Marijuana Insurance Pays $1 Million on California Wildfire Claim

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Marijuana Insurance Pays 1 Million on California Wildfire Claim

Marijuana has come a long way in recent years to legitimize itself yet it still remains illegal on a federal level as a Schedule I drug. This means that, until now, marijuana business has been shut out of banking and insurance services for fear of federal prosecution. But a change is in the air. A California based marijuana farm that incurred significant damage in the recent wildfires that devastated many in the state has received a $1 million insurance payout. This level of coverage for a marijuana based business is a milestone for the industry, further affirming that marijuana has reached the mainstream world.

A First (and Probably Last) Payment

many cannabis farms in california incurred significant damage from wildfires
Many cannabis farms in California incurred significant damage from wildfires.

Vice president at Cannabis Insurance Professionals, Matt Porter, has been in the process of talking to marijuana based businesses about insurance. He claims that, of the 50 or so times he presented crop insurance to marijuana farmers, only 10 percent decided to buy it. Cannabis Insurance Professionals is a division of Brown & Brown Insurance which is one of the largest insurance intermediaries in the world. The insurance carrier provided through Porter was based in London, England. While they have paid the claim without incident, they were not expecting to have such a big payout and have therefore decided not to continue insuring marijuana businesses.

“A Legitimate Claim”

Patrick McManamon, CEO of Cleveland-based Cannasure Insurance Services, told The Cannabist that “this was a legitimate claim that was paid.” He continues, stating “these companies are actually standing by what they said. In the past I think we’ve all heard horror stories of insurance companies (coming up with) some cockamamie something-or-other in their policy to get out of paying a claim. And here’s one that obviously…stood by its policy and paid it. That’s all you can ask for.”

Farmers who did purchase insurance through Porter paid $30,000 in premiums with a $25,000 deductible. Porter expects that this sum will increase in the future, after this claim. Farmers were able to claim market price for the damaged product which ranges from $1,000-$1,600 per pound and higher.

Contamination from Ash

wildfire ash destroyed california marijuana crops
Wildfire ash destroyed California marijuana crops by contaminating them beyond use.

The wildfires were considered to be the worst in state history. Ash covered the Santa Barbara area and these particles crept into marijuana greenhouses, contaminating plants. Tests were conducted on random samples of the plants and they tested positive for high levels of asbestos, lead, arsenic, and magnesium. The damage was clearly irrefutable. Whereas in the past farmers would have had to eat their losses, the farmers who purchased insurance were covered. The insurance was worded in such a way that would allow farmers to be covered from a variety of potential contaminants. “This policy contained some wording related to what we consider atmospheric change, or contaminants coming into the greenhouse,” says Porter. He states that this wording allowed the claims to be approved.

California recently legalized marijuana for recreational use by adults over 21. While it has been legal in the state for medical use since 1996, its legitimization across the country has paved the way for a more stable and secure industry in the future.

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