I believe the “2021 law” referred to the failed attempt to create a safe harbor for instance companies to sell insurance to cannabis operations that completed with state laws. I don’t believe anything got worse in 2021, just that the expected legal remedy didn’t happen.
No one is going to risk having their assets confiscated by the feds just to write some business. No, i don’t think there’s a law that specifically says “insurers can’t work with cannabis industry”, i think existing broader laws make it, if not outright illegal, far too risky for an industry that understands to risk to want to touch it.
Thank you!
I also note that the articles to which I linked, at the start of the thread, indicate that cannabis dispensaries find it difficult and expensive to buy insurance, but not impossible.
Some of them are self-insuring, and I’ve also heard of some cannabis businesses forming their own credit unions when “standard” banks and CUs refused to do business with them.
I would think that you’d need to set up a separate legal entity that did nothing but insure cannabis. Otherwise, you’d put too much other money at risk.
If you drive with a joint, your car can be confiscated. Similar laws make it dicey to write insurance for dispensaries.
https://content.naic.org/insurance-topics/cannabis-and-insurance
According to a 2021 report by New Dawn Risk, there are currently about 30 U.S. insurers offering cannabis coverage , up from only 6 insurers in 2020.
CA has apparently done that-
- The California Insurance Commissioner has approved a program to provide property and liability coverage for cannabis businesses operating in California. This program covers risks such as fire, theft, vandalism, product liability, and business interruption3. The program is offered by the California Fair Plan Association, a group of insurers that provides basic property insurance to high-risk applicants.
** The California Legislature passed Assembly Bill 2568 (AB 2568) in September 2022, which clarifies that it is not a crime for individuals and firms licensed by the California Department of Insurance (CDI) to provide insurance or related services to cannabis businesses. This bill aims to encourage more insurers to enter the cannabis market and offer more options and lower prices for cannabis businesses4. AB 2568 also allows CDI to share information with financial institutions that provide banking services to cannabis businesses, with the consent of the licensee5.*
Soo apparently, things are - ever so slowly- getting better.
Okay, I checked into the original story. (I saw it one a local tv news show but I found an online article.)
One point I had missed was that the woman’s insurance was a National Flood Insurance Program policy.
Here’s the article I found:
This past July set her and her husband back $100,000 in damages. That is damage that she said her FEMA insurance will not cover because of a federal rule that prohibits insurance for buildings that dispense marijuana.
FEMA- yeah, that is a Federal agency. Nope the Feds cant & wont insure the industry.
Yeah, all that would be completely unnecessary if the feds dropped their bad laws regarding cannabis.
Well, if the Dems take the House, Senate and Oval Office, it could happen. Not otherwise.
Interesting, and thank you for that – it might be a rule that’s specific to FEMA flood insurance.
Apparently the Feds were insuring the property. The woman had a policy through NFIP and was paying the premiums. It was when she filed a claim that she was told the policy was invalid.
They were very likely unaware that it was a cannabis company-in fact the cannabis company didnt directly have the insurance, it was the building owner who rented it. That was an issue with some banks I consulted with- they bank thru a shell company that doesnt sound like a dispensary. However, Investigations to check out new accounts can often find & close the accounts.
It seems strange to offer business insurance policies without asking what type of business is being insured. Especially when you have a regulation saying you don’t insure certain types of businesses.
You can be quite vague about the business you’re in. I have seen a dispensary describe themselves as a “health food store” when seeking to lease space. It’s become almost a code word.
It doesn’t seem to be a business insurance policy - if I’m understanding correctly, she owned and insured the building and rented it to a cannabis business. And I’m not at all sure that’s it’s a question insurers ask, since tenants and businesses change -plenty of convenience stores and tobacco shops in my area have now begun selling pot.
When I renew my home and umbrella insurance every year I’m asked to confirm that I have not done a number of things to the property in the last year, including:
Put in a swimming pool or hot tub.
Installed a trampoline or zipline.
Installed a propane tank.
Upgrade my electrical service.
I assume these would either materially change my premium or cause them to non-renew.
I assume there is a questionnaire of a much longer list for commercial property insurance.
The business wasnt insured- the building was by the owner.
Right.
I’d probably assume the same as you in your situation - but my homeowner’s insurance never asks me any of those questions when I renew. Or any other questions , for that matter. Now, it just wouldn’t be possible for me to do some of those things - my property isn’t big enough for a zipline. And some may not be legal - I can only have 2 20 pound propane tanks for a barbeque. But I could absolutely install an above ground pool or a hot tub and they never ask.
The woman owned a building which she rented out. That’s a business.