How Does “Essential” Business Status Affect the Cannabis Insurance Landscape?
May 1, 2020
- Last edition
May 19, 2020
The Run on Cannabis
The national coronavirus quarantine has been in effect for weeks and there isn’t a definitive end date established. Many people nationwide had a tough time getting hand sanitizer, toilet paper and other essentials, but there was another rush – for cannabis products. Places like California and even Canada saw inventory projections increase by as much as twenty-five percent. A third of cannabis users responded to a poll saying that they planned to increase their use of cannabis during the lockdown, and the sales figures of CBD stores and other legal cannabis dispensaries reflect that.
Cannabis is an Essential Business Now
Federal guidelines and state regulations have shut down most “non-essential” businesses, with only a few “essential” industries escaping the regulations. In what may seem like an uncharacteristic move to many, cannabis businesses are considered essential in several states. They still offer delivery services or orders can be picked up on site. 21 different states have labeled cannabis dispensaries essential. While marijuana is still illegal on a federal level, hemp-related products such as CBD oil are legal for their medicinal value. It is this medicinal nature that has allowed cannabis to remain not only legal, but “essential” in almost half of the United States.
Implications of the New Status
The insurance industry is still trying to figure out its relationship to cannabis, and the COVID-19 crisis may push them closer together. Obviously, the federal restriction of the drug has made most insurers unwilling to cover these businesses, even in states where it has been legalized. A major concern has been the state’s willingness to back the insurers under a federal case.
But if so many states are willing to declare cannabis an essential business, it may be worth the risk to insure these businesses. There is still a broad perception of cannabis and even CBD as an illicit drug business, something no underwriter cares to support. But with 21 states doubling down on the medicinal status of cannabis, it is likely there will be more insurance companies willing to cover these “essential” businesses.
Some problems still remain, even aside from the national ban. CBD is being marketed as a sort of miracle drug, with many scams and misleading advertisements. Until these popular misconceptions can be corrected, there will still be insurers unwilling to bear the risk of false advertisement and malpractice lawsuits.
Even the declaration of cannabis as “essential” during the coronavirus crisis has become an issue, as some dispensaries market their products as cure-alls, even for COVID-19. The states that have allowed them to remain open are working hard to corroborate facts and minimize allegations, and it seems likely that they will succeed with the governments behind them. With this, the novel coronavirus may have finally opened up the door for cannabis businesses to be insured.