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Risk and Regulations for Cannabis Insurance in California

Large Indoor Marijuana Commercial Growing Operation With Fans, Greenhouse, Equipment For Growing High Quality Herb. Cannabis Field Growing For Legal Recreational Use in Washington State

As we recently discussed, like any other business, cannabis producers and dispensaries must secure some form of insurance. While the market for cannabis insurance is growing, cannabis businesses still face unique hurdles due to the nature of the business and the fact that cannabis products are still illegal under federal law. While we hope and anticipate that federal anti-cannabis laws will change in the near future, for now, cannabis businesses must work with what they have. Below, we discuss some of the requirements and risks surrounding cannabis insurance in California. Reach out to a dedicated California cannabis business lawyer for help with your boutique cannabis company.

Basic Business Insurance Requirements

California has some basic insurance requirements for marijuana businesses. These include:

  • Commercial general liability insurance, minimum $2,000,000 plus at least $1,000,000 for each loss
  • $5,000 surety bond addressed to the State of California
  • Insurance must be purchased from an insurance provider licensed to do business in California
  • Distributor license applicants must show proof of insurance to the California Bureau of Cannabis Control (BCC)
  • Distributors must notify the BCC within ten business days of any lapse of insurance

New regulations and requirements are being added as the cannabis industry evolves. Talk to a knowledgeable California cannabis business lawyer as you start your business to ensure that you jump through all of the appropriate legal hurdles and avoid unnecessary liability.

Coverage Gaps and Pricing

We talked about some of the basic insurance coverage areas that any cannabis business should purchase, where available. These coverage areas include general business liability (personal injury on the facility, etc.), product liability (for defective cannabis products), crop insurance, workers’ compensation, property damage coverage, business interruption and loss of business income, commercial auto insurance for delivery vehicles, and coverage for employment disputes.

While these are all important coverage areas, they may or may not be available to all cannabis businesses. They also do not cover all areas of potential liability. Because cannabis is a new and somewhat controversial area of business, insurance providers have been slower to enter the cannabis business market. Policies that are offered might not be priced appropriately, given the more limited supply of insurance and providers’ attempts to take advantage of small business owners. When shopping for available insurance coverage, it is vital to have a savvy business lawyer on your side. A good cannabis business attorney will make sure that your policies are comprehensive, appropriate, and not overly expensive when compared to similar policies for other types of businesses.

Get Help from a Knowledgeable California Cannabis Business Lawyer

If you are interested in setting up a marijuana business or are dealing with regulatory, tax, licensing, or other legal issues with your cannabis business in Los Angeles or Southern California, call McReynolds Vardanyan, LLP, in Glendale at 818-855-2115. Our California cannabis business lawyers will work with you to get your budding business off the ground efficiently, effectively, and legally.

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