Linda McHenry

Blog

  • Update: Cannabis Regulation

    Update: Cannabis Regulation

    In prepping for the SILA Foundation webinar I presented yesterday, I have two items to share with you since the last time I blogged on the topic of cannabis.

    Topic #1: Decriminalization

    A number of states have decriminalized marijuana. Contrary to what many people infer from the term “decriminalized,” it does NOT mean a person is not guilty of a crime of possessing, growing, or selling marijuana. Unless the state has passed a law that stipulates the medical, or adult recreational, use/possession/sale of marijuana IS legal, it is still a crime.

    What the term means is that if a person has a “small amount” of marijuana in his or her possession, law enforcement will not arrest and charge that person with a crime. However, law enforcement may still confiscate the marijuana and the person can be fined for possession. Each state defines “small amount” differently. The most common amount is less than 1/4 of an ounce.

    So, what does this mean? Let’s say I’m driving along the road in a state that has not legalized the medical or recreational use of marijuana, but has decriminalized it. A cop pulls me over for speeding and spots the ounce of pot I have sitting in the cup holder in my console. The cop can arrest me for illegal possession, I can be charged and found guilty of a crime, and I can be fined or jailed–however the state punishes that particular crime.

    But, if the pot in the cup holder is less than the “small amount” defined by that state’s law, the cop can confiscate my pot (or not) and he can issue a citation that results in a fine (not a crime) for illegal possession ( or not).

    Here’s a URL that lists how each of the 50 states and the District of Columbia handle the legalization of marijuana: https://disa.com/map-of-marijuana-legality-by-state

    Topic #2: Court-Enforcement of Contracts re: Cannabis Businesses

    A recent ruling by the Nevada District Court shows that federal courts are handing down different findings with respect the the enforceability of contracts to which cannabis-related businesses are a party.

    If you want the full story, click the link above. Here’s the short story:

    When a cannabis business sues or is sued over breach of contract, the federal courts seem to be taking one of two positions:

    1. If the matter at issue relates to insurance, federal labor laws, federal intellectual property rights, and other contracts and laws not directly related to the growth, sale, etc. of cannabis, they seem to be ruling in a way that enforces the contract. Why? Because enforcement of the contract does not violate federal law under the Controlled Substances Act, which deems marijuana a Schedule I substance–and illegal under federal law. In other words, if I own a cannabis dispensary and lied on my insurance application about whether I use a safe, and my insurance company later denied my insurance claim for theft, the court will likely enforce the contract and side with the insurer (if it has proof I lied and violated the warranty about the safe).
    2. If the matter relates to a contract that are directly related the growth, sale, etc. of cannabis (such as a loan to expand the business), they seem to be ruling in a way that does not enforce the contract. In other words, if I failed to repay the loan I secured to expand my cannabis dispensary and the lender sued me to get the money back, the court will likely NOT find in favor of the lender suing me because I breached the loan agreement. Why? Because finding for the lender puts it in a position where it benefits from assisting an illegal cannabis business conduct operations–which violates federal law under the Controlled Substances Act.

    Summary

    How we insure cannabis risks in this country is ever-evolving and so long as federal and state laws differ with respect to legalization of marijuana, we’re in for a wild and exciting rollercoaster ride. Check back for more updates as they become available.

  • SILA Foundation Webinar

    SILA Foundation Webinar

    I’m honored to have been asked by the SILA Foundation to develop and present a webinar for their monthly series.

    The webinar will be presented live on Thursday, May 21 at 3 p.m. Eastern time. The topic is: Insuring Cannabis Risks.

    Click here to register: https://www.silafoundation.org/2020/05/webinar-insuring-cannabis-risks/

  • Business Interruption Insurance and the Pandemic

    Business Interruption Insurance and the Pandemic

    In a number of states, legislation has been proposed to compel insurance companies to pay business interruption losses. Before I discuss the 2 biggest issues related to this pending legislation, let me recap exactly what business interruption insurance is.

    Business interruption (BI) coverage is a form of indirect PROPERTY insurance. This mean’s a covered peril in a property policy must cause a loss, and that insured loss must, in turn, trigger the business to shut down operations.

    For example, if a business’ building were destroyed by an arsonist, the covered peril of fire caused the property loss. The business’ BI coverage will be triggered. However, if a flood destroyed the business’ building and shut down operations, the peril of flood is an excluded peril and neither the flood damage nor the ensuing business interruption would be covered by the policy.

    Although many people, including state governments and politicians, are calling for insurance companies to honor the business interruption losses of ALL businesses that were shut down as a result of COVID-19 orders, I don’t see that actually happening.

    Here’s why.

    First, coronavirus–or any virus, for that matter, is NOT a covered peril in any insurance policy I ever read. Even more importantly, most insurance policies contain specific exclusions for the perils of “virus” and “pollutant,” both of which would apply.

    Furthermore, the shutdown of operations to any business due to COVID-19 is not a result of property damage. It is the result of a civil authority making an order. And yes, although business interruption insurance does provide limited coverage for Civil Authority, that policy provision requires the civil authority to evacuate an area, or prevent access to it, because of a peril that is covered by the business’ policy.

    Back to the 2 big concerns I promised to discuss.

    First, when insurance companies file their premium rates with the states–as required by state law–those rates are approved by the states. The entire concept of risk pooling, which is the foundation of the insurance industry, is violated if an insurer MUST pay for every single loss experienced by every single policyholder in a particular year. Essentially, it would bankrupt an entire segment of the insurance industry.

    Next, the insurance policy is a legal contract. Contracts are regulated and enforced by the federal and state governments. However, the only parties to an insurance contract are the insurer and the insured–not the government. Under federal law no one can force the parties to a contract to amend its terms and conditions. I’m not a lawyer, and I’m not giving legal advice, but based on the talk I’m hearing from lawyers, it’s unlikely any state government will prevail in court if it attempts to constrain insurers to pay all business interruption claims they receive.

    This is the short version of the story about how the pandemic is affecting the current insurance marketplace and, specifically, business interruption insurance. For the long version, listen to Episode 5 of my podcast, Business Interruption Insurance in a Pandemic.

  • Attention Writers: Want Help Marketing?

    Attention Writers: Want Help Marketing?

    In light of shelter in place orders, those of us who have published books in the past couple of months have found it difficult to share the word about our new releases. Even without social distancing, marketing ourselves can be difficult.

    I just launched The Writer’s Voice podcast, which is a forum to discuss their craft … and their books. In most cases, I will also post YouTube videos of each guest. I’m currently in the process of interviewing and recording my first five guests and plan to air the first episode on Wednesday, May 27th.

    If you are interested in being a guest on the podcast, visit my website’s Podcast page and complete the request form.

    Feel free to share this post with any writers you know!

  • Book Release Date: May 26

    Book Release Date: May 26

    Pre-Order and Save!

    If you pre-order the eBook now, your cost will be $2.99. Beginning May 26, the full price for the eBook will be $3.99.

    Click here to pre-order on Amazon

    Relationships

    People, and how you get along with them, define your professional reputation. Do people like you? Do they trust you? Do they want to refer you to their families and friends? In Chapter Five of Taking the Mystery out of Business, Linda McHenry explains in detail how your sincerity, generosity, and understanding of people create the basis for all your business relationships and demonstrate your degree of professional success.