Insurance Academy

Covering Cannabis Risks on a BOP

By | October 31, 2019

Back in June 2018, AAIS filed its first CannaBOP policy to provide admitted markets a BOP that would cover the unique risks associated with cannabis businesses. While the admitted market has yet to fully embrace the cannabis businesses, this policy is paving the way for carriers to get involved with this truly emerging risk.

One speaker that the recent Insurance Journal Insuring Cannabis Summit noted that the cannabis segment is a true emerging risk unlike anything else that we’ve seen in many years in insurance. This is partially because of the tension that exists between the way that cannabis and cannabis products are treated by the federal government and the states.

One feature of the CannaBOP policy is how it defines its “basic territory”.

“Basic territory” means the United States of America, its territories and possessions, Canada, and Puerto Rico.

With respect to losses to “cannabis” or “cannabis accessories”, and losses arising out of or in any way related to “cannabis activities”, the “basic territory”:

  1. is limited to the state of California; and
  2. does not include land or property owned by the United States government.

The policy is limiting coverage related to the exposures of the cannabis business to the state of California, except for any land or property owned by the United States government. When you consider that almost half of the state is federal land, you understand that this is a significant limitation.

This is among the definitions that allow the policy to take a careful line between allowing coverage for a product that is legal in the state of California, while not allowing for illegal activity to occur (elsewhere, or within the state of California).

The Academy of Insurance is presenting our session Cannabis Risk Coverage Issues on November 7. You can sign up here.

About Patrick Wraight

Patrick Wraight, CIC, CRM, AU, is director of Insurance Journal's Academy of Insurance. He can be reached at pwraight@ijacademy.com.

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