Insurers and licensees alike concerned over Michigan cannabis liability insurance

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The state’s new legislation could force insurers and licensees to suddenly jump through complex hoops.

Michigan’s new cannabis liability insurance legislation has now become effective and may unintentionally force companies and their insurers in the state to have to scramble to ensure they are compliant with the mandatory and complex changes.

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The state moved forward in quite a surprising way with the requirements without consulting the insurance industry.

The Michigan cannabis liability insurance regulations went into effect quite suddenly without consultation with the insurance industry on the mandates’ feasibility. Many in the cannabis and insurance industries are expecting that by moving forward in this way, there will likely be unintended problems for both types of company.

The requirements have been laid out in the state Senate Bill (SB) 461 and Public Act (PA) 55. SB 461 was approved by state Governor Gretchen Whitmer in late December last year. It requires product liability coverage by licensed businesses. Each licensee or licence applicant is required to file “proof of financial responsibility” of at least $100,000 per license with the Marijuana Regulatory Authority (MRA). It must cover liability for bodily injury resulting from the production, distribution, sale or transportation of “adulterated” cannabis or cannabis products. By “adulterated”, the bill offers the definition of being “a product sold as marihuana that contains any unintended substance or chemical or biological matter other than marihuana that causes adverse reaction after ingestion or consumption.”

Cannabis liability insurance

In order to comply, licensees are required to purchase cannabis liability insurance with specific criteria.

The businesses need coverage that must include the following:

  • Having been issued by a licensed insurer in Michigan.
  • Does not contain a provision, limitation, condition or stimulation that relieves the insurance company of payment liability for any claim for which the act holds the insured company responsible.
  • Covers qualifying patient bodily injuries, including those incurred by intentional licensee conduct (though not if it occurred with the intent to cause harm).

The cannabis liability insurance must also meet a series of other requirements, including being signed for “attestation of compliance” by one of the insurer’s officers. Without meeting all the requirements, a business’ license will be suspended.

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