It has been 4 years since cannabis was first legalized for recreational use in Colorado and Washington, followed shortly by Alaska and Oregon. In that time, the insurance industry has learned a lot about how cannabis usage affects business insurance in those states.
Questions about employee rights, the legality of drug testing post-hire and other human resources issues should always be handled by an experienced human resources (HR) professional or qualified labor attorney. While Hayes Brokers are not legal professionals, we can advise on the insurance aspects of cannabis use in the workplace.
Here is how marijuana usage on the job may affect your insurance policies and premiums:
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 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 3-5 years from the date of loss.
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%-300% 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.
Is Your Drug Free Program Obsolete?
A private workers compensation insurer cannot refuse to insure an employer for lack of drug free program. However, most work comp insurers offer a drug free workplace premium credit. Without these programs you will 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 will 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 and/or other safety organizations. Your workplace may even be shut down, depending on severity of the injury or damage.
An employer’s first obligation is to provide a safe work environment for all employees. An HR professional or employment lawyer can review your current employee manual to specifically address marijuana usage in the workplace.