Health Hazard Exclusions in Cannabis Product Liability Policy Policies - What You Need to Know
Exclusions for Health Hazard (HH), have been the black sheep in cannabis product liability forms for a long time. Many agents and policyholders refuse to accept quotes that include those two words.
All insureds should have product liability coverage, without any restrictions for any illness, disease or condition. However, the absence of a HH exclusion on the forms list does NOT necessarily mean that coverage is more extensive.
Insurance professionals must be able to recognize the differences between the various coverage options available for cannabis insurance. This is because it is a risky market. Many cannabis insurance companies use proprietary coverage forms, which embed exclusions that are not apparent in standard ISO forms or from a cursory form list review.
This nuance is missing from statements like "Health hazard exclusions eliminate all bodily injury coverage", a common refrain when talking about cannabis product liability. Although it may seem true for the most general versions of the form it is misleading as it misclassifies all HH exclusions on the market as a single, standardized version. The statement implies that policies that don't contain a HH exclusion will cover a wide range of medical conditions.
This article will discuss the exclusions for health hazards and how to ensure that your clients have the right coverage.
Exclusions from Health Hazards
There are many HH exclusions. Each form must be evaluated according to its entire wording. All HH exclusions are essentially void of coverage for certain conditions that can be caused by cannabis use.
Exclusions for broad health hazard exclude coverage for a wide range of medical conditions and illnesses. These exclusions use general terms like "any kind of disease" or "disruption in organ function" to describe claims that might be covered for BI caused from the insured products.
While limited health hazard exclusions often start with broad language for chronic diseases that result from long-term cannabis use, they can be distinguished by exceptions for injury or poisoning. These exceptions can vary greatly. These exceptions vary greatly. Some forms provide coverage for acute poisoning only if the product is contaminated or adulterated. Others extend coverage to all acute poisoning and illnesses resulting from cannabis use.
Only a few carriers will cover cannabis product liability without any type HH exclusion. This allows for the most comprehensive coverage on the market. ISO coverage forms are used by carriers without any variation in HH exclusion. This allows for easy comparison of non-standard exclusions.
Condition, Illness, and Disease Exclusions
Even though carriers don't use an HH exclusion, most carriers still offer similar forms with different names. Exclusions for diseases, conditions and illnesses may be used as standalone forms, but they are often integrated into proprietary product liability coverage forms.
True specific disease exclusions list the diseases that are excluded from coverage. These include heart disease, cancer, and lung disease. They also exclude aggravation and exacerbation pre-existing conditions.
Broader forms of exclusions for specified diseases would be more appropriately called specified condition & disease exclusions. They also exclude respiratory and heart conditions in addition to those listed.
The most restrictive disease and illness exclusions exclude coverage for anyillness, or disease that is caused by cannabis.
Coverage In Practice - 2019 Vape Crisis
In September 2019, there were many reports of severe respiratory injuries and death related to vaping products. As of February 2020, the Centers for Disease Control reported a total of 68 deaths from vaping products and 2,807 hospitalizations due to e-cigarette use-associated lung injury (EVALI). Although the CDC strongly linked the EVALI epidemic to vitamin Eacetate, an ingredient in unregulated and black-market vape products, they could not exclude the possibility of other chemicals contributing to the outbreak.
Although increased awareness and enforcement have been shown to reduce the incidence of these injuries, there are still some anecdotal examples and the CDC no longer tracks statistics.
EVALI's Impact on the Regulated Cannabis Industry
EVALI can be largely attributed unregulated cannabis products. However, state-licensed cannabis producers have also faced product liability claims with similar allegations. Even if the claim is unfounded and the insured is not found negligent, the cost of defending such claims could run into the hundreds or even thousands of dollars.
How would these exclusions apply to a claim like this? Each claim is unique and coverage decisions must be made within the context of the entire policy. However, EVALI provides a valuable case study that allows you to see how exclusion terminology could be applied to new injuries allegedly caused cannabis consumption.
The CDC states that most EVALI cases involve people who inhaled vape products containing vitamin E. Acetate. This can cause lipoid pneumonia. 2 Does this constitute a disease, condition or illness?
Legal Barriers Created by Unified Interpretation of Medical Terminology
The policy does not usually define the terms "condition", or "disease", so they may be left open to interpretation by the insurers and courts. "Condition" can be defined as "a health problem that has certain characteristics or symptoms." 3 "Illness," a similar broad term, refers to "an unhealthy state of mind or body."
EVALI cases would be generally considered to be acute poisoning or illness. Although it would be a medical condition, the question of whether it should be considered a disease is open to discussion.
When determining coverage, it is important to consider whether the allegation involves acute injury that occurred at a particular time and whether the claim falls within an exception for acute injury.
A vape product containing non-cannabis ingredients intentionally added by the manufacturer would not meet the commonly used definitions "contaminated", but could be "adulterated," especially since the ingredient is not disclosed on the label.
Conclusion
Courts have held that ambiguous coverage forms should always be interpreted in favor the insured. However, affirmative coverage is preferable, particularly as many cannabis operators remain skeptical about insurers' willingness and ability to defend claims. Although the cannabis industry has yet not seen any multi-million dollar product liability claims to test the claims handling procedures of insurers, there is still potential. The nuances of coverage forms will play a significant role in determining whether policies provide coverage or not.
Retail agents and brokers should partner with wholesalers who are experts in cannabis to ensure that their clients have the best possible coverage. Amwins employs many cannabis specialists to provide professional, casualty, and property coverages.
Source: https://www.amwins.com