Tag: Texas Marijuana Laws

Practical Risk Management Tips for Texas Hemp and Cannabis Businesses

Written by texashempreporter on October 4, 2023. Posted in Business.

By Rae Guyse

Though coverage options have opened up to the hemp industry in recent years, hemp is still considered a high-risk industry with special insurance considerations that those in the hemp industry should be aware of. Whether you are a farmer, processor, manufacturer, or retailer, insurance is an important risk mitigation tool for you to have to in place. This article provides an overview of practical tips for securing the right insurance coverage for your business and includes other risk management issues to assess.

Work with a knowledgeable broker and shop around when securing insurance – and be sure to secure all required coverage lines needed to protect your business.

A broker with experience securing coverage for hemp and cannabis businesses can help you negotiate the right coverage. However, its important to do your own due diligence as well. Shop various coverage lines with multiple insurers. Not all insurance companies in this space are offering a good product, and some sell insurance coverage with so many exclusions you may be left high and dry should an accident occur. A skilled coverage attorney can also help by reviewing any policy terms you have been offered, breaking down your scope of coverage, and spotting any terms you may want to negotiate to have added for your specific business needs. Often, we see companies that believe they had secured correct coverage, only to find out during an adverse event that the coverage they needed had been whittled away by an exclusion to the policy.

Be sure to do a full business analysis to understand all of the coverage lines you require to be protected in all disaster scenarios. Ensure all buildings, machinery, crop, and lots are covered, but don’t just focus on only the product, equipment, or store front–you will need all the traditional first-party and third-party insurance coverage that every other type of standard business should have. First-party coverage refers to insurance for harms that occur directly to your property or business, such as property and crop insurance, business interruption insurance, intellectual property infringement, data loss, cyber insurance, and crime insurance. Third-party coverage covers liabilities to a third-party you may become responsible for, the most common being commercial general liability insurance. Commercial general liability generally affords protection when people get injured on your property (think “slip and fall” scenarios). Other types of insurance you likely need include commercial automobile insurance, workers’ compensation or employer liability insurance, and product liability insurance.

Should an incident arise, make sure you know which policies are triggered. Sometimes you can find surprise coverage in a policy you would not normally think would be triggered by a certain incident, so it is good practice to give each policy a quick review each time you have a potential claim.

Be familiar with your lease agreement and any included insurance requirements.

You should read and study your lease agreement cover to cover just like you would do with your insurance policy (and hire counsel to help you through it if resources allow). It is important that the landlord for any space you intend to rent for your hemp business understands the full purpose for which you plan to rent the space, especially any hemp cultivation or manufacturing activities. Your lease agreement governs the terms between the landlord and your business, and many of those terms relate to how risk is allocated between the parties. For example, your lease agreement should identify who is responsible for certain repairs, day to day maintenance of the building, and who owns improvements. It is also common for lease agreements to set forth certain minimum insurance requirements. Failure to adhere to the required insurance terms can put your lease at risk and reduce coverage availability. Make sure the “scope of use” terms of your agreement are broad enough to encompass your business activities. Also, take note of the renewal and termination terms, and whether and how much notice is required. Counsel may be able to help negotiate lease terms in your favor such as pushing the start date of your lease to after the date your business becomes fully operational, solidifying purchase options or the right of first refusal, or reducing certain obligations required of you under the proposed lease.

It is a good idea to have counsel in negotiating the terms of a lease agreement. It is relatively common for key terms to be missed in agreements drafted among parties, which can leave parties without much direction or recourse should something go wrong. It is smart to include terms that commit your landlord to complying with all rules and regulations needed to stay compliant for your businesses’ licensing or premises’ activities. Your landlord is equally likely to want to negotiate terms for legal “outs” for things such as illegal activity, bad grow years, lack of payment, and/or environmental violations. Landlords often also require indemnity from tenants for any liability or civil forfeiture issues.

Watch out for broadly written exclusions, and see if key endorsements can be added to your coverage.

