Can I get insurance for my marijuana grow? And is that worthwhile?
YES AND YES. For a long time, it was an open question as to whether marijuana inventory was insurable as a matter of law. That question was open even in situations where an insurer had intentionally written a policy tailored to a canna business. Strange, right?
In thinking about this situation, it is important to remember that insurance policies are just a species of contract. We should also note that if two parties agree to do something illegal, a court might consider their contract void and unenforceable. Courts have used the "illegal contract" theory in cannabis cases over the years, including a few insurance beefs. Hopefully, a recent Colorado federal court decision in Green Earth Wellness Center, LLC v. Atain Speciality Insurance Company will put the skids on that.
Green Earth is a medical marijuana dispensary and grow operation in Colorado Springs that's had a run of terrible luck. In 2012, smoke and ash from a wildfire "overwhelmed" Green Earth's ventilation system and damaged $200,000 in mother plants and clones. Atain investigated the claim for several months, then denied it in July 2013. Around that time, Green Earth's grow facility was robbed when someone snuck in through the roof. So Green Earth filed another claim with Atain, which Atain again denied, finding that the damage did not exceed Green Earth's deductible.
Green Earth called bunk, and sued Atain for failing to pay on its claims and for bad faith. Atain argued that it should be exempt from paying Green Earth's claims because of a policy provision excluding coverage for "[c]ontraband, or property in the course of illegal transportation or trade." Atain also argued that "public policy requires that coverage be denied, even if the policy would otherwise provide it." This is why people hate insurance companies.
Green Earth's policy required that any disputes be governed by Colorado law, and the court applied the law of that state, where cannabis is legal. The court also found that Atain knew Green Earth was a cannabis business, yet issued its insurance policy to Green Earth regardless of federal laws. As to Atain's illegal contract argument, the court said, "Atain, having entered into the policy of its own will, knowingly and intelligently, is obligated to comply with its terms or pay damages for having breached it." All of this makes perfect sense.
So here's the deal on cannabis and insurance: If two parties want to enter into an insurance contract under state law for a state-legal commodity, that policy is likely enforceable. In Oregon, there are insurance vendors who cater to weed businesses and carry all the lines. Because the rates are pretty reasonable and a good policy can insulate you from things like wildfires and burglars, weed insurance is a smart buy. Happy shopping.