1 Medical Marijuana: Will P/C Insurers Be The Only Ones Holding The Bag?Michael N. Tanoue September 9, 2015

2 Hawaii’s Medical Marijuana LawHawaii’s medical-use-of-marijuana law was enacted in See Act 228 (2000). “A qualifying patient or the primary caregiver may assert the medical use of marijuana as an affirmative defense to any prosecution involving marijuana,” provided they strictly comply with the requirements of the law. HRS § (a). However, Hawaii U.S.D.C. ruled that Act 228 actually “legalized” medical marijuana. Tracy v. USAA, 2012 WL (D. Haw. 2012).

3 Hawaii’s Medical Marijuana LawUnder HRS § (a), “the medical use of marijuana by a qualifying patient shall be permitted only if: “The qualifying patient has been diagnosed by a physician as having a debilitating medical condition”; The physician has certified in writing that “the potential benefits of the medical use of marijuana would likely outweigh the health risks for the particular qualifying patient; and The amount of marijuana possessed by the “qualifying patient” does not exceed an “adequate supply.” HRS § (a). The “qualifying patient” must also register with the Dept. of Health. HRS § (b).

4 Hawaii’s Medical Marijuana LawDefinitions of key terms: “Qualifying patient”: “a person who has been diagnosed by a physician as having a debilitating medical condition.” See HRS § “Adequate supply”: “an amount of marijuana jointly possessed between the qualifying patient and the primary caregiver that is not more than is reasonably necessary to assure the uninterrupted availability of marijuana for the purpose of alleviating the symptoms or effects of a qualifying patient’s debilitating medical condition ” HRS §

5 Hawaii’s Medical Marijuana LawEffective 1/2/15, “adequate supply” shall “not exceed seven marijuana plants, whether immature or mature, and four ounces of usable marijuana at any given time.” “Debilitating medical condition” means: Cancer, glaucoma, HIV; Chronic or debilitating disease or medical condition or its treatment that produces one or more of the following:

6 Hawaii’s Medical Marijuana LawCachexia or wasting syndrome; Severe pain; Severe nausea; Seizures, including those characteristic of epilepsy; and Severe and persistent muscle spasms, including those characteristic of multiple sclerosis or Crohn’s disease. Any other conditions approved by Dept. of Health by administrative rule.

7 Summary of Act 241 (HB321, HD1, SD2, CD1)Approved by Governor on July 14, 2015. Effective Date: July 1, 2015. Legislative Findings Hawaii’s medical use of marijuana was enacted on June 14, 2000 (HRS §§ to ). Law was silent on how patients can obtain medical marijuana if they or their caregivers are unable to grow their own supply.

8 Summary of Act 241 (HB321, HD1, SD2, CD1)Legislative Findings Hawaii has nearly 13,000 qualifying patients. A regulated statewide dispensary system was urgently needed by qualifying patients. Purpose of the Act is “to establish a regulated statewide dispensary system for medical marijuana to ensure safe and legal access to medical marijuana for qualifying patients.”

9 Summary of Act 241 Requires licensure of “medical marijuana dispensaries” – a person licensed to “own, operate, or subcontract up to two production centers and up to two retail dispensing locations.” Dept. of Health shall issue 8 dispensary licenses statewide: 3 for Honolulu. 2 each for Maui and Big Island. 1 for Kauai.

10 Summary of Act 241 Dispensary licensees are not subject to the prescription requirements of HRS § or to the board of pharmacy licensure or regulatory requirements under HRS Chapter 461. Dept. of Health must make dispensary licensing application forms available on 1/11/16.

11 Summary of Act 241 Licensees selected will be announced by 4/15/16.Retail dispensing licensees: May begin dispensing on 7/15/16 with Dept. of Health approval. Cannot open before 8:00 a.m. Must close by 8:00 p.m. Must be closed on Sundays and official state and federal holidays.

12 Summary of Act 241 Each dispensary licensee may commence dispensing marijuana and manufactured marijuana products to qualifying patients and primary caregivers no sooner than 7/15/16. “Marijuana”: in general, the plant (genus) Cannabis. See HRS § “Manufactured marijuana products”: “any capsule, lozenge, oil or oil extract, tincture, ointment or skin lotion, or pill that has been manufactured using marijuana.” Query: Is Marinol® a “manufactured marijuana product”?