Insurance policies are written in a complicated and hard to decipher format, where coverage is granted by a relatively broad coverage form, and that same coverage is then slowly stripped away by numerous exclusions and policy endorsements listed in different places throughout the policy. This is why it is important to read closely or work with coverage counsel to determine the scope of coverage your policy truly affords. For example, a broadly drafted “health hazard” exclusion in a product liability policy could remove coverage for the types of third-party injuries you would be seeking coverage for if it voids coverage for “any type” of adverse health effect resulting from the any use of your hemp product. Another one to look out for is language that bars coverage for any delta-8 or other novel cannabinoid product – many carrier forms will define “hemp” based on total THC content, not distinguishing between delta-9 and other variants. Vape-related exclusions are also common.

On the flip side, coverage counsel may also be able to help identify key coverage endorsements you can negotiate to have added to your policy. For example, a retailer selling CBD and delta-8 products would be smart to negotiate an Advertising Injury Endorsement, which protects the business from parties that claim to have been injured by an advertising claim made by the business. Make sure to ask your broker if they consider any form of false advertising claim fraudulent. This is one of those tricky areas where hemp or cannabis businesses often believe they have secured coverage – only to later find out when served with a lawsuit that the insurer will deny coverage. It is also a good idea to have an Intellectual Property Endorsement, which protects against accidental intellectual property infringement, a strict liability claim that can be costly to defend without proper coverage. Depending on the extent of your e-commerce activities, data loss coverage may also be recommended.

Understand the requirements of your insurance policies in the event you do need to make a claim.

All insurance policies will have specific terms within the policy you need to comply with in the event that you need to submit a claim. When an incident occurs that you think could be covered, don’t wait – most policies require you to provide prompt notice of a claim, and any significant delay could reduce or void coverage. Other terms explicitly require cooperation with the insurer’s investigation of the incident, and they will likely set forth numerous other policy conditions that must be satisfied for insurance to cover the incident. Compliance is also huge when it comes to ensuring you get the coverage you paid for – anywhere your business is out of compliance with federal, state, or local laws or regulations puts you at risk of losing coverage should an insurable event related to your business or product arise. You should also be mindful of what actions explicitly void coverage under your policy. Insurers will often dispute coverage and reserve their right to decline coverage when there is even a small chance that an exclusion may be found to apply to your claim. When communicating with your insurer, be sure to put everything in writing. Be sure to respond fully and promptly to all insurer requests. Also, be aware of privilege issues. Assume any communications with your broker will not be privileged in a later dispute over the claim should one arise, and do not forward any legal communications with your coverage counsel to another third party. In the event your insurer responds to your claim with a denial letter, skilled coverage counsel can review the basis for the denial and often find a legal basis for why coverage should be afforded. Where necessary, coverage counsel can escalate the denial to filing a demand or suit against your insurer.

While risk management is often the last thing a company wants to think about when getting started, it is essential to the long-term success of your business and one of the most important forward-facing steps you should cover from inception. It only takes one claim or lawsuit to put your business at severe financial risk. As the age old saying goes, an ounce of prevention is worth a pound of cure. Making sure you have a comprehensive insurance and risk management plan in place can help keep you protected.

Rae Guyse is an associate attorney with Ritter Spencer PLLC. Rae handles matters for companies in all sectors of the hemp, cannabis, and alternative medicine industries, including manufacturers, distributors, and retailers in matters related to compliance, licensing, insurance, trademarking and litigation. Prior to joining Ritter Spencer, Rae spent over two years as an insurance recovery attorney, helping companies maximize their insurance payout in claims against their insurers. As a skilled coverage attorney, Rae can assist you in reviewing your insurance policy before you sign the dotted line to ensure proper coverage. You can reach Rae at 214-295-5070, or email [email protected] to schedule a consultation with her.

How to Pitch Pot to Conservatives (For Starters, Call it “Cannabis”)

Written by Michael John Westerman on November 9, 2021. Posted in Business.

Grassroots and Hemp Seeds: How Traditional Political Action Has Failed TX Cannabis

With the 87th Texas legislature having come and gone without any particularly exciting progress on cannabis, it is clear that efforts on selling the conservative voting bloc on legalizing it have not been as fruitful as we might have hoped. Sessions come and go, and while other states are generating billions of dollars in tax revenue through recreational cannabis markets, funding education and social programs, and generally not being the worst to their voting constituencies, Texas continues to push the bar on careless legislating.

