Cannabis and Insurance

Remember not too long ago when weed was considered a taboo? It wasn’t often talked about and if you smoked, *gasp*, shame on you! Fast forward to now, and you can easily smell the skunky-stench while driving down the street to your local grocery store, kids in the backseat and all.

As you know, cannabis is federally illegal. The law prohibits the use, sale, or cultivation of marijuana. This is because the drug is deemed to have zero accepted medicinal purposes. Yet, the states are free to legalize marijuana if they choose. As a result, over half of the states in the United States have legalized weed in some way–whether it be medically, recreationally, or both.

This puts the marijuana industry in the business world, now known as CRBs, or cannabis related businesses. Dispensaries must follow the same guidelines as any other business would regarding the legalities behind operating a business–such as permits, licenses, and insurance. There is obviously a constant underlying risk for the dispensary itself to be in business considering the basic federal law. Because federal law will always trump state law, the “Feds” can come in at any moment and seize all product, halting sales and profits. Those involved in the marijuana industry have accepted this risk. However, insurance companies didn’t sign up for the legalization of marijuana. The risk the insurance company faces while insuring a CRB exceeds the risk of losing a bunch of weed to the police. This is why insurance companies have been so hesitant to insure dispensaries.

Insurance companies set their rates based on the risks and the possibility of damages and injuries. Because this business is so new, it’s hard for insurance to properly determine the risk involved with insuring CRBs. Dispensaries will need coverages similar to any other retail or crop operation, but the risks are, simply put, very unique.

To begin with, CRBs need property and product liability. The cultivation of marijuana includes labor and machinery and leaves the risk for injury. Product liability is important because products could be pronounced as “mislabeled” or even harmful. Because the psychoactive effects of marijuana range depending on the consumer, this puts a huge risk on the business.

Theft is also a major risk for CRBs. United States banks are forbidden from doing business with dispensaries because of federal law. Marijuana dispensaries deal strictly with cash so there is constantly an excessive amount of cash on the property.

Fire is yet another risk for dispensaries. Not only wildfires, as with any other business, but also from flammable internal sources. The crops are susceptible to catching flame, as with the equipment.

If anything happens that becomes an issue that must be handled in court, the insurance company is at risk for insuring an “illegal activity”. The carrier is now exposed to risks involving their reputations and money laundering. Companies that do choose to insure dispensaries must be thorough and careful with the wording of such policies.

The legality surrounding CRBs prevents some insurance companies from dealing with dispensaries. This makes carrier options limited. As the business continues to boom and create massive profits, insurance companies are likely to loosen up and open their doors for the increasing business that has come with the legalization of marijuana.