California Bureau of Cannabis Control Insurance Requirements for Distributor License

The State of California has issued insurance requirements for a cannabis distributor licensee effective January 1, 2018. Other types of licensees did not appear to have such requirements. A certificate of insurance with limits of $2,000,000 per aggregate and $1,000,000 per occurrence will be the required minimum limits. These documents are produced by a licensed retail insurance broker that indicates the coverage limits, insurance carrier, policy number, effective dates, and other terms and conditions of the policy.

The regulations are silent on adding any municipality or state agency as additional insured. Non-admitted insurance carriers, insurers qualified to do business by the Secretary of State and Insurance Commissioner, and registered risk retention groups can be the sources of cannabis insurance coverage. Further information may be discovered at the California Cannabis portal.

Most recently, Golden Bear Insurance Company of California was the first admitted insurance carrier to offer insurance protection for the marijuana industry.

The following is new text to be added to the California Code of Regulations
DIVISION 42. BUREAU OF CANNABIS CONTROL§ 5308. Insurance Requirements(a) An applicant for a distributor license shall provide the Bureau with a certificate of insurance that shows the types of insurance coverage and minimum amounts that have been secured as required by this section, and documentation establishing compliance with subsection (d) of this section.
(b) A distributor licensee shall at all times carry and maintain commercial general liability insurance in the aggregate in an amount no less than $2,000,000 and in an amount no less than$1,000,000 for each loss.
(c) A distributor licensee shall maintain the insurance required in subsection (b) from an insurance company that is:(1) A non-admitted insurer, that meets the requirements of Insurance Code section 1765.1 or 1765.2, and the insurance is placed pursuant to Insurance Code section 1763 and through a surplus line broker licensed under Insurance Code section 1765; or
(2) An insurer qualified to do business in California by the Secretary of State and authorized by the Insurance Commissioner to write the liability and property classes of insurance as defined by Insurance Code sections 102, 103, 107, 114, 108, and 120; or
(3) A registered risk retention group compliant with the California Risk Retention Act of 1991.(See California Insurance Code sections 125-140.)(d) Admitted insurers and risk retention groups must show proof of capitalization in the amount of at least $10,000,000.
(e) A distributor licensee shall notify the Bureau in writing within 10 calendar days of a lapse in insurance.