A series of deadly wildfires devastated California wineries, farms and small businesses in recent months. Many of these farms and businesses will be able to start rebuilding quickly, thanks, in part to insurance payouts and easy-to-access businesses loans. The same thing cannot be said of many of California’s legal cannabis cultivators who were hit by the wildfires and won’t have that help.

In November 2016, California voters legalized recreation marijuana by overwhelmingly passing Proposition 64. But due to the federal prohibition of marijuana, growers are often denied access to the basic financial and banking services that allow other farmers and agricultural interests to guard against the risk of wildfires and to rebuild after natural disasters strike.

In fact, instead of making daily or weekly bank deposits the way many small businesses do, cannabis growers and businesses in states that have legalized it — and thus are doing something completely legal under state law — are often unable to find banks willing to work with them. The result is a lot of them keeping their cash on hand and a wildfire can destroy it all.

[related_articles location=”left” show_article_date=”false” article_type=”automatic-primary-tag”] Typically, farmers would insure their crops to protect against things like wildfires. Unfortunately, many marijuana cultivators are unable to insure their crops and will be suffering major financial losses from plants destroyed in the wildfires.

Cannabis growers are not allowed purchase crop insurance directly from the federal government — due to the federal prohibition of marijuana — and getting insurance from private providers can be exceedingly tricky. Few private insurance companies want to risk the ire of the federal government so insurance policies specifically for marijuana growers are rare. And while general commercial liability and crop insurance is available, even then there is no guarantee that cannabis business will be covered if something happens to their product.

Bundles of $20 bills are placed on a table as Jerred Kiloh, owner of the Higher Path medical marijuana dispensary, prepares a trip to Los Angeles City Hall to pay his monthly tax payment in cash in Los Angeles. (AP Photo/Jae C. Hong)


Of the cannabis businesses that do have insurance, “50 percent are covered by policies that flat out exclude marijuana,” said Michael Aberle, senior vice president of Next Wave Insurance Services.

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His company has been underwriting commercial insurance policies for the cannabis industry for the past decade. But he says some marijuana farmers have purchased insurance policies without reading the fine print. Insurance companies, leery of federal law, often insert clauses into contracts that guard against them having to cover things like “health hazards,” “contraband,” or even Schedule I drugs. These disqualifying terms can be easily missed by marijuana business owners who are unfamiliar with buying insurance or by insurance agents who are unaccustomed to dealing with clients whose companies, while completely legal in the state, are violating federal law.

California just belatedly released 276 pages of rules for the recreational marijuana market that opens in January, but these regulations don’t solve any of the problems for cultivators looking to insure their plants or for legal marijuana businesses looking to set up bank accounts.

Those kinds of needed changes will only come when the federal prohibition on marijuana is lifted. In the meantime, many of California’s legal cannabis cultivators and businesses will continue to risk facing natural disasters, like wildfires, without insurance and be forced to run their businesses without basic banking services the financial sector would normally be happy to provide.

Christian Britschgi is an assistant editor at Reason.com and Reason magazine. This article was first published at OCRegister.com.

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