Los Angeles, CA

The Court of Appeal for the State of California recently took up the question of whether an individual who contracts COVID-19 from a family member who contracted the illness at work can sue their family member’s employer for civil damages.

California SB 447 amended California Code of Civil Procedure section 377.34 to permit wrongful death claimants in California to recover damages for decedents’ pain, suffering or disfigurement.

Michigan has adopted new legislation that unintentionally may make Michigan cannabis companies and their insurers scramble to determine how to comply with onerous regulations around mandatory product liability insurance. Legislating insurance requirements in a highly regulated and evolving industry characterized by unknown risks should happen only when all stakeholders have been heard.

The cannabis and hemp industries and their insurers should take notice and respond now as purveyors of hemp-derived delta-9 THC seek to exploit a perceived loophole in the 2018 Farm Bill’s definition of hemp extracts – these unregulated and intoxicating products are fraught with risk.

A recent Third Circuit decision examined the scope of the “any law pertaining to intellectual property” carveout to the immunity granted to internet platforms under the Communications Decency Act (CDA), ultimately choosing to significantly expand it to include the “nontraditional” intellectual property laws, including the right of publicity. In a previous decision addressing the same subject, the Ninth Circuit expressed concern that the interpretation that the Third Circuit now advanced will cause great uncertainty for the platforms and open the floodgates to litigation.

California Assembly Bill 45 allows for hemp-derived cannabinoids, extracts and derivatives in food and dietary supplements with various restrictions. Though expected to be a game-changer for hemp products sold in the world’s fifth largest economy, this legislation comes just weeks after the FDA denied two New Dietary Ingredient applications filed by well-known CBD brands, and it perpetuates the 50-state patchwork model for hemp products that the FDA was expected to remedy after passage of the 2018 Farm Bill.

Authored in collaboration with the National Cannabis Risk Management Association, this article identifies the chief causes of cannabis product testing and label failures. Testing and label failures place financial burdens on cannabis businesses and often are the source of product recalls, consumer class actions and alleged state regulatory violations or violations of consumer protection statutes. Cannabis industry risk management advancements and the adoption of uniform standards should help to drive down future liability for contamination, label inaccuracies, testing failures and similar claims.

Public comments regarding the U.S. Senate’s proposed Cannabis Administration and Opportunity Act currently are being solicited by the bill’s sponsors. While the final version is unlikely to be passed into law, this draft bill provides a good window into what broad federal marijuana legalization will resemble when it finally happens.

A statement by Justice Clarence Thomas, although it has no formal precedential value, nevertheless represents the most explicit statement yet from a sitting – and conservative – Supreme Court Justice that questions the rationality of current federal marijuana policy. Justice Thomas’s bold defense of federalism also should prove influential to members of the other branches of government who remain cautious on broad marijuana reform.

As the legalization of cannabis expands, regulatory and litigation risks also will evolve. Proposed legislation, such as the SAFE Banking Act, will likely lead to greater insurance capacity in the cannabis market, and removal of marijuana from the Controlled Substances Act will have a significantly positive impact on cannabis D&O exposures after a likely tumultuous transition period following legalization.

Congress has reintroduced the long-awaited Secure and Fair Enforcement (SAFE) Banking Act and related Clarifying Law Around Insurance of Marijuana (CLAIM) Act. If passed, these bills will be a game-changer for banks and insurance companies that wish to engage with plant-touching cannabis businesses and the multitudes of ancillary service providers that support the industry. Here’s how this pending legislation may impact the existing and future cannabis insurance industry and certain types of cannabis-related risks.

Insurers should be aware of the holding by the Northern District of Illinois in one of the first decisions concerning the duty to defend insureds for COVID-19 claims under a commercial general liability policy. The opinion also has implications far beyond COVID-19 claims under such policies, and this broad interpretation may apply with respect to other claims seeking injunctive relief.

While the cannabis industry faces legal risks similar to those of the supplement industry post-1994, cannabis industry has made enormous progress in self-regulation. Nevertheless, cannabis businesses may be confronted by an increasing product liability exposure as the market and the science continue to mature in tandem.

The Central District of California dismissed a negligence case against a broker in which the plaintiffs reasoned that while insurance agents generally do not have “a duty to volunteer to an insured that the latter should procure additional or different insurance coverage,” that rule does not apply under three exceptions, which were denied by the court.

A recent decision by the U.S. Federal Circuit Court of Appeals dramatically changes the risk exposure for generic manufacturers that have a drug on the market with a skinny label. The Federal Circuit has paved the way for a finding of induced infringement against every skinny-label drug, many of which have been on the market for years, and therefore have years of potential exposure.

The California Privacy Rights and Enforcement Act goes into effect in January 2023. Although this controversial ballot measure was meant to expand and make permanent the consumer protections within the California Consumer Privacy Act of 2018 (CCPA), privacy groups have expressed concern that the new law will place an unnecessary burden on businesses that are only now learning how to properly comply with the CCPA and that it may actually reduce consumer rights in important ways.

Wilson Elser attorneys present the current statutory framework, recent changes to the law in response to the novel coronavirus pandemic.

Members of Wilson Elser’s Cannabis Law team Ian A. Stewart (Partner-Los Angeles) and Neil M Willner (Associate-White Plains) collaborated with the firm’s Appellate Practice Chair Melissa A. Murphy-Petros (Of Counsel-Chicago) to draft an amicus brief to the U.S. Supreme Court in the publicized case of Washington v Barr, which seeks to invalidate marijuana's Schedule I status under the Controlled Substances Act on constitutional grounds.

A Texas court ruled that COVID-19 does not cause direct physical damage to property. The property policies at issue insured for accidental direct physical loss to Covered Property and contained a virus exclusion. 

