Wayne Wills, left, director of security at medical marijuana dispensary Aloha Green, looks over empty shelves Tuesday, June 6, 2017 in Honolulu. (Cathy Bussewitz, Associated Press)

Workers’ comp insurance firm drops all 7 of Hawaii’s medical marijuana dispensaries over fear of feds

Hawaii Employers' Mutual Insurance cited concerns over potential exposure for criminal liability based on federal law

HONOLULU — Hawaii’s largest workers’ compensation insurer is canceling insurance policies for seven medical marijuana dispensaries preparing to open this summer.

Hawaii Employers’ Mutual Insurance Co., citing concerns over criminal liability since the drug is considered illegal by the federal government, notified the affected dispensaries Wednesday its policies will be canceled in 30 days and that premiums would be refunded.

The company said its board of directors unanimously agreed to the decision after two independent legal opinions determined it would have “potential exposure for criminal liability” based on federal law.

HEMIC officials declined to identify the seven companies or how much they will be refunded. HEMIC does not cover Hawaii’s eighth marijuana dispensary, the Honolulu Star-Advertiser reports.

The move could delay the opening of Hawaii’s first dispensaries unless the companies can find an insurer willing to offer workers’ compensation policies. Hawaii law requires companies to provide workers’ compensation insurance that covers medical expenses and loss income for employees who are injured on the job. It also protects businesses from lawsuits by injured workers due to workplace conditions.

“We’re not providing an opinion or moral judgment on someone’s use of marijuana or not, and we’re certainly not taking a position opposed to the value of medicinal marijuana to treat certain medical conditions or chronic pain,” HEMIC Chief Executive Officer Marty Welch told the Honolulu Star-Advertiser Wednesday. “This was really simply a legal decision.”

The board had to ensure the company, its employees, its balance sheet and its 6,500 customers were protected, Welch added.

HEMIC accepted workers’ compensation insurance applications starting in 2016 after the state’s first medical marijuana licenses were issued to eight dispensaries, but said under state law, it can decline to insure “businesses engaged in illegal activities.”

HEMIC, a private mutual insurance company whose directors are elected by its policyholders, said it has a “fiduciary duty to act in the best interest of the company, its stakeholders and its 6,500-plus policyholders.”