The tension between federal and many states’ laws regarding cannabis likewise presents a high risk for insurers. For example, insurers that provide coverage to cannabis businesses engaged specifically in selling cannabis can be criminally liable for aiding and abetting in the sale of cannabis or conspiring to violate the CSA — even when the business’s activity is legal under state law. Further, intrastate issues may also cause complications if cannabis is not regulated uniformly within a state. Certain municipalities in a state, for instance, may restrict the cultivation or sale of cannabis within its locality even though the state generally allows it.
The production and use of hemp and its derivatives (including CBD) present far fewer complications with respect to insurance. This is due to the passage of the Hemp Farming Act of 2018, which was incorporated into the 2018 U.S. Farm Bill (the “Farm Bill”). The Farm Bill effectively decriminalized the production or use of hemp and cannabis derivatives with lower than .3% THC concentration on a dry weight basis. Therefore, unlike cannabis, the sale and possession of hemp are legal under federal law and there is no risk of prosecution under the CSA (though it is not that simple.
Whether a business is involved in hemp/CBD or medical or recreational cannabis, it should seek to obtain insurance coverage. Fortunately, multiple insurance carriers provide different types of coverage to businesses in the cannabis industry. Some examples of coverage options include commercial property insurance, employment practices liability, product liability, workers compensation, commercial general liability, and automobile insurance. Businesses involved in recreational marijuana, however, are mainly insured by surplus lines carriers, which are unlicensed and provide limited protection.
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