Razed California crops expose blind spots in insurance and regulation

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Vineyards and cannabis growers among the hardest-hit industries

Northern California’s record-breaking wildfires have already claimed more than 20 lives and razed a landscape encompassing thousands of homes and businesses, and long-term effects of this disaster–particularly in agricultural industries–are just beginning to take shape.

The state's wine and cannabis industries face devastating repercussions. Each represents hundreds of thousands of jobs and billions in revenue, but only the former has access to insurance on their crops. Supply chains for both will likely remain stable for the time being, but without insurance, many growers may never fully recover.

"[No cannabis grower] right now has insurance," Nikki Lastreto, with the Mendocino Cannabis Industry Association, told CNN. "They might have insurance on their house, but not on their crop." While a small number of firms advertise cannabis crop insurance, industry experts say that the field is extremely limited due to the risk providers face under conflicting state and federal regulations.

Mark Sektnan of the Property Casualty Insurers Association says his trade group does have members who represent marijuana dispensaries, but none who protect the actual crops and growers.

"What we have to figure out is, who's going to provide these guys insurance?" he tells ConsumerAffairs.

Federal and state laws that don't mesh

Businesses have typically been deterred from accommodating marijuana users or businesses -- even in so-called “420-friendly” states -- because cannabis is still considered a controlled substance under federal law. In fact, disabled people who legally use cannabis as medicine can still be fired if they fail a drug test, and workers’ compensation insurance can deny coverage to employees with cannabis in their system.

However, property insurance is typically regulated under state law, which has brought some smaller insurance companies to the market. Both High Times and The Insurance Journal point to a niche market of insurers willing to offer coverage to cannabis businesses.

Restrictions include crop value being capped at $500 per plant and a mandate that all of the property is equipped with video cameras.

Shoppers shouldn't notice a change

California lawmakers have asked major, commercial insurers to consider covering the marijuana industry, but it will take some work getting name-brand insurers to protect crops or dispensaries.

"It's hard to quantify what the risk is when you have this disconnect between the federal government and the state government," Sektnan said. "The current administration has come out to be much more aggressive on marijuana enforcement."

For now, business at dispensaries likely won’t be affected by the fires. An industry representative told VICE news that they do not expect the supply chain to be disrupted due to the huge amount of crop being grown in the region.

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