The bulletin states that those carriers with policies that could potentially cover losses related to marijuana products or activities clarify their exclusionary language. The use of “illegal activity”, “contraband” or “coverage inconsistent with public policy” is not sufficiently clear to let an insured know what is or is not covered. Even “criminal acts under federal law” is too vague to give a clear description of what is or is not covered. This failure to clearly identify marijuana activities or items from a policy could lead to an unfair claims issue. If a policy is issued to a marijuana dispensary with the knowledge that marijuana is the product to be covered, a later claim denial because of a vague “illegal substances” exclusion is going to be problematic.

 The department recommends language such as “activities, losses, or claims involving or resulting from possession, production, processing, sale, or use of drugs or substances classified as Schedule 1 under the Controlled Substances Act, such as marijuana, are excluded from coverage,” as providing adequate notice that marijuana products or activities are excluded. This guidance is being phased in over the next twelve months.

 In light of this bulletin, ISO is now taking a hard look at policy language and expects to produce Oregon-specific endorsements, exception rules and policywriting forms to address this issue. While Oregon is the first state to take such action, it is natural to expect other states to follow suit, and for ISO to expand such endorsements to apply to other states as well.