California Cannabis Industry Can Now Acquire Liability Insurance

California's new Cannabis Business Owners Policy makes it less risky for insurers to provide coverage for smaller marijuana operations.

Lukasz Stefanski/Shutterstock

The question of insurance coverage for cannabis businesses has always been a pressing one. But after the rash of wildfires that torched dozens of marijuana farms and production facilities, causing more than $1 billion in losses in California last year, the insurance issue has become even more urgent. And on Monday, California Insurance Commissioner Dave Jones proposed a solution. He announced that the California cannabis industry can now acquire liability insurance, thanks to a newly approved program.

California Sets Up Nation’s First Cannabis Business Insurance Policy

For years, legal cannabis businesses throughout California have faced a challenge trying to obtain insurance to protect their operations. For one, the ongoing federal prohibition of cannabis vexes the issue of how to actually enforce an insurance contract.

Additionally, most insurers who are willing to offer coverage to cannabis businesses are smaller carriers not subject to state regulations.

And on top of all that, there’s just the inherent riskiness of marijuana businesses generally. Major insurance companies have simply been hesitant to offer policies to such a risk-prone industry.

But public officials and private sector organizations have been pushing to change things. And their efforts have resulted in a first-of-its-kind program designed to close insurance coverage gaps for cannabis businesses.

On Monday, California Insurance Commissioner Dave Jones announced the approval of a new program that will provide insurance coverage to the marijuana industry’s entire supply chain.

The Orange County Register reports that the new program provides property and liability coverage for marijuana dispensaries, storage facilities, processors, manufacturers, distributors and other cannabis-related businesses operating in California.

“Cannabis businesses need insurance coverage to help them recover when something goes wrong just as any other legalized business does,” Jones said in a statement announcing the new program.

California Cannabis Industry Can Now Acquire Liability Insurance

Liability insurance in an important piece of the puzzle for cannabis businesses. Quality control and quality assurance issues plague the marijuana cultivation industry.

And a lawsuit against one part of the supply chain implicates everyone else. In fact, every business, from seed to sale, can face liability in a quality control lawsuit. But California’s new liability insurance program now provides them with protection.

The Cannabis Business Owners Policy (CannaBOP) is the brainchild of the American Association of Insurance Services (AAIS). The not-for-profit insurance advisory organization helped craft CannaBOP as a “one-stop shop” for marijuana-related businesses looking for coverage.

“We wanted to make sure this provided a fairly robust product liability package,” said assistant legal counsel for AAIS Phil Skaggs, a key architect of the CannaBOP program.

Importantly, it’s the mom-and-pop style operations and smaller startups, rather than the larger producers, that CannaBOP can best serve.

" Adam Drury : Adam is a staff writer for Green Rush Daily who hails from Corvallis, Oregon. He’s an artist, musician, and higher educator with deep roots in the cannabis community. His degrees in literature and psychology drive his interest in the therapeutic use of cannabis for mind and body wellness.."