Recreational cannabis use (also known as adult use) went into effect in California on January 1, 2018. State lawmakers and insurance regulators are still working to hammer out the details of how distribution will be regulated and what insurance will be required.
Here is what you need to know with regard to the insurance side at this time (please note that these regulations could change at any time):
An applicant for a distributor license will be required to show proof of surety bond in the amount of at least $5,000 payable to the State of California. This bond is to ensure payment for the destruction of any cannabis goods that may be necessitated by a violation of the Adult Use of Marijuana Act or any regulations adopted thereunder.
At this time there is no paperwork associated with this bond requirement or the type of bond required (other than surety). We will advise as soon as this requirement has been finalized.
Per the Bureau of Cannabis Control Emergency Regulation Text, the following insurance will be required for distributor licenses:
General Liability: A distributor licensee must maintain at all times a commercial general liability insurance policy in an amount no less than $1,000,000 per occurrence and $2,000,000 in the aggregate.
The State of California MUST be named as an additional insured on this policy. The State requires a 10-day notice of cancellation provision. A canceled policy will result in license revocation.
Any distributor who will be or is distributing cannabis goods must provide to the Bureau of Cannabis Control proof of insurance for each vehicle and trailer used to transport cannabis goods.
As a reminder, Hayes Brokers has insurance markets available for any class of cannabis operations in the State of California and in all states where cannabis is legal. If you can do it, we can write it.
All regulations including the insurance requirements are currently being reviewed and changes are sure to occur in the coming weeks. We will advise as soon as we know more.