Takeaways from Our Conversation with a Cannabis Business Plaintiff’s Attorney
Michael Sampson probably hasn’t built a rabid fanbase of followers among insurers and insurance attorneys, but his perspectives on loopholes in coverages and bad faith claims might pique their interest.
And what Sampson has built is a reputation as subject matter expert and a cannabis business plaintiff’s attorney. Sampson is a partner with Leech Tishman, where he leads the insurance coverage group and co-leads the cannabis industry group. He is also set to teach an inaugural “Cannabis in the Law” course in the fall at the University of Pittsburgh School of Law.
For our latest Insuring Cannabis podcast, we spoke with Sampson about the loopholes and miscues waiting to take a bite out of somebody’s bottom line. Following are takeaways from that conversation.
Sampson was asked to ID weaknesses or loopholes he sees in policies being offered to cannabis companies.
“There are, I think a couple different weaknesses or concerns that come up when looking at the policies that are being marketed and sold to cannabis related businesses,” Sampson said. “One is there still is not much variety in insurers who are willing to write the policies as perhaps you might see in other industries. Two is there still isn’t as much capacity or limits available. And then three, it really comes down to the terms, the conditions themselves, in particular, the policy exclusions.”
A common example of that is the health hazard exclusion, which he said “really guts the coverage.” Sampson also said he sometimes sees vaping exclusions that preclude much, if not all coverage, for vaping related products.
Beside counseling policyholders when obtaining insurance, Sampson often gets called when claims aren’t being paid.
He said he’s had to deal with an insurer who has written a policy for a cannabis-related business which then has tried to use a cannabis-related exclusion to get out of providing coverage on more than one occasion.
For example, he recently had a client that suffered a business interruption loss.
“It was a cannabis grower and because there was no property coverage for cannabis, the insurance company argued that there was no business interruption coverage available because it had been the cannabis that had been affected on the underlying claim that gave rise to the business interruption claim,” Sampson said. “And at the end of the day, we said, ‘Wait a sec. The only thing that this cannabis growing business would’ve been in the business of doing, was cannabis.’ And so to say, because there was a cannabis related loss, there was no business interruption coverage, was to effectively say that the business interruption coverage for which my client had paid was meaningless. It was elusory, it was worthless.”
Sampson said he examined the policy language, construing “exclusions narrowly, coverage grants broadly,” and explain why his client was entitled to the coverage.
Of course, he believes the No. 1 mistake cannabis insurers make is looking for reasons to deny claims instead of finding ways to provide the coverage.
In many jurisdictions, such a move can give rise to a claim for bad faith, he added.
“And so, insurance companies, whether insuring cannabis businesses or others, generally owe their policyholders a duty of good faith and fair dealing, and it’s important that they be held to that,” Sampson said.
Related: