In the wake of devastating wildfires in Northern California, many cannabis farmers were dealt a particularly hard financial blow. Cannabis businesses are generally unable to obtain insurance coverage. This is because the insurance industry is regulated by federal law – a federal law which classifies marijuana as an illegal substance. For this reason, when millions of dollars of crops were destroyed, the losses were not compensable. The wildfires also destroyed cash reserves of many businesses. Many cannabis businesses are forced to operate entirely in cash for the same reason – federal law prohibits regulated banks from offering financial services to cannabis businesses. With large cash reserves on site and many evacuation orders coming instantaneously, business owners were not always able to save their business funds. Now, the state Department of Insurance is speaking to cannabis business owners to learn about the challenges they face, and how the insurance industry can better meet the future needs of the cannabis industry.
A New Option for Protecting Cannabis Business Assets
A series of recent moves within California’s insurance industry indicate that cannabis business owners may be better able to protect their assets from future acts of force majeure. The Insurance Journal reports that, for the first time, a carrier admitted to the California Department of Insurance has filed to provide coverage to legal cannabis businesses within the state. Other carriers have expressed the desire to file with the Department to offer similar products to the legal cannabis industry. Standardized insurance forms for the cannabis industry may also be available in the very near future.