Canadian Underwriter

How your commercial clients are exposed to pot liability even if they don’t produce cannabis

January 25, 2019   by Greg Meckbach

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Marijuana poses a liability risk for commercial clients even if they are not in the cannabis business, an insurance lawyer suggests.

Suppose your client operates a hotel where a party takes place. If someone smokes cannabis at that party, drives, causes a collision and injures someone, the hotel could be named in a lawsuit by the vehicle accident victim.

“If the hotel operator was aware that there was a party being held on their premises where people were consuming cannabis to the point of intoxication and then driving, they could be found liable,” said Ari Krajden, litigation lawyer for Kawaguchi Krajden LLP.

Krajden’s work includes advising brokers on the effect of cannabis legalization.

Even if your commercial client is not in the cannabis business, that client can face host liability risk related to marijuana use. This means the client could potentially be named as a defendant in a personal injury lawsuit if the plaintiff alleges the client failed to exercise due diligence.

“The legal question is whether a duty of care can be established and whether conduct falls below the standard of care,” said Krajden.

“In the specific scenario of a hotel operator, the questions will be whether they reasonably should have known that there was a danger and did they take reasonable actions to reduce the likelihood of the danger.”

In Canada, as of Oct. 17, 2018, it is no longer criminal offence for adults to possess up to 30 grams and for people younger than 18 to possess up to five grams of dried cannabis.

A lottery for would-be cannabis bricks-and-mortar retailers in Ontario was held earlier this month. Right now, the only way to buy recreational cannabis in Ontario is to order online from the Ontario Cannabis Store, a government-run monopoly. But the province plans to let 25 privately-run stores open, with licensing administered by the Alcohol and Gaming Commission of Ontario.

If you place insurance for one of these stores, they will face liability risk. “A private retailer owes a duty of care to it’s customers and to the public at large,” said Krajden. “In a sense, a private retailer faces the same potential liability risk as an alcohol retailer.”

If a private retailer is named as a defendant in a personal injury lawsuit, “the legal question will be whether their actions or inaction fell below the standard of care,” Krajden said. “Practically speaking, retailers will require training similar to the Smart Serve course that is required for alcohol retailers. Cannabis retailers will have to be mindful of to whom they are selling, what that person’s current level of intoxication is, and whether [the buyers] pose a danger to themselves or the public.”

Krajden’s specialties includes insurance coverage disputes and personal injury lawsuits.


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