Northern California wildfires

As reported extensively in the media over the past week, the cannabis industry has been hit hard by recent natural disasters. While companies doing business in this industry may face some unique challenges in purchasing insurance, and when attempting to obtain coverage for losses, insurance coverage – contrary to certain media reports – nevertheless may be available to them.  As such, cannabis-related companies should not just pass on submitting claims to their insurers when they experience losses.  Nor should they reflexively forego obtaining insurance in the first place.

Recent media reports

Both the Northern California wildfires and Hurricane Maria have caused extensive cannabis-related losses:

  • On October 13, 2017, The New York Times reported: “Fatal fires that have consumed nearly 200,000 acres in Northern California, devastating the region’s vineyards particularly in Napa and Sonoma Counties, are also taking a toll on a fledgling industry just months before its debut: recreational marijuana. Many of the region’s farms, including those that harvest cannabis, have been scorched, including those in Sonoma County and in Mendocino County, the center of California’s marijuana industry. Mendocino is one of three California counties that comprise [the] Emerald Triangle, where much of the United States’ marijuana is produced.”
  • On October 12, 2017, cnn.com reported: “Blazes have destroyed a number of farms in Mendocino County right before legal recreational sales begin in California.”
  • Also on October 12, 2017, the USA Today reported that “[m]arijuana farmers and dispensary owners across Northern California are nervously watching as wildfires burn through some of the state’s prime cannabis growing areas and destroy valuable crops ….”
  • On October 11, 2017, Marijuana Business Daily reported: “Hurricane Maria devastated Puerto Rico’s medical marijuana industry, setting back its development at least six months – if not much longer – and causing millions of dollars in damage to [medical marijuana] businesses. No outdoor marijuana cultivation facilities survived ….”

Often citing industry insiders, some of these publications have reported that insurance is not available to cover cannabis-related losses. The New York Times, for example, reported that “reliable insurance [is] difficult to acquire.”  Other publications went further, stating categorically that no insurance is available to the cannabis industry.  CNN reported:  “Cannabis cultivators cannot insure their businesses because federal law prohibits marijuana, which means that financial institutions can’t go near it.”  Likewise, the USA Today reported that “pot growers can’t get crop insurance like traditional farmers ….”
Continue Reading In Wake of Disasters, Do Not Just Assume No Coverage Available for Cannabis-Related Losses