This month has been a big month for lowering the risk of operating a cannabis business in California. First, the state moved toward creating a banking system for cannabis companies. Now, the California Insurance Commissioner has approved a program to allow dispensaries, storage facilities, processors, distributors, and other cannabis businesses to procure property and liability coverage.
The program, Cannabis Business Owners Policy (CannaBOP), will make it easier for insurers to enter the market and fill coverage gaps for cannabis businesses. Developed by the American Association of Insurance Services (AAIS), CannaBOP was approved quickly and is ready to offer a package policy that includes both liability and property coverage. The program is supported by rules and loss costs (as with any insurance policy package) and was developed through analysis of market exposures and rating guidelines specific to the cannabis industry.
This announcement has been building since January, 2018 when cannabis became legal state-wide. A cannabis surety bond program was launched in February, and coverage for commercial landlords renting to cannabis companies was announced in May. Before this month’s announcement, cannabis companies were limited for choice: nearly all insurers willing to offer coverage were small carries that were not regulated by the state and often hesitant to provide coverage to a perceived high-risk industry.
Should you get cannabis property insurance? The answer depends on your unique cannabis business. CannaBOP is designed for smaller cannabis operations and for start-ups that need coverage but haven’t been able to find it – until now. For cultivators working with pesticides and quality control issues, this type of insurance is a great way to protect your business from product liability lawsuits.
Keep in mind, however, that CannaBOP relates specifically to property and liability insurance – and it does not include workers comp coverage or auto insurance. For that coverage, you might look to those smaller, non-regulated insurance companies who have been providing interim property coverage until this announcement.
If you have additional questions about insurance or protecting your cannabis business, please reach out to our team! We’d be happy to help.