Throughout October 2017, devastating wildfires have taken lives and caused millions of dollars in damage all across California. While the destruction is tragic for all Californians who have been affected, one particular group of small business owners have been hit especially hard by damage. Marijuana growers are generally prohibited from insuring their businesses. This has left many Northern California marijuana growers with vast amounts of property damage and destruction, but no manner of recouping their losses. Worse, the losses come just as legal marijuana sales are set to begin in January.
Why Marijuana Farmers Cannot Insure Their Businesses
Marijuana is entirely prohibited under federal law. There are no provisions for personal or even medicinal usage. Because of this, insurance carriers – most of whom are subject to federal regulations – are prohibited from insuring the businesses, products, or assets of marijuana businesses. Even when businesses are cultivating cannabis lawfully under the state’s Medical Marijuana Program (California Health and Safety Code §11362.7 to 11362.85), they are not able to access insurance coverage. These business losses have been even greater due to the timing of these wildfires. Salon reports that many business owners have spent “their life savings” getting permits and preparing their crops for legal sales on January 2, 2018.
These same federal regulations prevent many cannabis owners from using traditional banks or financial services. Banks with locations in multiple states are subject to federal regulations, and thus cannot offer accounts or lending services to cannabis business owners. Many cannabis businesses are left to operate entirely in cash. This, too, has caused devastating losses for marijuana business owners who lost cash in the wildfires – in addition to structures, crops, and other business assets. According to CNN, many farmers often invest as much as $5 million on their facilities and $3 million on their crops. Some of these facilities can be insured as structures. Many cannot. Crops are left wholly unprotected.
How Marijuana Business Owners Can Recover Their Business Operations
While insurance coverage may not be available, there are many strategic business plans which can help business owners reinitiate operations and, in time, regain profitability. Certain investments are not entirely lost by the destruction of a single crop. Business permits, for example, may cover the next growing cycle. The administrative and legal preparations for a new enterprise of recreational marijuana sales can be applied to future crops. Distributors and retailers may not sustain direct losses as a result of the wildfires, but they, too, may face supply issues with destruction of so much product. These business owners can also mitigate their losses by adjusting their business plans. Supply sources can be diversified. Retailers can expand their inventory to carry a wider selection of cannabis products and equipment. Consult with an experienced California cannabis business plan lawyer to determine how you can best rebuild your business after a natural disaster. While disaster may have already struck, and insurance coverage may not be available, it is still possible for business owners to plan for a profitable future.
The Los Angeles Cannabis Law Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.
Additional Resources:
California wildfires torch state’s legal marijuana farms, leaving owners helpless, October 12, 2017 by Charlie May, Salon
More Blog Entries:
Marijuana Insurance Concerns Amid Expanding Legalization, March 13, 2015, by Cannabis Law Group