California Department Encourages Development of Insurance Products for Legal Cannabis; Industry Begins Moving In

In a letter sent to California insurers on 4/20, California Insurance Commissioner Dave Jones reiterated his call for insurers to file rates and forms for insurance products for the California cannabis industry. In an effort to allay fears about potential pushback or legal consequence based on the fact that cannabis remains illegal at the federal level, Jones emphasized that “President Trump has reversed his administration’s cannabis enforcement policy and will refrain from using federal law enforcement against cannabis businesses legally operating in states that legalized cannabis.” Jones also noted that, even prior to President Trump’s recent decision to refrain from enforcement, there have been no reported instances of federal prosecution of a cannabis business lawfully operating in a state that legalized cannabis. As part of his pitch, Jones reiterated that the California Department will process cannabis rate filings quickly and will not object to proposed rates that have a rational basis.

Though the inconsistent messaging and lack of certainty concerning enforcement coming from various parts of the federal government keeps certain players on the sidelines pending more definitive guidance, others are taking the plunge. The American Association of Insurance Services (“AAIS”), an insurance advisory organization, filed a cannabis business owners policy in California (perhaps coincidentally, on 4/20) that it said was the first of its kind. AAIS developed a state-specific business owners program for the cannabis industry, including forms, rules and rating information in response to a request from the California Department last year. The AAIS California CannaBOP program packages both property and liability coverage for qualifying California dispensaries, storage facilities, distributors and other cannabis related businesses.