A California state court granted an insurer’s demurrer, ruling that business suspension due to COVID-19 was not caused by direct physical loss of or damage to the property at the premises. The insurer asserted that irrespective of why the business shut down, there was no direct physical damage to the property that caused the plaintiffs’ business income loss.

A new interim rule issued by the Drug Enforcement Administration states that all hemp derivatives or extracts that exceed 0.3% delta-9 THC remain schedule I controlled substances. This clarification may potentially create a profound practical obstacle to the legal manufacturing of most hemp-derived CBD products, since hemp extract almost invariably exceeds 0.3% delta-9 THC concentration at some point during the extraction process before it is brought back into legal compliance for the final product.

Courts in various states have issued differing decisions as to whether there is coverage for business interruptions during the COVID-19 pandemic and/or whether government shutdown orders constitute a "direct physical loss" that triggers the policy. Below are links to the various states’ respective decisions.

A Missouri District Court ruled in favor of defendant restaurants and hair salons in Missouri on the grounds that the “all-risk” policies at issue did not define “physical loss” or “physical damage” and did not include any exclusion for losses caused by viruses or communicable diseases.

A Washington, D.C. court recently found that a property insurance policy does not provide business interruption coverage for COVID-19 losses. The court held that COVID-19 does not cause direct physical damage to property, which is a prerequisite to coverage, and concluded that, “even in the absence of [the virus] exclusion, plaintiffs would still be required to show a ‘direct physical loss.’”

While cannabis litigants may be forced to appear in federal court, there are steps that may lessen the chances of a federal court invalidating cannabis contracts and other important rights. The author also explores a spectrum of enforceability for cannabis-related disputes in the federal courts.

California Assembly Bill 1552 would create three rebuttable presumptions affecting the burden of proof in a case in which the insured alleges that its business was interrupted due to the COVID-19 pandemic. If enacted, the bill would take effect immediately and apply retroactively to commercial business interruption policies in effect after March 4, 2020, the date a state of emergency was declared.

A Michigan state court judge has ruled that direct physical loss is required to trigger business interruption coverage for loss purportedly arising out of the novel coronavirus and related government stay-at-home orders. In fact, the court held that the virus exclusion in the property policy would have barred coverage even if the insureds had alleged that the virus caused physical damage.

The federal court in Los Angeles dismissed a collection of cases alleging negligent infliction of emotional distress based solely on the proximity of passengers quarantined on a cruise ship to individuals with COVID-19. The court noted that if it were to adopt the plaintiffs’ position, it could lead to “a flood of trivial suits, and open the door to unlimited and unpredictable liability.”

On June 26, 2020, the U.S. Department of Labor issued guidance stating leave under the Family First Coronavirus Response Act is available when a parent is unable to work or telework because of the need to care for a child after summer camp or summer enrichment program closes due to COVID-19 concerns.

California's Prop 65 now identifies THC as a chemical that may cause reproductive harm and no “safe harbor” level has yet been identified, meaning that any detectable amount of THC in a product sold in California requires a compliant Prop 65 warning. This new rule is effective and enforceable as of January 3, 2021. Cannabis and CBD companies should start planning now to mitigate this risk.

In May 2020, Louisiana’s governor signed three laws granting businesses state protection from most lawsuits involving COVID-19 deaths or injuries. The bills took effect immediately and are retroactive to March 11, 2020.

While numerous jurisdictions have already provided some form of immunity to first responders, four states recently passed laws that grant businesses immunity from civil liability for claims relating to COVID-19, and least three others are weighing similar proposals.

The insurance commissioners of Arkansas, Georgia, Kansas, Maryland, North Carolina and West Virginia recently issued communications regarding business interruption coverage. The high points of these communications are summarized in this article.

Some hemp-derived products contain amounts of THC comparable to state-regulated marijuana consumer products, which are still illegal under federal law and highly regulated by states with adult-use and medical cannabis programs. Do these new products impermissibly exploit a legal loophole or are they the first THC products that legitimately fall outside the Controlled Substances Act?

Federal policy regarding enforcement of the Controlled Substances Act has shown ambivalence where the possession and distribution of marijuana is consistent with well-regulated state law. Some federal courts, however, take a nuanced but strict position with respect to enforcement of cannabis-related contracts and other rights by evaluating whether enforcement would require the litigant to actively violate the Act. This brings into question where the line is drawn for enforcing a contract in federal court, and has deep implications for every cannabis stakeholder.

The publication provides a summary of the national responses of the United States, the United Kingdom, Canada, New Zealand and Australia, along with some of the issues they raise for employers.

The proposed Pandemic Risk Insurance Act of 2020 seeks to create a federal program that would provide for a system of shared public and private compensation for business interruption losses resulting from a pandemic or outbreak of communicable disease. The program would be administered by the Department of the Treasury and act as a reinsurer for commercial property/casualty insurers.

Our Q&A document reviews laws and local guidance, discusses workplace safety and other issues that may arise when workers return from furlough & addresses “frequently asked questions” from the employer perspective.

Bringing to seven the number of states proposing the retroactive expansion of business interruption policies to cover losses in connection with the outbreak of the coronavirus, three South Carolina state senators have introduced S.B. 1188.

The document answers questions posed by employers who are navigating an uncertain business environment and advises on new state and federal regulations.

New Jersey, Ohio, Massachusetts, New York and Louisiana proposed bills that would retroactively expand business interruption policies to cover losses in connection with the outbreak of the coronavirus. Now Pennsylvania has joined the effort, and the recently proposed bills may be only the tip of the iceberg.

