Insuring Against the Environmental and Other Risks, and Preparing for the Rewards Associated with the Emergence of Legal Cannabis: Smoking Hot or Up In Smoke?

Environmental Law Journal

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PUBLISHED ON: November 10, 2015

Legal cannabis appears here to stay, whether for medical or recreational purposes. With California facing very serious drought conditions and millions of people seeking legitimate medical relief, effectively managing cannabis-industry risks becomes even more urgent. This article provides an overview of the risks and insurance coverage issues facing this nascent industry, with an emphasis on environmental risks. Many of the identifiable risks are common to virtually all businesses. However, some risks to the environment, including impacts on water quality, energy use, and waste management and disposal, are more specific to the industry. There are unique risks as well, including those posed by the dichotomy between state approval and continuing federal regulation and the resulting impact on obtaining financing or payment of insurance claims. All of these issues require further analysis for purposes of effective risk management, insurance underwriting, and government regulation.