13 Summary of Act 241 “Qualifying patient”: definition remains the same, i.e., “a person who has been diagnosed by a physician as having a debilitating medical condition.” “Debilitating medical condition”: definition remains the same, except for inclusion of “post-traumatic stress disorder.” “Primary caregiver”: definition remains the same, i.e., an adult (other than the patient or the physician) “who has agreed to undertake responsibility for managing the well-being of the qualifying patient with respect to the medical use of marijuana.”

14 Summary of Act 241 “A dispensary shall be prohibited from off-premises delivery of marijuana or manufactured marijuana products to qualifying patients or to primary caregivers of qualifying patients.” “[A] qualifying patient or the primary caregiver of a qualifying patient may receive manufactured marijuana products at a retail dispensing location following completion of a sale.”

15 Summary of Act 241 Types of manufactured marijuana products: Capsules;Lozenges – “a small tablet manufactured in a manner to allow for the dissolving of its medicinal or therapeutic component slowly in the mouth”; Pills; Oils and oil extracts; Tinctures; Ointments and skin lotions; and Other products specified by the Dept. of Health.

16 Summary of Act 241 Packaging of manufactured marijuana products:One “dose” of any capsule, lozenge or pill shall contain no more than 10 mg of THC. Any multiple-dose package or any container of oil shall contain no more than 100 mg of THC per pack or container. Dispensing limits for marijuana: No more than 4 oz. in a consecutive 15-day period. No more than 8 oz. in a consecutive 30-day period.

17 Summary of Act 241 A qualifying patient and a primary caregiver may cultivate or possess an “adequate supply” of medical marijuana: The definition of “adequate supply” was amended to specify that “[t]he four ounces of usable marijuana shall include any combination of usable marijuana and manufactured marijuana products , with the marijuana in the manufactured marijuana products being calculated using information provided [by the manufacturer as required by law].”

18 Summary of Act 241 Authorized sources after 12/31/18:Licensed dispensary, provided that the marijuana or manufactured marijuana product is “purchased and paid for at the time of purchase”; or Cultivation not exceeding “adequate supply.” After 12/31/18, no primary caregiver will be allowed to cultivate for a qualifying patient. Certifying physician must have a “bona fide physician-patient relationship.”

19 Will P/C Insurers Be The Only Ones Holding the Bag?Medical insurance probably will not cover medical marijuana. HMSA said it will wait for approval from the FDA before considering covering medical marijuana. Pacific Business News, July 22, 2015. Family Health Hawaii reportedly is willing to talk to dispensaries and doctors about the viability of covering medical marijuana. Id.

20 Will P/C Insurers Be The Only Ones Holding the Bag?Neither the ACA nor Hawaii’s Prepaid Health Care Act requires coverage for medical marijuana. Pacific Business News, July 22, 2015. The Controlled Substances Act (CSA), 21 U.S.C. § 801, et seq., designates marijuana as a Schedule I drug. “Congress expressly found that the drug has no acceptable medical uses.” Tracy v. USAA, 2012 WL (D. Haw. 2012).

21 Will P/C Insurers Be The Only Ones Holding the Bag?The U.S. Supreme Court and other federal courts have held that, under the Supremacy Clause, federal law prevails over state law, and, under federal law, the possession and cultivation of marijuana for medical use is illegal. Gonzales v. Raich, 545 U.S. 1 (2005); see also United States v. Stacy, 2010 WL (S.D. Cal. 2010); Tracy v. USAA, 2012 WL (D. Haw. 2012).

22 Insurance Issues OverviewHRS § : “This part shall not be construed to require insurance coverage for the medical use of marijuana.” This statute: Is not limited to medical insurance. Tracy v. USAA, 2012 WL (D. Haw. 2012). May apply to all forms of insurance. Id. Does not preclude insurers from agreeing to provide coverage for medical marijuana. Id. In my opinion, may not preclude other statutes from requiring coverage for medical marijuana (e.g., HRS Chapters 431:10C and 386).

23 Insurance Issues A Hawaii statute governing homeowner’s insurance policies requires that there be an “insurable interest” in the property insured, and that the insurable interest must be “lawful.” HRS § 431:10E-101. Hawaii U.S.D.C. ruled that medical marijuana plants are “legal” under Hawaii law and that, therefore, a homeowner’s insured has a “lawful” interest in the plants. Tracy v. USAA, 2012 WL (D. Haw. 2012). But see Coats v. Dish Network, No. 13SC394 (Colo. Sup. Ct. 2015) (Colorado’s “lawful activities” statute governing employment actions does not protect employees who use medical marijuana since the term “lawful” refers to both state and federal laws).

