Congress has done little to address the issue. A group of Oregon lawmakers introduced a bill in September that would make federal disaster funding available to the cannabis industry, but it has little chance of passing in the waning days of this Congress. Separate legislation would create better access to banking — potentially allowing some small business owners to borrow money to pay for insurance or to cover losses — but it would not give farmers access to federal crop subsidies or encourage insurers to cater to the industry.
Since May, cannabis businesses from Oregon to Massachusetts have dealt with both natural and man-made disasters. As protests over racial injustice erupted across the country, so did looters — many targeting cannabis dispensaries in cities including Portland and Oakland, Calif. Then, wildfires destroyed farms and spewed ash at sensitive crops from Central California to northern Washington state. Many of the small business owners, like Haworth, are facing one or both of these crises without insurance.
Some advocates and industry leaders have called for state governments to create insurance or disaster funds for companies where there are legal marijuana markets, but no state has done so at this point. Others say the only thing that will solve this problem is federal legalization of marijuana.
Thirty-three states have legalized recreational or medical marijuana, but the federal government still lists it as a Schedule I drug under the Controlled Substances Act — a category that includes heroin and means the drug does not have any medical value and can be highly addictive.
The classification means marijuana does not qualify for any federal funding — including crop insurance or FEMA disaster assistance. And crop insurance without federal funding can be prohibitively expensive.
For most other agricultural commodities — like avocados, tea and maple syrup — the federal government subsidizes insurance premiums. In 2017, the Federal Crop Insurance Corporation insured nearly $18.7 billion worth of more than 300 specialty crops.
Hemp, which was legalized by the 2018 farm bill, now qualifies for federal crop insurance — but only about 5 percent of hemp crops in the country have become insured so far through the federal program, according to the USDA’s Risk Management Agency. The industry is also eligible for coronavirus relief funding.
“Crop insurance is typically very expensive and people don’t tend to buy it unless it is heavily subsidized,” said Joseph Glauber, a senior research fellow at the International Food Policy Research Institute.
For Nathan Howard, co-owner of cannabis farm East Fork Cultivars in southern Oregon, crop insurance would have been around $40,000 a year. For Wendy Kornberg, whose farm lies in the mountains of California’s Humboldt County, the price tag would have been $120,000 a year.
“If we don’t burn, it will be so expensive for a single year that we will be digging ourselves out of a financial hole just from insurance costs,” said Howard. “They just aren’t reasonable for farmers.”
Crop insurance prices vary depending on whether plants are grown indoors or outside — indoor crops are cheaper to insure — and if they are in a fire zone. But Matt Porter, a broker adviser for Brown & Brown Insurance in Southern California, said that even vineyards growing a similarly high-maintenance crop in the same fire-prone regions of the state pay much less in crop insurance than cannabis farms.
“It’s probably at least double, if not triple, what the price would be to ensure grapes and a winery in the same form — just because it is marijuana,” Porter said.
California has tried to create state-based versions of federal programs typically available to the average company that the cannabis industry cannot access. For example, Gov. Gavin Newsom on Sept. 30 signed a bill, that gives California financial institutions greater protections when offering services to the industry — similar to what the SAFE Banking Act would do at the federal level. But subsidizing insurance policies for an entire industry is the type of huge financial burden that typically only the federal government can take on.
“The state [is] saying it’s legal. And the state’s regulating it,” pointed out Harry Kazazian, CEO of California cannabis company 22Red. “The state’s got to step up and say, ‘Hey, you know, what, we’re gonna provide this additional state insurance that you could pool into, and we’ll seed it.’”
Access to banking may help, indirectly. Some consultants say the cash-only reputation of the industry encourages looting and other break-ins.
Ron Leggett lost around $50,000 when his Oakland, Calif., business was looted in May. Leggett is one of the city’s first social equity licensees and says he’s the first Native American to receive a license outside of a reservation in the country.
“That night, I lost everything,” Leggett said.
Leggett’s community has stepped up to help him out, launching a GoFundMe campaign and donating product — but he says the looting has still set him back months.
“The plan was to acquire some better insurance when I had a little bit more money,” he said. “I was just getting ready to launch my first product. And then that happened.”