It might be fulfilling, even entertaining, to blame the legislature and the politicians, but keep in mind we vote them in, and remember this when considering whose name to tick off next time. Willie Nelson for governor anyone? He does claim to have begun the “Teapot Party”, but let’s hope he doesn’t take to tossing bales of cannabis into a harbor should Texas ever decide to legalize and tax the agricultural commodity.

Cannabis is Not from California, Nor Will It Turn Texas Into California

marijuana leaves cannabis plants a beautiful background

Texas does not have to become California to make progressive steps towards generating billions of dollars in tax revenue. Instead of hippie weed, why not country wildflower? It’s all about framing and packaging, and given that some of the worst political presents in history were wrapped in the most wonderful cutest little boxes that the nation just could not wait to tear open, why not repackage the cannabis market for the Texan psyche?

The drastic leaps backwards concerning women’s reproductive rights notwithstanding, the 87th Legislature of Texas denied cancer patients and veterans the ability to purchase cannabis with sufficient levels of THC to do what the entire purpose of medical marijuana is to do: provide adequate levels of THC to impactfully support treatment.

If the government were to limit the amount of alcohol allowed in beer to ineffective levels, or deny sufficient amounts of cheese to populate the space between patties and buns on a Big Mac, the nation would explode like a powder keg into a second civil war, complete with patriotic psychedelic fireworks (more on psychedelics in a future article).

So how do we get the conservatives on board and actually make some godforsaken progress this next legislative session? Pitch them not on the lifestyle benefits of pot, but on the economic value of the complete cannabis plant. Hemp is cannabis. Hemp is legal, employing thousands of citizens and generating millions in taxable revenue for good ‘ol Tejas at this very moment.

The mainstream asks, “so how is hemp legal and weed is illegal if it comes from the same plant?” Great question, mainstream, let’s draw a parallel they’ll all understand.

The Alcohol and Tobacco Analogy Pushes the Dials and Doesn’t Just Run the Wheels

Alcohol is to wheat what marijuana is to hemp and nicotine is to tobacco: an agricultural byproduct. All three are intoxicants, all three can alter one’s consciousness, although only two kill hundreds of thousands of Americans annually, the two that are legal. Why again is marijuana illegal?

It’s Already Here, Why Not Tax It and Save on Useless Law Enforcement Efforts?

Cannabis herb and leaves for treatment.Buds. Skunk. cbd, hemp buds and money,Closeup of assorted American banknotes.World economic crisis associated with coronovirus.

The character played by actress Michelle Rodriguez in the film “Machete” by director Robert Rodriguez says something like “We didn’t hop the border, the border hopped us.” The historical and political poignancy of this quote from an otherwise grindhouse feature of ultraviolence and Danny Trejo-driven awesomeness aside, cannabis in a similar manner has already transcended the borders of Texas. We have legal hemp, and if you might be looking for a product of the cannabis plant containing more than the legally allowed .3% THC, you likely know a person, or know a person who knows a person. You dig? It’s around, man, don’t be a square and it just might find you.

Marijuana Enforcement Measures are Exceptionally Discriminatory

As reported by the New York Times, Willie Nelson was caught by canine officers in the West Texas Town of Sierra Blanca with a quarter ounce of “high-grade, domestically grown marijuana”. Way to keep it ‘Merican Willie. The Hudspeth County Attorney on the case, Kit Bramblett, stated to local publication The Big Bend Sentinel, “I’m gonna let him plead, pay a small fine, and he’s gotta sing ‘Blue Eyes Crying in the Rain’ with his guitar in the courtroom. I ain’t gonna be mean to Willie Nelson.”

Now, substitute out “Willie Nelson” for “a Black teenager in a hooded sweatshirt”, and take a moment to envision what might have happened to our theoretical teenager if caught in West Texas with a quarter ounce of “high-grade, domestically grown marijuana”. I think it is safe to assume the canines and officers would have taken a different approach during the arrest, and the prosecutor would not be asking them to sing ‘Blue Eyes Crying in the Rain’ in the courtroom then let them go with a small fine.

