Cannabis in the Courts

So far, 2021 has been no exception to the general rule about cannabis: Developments move at a fast and furious pace. Workers’ compensation claims, in particular, have been gaining momentum in 2021’s first quarter, with a slew of courts in New York, New Hampshire, and Massachusetts all deciding significant issues regarding a carrier’s duty to reimburse an injured worker for legally purchased medical marijuana.

While appellate courts in New York and New Hampshire held that workers’ compensation carriers must repay claimants for the monetary costs of medical marijuana, an appellate court in Massachusetts determined the exact opposite. It decided that, because marijuana is federally illegal, the carrier cannot be compelled to reimburse a claimant for the cost of medical marijuana. These cases are analyzed below.

New York

In the matter of Quigley v. Village of E. Aurora, 2021 N.Y. App. Div. LEXIS 1223 (3rd Dept. Feb. 25, 2021), the Appellate Division, 3rd Department upheld a full-board decision granting a variance request for medical marijuana. The court noted that while marijuana is a Schedule I drug under the Controlled Substances Act (CSA), and it is federally illegal to manufacture and distribute, New York’s Compassionate Care Act (CCA) provides an exception in cases where the controlled substance was obtained pursuant to a prescription or at the direction of a practitioner.

Furthermore, the court held that neither the CCA nor workers’ compensation law requires a workers’ compensation carrier to manufacture, distribute, or possess marijuana. Rather, the CCA requires workers’ compensation carriers to reimburse claimants for the monetary costs of medical marijuana that claimants obtain from their practitioners.

 Rebutting the carrier’s argument that forcing it to reimburse the claimant for medical marijuana would violate federal law, the court relied on an often-cited 2020 New Jersey decision, which reasoned a carrier cannot be said to be aiding and abetting a crime or engaging in a conspiracy to commit same because the alleged criminal transaction (the claimant purchasing medical marijuana) is necessarily completed prior to any request for reimbursement.  See Hager v. M&K Construction, 462 N.J. Super. 146 (App. Div. 2020).

In another case, Pal Environmental Safety, 2021 NY WRK. COMP 1129, which was decided on Feb. 26, 2021, a full-board panel of the New York Workers’ Compensation Board (NYWCB) issued a decision granting a variance request for medical marijuana. Interestingly, the carrier argued that it was denying the request for medical marijuana not because it was federally illegal, but because the injured worker was enrolled in Pennsylvania’s medical-marijuana program. Granting the request for medical marijuana, the board panel held:

Here, we concur with the [workers’ compensation law judge] and authorize the variance for medical marijuana. We find that authorization for the use of medical marijuana is authorized pursuant to Public Health Law and the Medical Treatment Guidelines. Further, we find that the variance and the medical report attached by Dr. Rudnick meets the burden of proof. It was stated in the report that the claimant has been using medical marijuana in Pennsylvania for chronic pain, therefore he has a prior history that his physician is indicating is working. Further, the report stated that the claimant’s ‘use of opiates is to be decreased in the future’ therefore we find that the medical marijuana is necessary as an alternative for the claimant’s chronic pain.  

In the midst of these decisions, the NYWCB announced on Feb. 19, 2021, that it “plans to propose updates to the New York workers’ compensation drug formulary (drug formulary). These updates include amending the drug formulary prior-authorization process to include medical marijuana and to update the drug formulary itself.”

By all indications, it appears that the NYWCB will include medical marijuana in the drug formulary. Cannabis is currently subject to a variance request, as medical-treatment guidelines and the drug formulary do not support its need. With this update and the new OnBoard system going live on April 1, 2021, medical marijuana will be submitted through the OnBoard system as a prior-authorization request. If it is denied by the Level 1 reviewer, it will be escalated to Level 2 automatically. The recommending physician must provide the carrier with the injured worker’s CCA program certification if a request for medical marijuana is submitted.

New Hampshire

On March 2, 2021, the New Hampshire Supreme Court issued its decision on the compensability/reimbursement of medical marijuana. In In Re Appeal of Panaggio, Compensation Appeals Board No. 2019-0685, the New Hampshire Supreme Court reversed and remanded a Compensation Appeals Board (CAB) decision that found if insurers were “to pay for Mr. Panaggio’s prescription medication marijuana it would commit a federal crime…by aiding and abetting Mr. Panaggio’s illicit purchase and possession.”

On appeal, the New Hampshire Supreme Court—adopting the reasoning set forth in the dissent of a Maine Supreme Judicial Court case (Bourgoin) and a New Jersey case (Hager)—found that complying with an order requiring reimbursement for medical marijuana lacked the requisite intent and active participation necessary for an aiding-and-abetting charge. The carrier would “not be guilty of aiding and abetting Panaggio’s violation of the CSA because the insurer would not be an active participant with the mens rea required….”

The court further noted that reimbursing the claimant does not interfere with the federal government’s ability to enforce the CSA, which is “free to prosecute him for simple possession of marijuana under the CSA.”

New Hampshire and New York joined New Jersey, New Mexico, and Connecticut as states in which courts have mandated reimbursement of medical marijuana by workers’ compensation carriers.

Massachusetts

Contrary to the recent decisions in New York and New Hampshire, an appellate court in Massachusetts held that a workers’ compensation carrier is not obligated to reimburse for the cost of medical marijuana.

In Mark T. Delano v. Partners Healthcare System Inc. et al., case number 2020-P-0192, the Massachusetts Appeals Court held that its ruling was controlled by the prior Massachusetts Supreme Court’s decision in Daniel Wright v. Central Mutual Insurance, which held that insurance companies cannot be compelled to reimburse injured employees for medical marijuana because it is federally illegal.

The injured worker, Mark Delano, sought reimbursement for medical marijuana he used to treat a 2014 workplace injury. The employer denied reimbursement and the denial was upheld by the Department of Industrial Accidents.

The court in Delano held, “In affirming the denial of the claim, the court considered how the Massachusetts medical marijuana act was carefully drafted within a difficult regulatory environment and contained specific provisions designed to avoid conflicts with federal law.”

Massachusetts joins Maine, California, Florida, and others that have issued rulings holding that workers’ compensation carriers do not have to reimburse for medical marijuana costs.

The jury is still out on this shifting tide as the industry awaits further guidance from the federal government. Recent statements from Senate Majority Leader Chuck Schumer (D-N.Y.) have reenergized the industry with hints about the prospect of federal legalization. On Feb. 1, 2021, Schumer, Sen. Ron Wyden (D-Ore.), and Sen. Cory Booker (D-N.J.) issued a joint statement that said ending cannabis prohibition was a top priority for the Senate. Within the coming weeks, Schumer is expected to unveil legislation to this effect, and the industry anticipates that it will draw from elements of the SAFE Banking Act and the MORE Act.

In the meantime, carriers should closely monitor these medical marijuana-related actions and consult with counsel to advise of their reimbursement obligations.