Cannabis industry participants face heightened risks when purchasing and using insurance products.

Generally speaking, disputes between carriers and insureds are not infrequent; however, coverage disputes in the cannabis industry can be of a different caliber altogether. There is ample evidence suggesting that, on a very basic level, cannabis industry participants face heightened risks when purchasing and using insurance products, with the end result being that many operators believe they have adequately insured potential risks when in fact they haven’t.

In this white paper we discuss several key areas for cannabis industry operators to consider when purchasing insurance:

  • Make sure all risks are insured
  • Be wary of exclusions
  • Choice of law provisions
  • Choose advisors & business partners carefully

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Chapter 1 – The Double-Edged Nature of the FDA Approval Process

2018 proved to be a very busy (and frankly dizzying) year for the cannabis industry as three more states, including Missouri, passed laws legalizing some form of cannabis use, bringing the total number of such states and U.S. territories to well over thirty, despite the fact that cannabis, and its use, remains unlawful, under federal law that is. Today, there are thirty-three states that allow for medical use of cannabis, while ten states have legalized the recreational use of cannabis.  What is more, several state governments and governors are expected to prioritize new cannabis-related policies in 2019. As more states decide to permit various uses of cannabis, one issue that remains generally unanswered lies at the intersection of these emerging state laws and U.S. patent law, which falls within the exclusive purview of the federal government, both statutorily and in enforcement of patent rights.

Continue Reading Unique Issues with Cannabis-related Patents and Their Enforcement

New development business concept

Yesterday, Laura A. Labeots, Ph.D., J.D., posted an update on the significant changes to the Agricultural Improvement Act of 2018 on our Food & Agribusiness blog.

What does this post mean for the cannabis industry?

Since much of cannabis is asexually produced, it appears that marijuana and industrial hemp cultivators can utilize the Plant Variety Protection (PVP) certificate to exclude competitors from utilizing its genetics for hybrids. While we will closely monitor the industry’s ability to utilize the PVP certificate going forward, initially this looks like a viable mechanism to protect your intellectual property (IP) that was otherwise unprotectable a few weeks ago.

Some cannabis cultivators and manufacturers believe they are exempt from OSHA visits because the Federal government does not recognize cannabis as a legal drug. On June 19, 2018, a worker in a California cannabis manufacturing facility was using propane to extract oil from cannabis flowers. The propane ignited and exploded, leaving the employee with serious injuries.  The incident was followed by an investigation by California OSHA.  According to a California Department of Industrial Relations press release, the Cal/OSHA investigation revealed the employer did not test the atmosphere inside the work area for flammable gases or vapors before allowing equipment to be operation. Cal/OSHA wrote the company up for 10 violations, including failure to identify hazards and provide PPE, failure to maintain equipment in a safe operating condition, failure to protect workers around flammable vapors, failure to train employees, and failure to establish an emergency action plan and a hazard communication plan. The proposed penalty amount for the 10 alleged violations is $50,470.

Is your facility OSHA compliant? OSHA has jurisdiction to inspect your facility and will conduct an inspection/investigation if there is an accident or an employee complaint. Contact one of our safety and health attorneys for more information on safety compliance or how to handle an OSHA inspection/investigation.

Congratulations to Steve Levine for being named as a Top Lawyer in Marijuana Law by 5280 Magazine for the fourth year in a row. Since 2010, Steve’s major focus has been on the ever-changing cannabis industry where he keeps abreast of the shifting regulations governing the sale and use of cannabis in both the marijuana and industrial hemp sectors. He leads the firm’s cannabis practice in both Colorado and California. Read more about this recognition in our news release.

After a lengthy compromise process, The Agriculture Improvement Act of 2018 (the 2018 Farm Bill) was passed on December 12, 2018 by Congress and delivered to the White House for the President to sign. The 2018 Farm Bill will replace the Agriculture Improvement Act of 2014, which expired on September 30, 2018. Distributing more than $850 billion, the 2018 Farm Bill is an enormous piece of legislation and funds programs such as crop insurance, school lunches, and the Supplemental Nutrition Assistance Program (SNAP).

Integrated into the massive omnibus Farm Bill is the bipartisan Hemp Farming Act of 2018, spearheaded by Senator Mitch McConnell. The Hemp Farming Act will legalize at the federal level the production of industrial hemp, defined as Cannabis sativa L. plants containing less than three-tenths of a percent of THC, the intoxicating chemical in marijuana. The low concentration of THC makes these plants unsuitable for marijuana production, which remains federally illegal.

First and foremost, the 2018 Farm Bill will abolish this inconsistent treatment by removing industrial hemp from the definition of “marihuana” in the Controlled Substances Act (CSA). In addition, tetrahydrocannabinols contained in industrial hemp will be removed from the purview of the CSA. This amendment to the CSA will decriminalize the production and use of the Cannabis sativa L. plant and its derived products that match the definition of industrial hemp, such as hemp seed oil, CBD oil, hemp fibers and hemp paper. Continue Reading Industrial Hemp: On the Brink of Legalization

While the basic principles of due diligence still apply, vetting existing marijuana and hemp businesses presents some unique variables and risks.

The cannabis industry is expected to grow exponentially over the next decade. Cutting a deal at this stage could potentially reap outsized rewards, but as ever, deals carry with them a certain element of transactional risk.

In this white paper we discuss:

  • Assessing financial statements
  • Intellectual property due diligence
  • Business and regulatory relationships
  • Regulatory compliance

Read this white paper to learn more about a more customized approach to cannabis industry-related due diligence.

 

Download the White Paper