Many workplaces that traditionally have had few recordable or reportable work-related illnesses must now educate themselves on their obligations under federal and state health and safety laws or face expensive fines from regulators and greater exposure to workers’ compensation claims and liability lawsuits. By preparing an infectious disease preparedness and response plan, the employer will engage in the necessary exercise of creating clear lines of communication, identifying where and how workers might be exposed and implementing workplace controls. Performed properly, this exercise should result in better workplace morale, lower absenteeism, less business disruption and liability defenses if needed.

Recently, Ohio, Massachusetts and New York followed New Jersey’s example by proposing bills that would retroactively expand business interruption policies to cover losses in connection with the outbreak of the coronavirus. Now Louisiana has joined the effort, and the recently proposed bills may be only the tip of the iceberg.

After hearing that insurers were denying business interruption coverage, members of Congress petitioned the Insurance Commissioner to help businesses get coverage so they can remain solvent throughout COVID-19 pandemic. Insurance industry trade groups cited estimates that just one month of business interruption losses for small businesses could reach $383 billion, thereby potentially threatening the solvency of the entire insurance industry.

Wilson Elser has compiled information on the state laws in all 50 states and the District of Columbia with respect to certain key issues that employers must or may need to address in terminating or reducing their workforce during the COVID-19 pandemic.

Recently, Ohio and Massachusetts followed New Jersey’s example by proposing bills that would retroactively expand business interruption policies to cover losses in connection with the outbreak of the coronavirus. Now New York has joined the effort, and the recently proposed bills may only be the tip of the iceberg.

American companies thinking about how to structure their workforce in the coming weeks will need to understand how to access the benefits of the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provides $2 trillion in relief to address the expected economic impacts of the COVID-19 pandemic.

The U.S. Supreme Court uses a two-part test to determine the constitutionality of proposed state laws that mandate the eradication of policy provisions and exclusions. First, the Court examines whether the state law has operated as a “substantial impairment” of a contract. Unless this showing is made, the Court will uphold the statute and will not proceed to the second step, which would be a review of the “purpose and necessity” of the state law.

Insurers were instructed by the New York Department of Financial Services to provide the volume of business interruption coverage, civil authority coverage, contingent business interruption coverage and supply chain coverage they have written. Additionally, each insurer must examine the policies it issued and explain the coverage each policy offers in regard to COVID-19, presently and as the situation develops.

When confronted with crisis conditions and medical equipment shortages, medical professionals should be allowed flexibility to provide real-time solutions to complicated medical decision-making – within a crisis standards of care framework that incorporates elements of fairness, transparency, consistency, proportionality and accountability, consistent with AMA and state guidelines.

Congress has passed and the president has signed the Emergency Family and Medical Leave Expansion Act amends the Family and Medical Leave Act, which require unprecedented actions on the part of employers and government in the face of COVID-19 pandemic.

Wilson Elser has compiled a reference guide for employers that, while not comprehensive, provides general information and links to resources that can help employers determine a thoughtful course of action during the current state of emergency declared due to the COVID-19 pandemic.

The U.S. Food and Drug Administration recently released a report that outlines a variety of actions taken or being considered by the FDA to advance the potential regulatory pathways for CBD, including “the agency's progress toward obtaining and analyzing data to help determine a policy of enforcement discretion and the process in which CBD meeting the definition of hemp will be evaluated for use in products.”

A review of Liability and Workers’ Compensation insurance factors that all insurance stakeholders should consider when claims under these policies are brought forward.

The Food and Drug Administration has not attempted to make any distinction between highly concentrated CBD isolate versus “full-spectrum” hemp extracts that contain numerous cannabinoids, including CDB, at lower concentrations. The form of CBD nevertheless should be an important consideration when evaluating a product’s legality as a food additive or dietary supplement under the Food, Drug and Cosmetic Act.

A review of Business Interruption factors that insurance stakeholders should consider when claims under these policies are brought forward.

Wilson Elser’s Cannabis Law and Employment & Labor practices have joined forces to produce the first comprehensive, state-by-state review of current laws and resulting trends across the nation

Labels on most cannabis products focus on THC and CBD concentration to the exclusion of other potentially potent cannabinoids. The newest identified cannabinoid, THCP (tetrahydrocannabiphorol), is many times more potent than THC.

With more than 120 identified cannabinoid compounds found in the plant genus Cannabis, it’s all but certain that products based on cannabinoids other than THC and CBD will become better known. The two most likely contenders are cannabigerol, or CBG, and cannabinol, or CBN.

The mothers of two former youth football players, each of whom died in their mid-twenties a decade after they last played youth football, sued for money damages and to enjoin advertising that “youth tackle football is safe for minor children.” In a decision of first impression, the U.S. District Court for the Central District of California granted Pop Warner Football’s motion for summary judgment against negligence and wrongful death claims.

The U.S. Department of Agriculture’s interim final rule for its Domestic Hemp Production Program, which was unveiled on October 31, 2019, has caused concern with several issues critical to the hemp and CBD industries, including what constitutes acceptable testing and sampling procedures. The interim rule states that all testing shall be performed by DEA-certified labs and that a failed test from a distinct lot may invalidate the entire harvest, which would cause major income losses for producers.

Despite the FDA’s ongoing prohibition of CBD in ingestible products, a statement just released by federal banking regulators provides some clarity on the legal status of commercial hemp and the legal obligation of banks that will greatly assist with the fluid growth of the wider hemp industry.

Laboratory testing of fluid collected from the lungs of 29 patients with EVALI submitted to the Centers for Disease Control and Prevention from 10 states found vitamin E acetate in all of the fluid samples. CDC reports that “this is the first time that we have detected a potential chemical of concern in biologic samples from patients with these lung injuries.”

With a viable case now before the courts, manufacturers of state-licensed and regulated cannabis products, including THC vape products, widely support meaningful regulation that would help to prevent health problems caused by illicit and unapproved products.