Making the Effort? Reaching Out to Your Representatives

While you might think that the hemp companies generating hundreds of millions annually and their lobbyists will sway the minds of the Texas Legislature to legalize marijuana, don’t. It hasn’t happened yet, while recreational cannabis has been proving it value across the nation for nearly a decade at this point. While niche progress is made here and there to support commerce and the interests of the companies paying the lobbyists, as with the smokable hemp ban, broad political change takes broad effort on behalf of the body politic. Us.

Reaching out to your local representatives and communicating your position in support of legalizing recreational cannabis might be helpful. Before voting, determine who supports cannabis, and ask them what they plan to do in support of it if they make it into office. Vote with your voice, and inform your choices with hard data not glossy propaganda. Instagram is not news, but do slide into people’s DMs whom you find attractive, that’s what it’s for they tell me.

Money with sheet of marijuana close-up on background of one hundred dollars with an artificial ray of light, high quality image. Thematic photos of hemp and cannabis

Recreational cannabis is not far away from Texas, in fact there’s a market just above us in Colorado, and quite a bit of products diverted from other markets already here. Whether or not Texas decides to do what is best for the citizens of the state depends upon us. Or not. In all likelihood the Fed will legalize cannabis before Texas ever does, so advocate and vote, or don’t, it ultimately might not make any difference in the end. Just do you, live long and prosper, and maybe at some point you can legally buy a joint at a recreational dispensary in Texas to get over the futility of it all while allowing a moment in time to go up in smoke.

Cheers,

Michael John Westerman, Esq.

www.mjwestermanlaw.com

Central Texas’ Landlord-Tenant Attorney

Penalty Reduction Bill an Update on Joe Moody’s HB 2593

Written by Jesse Williams on June 30, 2021. Posted in Legislative.

Penalty Reduction Bill HB 2593 an Update on Joe Moody’s

by Jesse Williams

Rep. Joe Moody (D) of El Paso authored HB 2593. The bill specifically deals with marijuana concentrates of up to 2 oz of tetrahydrocannabinols (THC). Moody had previously authored what has become HB 441 (another penalty reduction bill for marijuana flower) authored by Rep. Zwiener in the 87th legislative session.

HB 2593 would remove tetrahydrocannabinol and related substances from Penalty Group 2 and place them in a new category, Penalty Group 2-B, under the Texas Controlled Substances Act.

Penalties for possession of substances from the new Penalty Group 2-B would have been the same as those in Penalty Group 2-A, which range from a class B misdemeanor if the substance is two ounces or less, to life in prison or a term of five to 99 years and a fine up to $50,000 if the amount of substance possessed is more than 2,000 pounds.

Right now, any amount of concentrate found in your possession is a state felony. The last time penalty reduction was passed by the Texas legislature was 1973.

The bill passed out of the House committee with only two nay votes and passed in the House with a final supermajority vote of 108-33.

The bill proceeded to the Senate where it passed out of committee with only 2 nay votes as well. From there the bill was approved out of the Texas Senate with a delta-8 amendment attached by Senator Perry. The amendment would bring the regulation of delta-8 to what Perry called the federal limit imposed on THC by the 2018 Farm Bill. The second reading of the bill was passed with a 25-6 vote, and after the third reading for the final passage with amendment added, a vote of 24-7 was taken to pass the bill with supermajority support.

Grinded weed shaped as Texas and a joint.(series)

Senator Hinojosa asked if the amendment would bring any lab confusion such as the previous hemp bill, to which Perry responded no. Perry was also asked if the author (Moody) was okay with this amendment, to which the answer was yes.

When the bill went back to the House to see if the author conferred with the amendments or wanted a conference committee, Rep. Moody made a point of order on the bill. Moody requested a conference committee on the grounds that the delta-8 amendment was not germane (not relevant to purpose) to the bill it was added to. The House agreed that the amendment was not germane and the bill went to the conference committee. The same conclusion was reached in the conference committee.

The House then voted on the conference committee version without the delta-8 amendment language and passed the bill again. The bill was then sent to the Senate to be heard by the members on the floor. When sponsor Sen. Nathan Johnson (D) requested for the bill to get a vote on the floor, Lt Gov Dan Patrick denied the request, likely from frustration that the delta-8 amendment language was not present.

