.
If, however, Jim uses medicinal marijuana to ease the
For instance, Oregon’s Control, Regulation and Taxation symptoms of multiple sclerosis, he would get a higher rate
of Marijuana and Hemp Act states, “No contract shall be based on the severity of the condition being treated, not his
unenforceable on the basis that manufacturing, distributing, use of marijuana.
dispensing, possessing or using marijuana is prohibited by
federal law.” Nonetheless, the extent to which your life insurance might
be affected by smoking marijuana will depend on the
In other states, possession limits are so low that insurance individual insurer and the frequency of your use.
companies aren’t bothering to fight claims.

may 2017 insight 17