Use of a “one size fits all” CBD label is a bad idea because no single label is compliant with the different requirements of all states that presently allow the sale of ingestible CBD products. A CBD company also should be prepared to respond quickly to changes in state CBD laws, which may require label changes or withdrawal from the state market on short notice.

In this case the plaintiff worked on drilling platforms off the California coast on the outer continental shelf and was paid for his time on duty but not for his time on standby, during which he could not leave the platform, which is legal under federal law. The plaintiff filed under California law alleging that California’s wage-and-hour laws entitled him to standby pay.

Atlantic Richfield (ARCO) is seeking to overturn a decision by the Montana Supreme Court allowing property owners to seek in Montana state court restoration damages that went beyond a clean-up plan determined and mandated by the EPA for the massive and historic Anaconda Smelter copper mining contamination that impacted more than 300 square miles, including residential communities.

The USDA’s recent opinion is an important development that should go a long way toward resolving any lingering doubt that 2014 Farm Bill−compliant hemp and hemp-derived products are legal in interstate commerce, and may be persuasive to the Ninth Circuit Court of Appeals as it considers the release of a seized shipment of hemp confiscated in January.

While manufacturing and retail sales of marijuana-derived CBD products are permitted in accordance with California’s cannabis regulations, hemp-derived CBD remains unapproved for use as a food ingredient, food additive or dietary supplement. Assembly Bill 228 is about to change that.

No matter how a company chooses to participate in the CBD industry, it must be counseled on FDA regulatory risk based on the product type in addition to the risks of marketing and selling CBD products on a state-by-state basis. Because the legality of CBD products varies widely by state and is changing so rapidly, providing a concise analysis of critical CBD legal and risk management issues can be a challenge.

Advising companies on CBD risk management is challenging due to the rapid pace of developments and frequent confusion caused by often false or misleading online information. In this article, Ian Stewart outlines the critical CBD legal and risk management issues to watch.

In a recent press release, outgoing FDA Commissioner Scott Gottlieb reinforced the FDA’s position that it is unlawful to introduce food containing added CBD or THC into interstate commerce, or to market CBD and THC dietary supplements. While the availability of CBD products dramatically increased over the past several years, many unanswered questions and potential health risks remain.

FDA Commissioner Scott Gottlieb’s resignation came only days following his testimony before the House Appropriations Committee regarding the FDA’s regulatory plans for CBD (cannabidiol). Congress also heard testimony from the Secretary of the U.S. Department of Agriculture on the status of industrial hemp cultivation pursuant to the 2018 Farm Bill.

The New York City Department of Health and Mental Hygiene announced that “restaurants in New York City are not permitted to add anything to food or drink that is not approved as safe to eat … Until cannabidiol (CBD) is deemed safe as a food additive the Department is ordering restaurants not to offer products containing CBD.”

Whatever one’s position on California Section 5032, there is no disputing it will serve to disrupt the current California cannabis market and cause many existing business relationships to change or cease. While the industry waits for clarity, the prudent course is to embrace full disclosure.

Ultimately, the new federal protections contained in the 2018 Farm Bill will move the CBD-based food and supplement industry closer to unrestricted national and international distribution of hemp-derived CBD products. Until approved by the FDA, however, CBD as an ingredient in foods and supplements will continue to be risky.

U.S. Customs and Border Protection officials have broad powers, and the U.S. Constitution’s Fourth Amendment protections against unreasonable search and seizure are lessened at the borders. CBP also has broad access to publicly available information as well as other information from U.S. government and state government sources.

As Canada draws ever closer to October 17, 2018 – the date on which the Cannabis Act comes into force and recreational or other adult-use cannabis is set to be unveiled across Canada – complex regulatory issues continue to cloud the celebrations, including individuals working or investing in the Canadian cannabis sector being turned back at the U.S. border – or worse.

Until a reliable marijuana-impairment standard is developed, relevant stakeholders must be educated on the unique toxicology of cannabis and how it differs from alcohol, as well as the lack of any scientific basis for state driving laws that rely on THC limits, which do not closely correlate with impairment.

Unlike any other agricultural business, cannabis cultivators that use pesticides are faced with the dangerous nexus of inadequate federal research and oversight, rapidly evolving state regulations, onerous testing standards and high levels of potential legal liability.

Cannabidiol (CBD) now may be legally distributed, sold, imported or exported without restriction so long as it is from properly sourced industrial hemp, but CBD may be added to food products only if it is derived from marijuana. It is difficult to logically reconcile this “schizophrenic” state of the law.

To comply with California’s Cannabis Track and Trace METRC system, business operators must maintain a large amount of valuable data throughout the cannabis life cycle and down the supply chain, increasing the risk of liability in the event of a cybersecurity incident. Cannabis companies would be wise to consider implementing additional best practices to decrease their exposure to data security threats.

 

The guidelines California and other states have issued regarding the recommending of cannabis for medical conditions serve as a starting point for the discussion surrounding the standard of care by creating baselines and establishing routine practices by which physicians can familiarize themselves with the requirements of the changing world of medicine and incorporation of cannabis as a modern treatment for their patients’ conditions.

Given recently finalized state regulations governing the nascent recreational marijuana industry in Massachusetts, marijuana establishments should maintain a close watch on advertising, marketing, branding and promotional activities, which will be critical to managing risk.

A high-profile cannabis consumer class action was filed in Los Angeles on May 10, 2018, and it is expected that many more are on the horizon. Although class actions that assert breach of express and implied warranties, negligent failure to warn and violation of cannabis laws will be difficult to avoid as the California cannabis market expands, a well-informed licensee may nevertheless effectively mitigate its risk through vigilance and by instituting best practices consistent with the regulations.

