Alabama DOI Needs Insurers to Light Up the Budding Medical Marijuana Business in the State

Alabama lawmakers legalized medical marijuana two years ago. But that came with a high hurdle: Dispensaries, growers, processors and other license applicants must have at least $2 million of liability and casualty insurance.

Now, the Alabama Department of Insurance says it can’t find an insurance market for that and is asking insurers to fill the prescription.

“At this date, the Alabama Department of Insurance has had difficulty determining whether such ‘liability and casualty insurance’ in the medical cannabis area is available in the Alabama market,” reads a bulletin posted in May. “The Department encourages property and casualty insurers to submit rates and forms…”

The cannabis law, known as the Darren Wesley “Ato” Hall Compassion Act, after the son of a state representative who died of AIDS more than a decade ago, took effect in May 2021. The window for marijuana business applications closed Dec. 31, 2022. Some 90 enterprises, including some of larger names in the cannabis business, have applied for licenses, according to the Alabama Medical Cannabis Commission.

But the lack of available insurance appears to be a missing ingredient in approving the licenses.

The department noted that the filing process for insurers may not be so onerous: All insurance filings will be “file and use,” except for workers’ compensation coverage, which must be approved by the department before policies are offered. The filing fee is $100 per form or rate, with a maximum of $5,000 per submission.

Cannabis-related rates would remain in effect for three years or until DOI actuaries are better able to forecast rates based on statewide experience. More information is available from erick.wright@insurance.alabama.gov.

Some 38 states now allow the medical use of cannabis products, according to the National Conference of State Legislatures, and insurance requirements vary greatly. Florida regulations require a performance bond of as much as $5 million. Georgia may require a surety bond in some cases, according to Insureon, an insurance brokerage.

But some states, including nearby Mississippi and Tennessee, have no business insurance requirements.