The unanticipated success of medical hemp sales in twenty-eight states of the US has given rise to a huge number of businesses growing, harvesting, transporting, distributing, and selling cannabis products. Having a such a colossal response gives rise to mammoth logistical problems, giving rise to a need for property and liability insurance in order to protect these mostly small, fledgling enterprises, and the people that make them work.
As usual, the state of California is pioneering the way to successfully protect the enormous investments of time, manpower, labor, materials, and property to ensure marijuana consumers’ needs, wants, and demands are met. California Insurance Commissioner Dave Jones has instigated a program to provide 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,” said Jones. “This first-of-its-kind Cannabis Business Owners Policy, or CannaBOP program, will make it easier for more insurers to enter the market and fill coverage gaps for cannabis businesses.”
Forms, rules, and rating information were distilled into a policy developed by the American Association of Insurance Services (AAIS), a not-for-profit insurance advisory organization. Again, it is Jones who fomented an initiative launched in the last year to encourage commercial insurers to step in and fill coverage gaps for the cannabis industry.
As a result, the first filing and approval of commercial insurance for the cannabis industry Golden Bear Insurance Co, a state-regulated carrier, has appeared. In February, the first surety bond program for the industry was announced, and in May, the first coverage for commercial landlords in the industry and a product liability and product recall program were revealed.
Phil Skaggs, an assistant legal counsel for AAIS, helped create the program, which is designed as a one-stop shop for marijuana-related businesses who need coverage. This is because product liability lawsuits involve everyone in the chain of supply, all the way from the farm to the business that’s selling the product. They all get sued. All need some kind of legal and financial protection. This kind of insurance defends them. Constructed mainly for smaller startups and mom-and-pop operations that need coverage but don’t know where to find it, this is a potent answer to some of the liability and risk hemp-involved businesses face and need to surmount.
While the U.S. officially continues federal restrictions against marijuana, hemp-based businesses will likely be allowed to operate as long as insurance contracts can be enforced in California courts. This, in turn, has positive ramifications for the entire cannabis industry nationwide.