Most states now recognize some form of legalized cannabis. This expansion of legalization reflects a sea change in societal attitudes relating to the use of cannabis over a relatively short period of time. This is itself a story.
However, what is often lost in the story is what the state and reservation legal cannabis industry (LCI) must navigate once it is allowed to operate in a state and the related needs of such a complex and multi-faceted industry.
The LCI supply chain begins with cultivation and includes some or all of:
Distribution Manufacturing Extraction Delivery/transportation Retail sales Testing Compliance Security Insurance Is Often Neither Available Nor Affordable
If necessary and appropriate insurance was widely available, each part of the LCI chain would be insured, just as any other industry uses insurance to protect against unexpected losses. Indeed, the potential for loss in the LCI cannot be ignored.
Unfortunately, necessary and appropriate insurance is often neither widely available nor affordable. And often insurance that seems appropriate for the risks includes provisions that limit or exclude coverage altogether. These gaps in the insurance industry leave LCI participants and consumers without insurance to rely on when things go wrong.
The recent vaping crisis may expose some of these gaps in coverage (although, usage of black market vaping cartridges has complicated understanding of the cause of the lung disease, which means the extent of, and even existence of, injuries that can be attributed to the LCI remains unknown).
For example, some products liability insurance sold to the LCI in recent years has actually included exclusions for bodily injury relating to cannabis products. While this may be an extreme example of an exclusion, the LCI must navigate the common problem of insurance products being sold that do not adequately cover the extent of the risk presented.
As the LCI expands, it is just a matter of time before the lack of adequate insurance results in a major loss that cannot be easily absorbed by industry participants unless something changes to expand access to insurance. This scenario could be exponentially worse from a public policy perspective if the harm of the uninsured loss was born by consumers.
SAFE Banking Act Could Expand Access to Insurance
One of the most closely watched issues in 2019 relating to the LCI has been House passage of H.R. 1595, the SAFE Banking Act. Understandably, most of the mainstream focus relating