As part of its “adult-use” marijuana regulations, which are expected to take effect next week, the Commonwealth of Massachusetts will require that “Marijuana Establishments” – which include cultivators, manufacturers, and retailers – procure commercial liability insurance in established amounts. Massachusetts’ new regulations are the most recent reminder that cannabis-related businesses must be aware of state regulations and their insurance requirements.
On March 9, 2018, Massachusetts’ Cannabis Control Commission (the “Commission”) “filed its finalized regulations” intended to govern the Commonwealth’s adult-use marijuana industry with the Commonwealth’s Secretary of State. The “regulations are not yet in effect. … The regulations will become effective when published in the Massachusetts Register.” They “are on track to be published on March 23, 2018.”
Pursuant to Section 500.105(10)(a) of the finalized regulations, “Marijuana Establishments” are required to
obtain and maintain general liability insurance coverage for no less than $1,000,000 per occurrence and $2,000,000 in aggregate, annually, and product liability insurance coverage for no less than $1,000,000 per occurrence and $2,000,000 in aggregate, annually, except as provided [elsewhere in the regulations] or otherwise approved by the Commission.
The deductible for each policy shall be no higher than $5,000 per occurrence.
Section 500.105(10)(b) of those regulations further provides that if a “Marijuana Establishment … documents an inability to obtain the minimum insurance coverage required under [Section] 500.105(10)(a) [it] may place in escrow a sum of no less than $250,000 or such other amount approved by the Commission, to be expended for coverage of liabilities.”
These insurance requirements for Massachusetts’ adult-use marijuana industry mirror the requirements that the Commonwealth already imposes on its medical-marijuana industry.
Awareness and understanding of regulations such as these is important for any cannabis-related business. Familiarity with insurance-related regulations specifically can be particularly important when purchasing insurance. That said, even after procuring coverage, it is imperative for a cannabis-related business to stay up to date on the applicable regulations. Knowledgeable legal counsel can offer significant assistance in that regard.