With Thursday’s Senate approval of Bill C-45, Canada’s legal landscape for marijuana possession has been cleared. From an insurance perspective, Canada’s decision to lift a 95-year prohibition on recreational cannabis has the potential to cause many pitfalls in all areas of coverage and claims. These include the obvious impact on auto policies to the more subtle impact on health insurance, statutory accident benefits and product liability. Canada’s pragmatic approach to regulating cannabis will likely result in many sleepless nights and headaches for insurance underwriters who have less than a month to play catch-up in considering the implications of Bill C-45 to insurance policies. Also, what impact will Bill C-45 have on insurance premiums?
While there are certain similarities with alcohol-based impairment and cannabis-based impairment in the context of third-party motor vehicle liability, other forms of insurance, most notably homeowner’s insurance, will be impacted. Although large-scale grow-ops will remain illegal and void most homeowner’s policies that are faced with related claims, there remains uncertainty with the home cultivation of cannabis (it is anticipated that homes will be limited to four plants per dwelling) that will be legal under Bill C-45. Given the inherent dangers and potential damage caused by home cultivation (water damage, fire, mould, etc.), it is anticipated that the approach will be a recognition of the increased risk of claims to “all perils” policies. This will be similar to having a swimming pool, and thus prompting insurers to address such potential claims as an added risk reflected in insurance premiums. Speaking of premiums, a recent US survey noted that in every state where recreational marijuana has been legalized, but one state, auto insurance rates increased at a rate that was double that of those states with a full ban on cannabis.
Furthermore, it is anticipated that Bill C-45 will also have an impact on health insurance and statutory accident benefits. Given that various companies (Loblaws and Shoppers Drug Mart) previously announced that they would include medical marijuana in their employee benefit plans, and various statutory accident benefits’ decisions have approved the reasonableness of referrals for medical marijuana, where does the legalization of cannabis fit into this equation? As both health insurance and first-party auto insurance policies have addressed the anticipated changes of Bill C-45 in advance of July 1, 2018, there is less concern regarding the ongoing impact on such policies.
Finally, given the commercial nature of cannabis legalization, the potential exists for product liability claims. Although slight, it is anticipated that such claims would affect a large number of people and have significant legal potential.
At the end of the day, and like other recent social changes that have impacted on insurance coverages, there is little doubt that insurers and their counsel will adapt to the changes created by Bill C-45. This includes undertaking an analysis of current insurance policy exclusions and prohibitions, and establishing a framework that addresses the above concerns to ensure that claims are appropriately adjusted.
Seth Kornblum represents national and international insurance clients and self-insured companies on insurance defence litigation matters.
Do you have questions about this topic? Email Seth at firstname.lastname@example.org or call him at 416-306-1790.