It has been four years since cannabis was first legalized for recreational use in Colorado and Washington, followed by Alaska and Oregon.
In that time, the insurance industry has learned a lot about how cannabis usage affects business insurance in those states.
To start, questions about employee rights, the legality of drug testing post-hire and other human resource questions should be handled by a qualified labor attorney or human resources professional. However, as an insurance professional, I can advise that employee use of marijuana on the job may affect your insurance policies and premiums.
Here's are three ways allowing on-the-job use of marijuana could affect your insurance premiums and cost of doing business:
A company's drug policy and number of claims will impact its ability to obtain or renew bonds. (Photo: Shutterstock)
|Can you get insured or bonded?
As the legalization of marijuana continues across the country, insurance companies may begin to include questions about drug-free programs and marijuana usage on applications as part of the underwriting process. A strict company policy on these issues will make these questions easier to answer.
An employer's main concern should be providing a safe work environment that also allows for the completion of projects in a timely manner. Recreational marijuana usage by employees may affect a company's ability to do so.
Failure to perform as required by contractual obligations may result in your bonding company nonrenewing your bonds. Finding replacement bonds when nonrenewed for this reason may not be possible, or may come at an increased cost.
Large or frequent claims may result in nonrenewals or declinations of coverage by liability insurance companies, as well. Impaired employees can contribute to both of these, costing employers in increased insurance premiums for anywhere from three to five years from the date of loss.
Employers with a drug-free environment may receive a credits to help lower workers' compensation premiums. (Photo: Shutterstock)
|How will your workers' compensation coverage be affected?
If an employee is injured on the job, workers' compensation will pay even if that injury is due to impairment. In the event of a major injury or a series of minor injuries, the insurance company will send loss control consultants to your business. These consultants will determine any safety hazards that contributed to the injuries and make recommendations for changes to make a safer workplace.
One large claim or many small, frequent claims related to marijuana or other drug use can cause a policy to be nonrenewed. Finding other coverage in the private market after nonrenewal may not be possible, leading an employer to seek coverage from the state insurance fund. This coverage is sometimes 200 to 300 percent higher (or more) than in the private market. In states where the state insurance fund is the only workers' compensation insurer, premiums may also be heavily surcharged.
Make sure your drug program is up-to-date and complies with all state and federal regulations. (Photo: Shutterstock)
Is your drug-free program obsolete?
A private workers' compensation insurer cannot refuse to insure an employer for lack of a drug-free program. However, most workers comp insurers offer a drug-free workplace premium credit. Without these programs, you will likely pay higher premiums.
|The bottom line
If you wouldn't allow an employee to perform their job duties under the influence of alcohol or while taking mind-altering prescription medications, then you won't allow them to perform those duties while under the influence of marijuana.
Allowing impaired employees on the job may result in injuries and property damage that will eventually lead to higher insurance premiums in the event of claims. Bodily injury and property damage caused by impaired employees can also result in fines by OSHA or other safety organizations. Your workplace may even be shut down, depending on the severity of the injury or damage.
An employer's first obligation is to provide a safe work environment for all employees. A human resources professional or employment lawyer can review your current employee manual to specifically address marijuana usage in the workplace.
Galen Hayes is president of El Sobrante, California-based Hayes Insurance, a full-service commercial insurance brokerage and risk management firm. Email him at [email protected]. Opinions expressed in this article are his own.
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