Allegations of false advertising often are uninsured claims, leaving a business on its own without cover. Fortunately, instituting best advertising and marketing practices consistent with California’s regulations should mitigate most risks associated with an expensive lawsuit.

Most people know that driving impaired is illegal, regardless of the substance. Yet many people don’t realize how difficult it is to reliably test for cannabis intoxication. Determining actual impairment following marijuana use is far more complex than the simple and reliable tests used to detect alcohol impairment.

The California Bureau of Cannabis Control has adopted licensing regulations for commercial cannabis businesses, including those that transport cannabis product throughout the state. However, licensing delays and other issues, including federal involvement, have made the current distribution process more cumbersome and potentially riskier for distributors.

A recent California Supreme Court decision gives residential property developers authority to stay construction defect litigation until plaintiffs comply with pre-litigation requirements. It also provides developers with a basis to eliminate common law causes of action except for breach of contract, fraud and personal injury claims, which are the only exceptions in the Right to Repair Act.

As California’s cannabis market expands, businesses will find it very difficult to avoid claims premised on violation of California’s new cannabis regulations but actionable under the state’s Unfair Competition Law and the Consumers Legal Remedies Act. However, a well-informed licensee may effectively mitigate its risk through vigilance and the institution of best practices consistent with the regulations.

Keeping track of California’s employment-related legislation can confound even the most diligent employers. A quick review of the topics covered here can set your business on the road to compliance and give you peace of mind.

On November 16, 2017, the Los Angeles City Council released two draft ordinances adding Article 4 to Chapter X of the Los Angeles Municipal Code to regulate cannabis in the City of Los Angeles. These revised ordinances were read at a Rules Committee hearing on Monday, November 20, 2017, and approved as amended by a full Council vote. Notably, the ordinances provide guidelines for procurement of licenses at the City level in furtherance of State law requiring city approval to obtain a California license.

The production, distribution and sale of an ingestible product that has psychoactive effects will certainly result in robust product liability litigation. Public policy supports the requirement that participants in the cannabis industry have liability insurance because there is a strong public policy in favor of compensating those who suffer compensable injury. In addition, private insurance regimes often provide excellent loss prevention services directly and indirectly by their underwriting practices. Finally, liability insurance provides stability to industry participants.

Prop 65 was passed by California voters in 1986 after an aggressive lobbying campaign by environmental and public health activists with the intent to improve public health. The general consensus, however, is that Prop 65 has placed an undue burden on California businesses while achieving no significant impact on public health over the past 30 years. 

A Chinese court’s recognition of a California commercial judgment is certainly a landmark development in the legal relationship between the world’s two largest economies. However, this single example of reciprocity will not guarantee that other U.S. commercial judgments will be recognized and enforced by Chinese courts.

While the plaintiffs in a recent lawsuit challenging the constitutionality of the Controlled Substances Act as it pertains to cannabis make some compelling arguments, it will be difficult to convince the federal court of its merits. Success by the plaintiffs, however, will have significant consequences for the cannabis industry by allowing it better access to banks, interstate commerce, tax deductions and other protections enjoyed by the legal market. 

California is discussing the prospect of implementing a public banking model to facilitate access to financial services for marijuana-related businesses operating in compliance with state law.

On May 22, 2017, California Insurance Commissioner Dave Jones led a teleconference with 63 insurance industry stakeholders to discuss insurance requirements set forth in California’s proposed cannabis regulations. He stated: “The department has an important role to play as new industries emerge and the market adapts to meet the changing needs of all insurance consumers.”

The development of new technology that provides an objective measurement of cannabis intoxication, such as mouth swab test kits that detect the presence of six legal and illegal drugs, is a critical step needed to ensure public safety and instill confidence in the legalized marijuana industry.

There are at least two strong reasons to remain cautiously optimistic about the future of legal marijuana in the years to come. First, President-elect Trump stated that he would not permit his attorney general to shut down Colorado’s adult-use marijuana program because “it should be up to the states, absolutely.” Second, the eight ballot initiatives approved by voters on Election Day brought the number of states that allow some form of legal, regulated cannabis to 28.

According to documents filed in California federal court on April 25, 2016, an attorney who registered domain names in her own name is refusing to relinquish control over several domain names after she left her prior firm. The bottom line is that online locations are now just as valuable, if not more so, than their real-property counterparts, and steps should be taken to ensure that each business or organization properly protects its interests.

The California Central District Court has concluded that certain provisions of the California Resale Royalty Act (CRRA) are preempted by the Copyright Act of 1976. As a result, the court eliminated a provision of the CRRA that could have incentivized collectors and auction houses to relocate outside California to avoid its resale restrictions. In addition, the court drew a distinction between direct sellers and online platforms, which could hold increasingly significant implications as forums for the sale of fine art transition to online and virtual platforms.

Two recent lawsuits will allow the EEOC to test the persuasiveness of its current interpretation of Title VII’s prohibition of sex discrimination, but it is unlikely that either action will clarify the ongoing jurisdictional split on this issue in federal courts. While the appellate circuits have thus far agreed that Title VII does not prohibit harassment or discrimination because of sexual orientation, recent decisions at the district court level have embraced the EEOC’s interpretation.

Most statutory laws governing extended warranty contracts pertain to consumer products, and in that context are regulated for the protection of the consumer. Since commercial buyers would not need the same protections, any licensure or registration requirements would not apply to the manufacturer in the commercial context, suggesting that the seller of the extended warranty would not be required to be licensed or registered.

A recent decision by the European Union Court of Justice will likely have tremendous consequences for the cross-border trade in data between U.S. companies and EU citizens. No longer will U.S. companies be able to rely on Safe Harbor program participation and self-certification as a layer of protection when handling the data of EU citizens.

