The American Association of Insurance Services, Inc. (AAIS), offers a business
owners policy (BOP) that provides liability and property coverage for cannabis-related
businesses. The AAIS Cannabis Businessowners Policy (CannaBOP) is a step in the right
direction because it offers a specialized, admitted-market insurance solution tailored
specifically for the legalized cannabis industry. Unlike a standard BOP that contains
several exclusions that could apply to cannabis-related losses, the CannaBOP provides a
comprehensive package policy that addresses cannabis exposures for qualifying businesses
that meet specific eligibility criteria.
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Who Is Eligible for a CannaBOP?
In general, the CannaBOP is designed for small businesses in the
cannabis industry. However, eligibility is based on the nature as well as the size
of the insured's business. Businesses in the cannabis supply chain that support
either recreational or medicinal use of cannabis are eligible for a CannaBOP,
subject to certain limitations. These include dispensaries, distributors, and
manufacturers of cannabis products. Only businesses operating in the 10 approved
states may be eligible for a CannaBOP, including California and Colorado.
How Is "Cannabis" Defined in the CannaBOP?
"Cannabis" is broadly defined to include any plant of the cannabis
family, including both marijuana and hemp, as well as its compounds, concentrates,
derivatives, and extracts. However, the definition excludes nonpsychoactive plant
components, such as stalks, fiber, and sterilized seeds that are used in everyday
products like textiles, paper, ropes, and cosmetics.
"Cannabis accessories" are separately defined as equipment,
products, or materials for use in cannabis activities or for the consumption of
cannabis.
How Are Cannabis Operations Defined in the
CannaBOP?
"Cannabis activities" are defined as commercial activities that
are both regulated by the state where the policy was issued and involve cannabis.
This means it includes nearly every stage of the supply chain and operations of
cannabis production and sales, such as the delivery, transportation, labeling,
packaging, sale, and storage of cannabis.
How Does a CannaBOP Provide Property Coverage?
A standard BOP contains a broad exclusion for contraband that may
apply to cannabis. Because the sale of cannabis is illegal at the federal level, it
may be classified as contraband. In contrast, the contraband exclusion in the AAIS
CannaBOP contains an exception for legally possessed, transported, or traded
cannabis. This exception preserves property coverage for cannabis only if the
insured meets the conditions set in the exception.
A standard BOP contains a broad exclusion for criminal,
fraudulent, dishonest, or illegal acts committed by the insured. Because cannabis is
illegal at the federal level, any commercial activity such as manufacturing,
distribution, or sale may be considered an illegal act. In contrast, the fraudulent,
dishonest, or illegal acts exclusion in the CannaBOP contains an exception for
cannabis activities conducted in compliance with laws, rules, and regulations of the
state where the policy is issued and the business operates. This exception preserves
coverage for losses caused by "cannabis activities" only if the insured meets the
conditions set in the exclusion.
How Does a CannaBOP Provide Liability Coverage?
The AAIS CannaBOP provides liability coverage for bodily injury,
property damage, and personal and advertising injury, only to the extent that the
insured obtains and maintains all required licenses and follows all applicable laws
relating to cannabis and cannabis operations. This condition is reinforced in the
two insuring agreements and three key exclusions.
Cannabis Laws and Regulations
Controlled Substances, Contraband, and Property in the Course of Illegal Transportation or Trade
Prohibited or Restricted Materials
Additionally, the liability coverage section in the CannaBOP
excludes several cannabis-related exposures.
Cannabis Cultivation
Cannabis-Related Illness, Sickness, or Disease
Cannabis Use, Inhalation, or Exposure
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
The American Association of Insurance Services, Inc. (AAIS), offers a business owners policy (BOP) that provides liability and property coverage for cannabis-related businesses. The AAIS Cannabis Businessowners Policy (CannaBOP) is a step in the right direction because it offers a specialized, admitted-market insurance solution tailored specifically for the legalized cannabis industry. Unlike a standard BOP that contains several exclusions that could apply to cannabis-related losses, the CannaBOP provides a comprehensive package policy that addresses cannabis exposures for qualifying businesses that meet specific eligibility criteria.
Want the full breakdown? This article is just a high-level overview. Unlock the complete, section-by-section analysis of the AAIS CannaBOP—including hidden exclusions, full state eligibility rules, and critical compliance traps for your clients. Subscribe today to unlock access!
Who Is Eligible for a CannaBOP?
In general, the CannaBOP is designed for small businesses in the cannabis industry. However, eligibility is based on the nature as well as the size of the insured's business. Businesses in the cannabis supply chain that support either recreational or medicinal use of cannabis are eligible for a CannaBOP, subject to certain limitations. These include dispensaries, distributors, and manufacturers of cannabis products. Only businesses operating in the 10 approved states may be eligible for a CannaBOP, including California and Colorado.
How Is "Cannabis" Defined in the CannaBOP?
"Cannabis" is broadly defined to include any plant of the cannabis family, including both marijuana and hemp, as well as its compounds, concentrates, derivatives, and extracts. However, the definition excludes nonpsychoactive plant components, such as stalks, fiber, and sterilized seeds that are used in everyday products like textiles, paper, ropes, and cosmetics.
"Cannabis accessories" are separately defined as equipment, products, or materials for use in cannabis activities or for the consumption of cannabis.
How Are Cannabis Operations Defined in the CannaBOP?
"Cannabis activities" are defined as commercial activities that are both regulated by the state where the policy was issued and involve cannabis. This means it includes nearly every stage of the supply chain and operations of cannabis production and sales, such as the delivery, transportation, labeling, packaging, sale, and storage of cannabis.
How Does a CannaBOP Provide Property Coverage?
A standard BOP contains a broad exclusion for contraband that may apply to cannabis. Because the sale of cannabis is illegal at the federal level, it may be classified as contraband. In contrast, the contraband exclusion in the AAIS CannaBOP contains an exception for legally possessed, transported, or traded cannabis. This exception preserves property coverage for cannabis only if the insured meets the conditions set in the exception.
A standard BOP contains a broad exclusion for criminal, fraudulent, dishonest, or illegal acts committed by the insured. Because cannabis is illegal at the federal level, any commercial activity such as manufacturing, distribution, or sale may be considered an illegal act. In contrast, the fraudulent, dishonest, or illegal acts exclusion in the CannaBOP contains an exception for cannabis activities conducted in compliance with laws, rules, and regulations of the state where the policy is issued and the business operates. This exception preserves coverage for losses caused by "cannabis activities" only if the insured meets the conditions set in the exclusion.
How Does a CannaBOP Provide Liability Coverage?
The AAIS CannaBOP provides liability coverage for bodily injury, property damage, and personal and advertising injury, only to the extent that the insured obtains and maintains all required licenses and follows all applicable laws relating to cannabis and cannabis operations. This condition is reinforced in the two insuring agreements and three key exclusions.
Additionally, the liability coverage section in the CannaBOP excludes several cannabis-related exposures.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.