Musk’s Alleged Drug Use Creates Insurance Risks for His Board

Elon Musk’s alleged drug use leaves his companies and their boards exposed to potential shareholder claims that directors’ and officers’ insurance is meant to cover.

Musk, the world’s richest person, has used recreational and illegal drugs in recent years—including LSD, cocaine, ecstasy, and psychedelic mushrooms—and has an active prescription for ketamine, according to a report from The Wall Street Journal.

Musk’s reported behavior carries risks for the board directors of Tesla Inc.,Space Exploration Technologies Corp., and his other companies because they have a duty to shareholders to oversee his executive role, and the companies forbid the use of drugs ...