Resources & Insights

Finding Cannabis Coverage While It’s Still Illegal (Federally)

July 11, 2019

Is the insurance industry about to finally embrace the business of covering cannabis businesses?­­

Insurers have a long way to go in making cannabis coverage available, whether we’re talking about growers, processors, distributors or dispensaries.
CCIG’s Spencer Mahoney.

Not likely, but there may be a sliver – and I really mean sliver – of good news to share about claims:

According to one carrier participating at a recent Insurance Journal webinar, what’s known in the insurance industry as “claims experience” is looking better than anticipated.

Property and liability claims have, of course, been filed, but it appears not at the frequency or levels that are causing alarm.

That’s the good news, because lower claims could help attract more carriers to the cannabis market.

However, as we all know, the insurance world tends to be extra-careful, always wary about treading into unfamiliar waters. Its approach to the burgeoning but still fledgling cannabis business is a classic example of that conservative approach.

That’s why few insurers have yet to write cannabis policies, preferring to take a wait- and-see attitude until those waters become more familiar.

Yet, as anyone running a growing cannabis business will attest, none of this eases the demand for proper coverage. The risks in cannabis may not be any more profound than, say, everyday farming or food processing, but they are definitely part of the picture.

Hurdles Remain

Insurers’ reluctance to wade in has left many cannabis businesses facing a risk-fraught world – one in which the plaintiff’s bar is always ready to pounce – without a net.

That’s never fun, and especially true for cannabis business owners who face workers’ compensation claims, mislabeling claims and, if they’re in the CBD business, false advertising claims related to pain-relief and related claims by their sellers.

We didn’t need the reminder, but as A.M. Best noted in a recent report, one of the key hurdles facing insurers is the federal government, which still classifies cannabis as a controlled substance, continuing its status as an illegal drug even as individual states increasingly legalize its use.

“Those directly and tangentially involved in the industry need insurance that addresses the specific needs of growers, retailers, distributors, property owners and lab researchers,” the A.M. Best report says. “However, despite growing demand from both producers and retailers alike, many carriers are reluctant to embrace the industry, owing to its classification as a Schedule I drug in the eyes of the U.S. federal government, under the Controlled Substance Act of 1970.”

Because marijuana is not legal at the federal level, some carriers see marijuana insurance as a “debatable” move, A.M. Best said.

Well, yes, we know, thanks. But, thankfully, not all of them.

Approximately 25 carriers (mostly non-admitted) provide coverage in the space in both the U.S. and Canada, A.M. Best said.

Carriers that have entered the market are typically partnering with “agencies and producers that have a better understanding of the industry and the needs of cannabis businesses,” A.M. Best said.

That’s welcome, but allow me to amplify a bit:

First, working with a “non-admitted” carrier can be riskier than doing so with an “admitted” insurer, so be careful who you do business with. Also, it’s easy to find a broker claiming a certain expertise in just about anything. But, again, buyer beware. Finally, if you’re a cannabis business, you might feel good about your coverage. But property and casualty insurance is like anything else in life. You get what you pay for.

As A.M. Best warned, cannabis company owners should be careful about shared limits between general liability and product liability, plus non-stacking endorsements and policies that often lack a duty to defend.

We can explain all of that, if you’d like. The short of it is, insurers have a long way to go on the cannabis front, whether we’re talking about covering growers, processors, distributors or dispensaries.

Finally, remember, we have experts here at CCIG who can answer your questions about cannabis coverage and how to better protect your assets. Just reach out!

Spencer Mahoney is a CCIG insurance advisor. Reach him at 720-212-2051 or

CCIG is a Denver-area insurance brokerage with personal and business insurance clients nationwide. We do more than make sure you have the right policy. We also help you lower your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.

Read more:

A Better Way to Lower Your Insurance Rates
Is Your Safety Program Working?
8 Things to Consider When Choosing an Insurance Advisor


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