Question coming with frequency from lawyers; “Does attorney malpractice insurance cover my ‘marijuana practice’?”
The short answer to this question is there is no specific exclusion in almost all lawyer’s professional liability insurance policies for a ‘marijuana practice’.
Longer answer gets complicated.
The attorney malpractice insurance policy objective is providing errors and omissions coverage when an attorney is accused of attorney malpractice. With many states making the growing, sale, manufacture and use of cannabis products legal there is an increasing need for legal advice. Easy part of that answer is if the attorney is providing criminal defense for a client accused of marijuana related crimes there should be malpractice coverage.
More hazy answer comes for the attorney providing legal advice to set up any part of cannabis related businesses. The fact is marijuana growing, sale manufacture and use under federal law remains an illegal activity under the federal Controlled Substances Act (CSA). Almost every violation of CSA qualifies for RICO. In light of this, certain state supreme courts, like Ohio, have recently stated that an attorney that assists cannabis businesses in providing legal advice commits an ethics violation.
And further down the rabbit hole, for attorney accepting cash payment for services from the cannabis industry, much of this money will go into the attorney IOLTA account or Trust account. Although the federal cases that have been brought against attorneys for these issues to date have appeared to be extreme examples, attorneys do open themselves up to money laundering charges and RICO violations under federal law. When the attorney is accused of a crime, attorney malpractice policies will not answer.
Excerpts from a typical lawyer’s professional liability policy show coverage issues get murky. The current Professional Solutions policy is a good example.
First the policy carves out much of the cannabis coverage in the definition of damages:
“Damages do not include:
c. Civil or criminal fines, sanctions, penalties or forfeitures, whether or not related to, or as a result of local, state, or federal regulations, statutes, ordinance, law, rules of civil or criminal procedure, and any such judgments,”
Next the policy reinforces that the policy will not coverage criminal acts in the Exclusion section:
“2. Dishonest, fraudulent, criminal, deliberate, intentionally wrongful, or malicious acts or omissions committed by or at the direction of, with the knowledge of, or ratified by any Insured.”
Even if legal in the state it is still a crime under federal law.
Most attorney malpractice policies have similar prohibitions of coverage. So even if the underwriter will write attorney malpractice coverage for the cannabis attorney, the insurance carrier claims department may decline to even defend the attorney.
Attorney General Jeff Sessions reiterated his opposition to legal weed recently and a congressional amendment prohibiting federal prosecutors from targeting medical marijuana expires at the end of the year. So if Jeff Sessions decides to send folks knocking on attorneys’ doors there is likely little to no malpractice insurance coverage. Although no insurance coverage may be the least of the attorney’s worries.