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Legalization of marijuana calls for ‘more thorough’ risk assessment from brokers: OIAA speaker


January 31, 2017   by Greg Meckbach, Associate Editor


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The legalization of marijuana for medicinal purposes is “creating a challenge” for claims adjusters and brokers alike, with a need for customized insurance policies for producers and for updating lease agreements, a speaker suggested at a conference Tuesday.

“Possession of marijuana in Canada at the moment is still not legal and the only permitted use is for medical use and it is highly regulated,” said Linda
Papadopoulos, vice president of corporate and risk management at brokerage Pearson Dunn Insurance Inc., during a conference session at the Ontario Insurance Adjusters Association’s professional development and claims conference.

During her presentation, Papadopoulos discussed the scenario of a loss where a claims adjuster finds out the “proximate cause” is the legal production of marijuana.

Parliament reflected in Bank of Canada building, Ottawa

“We as an office have not had that experience but we know of other claims where, because of the question marks and uncertainties, the insurer has paid for the loss but then very quickly came off risk as well,” she said. “Where we are being told of that type of situation, we’re having to place commercial insurance through some of the specialty markets where available right now that offer this type of insurance protection, on a personal liability policy, and that’s creating challenges for adjusters. It’s creating challenges for brokers.”

Some insurers are providing coverage for licensed producers of medical marijuana in Canada, she reported.

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“Whether these licensed producers are commercial establishments or private home owners, in fact the legalization of marijuana can provide an opportunity for the creation of new insurance products but you have to watch those risk controls,” she told attendees. “As insurance advisors and brokers, we now have to do a more complete and thorough risk assessment.”

Brokers who do not ask clients the right questions can face errors and omissions risk, Papadopoulos suggested during her presentation, titled Uber and Marijuana – Managing the risks in order to avoid loss.

“These two risks of uber and the legalization of marijuana have been very challenging for all types of clients in the past year,” she said. “Both the legalization of marijuana and uber are relatively new in Canada.”

She drew comparisons to cyber a few years ago, when there was “maybe a small handful” of insurers covering cyber risk, she suggested.

“Today almost every insurer and their uncle is offering some form of cyber protection and coverage and this increased supply of the product has actually driven down the cost, generally and relatively speaking,” she said. “I see this happening with the emerging legalization of marijuana and even uber.”

With the uber transportation service, the challenge for insurance professionals is “a lack of consistency in our municipalities as to how the service is regulated, if at all,” she said, noting she “applauds” Intact and Aviva for designing a product for Ontario auto.

“I think every auto insurer should have an endorsement or a rider available for uber operations,” she said, but there is still a challenge with accident benefit claims.

“When there is an accident benefits claim, how do you as adjusters pick the pecking order? That’s my biggest challenge,” she said. “I have a problem right now understanding the pecking order when there is an automobile loss with respect to accident benefits. Now you introduce the uber element.”

The legalization of marijuana for medical use raises questions as to whether lease agreements need to be changed.

“I am working with lawyers right now with the Hamilton Law Association just to talk about clauses in tenant-landlord leases,” Papadopoulos noted. “A lot of these clauses in landlord-tenant agreements have very outdated clauses. Some have templates that still refer to comprehensive general liability and that product hasn’t been around for years or they refer to ‘bodily injury’ as ‘personal injury’ and we know as an insurance and claims group that they are very different things.”