First Cannabis Product Liability Insurance in Calif. Debuts

California's first cannabis product liability insurance debuts, mg magazine, May 2018

SACRAMENTO, Calif. – The first state-authorized insurance program to offer California cannabis businesses coverage for product liability and recall claims has debuted. Offered by Continental Heritage Insurance Company, the program is available to holders of cultivator, manufacturer, distributor, retailer, and medical licenses. Testing labs are not eligible.

“Whenever anyone shops in, works in, sells products to, or invests in a cannabis business, I want there to be insurance coverage available,” said Insurance Commissioner Dave Jones, who gave the program final approval May 16. “Continental Heritage Insurance Company’s insurance product is another example of the success we are having in getting more insurance coverage for the cannabis industry. I encourage more insurance companies to follow Continental Heritage’s lead.”

Last year, Jones launched an initiative  to encourage commercial insurance companies to fill coverage gaps for the cannabis industry. The first approval of commercial insurance for the industry was announced in November, the first surety bond program for the industry, also offered by Continental Heritage, was announced in February, and the first commercial landlord coverage was announced earlier this year.

Last month, in the wake of published reports that President Donald Trump abandoned Attorney General Jeff Sessions’s policy on enforcement of federal cannabis laws, Jones renewed his call for insurers to offer products for California’s legalized industry. As part of that effort, he convened meetings between commercial insurance executives and cannabis business owners to educate the insurance industry about the sophistication, professionalism, and risk-management within the industry. Jones also organized tours of cannabis businesses for insurance executives.

In October 2017, Jones held the first-in-the-nation public hearing to identify insurance gaps faced by cannabis businesses. The hearing revealed that while there was insurance available from surplus lines insurers (PDF), coverage was limited in scope and admitted carriers were not yet writing policies. The commissioner subsequently allocated additional staff time to cannabis insurance filings in order to meet what he deemed a “critical need.”