Cannabis will be a legal product in Canada on October 17, 2018. Legalized cannabis raises a number of potential liability issues that should be on every insurer and insured’s radar.

The New Regime

An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts (the “Cannabis Act“) received Royal Assent on June 21, 2018, and will come into force on October 17, 2018. It is the product of almost three years of significant dialogue between the House of Commons and the Senate.

Once in force, the Cannabis Act will permit individuals 18 years or older to legally possess up to 30 grams of cannabis and grow up to four cannabis plants in their private residence – although some provinces have increased this minimum age and are pushing back against the allowance for home-grown plants. Permitted forms of cannabis will include dried, fresh and oils, with edibles likely to be added in a year. Cannabis accessories and services will also be regulated. Until October 17, cannabis will remain a regulated narcotic and those who advertise, possess or sell cannabis will continue to be subject to criminal penalties (with some exceptions for medical use).

There will continue to be criminal consequences for those acting outside the legal framework for cannabis, and in particular for those who make cannabis available to young people. For example, there are criminal penalties for possessing marijuana in excess of the legal limit, illegally distributing or selling marijuana, and taking cannabis across Canadian borders.

The provinces and territories will have independent jurisdiction to license cannabis and regulate its distribution and sale. As with alcohol, the provinces have put forward different distribution models. All activities will be licensed, but certain provinces have elected to establish government-owned monopolies to sell cannabis, while others will allow private retailers into the market. Recreational consumption restrictions will also vary by province, with many provinces electing to prohibit public consumption. Many provinces have also prohibited licensed activities from taking place in close proximity to schools, hospitals and other premises with similarly vulnerable populations.

The restrictions adopted in Ontario are illustrative. Ontarians are only permitted to use recreational cannabis in private residences, or individual apartment units. Many multi-unit buildings, like condos, have placed further restrictions on marijuana usage, including outright prohibiting its use. Additional restrictions on usage apply in the workplace and while driving.

Ontario has also restricted how cannabis can be bought and sold. As of October 17, 2018, the Ontario Cannabis Store website will be the only legal option for purchasing recreational cannabis. However, the government is expected to introduce legislation that would open up a private retail model for cannabis that would launch by April 1, 2019.

Legalized cannabis raises a number of issues that will be of interest to insurers and insureds.

Driving

The first issue of note pertains to cannabis use and driving. Driving while under the influence of marijuana is strictly regulated under the new regime. At the federal level, it will now be a criminal offence for drivers to have 5 nanograms of THC in their blood, or 2.5 nanograms of THC if the driver has also consumed a certain level of alcohol. It will also be a summary offence to have between 2 and 5 nanograms of THC in the blood while driving. Police officers will have the power to use oral fluid screening devices at the roadside to check for impairment to this effect, though the federal government has not yet approved a roadside screening device for use.

Some provinces, including Ontario, have implemented even stricter prohibitions on young, novice and commercial drivers. For example, in Ontario, individuals under the age of 21, or driving with the Ontario version of a learner’s permit, are not permitted to have any cannabis in their system while driving.

Impaired driving, and the mechanisms adopted by law enforcement to screen for cannabis impairment, will be of interest to automobile insurers, as determinations about impairment will be important for assessing driver liability in automobile accidents. Assessing impairment from cannabis use remains an open question, as the level of THC in the blood may not be as strong an indicator of impairment as it is for alcohol. Heavy cannabis users may not experience the same level of impairment as infrequent users who have the same level of THC in their blood.

Marketing and Promotion

Branding, packaging and advertising will also be restricted under the new regime, incorporating similar restrictions applicable to tobacco, prescription drugs and alcohol products. The proposed regulations require that every product label include a standardized cannabis symbol with a specified size, appearance, and placement. Mandatory health warning messages and THC content are also required on packaging. Images or graphics besides the brand name and logo are prohibited, as are coatings, embossing, cut-outs and peel-aways. Furthermore, packaging must be plain, with a background of uniform colour that cannot be metallic or fluorescent.

Promotion of cannabis and related accessories and services cannot appeal to young people or present brand elements in a way that evokes “glamour, recreation, excitement, vitality, risk or daring.” Further, celebrity endorsements and sponsorship of buildings, activities and events will be prohibited. Branded merchandise will be allowed, narrowly escaping the Senate’s attempt to excise this exemption. These advertising requirements are federal, but provinces are free to implement stricter minimum regulations (and some already have).

These marketing and promotional requirements carry liability risks for corporations, directors and officers. The maximum penalty for an offence related to promotion, packaging and labelling is $5,000,000 and imprisonment for up to three years. Corporate directors and officers who are found to be party to an offence may be found personally liable and subject to the same penalties.

Cannabis in the Workplace

Some provinces, like Ontario, have passed laws that make consuming recreational cannabis in the workplace illegal, even after October 17, 2018.

Even so, cannabis in the workplace will be a concern for all employers and insurers after legalization. Occupational health and safety requirements dictate that employers must ensure employees are not impaired on the job in safety sensitive industrial or construction contexts. Employers will need to ensure that employees are not surreptitiously consuming marijuana on the job, or coming to work impaired. Monitoring this type of behavior may pose new challenges as edibles and other forms of inconspicuous marijuana consumption become more commonplace.

Historically, employers have used drug testing to ensure workers in safety sensitive positions are not impaired. However, the classic zero-tolerance attitude toward any level of cannabis in the bloodstream may no longer be a viable approach. Some studies have suggested that measurable levels of THC may remain in the bloodstream of marijuana users even after any impairment caused by the drug has passed. As such, zero-tolerance policies toward any levels of THC in the bloodstream may no longer be reasonable, as they stand to penalize recreational marijuana users who consume cannabis outside the workplace and come to work when they are no longer impaired.

Employers will have to resolve these issues in order to avoid liability for workplace accidents and injuries, as well as under provincial and federal health and safety legislation.

Cannabis and Social Hosts

The legalization of cannabis also raises a number of as yet undetermined issues for social hosts like restaurants and bars. Such establishments will continue to be liable as commercial hosts if they sell alcohol to persons who are intoxicated, and those persons are a danger to themselves, others, or other property. Further, Ontario’s Liquor Licence Act prohibits the sale of alcohol to persons who are intoxicated, including those impaired by recreational cannabis. Like in other areas, social hosts will also have to resolve the challenge of identifying and assessing the impairment of their customers.

Insurance Risks

The introduction of legalized cannabis introduces potential liability for insurers and insureds on a number of fronts, from automobile accidents to social host liability.

Insurers and insureds should familiarize themselves with the risks they may encounter when the Cannabis Act comes into force, and take steps to prevent potential liabilities.