California Wildfires Highlight Insurance Challenges, Importance of Location for Cannabis Growers

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By Omar Sacirbey

Wildfires raging through northern California since early summer have destroyed hundreds of cannabis farms, causing millions of dollars in damage to cultivation sites and adding complications to an industry already facing myriad hurdles.

The fires bring to the forefront several issues facing growers in unregulated medical cannabis states. They also provide lessons in the realms of insurance, crop location and client relationships.

Much of the damage occurred in federal wilderness land where illegal grows are located, and most of that cannabis works its way out of state rather than into California dispensaries.

But a sizable number of growers serving the state’s legal MMJ market were affected as well, and their very future is in question.

Hezekiah Allen, executive director of the California Growers Association, estimated that 250 cannabis farms supplying dispensaries and collectively covering some 50,000 acres may have been affected by this season’s fires, thought by many to be the worst ever.

It’s hard to put a monetary figure on the losses. But in a survey of 215 members last year, Allen found that grower households generated average annual net incomes of about $102,000.

So fire-related damages to cultivators serving the state’s MMJ businesses could easily stretch into the seven figures, and possibly even eight.

Insurance Concerns

One of the biggest problems for cannabis growers in California revolves around insurance – or a lack thereof.

The Farm Services Agency of the Department of Agriculture provides aid to farmers and ranchers to cover some losses and rehabilitate damaged land. But because cannabis is still illegal federally, marijuana farmers are not eligible for the federal aid.

The lack of federal protections, one might think, would convince cannabis farmers to buy fire or disaster insurance. However, many marijuana cultivators in California don’t have insurance. Allen, for instance, said he thinks none of the members in his group have coverage.

Chalk it up to the unregulated nature of California’s cannabis industry.

Avis Bulbulyan, a cannabis consultant in Los Angeles, said while its normal for growers in states that issue cultivation licenses to have insurance, those in a state like California where regulations are not yet in place are less likely to get coverage.

The state recently pushed through regulations on the MMJ industry, but it will be a while before they are finalized and implemented.

In a market without regulations, cultivation sites that do carry insurance are often afraid to file a claim because they might have to open up their books to support evidence of a loss, and that could get them in hot water.

“You may want to report the loss of a generator or of some of your product, but then you have to ask yourself, does this justify opening my business to scrutiny,” Bulbulyan said.

The nation’s leading insurance companies haven’t yet stepped into the cannabis industry, reinforcing the perception that coverage is not available to cultivators. But a small number of local or regional insurers have started to offer coverage to marijuana farmers, though there are different understandings of what underwriting standards allow them to insure.

Ford, for example, said that he is unable to offer growers wildfire or disaster insurance. But he can offer business and commercial liability insurance, as well as product liability insurance. However, he added, he couldn’t insure product – like plants – when they are outside, but could insure products that are in storage indoors.

The key for growers – even in unregulated markets like California – is to put in the time and due diligence required to find insurance coverage, even if you can’t find a plan at first.

“Everyone who is not in compliance, they need to have an a-ha moment, and say ‘I need to protect my work,’” said John Ford, president of the John Ford Insurance Agency, in Eureka, California. He said that workers’ compensation insurance is required for any business that has employees.

Having regulations in place will also encourage growers to get insurance, Bulbulyan said.

Location Issues

Doug Banfelder, president of Premiere Southwest Insurance in Scottsdale, Arizona, said federal laws and outdoor grows aren’t a factor in how he figures who he can and cannot insure.

Rather, it’s how accessible or not a farm is to a fire department and hydrants.

A “1” means an area has fire stations and hydrants close by, while areas designated “9” or “10” have no hydrants or paved roads nearby, and are extremely hard to get to. Many grows are in such areas.

“We can’t provide property coverage to those folks,” said Banfelder. “Anyone shopping to locate a farm should ask the fire department what protection class their site has.”

If a grower is located on property that is close to hydrants and reasonably accessible to emergency vehicles, then the chance of being insured is higher, Banfelder said.

But the need for isolation may soon become unnecessary once new industry regulations take effect, and make it possible for growers to operate above ground.

“People will no longer feel like they need to hide,” said Allen.

That means growers who have lost their crops and want to start anew should restart their grows in areas that emergency vehicles won’t have trouble reaching. Growers who weren’t affected by the fires may also want to consider moving their crops to safer locations if the cost isn’t prohibitive.

Recovery Mode

Cannabis farmers serving infused products companies and dispensaries in California also find it hard to recover clients who were forced to look for their supplies from other growers.

Restoring old relationships that have been replaced is difficult, Allen said.

Rather than rushing back in, cannabis farmers should consider waiting for regulations to take hold and see what kind of market opportunities that will present.

“If they can recover, they can sell into an open market place,” Allen said.

While dispensaries won’t be lacking supplies, Allen hopes the fires will make regulators, cultivators and retailers think about how to improve connections between growers and their customers.

“There’s not a shortage of supply. There’s a shortage of connections between growers and retailers,” said Allen. “California is big and there’s a problem connecting the dots.”

Omar Sacirbey can be reached at