California has adopted the California Electronic Communications Privacy Act, which provides a degree of parity between digital and physical records in the protection against unlawful searches and brings California back to the forefront of digital privacy legislation.

Amendments to California’s Data Breach Notification Statute will take effect on January 1, 2016. Important changes to the existing law include new requirements for security breach notification through the use of prescribed headings in the notification letter and certain amended definitions. This amendment applies to all persons and businesses that conduct business in California and to all California governmental agencies.

If adopted by the High Court of Ireland, a decision issued by Advocate General Yves Bot of the Court of Justice of the European Union would eliminate the safe harbor from EU privacy law afforded to U.S. companies under Decision 2000/520. Eliminating safe harbor could leave U.S. companies in a state of uncertainty and require them to take a long hard look at the EU’s onerous compliance requirements.

In California, most fee disputes involving independent counsel will be resolved by the parties either informally or through the fee arbitration set forth in Civil Code section 2860(c). A recent case before the California Supreme Court presented a new possibility by noting that section 2860 fee arbitrations are not limited to disputes between the insurer and the insured, but can also be between the insurer and Cumis counsel.

A recent study by the U.S. Geological Survey analyzed geographical areas and population centers as indicators of groundwater quality in California to capture a more accurate regional picture of water resources, an approach that could help water providers, regulatory authorities and policy makers relate groundwater quality to health outcomes.

Businesses in 2015 have become enthralled by virtually unlimited access to customers and business partners via online platforms. Unfortunately, many have focused on the potential profits arising from such undertakings without sufficient consideration for the problems that too frequently arise.

The Supreme Court’s ruling granting same-sex couples nationwide the constitutional right to marry strikes down same-sex marriage bans in 13 states and mandates that all 50 states must recognize same-sex unions. Employers should review benefits programs, handbooks and employment policies and practices to ensure they treat all married couples in the same manner.

The California Supreme Court ruled in a June 2014 case that if it is found during the discovery phase that a plaintiff is actually unauthorized to work in the United States, such a discovery would result in an eradicated future lost wage award. Given the potential savings, an employer should seek to ascertain a former employee’s work eligibility status when defending against discrimination claims.

In an opinion issued on January 22, 2015, the Fourth District Court of Appeals left the door open for an insured in a multi-carrier insurance coverage case to attempt the allocation of settlement monies away from defense costs and essentially “pocket” settlements – attributing them to Brandt fees – while continuing its efforts against non-settling carriers.

The California Third Appellate District  recently overturned a lower court’s denial of a motion to dismiss a class action lawsuit seeking $4 billion in damages under California’s Medical Confidentiality Act due to the alleged disclosure of medical records. The Appellate Court specifically held that the mere theft of medical records without any allegations that an unauthorized person viewed these records is insufficient to state a claim.

A California court holds that an insured entitled to “independent counsel” can retain more then one firm where the insured demonstrates that the retention of a second firm and the fees charged by that firm are “reasonable and necessary” to the defense of the underlying claim.

 

On July 3, 2014, the California Supreme Court held that, based on common law principles, an architect owes a “duty of care” to future homeowners in the design of a residential building. To what extent the design professional must assume a role of principal architect or become involved in the construction phase before a duty will run to the ultimate purchaser of the condominium remains an open question.

An insurer is not liable under California law for failing to settle a liability claim when no settlement demand has been made and there was no evidence that the insurer knew or should have known the claimant was interested in settlement.

A recent California Court of Appeal case confirms the limited duty of an insurance broker only to use reasonable care, diligence and judgment in procuring the insurance requested by an insured. The court rejected arguments that the duty of an insurance broker to its client should be expanded for policy reasons.

While a recent decision by the California Court of Appeal is unfavorable to defendants, it does not completely close the door to the viability of the “sophisticated intermediary” defense. The Court says it is not enough for a supplier defendant to simply show the plaintiff was an employee of a sophisticated intermediary to avoid liability. The supplier must also show it had sufficient reason to believe the ultimate user knew or should have known of the hazards.

The California Court of Appeals (Fourth District) has held that the Right to Repair Act does not provide the exclusive remedy to homeowners in cases where actual damage has occurred because of construction defects, thereby upholding a homeowner’s common law rights and remedies to seek actual damages despite noncompliance with the terms and conditions required for relief under the Act.

The California Supreme Court has concluded that actions by the State Legislature do not expressly or impliedly preempt the authority of California cities and counties – under their traditional land use and police powers – to allow, restrict, limit or exclude facilities that distribute medical marijuana.

On May 8, the Supreme Court of California heard oral arguments in a case that could decide whether an insured can bring a cause of action against its insurer under the Unfair Competition Law and if previous case law bars such an action.

California’s First District Court of Appeal finds common law and statutory duties extend from design professionals to ultimate purchasers of residential construction. Despite the extensive analysis by the court, there remain open questions regarding the extent of the duty of care of design professionals to ultimate purchasers.

While a California Appellate Court extended the “completed and accepted” doctrine to architects’ field operations, it limits application of the doctrine to patent defects and activities in the field – the doctrine does not apply to claims of error in the development of plans and specifications.

As businesses and families that were caught in the path of Hurricane Sandy begin to survey the damage, insurers are feeling the first surge of many claims to come. Now’s the time to confer with Wilson Elser’s knowledgeable and adept insurance attorneys to be certain you’ve got all contingencies covered.

This is the first in a series of alerts designed to provide you with clarity and understanding of the important and significant issues raised by this unprecedented crisis.

California’s governor has signed Assembly Bill 1875, which limits the length of depositions in civil cases. The new law will go into effect on January 1, 2013.

In Pinnacle Museum Tower Association v. Pinnacle Market Development, the California Supreme Court’s opinion demonstrates a strong public policy in favor of the mandatory arbitration of disputes. This case has clear implications regarding the enforceability of mandatory arbitration provisions in many other areas as well.