When this request on the floor was denied, the bill was effectively dead because the deadline was coming up within hours to have the bill passed by the Senate floor once more and sent to the governor.

Concentrates of THC now remain a state felony in the state of Texas until the legislature convenes again in 2023 to possibly bring up another bill.

Going Green: Could COVID-19 Spark Full Legalization for Texans Sooner Than Anticipated?

Written by Stacey Lovett on June 8, 2020. Posted in Agriculture, Business, Health. 2 Comments on Going Green: Could COVID-19 Spark Full Legalization for Texans Sooner Than Anticipated?

“Legalize It” has not been an easy song sung by all Texas constituents in the push for complete marijuana reform in the Lone Star State, but many steps have been taken by legislators in the development of industrial hemp production with state licensing opened this past March for potential growers. Many question if the full legalization of cannabis to include marijuana will quickly follow, especially in the wake of mass unemployment and budget shortfalls with the COVID-19 shutdown which challenges the prior pushback of it with the future potential there to really bring in the green.

Should the proposed national SAFE banking act pass in Congress, it would create a “safe harbor” for the financial institutions backing legal dispensary and grow operations operating under state law but not yet backed by federal law. They would not be prohibited or penalized for their affiliation with these businesses, creating the foundation to collect tax revenue from the booming marijuana industry which estimated to have reached $15 billion in sales last year alone. Substantial increases of marijuana sales during the shutdown were reported in states who have already legalized it recreationally and deemed dispensaries essential businesses in the majority of those states. These states are closer to reaping the benefits that potentially mirror the post-prohibition lift of the ban on alcohol which generated a great deal of revenue nationwide, but what does it look like for Texas in the time being?

As one of the leading global growth sectors, cannabis continues to appear on more and more ballots across America and beyond medicinal and recreational use it creates a wider new market opportunity on the non-narcotic side of hemp as an alternative crop for US farmers. Ultimately, the opportunities for this cash crop bringing in the cash are endless, no matter what end of the spectrum of cannabis you may be on. It has the potential to be the future of textiles, construction materials, bio-plastics, fuels, and food for both humans and livestock, all grown on home soil. And as of March 2020 Texans can apply for their license to grow but still await the green light to do so. Experts like the Texas Hemp Growers Association, however, warn those looking to quickly cash in on the cash crop that it’s not going to be an overnight success. There are quite a bit of agronomic requirements and education that will need to feed into all of the legal and regulatory framework currently being put in place. Farmers and growers need to understand and integrate the multitude of economies around this market to cultivate the most success. But that’s not to say it can’t be done, it just needs to be done right. And that’s where Texas legislators and Texas Department of Agriculture have been working alongside federal leaders like the USDA on rulings for state hemp programs and continue to build the infrastructure of it all to benefit the average Texan. New economic growth is on the horizon but is there more untapped potential that could help in the shorter term?

Heather Fazio, the director of Texans for Responsible Marijuana Policy estimated in a recent interview with CBS Austin that “[with potential legalization,] even with modest taxes imposed, the State of Texas could bring in as much as $1 billion. This funding can help fill the budgetary gap created by government shutdowns in response of COVID-19.” But how fast would and could the state even be able to move towards full legalization in hopes to mitigate loss? So far it has met expectations leading up to what directors had projected in the overall hemp plan yet remains a question whether 2020 will see the first crop year for licensees. And, without, would revenue from the hemp alone be enough to revitalize the state? Many questions arise and remain with the full benefit this crop could provide and the terrain is everchanging with the amount of research being poured into it at every level. Economists advise that financial success lies in the proper infrastructure being put into place alongside laws which helps validate Texas’ slow and steady pace, but are we going to need to pick up the stride in this race with recent global economic downturn? It has remained a hot topic on both conservative and progressive tickets and recent socioeconomic changes surrounding the Coronovirus pandemic raise a whole new set of factors to consider in it.

As the push towards decriminalization of it in its entirety continues, it evolves with the needs of the people and as we’re met with an issue that affects us nationally, the potential to reap full benefits of the plant sparks even more of a conversation this season for Texans especially. It has already proven to be a budding industry but the question remains how far will we allow it to bloom?