24 Insurance Issues Common law rule: Courts may decline to enforce a contract (such as an insurance policy) that is illegal or contrary to public policy. Coverage for stolen medical marijuana plants is not available under a homeowner’s policy, even though medical marijuana is legal under Hawaii law, since the insured’s possession and cultivation of marijuana is still illegal under federal law. Tracy v. USAA, 2012 WL (D. Haw. 2012).

25 Insurance Issues Workers’ CompensationHRS § (a): “[T]he employer shall furnish to the employee all prescription drugs as the nature of the injury requires.” Apparently, Marinol® already has been prescribed and WC payments have been made, though the numbers are small. No hard caps on benefits. HRS § allows subrogation in third-party liability claims, so some of the benefits may be recovered.

26 Insurance Issues Auto Personal Injury Protection (PIP)HRS § 431:10C-103.5: The term “personal injury protection benefits” means “all appropriate and reasonable treatment and expenses necessarily incurred as a result of the accidental harm.” Even merely “palliative,” and not only “curative,” treatment is covered. Gamata v. Allstate, 90 Hawaii 213, 978 P.2d 179 (App. 1999). Limit of $10,000, unless Added PIP is purchased, then up to $100,000. Due to covered loss deductible, no PIP reimbursement allowed in majority of cases.

27 Insurance Issues Third-Party Liability CasesThe plaintiff is entitled to recover damages for medical services that are “necessary” as long as the charges are “reasonable” as required for the injuries sustained. Bynum v. Magno, 106 Hawaii 81, 101 P.3d 1149 (2004). Even if the liability policy does not apply, the insured is still liable for such damages. If a WC insurer asserts a subrogation claim, the liability insurer may have to pay.

28 Insurance Issues UM and UIM ClaimsHRS § 431:10C-301(b)(3): insurance for “the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles.” HRS § 431:10C-301(b)(4): insurance for “any person legally entitled to recover damages from owners or operators of underinsured motor vehicles.” If WC paid, there is no subrogation against a UM or UIM insurer.

29 Insurance Issues Property InsuranceCoverage for stolen medical marijuana plants is not available under a homeowner’s policy, even though medical marijuana is legal under Hawaii law, since the insured’s possession and cultivation of marijuana is illegal under federal law. Tracy v. USAA, 2012 WL (D. Haw. 2012). Consider: Even though marijuana is still illegal under federal law, the U.S. government is not expending resources to enforce marijuana laws in States where medical marijuana is legal.

30 Summary of Act 242 (SB1291, SD2, HD2, CD1)Amends HRS Chapter 329 to provide that: “No school shall refuse to enroll or otherwise penalize, and no landlord shall refuse to lease property to or otherwise penalize, a person solely for the person’s status as a qualifying patient or primary caregiver in the medical marijuana program under this part, unless failing to do so would cause the school or landlord to lose a monetary or licensing-related benefit under federal law or regulation.” For purpose of medical care, compliant use of medical marijuana shall not disqualify a registered qualifying patient from medical care.

31 Summary of Act 242 (SB1291, SD2, HD2, CD1)Amends HRS Chapter 329 to provide that: No qualifying patient or primary caregiver shall be denied custody, visitation or parenting time, nor shall there be a presumption of neglect of child endangerment. Amends HRS Chapters 421J (Planned Community Ass’n), 514A (Condominium Property Regimes) and 514B (Condos) to prohibit discrimination against medical marijuana users, “unless the [governing] document prohibits the smoking of tobacco and the medical marijuana is used by means of smoking.”

32 Summary of Act 242 (SB1291, SD2, HD2, CD1)Act 242 does not address employment discrimination against a qualifying patient. The original bill (which did not pass) did: It proposed amending HRS Chapters 329 and 378 to protect an employee who tests positive for the presence of marijuana, provided the employee is a “qualifying patient”; It specified that nothing in the bill shall be construed to authorize the use of medical marijuana in the workplace; and It specified that the bill would not supersede any statute, rule, contract, collective bargaining agreement, or workplace policy prohibiting an employee from being under the influence of marijuana while working in the workplace.

33 Will P/C Insurers Be The Only Ones Holding the Bag?