California Supreme Court Rules Policyholders in Long-tail Environmental Claims Can “Stack” Coverage Limits over Multiple Policy Years and Take “All-sums” Approach to Indemnity Allocation
On August 9, 2012, in the State of California vs. Continental Insurance Co. et al. the California Supreme Court affirmed an appellate court decision on the “all-sums-with-stacking” default allocation rule regarding commercial general liability policies purchased by California from multiple insurers over several years.

A recent California Supreme Court decision reaffirmed the need for clients to communicate with counsel early concerning the investigation conducted after an accident. The attorney can then direct the necessary investigation and analyze the manner in which witness information should be obtained to provide the necessary work product protection should the matter result in litigation.

Wilson Elser Attorneys, William T. Bogaert, David Eisen, Joanna Piorek and Jason M. Kuzniar Co-authored Recent Developments in Professionals, Officers and Directors Liability in the Tort Trial and Insurance Practice Law Journal, Vol. 47, Issue 1, Fall 2011 published by the Tort Trial and Insurance Practice Section of the American Bar Association.

Analyzing an issue that no California court has directly addressed, a recent Ninth Circuit decision holds that insurers must promptly seek to effectuate settlement once liability has become reasonably clear, even in the absence of a settlement demand. The court also lent more fuel to the ongoing debate concerning the role of the genuine dispute doctrine in the context of third-party claims.

Legal Insights, the Chartis Insurance Company’s internal newsletter, has published an article written by William K. Enger entitled “U.S. Supreme Court Upholds Arbitration Clause in Credit Repair Contracts and Overrules Ninth Circuit.”

The Virginia Supreme Court rejected an insured’s rehearing bid and again ruled that the damages in a global warming suit allegedly stemming from the intentional emission of greenhouse gases did not arise from a policy-defined “occurrence.”

Because the California Supreme Court has provided some specific guidance regarding employers’ obligations in reference to meal and rest breaks, it is very important that employers review their policies and practices to ensure they are in compliance with the requirements set forth in a recent decision.

DRI - the Defense Research Institute – has published an article on Section III of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) written by Meg Gambino, Steve Joffe and Maria Caruana in the April 2012 issue of For The Defense.

In Pacific Rim Mechanical Contractors, Inc. v. Aon Risk Insurance Services West, Inc., a case of first impression, the court held that an insurance broker, after procuring a policy of insurance for a developer on a construction project, does not owe a duty to apprise a subcontractor that was later added as an insured under that policy of the insurance company’s subsequent insolvency, absent the assumption of a contractual duty to do so.

The California Court of Appeal has reaffirmed that, absent extraordinary circumstances, the suppliers of raw materials and component parts cannot be held liable for negligence or strict products liability to a manufacturer's employee who is injured while using the raw materials in the manufacturing process. The trial court ruled in favor of the defendants, who moved for judgment on the pleadings on the basis of the raw materials and component parts defenses.

The California Supreme Court held that the doctrine of strict liability was never intended to impose absolute liability, which would place an excessive and unrealistic burden on product manufacturers who should not be required to insure and warrant against the potential risks involved with another manufacturer’s product.

The 8–1 decision upholds arbitration clauses over a customer’s right to file a lawsuit. The decision therefore reinforces the Supreme Court’s view that contractual arbitration does not conflict with the statutory right to file suit.

Legal Insights has published two articles by California-based Wilson Elser attorneys in its winter 2012 issue.

In The AES Corp. v. Steadfast Ins. Co., the Virginia Supreme Court focused its opinion on what constitutes an accident and what are the “natural and probable consequences” of actions. The Court may have chosen a high-profile litigation theme such as global warming to clearly articulate that, at least in Virginia, liability insurance is designed to cover only losses caused by “true accidents.”

SB 474, recently signed into law by Governor Edmund G. Brown, Jr. bans so-called “Type I” indemnity agreements that require subcontractors to assume liability for general contractors’ negligence.

On August 22, 2011 the California Supreme Court made claims by injured workers against general contractors more difficult when it held in Seabright Insurance v. U.S. Airways that the hirer of a subcontractor presumably delegates to the subcontractor any duties that arise regarding a safe workplace for the subcontractor’s employees.

The August 3, 2011, California Court of Appeal ruling in Mansur, et al. v. Ford Motor Company, et al. will further strengthen manufacturers’ efforts to exclude the vague consumer expectations test in complex product liability cases where alleged defects go beyond the common knowledge of laypersons.

Today, the Supreme Court of California held that unpaid medical expenses are not economic damages and therefore not recoverable. Plaintiffs may be awarded no more than the amount the medical providers accepted as full payment for their services.

On June 20, 2011, the United States Supreme Court reversed the decision of the United States Court of Appeals for the Second Circuit in American Electric Power Co. Inc., et al. v. Connecticut et al., and dismissed the federal common law nuisance climate change claim brought by several states, the City of New York and three land trusts against four private power companies and the Tennessee Valley Authority.

Employers across the nation breathed a sigh of relief as the U.S. Supreme Court found that the Ninth District Court's certification was not consistent with Rule 23's requirements that a class action must have common "questions of law and fact."

On May 19, 2011, the presiding judges of Los Angeles, Orange and San Diego counties filed a petition with the chair of the Judicial Council of California to have all asbestos cases in those counties coordinated. To support this petition, the presiding judges pointed to a sea change in asbestos litigation in recent years. If approved, what impact will the petition have on procedures and legal rulings in asbestos cases?

The 9th U.S. Circuit Court of Appeals recently decided a dispute over who should pay the costs of cleanup of hazardous substances in a berth in Los Angeles Harbor. The case centered on the definition of an "owner."

