Tag Archives: insured

The West Coast Wildfires: What is the Impact on the Cannabis Industry?

By Aaron G. Biros
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Since the beginning of this year, more than 8,100 wildfires have burned in California, torching a record 3.7 million acres of land in a state with one of the largest cannabis economies in the world. With the effects of climate change continuing to wreak havoc on the entire West Coast, smoke from those fires has spread across much of the country throughout the summer.

As we approach October, colloquially referred to as Croptober in the outdoor cannabis market for the harvest season, we’re seeing the August Complex Fire creep towards the Emerald Triangle, an area in northern California and southern Oregon known for its ideal cannabis growing conditions and thousands of cultivators. The wildfires are close to engulfing towns like Post Mountain and Trinity Pines, which are home to a large number of cannabis cultivators.

Hezekiah Allen, executive director of the California Growers Association, says losses could reach hundreds of millions of dollars. Fires across Oregon have torched dozens of cultivation operations, with business owners losing everything they had. The Glass Fire has already affected a large number of growers in Sonoma and Napa Counties and is 0% contained. None of these cultivators have crop insurance and many of them have no insurance at all.

The impact from all of these fires on the entire cannabis supply chain is something that takes time to bear witness; a batch of harvested flower typically takes months to make its way down the entire supply chain following post-harvest drying and curing, testing and further processing into concentrates or infused products.

Image: Heidi De Vries, Flickr

The fires affect everyone in the supply chain differently, some much more than others. Sweet Creek Farms, located in Sonoma County, lost all but one fifth of their crops to fires. Other cultivators further south of the Bay Area have lost thousands of plants tainted by smoke.

Harry Kazazian, CEO of 22Red, a cannabis brand distributed throughout California, Nevada and Arizona, says he is increasing their indoor capacity to make up for any outdoor flower loss. But he said it has not impacted his business significantly. “Wildfires have been a part of California and many businesses have adapted to dealing with them,” says Kazazian. He went on to add that most of his flower comes from indoor grows in the southern part of the state, so he doesn’t expect it to impact too much of his supply chain. Kazazian is right that this is not a new concept – the cannabis industry on the West Coast has been dealing with wildfires for years.

George Sadler, President of Platinum Vape

George Sadler, President of Platinum Vape, has a similar story to tell – the fires have impacted his supply chain only slightly, saying they had a handful of flower orders delayed or cancelled, but it’s still business as usual. “It’s possible this won’t affect the supply chain until later in the fall,” says Sadler. “There has definitely been an effect on crops that are being harvested now. It may end up driving the price of flower up, but we won’t really know that until January or February if it had an effect.”

Sadler believes this problem could become more extreme in years to come. “Climate change definitely will have an effect on the industry more inland, where we’re seeing fires more commonly – it could be pretty dramatic.”

One beacon of hope we see every year from these fires is how quickly the cannabis community comes together during times of hardship. Sadler’s company donated $5,000 to the CalFire Benevolent Foundation, an organization that supports firefighters and their families in times of crisis.

A large number of cannabis companies, like CannaCraft, Mondo, Platinum Vape and Henry’s Original, just to name a few, have come together to help with relief efforts, donate supplies, offer product storage and open their doors to families.

If you want to help, there are a lot of donation pages, and crowdfunding campaigns to support the communities impacted. The California Community Foundation has set up a Wildfire Relief Fund that you can donate to.

This GoFundMe campaign is called Farmers Helping Farmers and still needs a lot of funding to reach their goal. Check out their updates section to see how they are helping cultivators in real time. This Leafly page is also a very useful guide for how you can donate supplies, volunteer and help those impacted the fires.

Gaps in Standard Property Insurance Can be an Unknown Hazard for Cannabis Businesses

By Susan Preston, T.J. Frost
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Basic business liability coverage is not enough for those cultivating, selling and distributing cannabis. General liability, property and even commercial renter’s insurance policies all exclude aspects of cannabis operations, leading to significant gaps in coverage.

Unfortunately, many cannabis operations purchase traditional property policies, assuming they’re insured. Then, when a claim comes to light, they find out they’re not covered.Consider the following common exclusions that could lead to a costly business interruption – or worse

Although the production, sales and distribution of cannabis is legal in many U.S. states, it is still illegal federally. This disparity can cause confusion when it comes to insurance compliance. Cannabis companies will want to secure industry specific coverage for risks associated with property, business interruption, and auto as well as general liability.

Consider the following common exclusions that could lead to a costly business interruption – or worse – a shutdown of operations when not properly insured:

  • Property coverage does not cover crops. Cannabis crops require specific coverage for different growth stages, including seedling, living plant and fully harvested. The insurance industry has designed policies specifically for indoor crop coverage for cannabis operations. There is some market availability for normal insured perils such as fire and theft, to name a few. Work with your broker to review your property policy and any potential exclusions related to cannabis operations. There is currently not much availability for insurance for outdoor crop.
  • Auto policies exclude cannabis transport. Some states require separate permits for transportation. Review coverage options with a knowledgeable broker before moving forward with driver hiring. Implement driver training sessions on a regular basis, conduct background checks and review MVRs prior to hiring company drivers. Teach drivers how to handle accidents on the scene, including informing law enforcement of the cannabis cargo. Remember that transporting cannabis across state lines (even when legal in both states) is still illegal due to federal law.
  • Equipment damage and/or breakdown coverage may be excluded from property policies. Consider the expenses and potential loss of revenue due to mechanical or electrical breakdown of any type of equipment due to power surges, burnout, malfunctions and user error. Having the right equipment breakdown insurance will help you quickly get back into full operation, with minimal costs. Conduct an onsite risk assessment of your equipment to get a comprehensive picture of your risk exposure, and review current insurance policies to identify key exclusions. 

Organizations looking for cannabis business insurance are best off working with a qualified broker who is knowledgeable in the cannabis space.As the cannabis industry continues to expand, more and more insurance options have become available. And yet as with any fast-paced industry, not every option that appears legitimate is a good risk for your cannabis business.

Be a contentious insurance consumer. Review the policy closely for exclusions and coverage features so you understand the premium rates and limits of the policy.  Discuss with your broker the history of the carrier as to paying claims in a timely fashion.

Organizations looking for cannabis business insurance are best off working with a qualified broker who is knowledgeable in the cannabis space.