published in The Journal Record | August 9, 2018

The business community is abuzz with anticipation for the future of the medical marijuana industry in Oklahoma. The June election saw Oklahoma approve one of the nation’s most expansive medical marijuana laws, and more ballot initiatives are making their way to the voters.

These new laws explicitly contemplate recreational cannabis operations. It is an exciting time for entrepreneurs and companies looking to capitalize on a budding new industry. But when they do, they need to be prepared for old, familiar problems.

Businesses in Oklahoma are beset by lawsuits, and the marijuana industry will be no exception. Plaintiffs will sue for hurt feelings, things that never actually happened, and things that are not really a business’s fault. Common sense is not necessary or even encouraged for filing a lawsuit; all a plaintiff needs is a check for the filing fee and a map to the courthouse. There will, unfortunately, even be a very small number of lawsuits that have merit.

The growing medical marijuana industry faces real liability challenges. It has the environmental and agricultural concerns of farmers, the contract and tort problems of manufacturers, the compliance concerns of pharmaceutical companies, and the cash-heavy logistics of the convenience store industry. Cannabis cultivators, manufacturers, and vendors will all have different needs, and even non-cannabis businesses need to be concerned – I’m looking at you, landlords.

Businesses typically manage these risks with insurance policies. But the strange history of cannabis imposes unique challenges on the industry’s ability to acquire and use insurance. A given business might need coverage for general liability, product liability, crop insurance, medical liability, premises liability, employee misconduct, or third-party misconduct. But many insurers have no interest in offering coverage to marijuana businesses while federal prohibition remains in place. And some carriers that have insured marijuana businesses have later disputed claims, arguing that the policy is void for illegality or citing policy exclusions for federal contraband, scheduled drugs, or health hazards.

There are no easy answers to these questions. Entrepreneurs and businesses need to consider potential liability issues early and often when planning their new enterprises, and they should involve accountants, lawyers, and insurance brokers wherever possible to ensure both regulatory compliance and adequate protection. The plaintiffs will come – and when they do, you want to be in a position where you can just relax.