A U.S. Supreme Court ruling upholds background checks on employees working for a NASA contractor – an important decision affecting workers’ constitutional privacy rights.

Manufacturers will need to keep on top of reports of product safety issues posted on a new government website. The U.S. Consumer Product Safety Commission will give companies a chance to challenge complaints made on its website, but response needs to be rapid, especially when there is a concern about the accuracy of a complaint.

In California v. Hearthside Residential Corp., the U.S. Court of Appeals for the 9th Circuit determined an issue of first impression: at what specific time is land "ownership" determined for purposes of clean-up liability under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

In our November 2010 Environmental Alert, we reported on the three nuisance-based climate change lawsuits that have been proceeding in the federal courts. On December 6, 2010, the U.S. Supreme Court granted certiorari to review one of those cases – American Electric Power Co. v. State of Connecticut (AEP).

In the recent cases of Crawford v. Weather Shield Manufacturing, (2008) 44 Cal. 4th 541, and UDC-Universal Development Company LP v. CH2M Hill, (2010) 181 Cal.App.4th 10, California appellate courts have upheld a design professional's contractual defense obligation, even in the absence of any finding of negligence by the design professional.

In Scottsdale Insurance Company v. Century Surety Company – B204521, the California Court of Appeal recently ruled that an insurance company seeking equitable contribution must establish that it paid more than its "fair share," the proof of which would determine the amount of damages recoverable in such an equitable contribution action.  The Court of Appeal also ruled that when an insurer contests a claim for equitable contribution based on a "prior work exclusion" in its policy, the insurer must prove that the exclusion is "conspicuous, plain and clear."

In a much watched decision regarding the discoverability of reinsurance information, the District Court of Oregon recently denied a motion for reconsideration of its prior order finding such material discoverable and not cloaked by the attorney-client privilege or work product doctrine. The Regence Group v. TIG Specialty Insurance Co. Case no 07-1337-HA (USDC D. Or. Feb. 4, 2010). This ruling has troubling implications for cedents and their reinsurers, and it is a departure from well established precedent in other jurisdictions, notably California.

In several recent alerts, we have advised our clients of two federal appellate decisions, Connecticut v. American Electric Power Co., Inc. (582 F.3d 309 [2d Cir. 2009]) and Comer v. Murphy Oil USA (585 F.3d 855 [5th Cir. 2009]) that have allowed lawsuits seeking damages for global warming based on the federal common law of nuisance to go forward, and one district court decision, Native Village of Kivalina v. Exxon Mobil Corp. (663 F.Supp.2d 863 [N.D.Cal. 2009]) that has dismissed such a claim.

On January 12, 2010, Governor Arnold Schwarzenegger announced that the California Building Standards Commission unanimously adopted the first-in-the-nation mandatory Green Building Standards Code (CALGREEN).  These mandatory building regulations will apply to all new construction in California including, but not limited to, all residential and commercial buildings.  The CALGREEN Code will take effect on January 1, 2011, and will become the baseline for regulating green construction statewide.

On February 23, 2010, the United States Supreme Court in Hertz Corp. v. Friend, et. al., unanimously held that a corporation's "principal place of business" for the purposes of federal diversity jurisdiction shall be determined by the "nerve center" test.  This refers to the corporation's center of direction, control and coordination, as opposed to the "business activities" test used in the Ninth Circuit and elsewhere.

Following our December 2009 advisory, "The Application of Nuisance Law to Greenhouse Gas Emissions," this is the latest in a series of client advisories concerning climate change-related liability.

Plaintiffs who had made claims for alleged global warming damages received a recent setback in the Northern District of California U.S. District Court. In Native Village of Kivalina et al vs. ExxonMobil Corporation et al. ((2000 N.D. Cal) 2009 U.S. Dist Lexis 99563), Judge Saundra Brown Armstrong granted a motion to dismiss the complaint filed against 24 oil, energy and utility companies alleging that their greenhouse gas emissions created a public nuisance and contributed to climate change brought on by global warming. This decision focuses on the fundamental problems with such claims and foretells a potential split between federal circuits and an issue that will ultimately need to be decided by the United States Supreme Court.

A recent decision by the Fourth Appellate District of the California State Court of Appeal, City of Carlsbad v. Insurance Co. of the State of Pennsylvania (2009 Cal.App. LEXIS 2025), has upheld a land subsidence exclusion to a CGL insurance policy, finding that the exclusion, which precludes coverage for "property damage arising out of land subsidence for any reason whatsoever," is not ambiguous and does not violate Insurance Code Sec. 530.   This published decision should prove to be extremely useful to insurers seeking to assert such exclusions upon tender of a third-party landside claim.

Recently, President Barack Obama signed into law the National Authorization Act for Fiscal Year 2010, which extends military caregiver leave provisions to veterans.  Under the new law, a worker will be able to take up to 26 weeks of leave from employment to care for a veteran for up to five years after the service member leaves the military.  The leave could be taken by the caregiver if the veteran suffered a qualifying injury or illness in the line of active duty (or had an existing injury or illness aggravated in the line of active duty).  The injury or illness could manifest itself before or after the service member became a veteran.

The Mexican government recently imposed import tariffs on $2.4 billion of U.S. goods after the United States suspended a program allowing Mexican trucks to deliver goods across the border.  When the U.S. closed the southern border to Mexican trucking in March, Mexico promised to retaliate.  Mexico has released a list of 89 U.S. products that will face tariffs of 10 percent to 45 percent.

In its March 9, 2009 ruling in State of California v. Underwriters at Lloyd's London et al. (S149988) ("Underwriters"), the California Supreme Court, which is the highest court in that state, handed down a significant ruling for insurers and insureds litigating coverage for environmental pollution.