Southern California marijuana businesses facing direct and residual effects of the latest round of wildfires will yet again have to deal with the challenges that come with limited insurance coverage, smoke damage and evacuations that will likely compound the sector’s existing financial pressures.
According to local outlets, the Pacific Palisades fire, along with the Eaton, Hurst and Woodley fires, has burned more than 15,000 acres, driven by hurricane-force winds, and triggered widespread evacuations, with mandatory orders stretching from the Pacific Coast Highway to Topanga Canyon Boulevard toward Interstate 405.
Many delivery services have suspended operations to keep drivers off the roads, while some retailers continue to operate without clear emergency protocols.
Cannabis companies could face “exponential losses” that other businesses don’t during disasters, United Cannabis Business Association President Jerred Kiloh told Green Market Report on Wednesday, in large part because of restricted insurance options and prohibitively expensive premiums.
“Fire insurance is not usually on a lot of commercial insurance plans,” Kiloh said. “And when you pay this much insurance just as cannabis, you got to pick and choose what is high risk and what is not.”
He added, “I think when people are cutting costs, they’re cutting these kind of costs first… I think a lot of people are reducing their insurance coverage just to afford to stay in business.”
Most cultivation operations appear safe from direct fire damage for now. The facilities cluster in industrial areas with cheaper real estate, such as Sun Valley, Van Nuys and warehouses along the Ronald Reagan Freeway, rather than in the wooded residential zones currently threatened, according to Kiloh. But growers are taking precautions.
“A couple of OGs I know are all on emergency generators. Running bare minimum lighting. Putting air purifiers in their rooms,” Oliver Summers, president of retail operations at United Patient Alliance in Sun Valley, said in a text message. The situation has industry veterans “reminiscing about the Long Beach power outages from about 10 years ago.”
Even indoor growing sites miles from the flames remain vulnerable to smoke infiltration through ventilation systems designed more for odor control than smoke defense.
“Even though crops do a lot to filter air coming in and going out, there’s just no way to filter that kind of air coming in when mostly you’re trying to scrub and clean air from smell when it’s going out,” Kiloh explained. “You’re sucking fresh air in from the outside. And if you’re not treating that air, you could be sucking smoke into your rooms.”
The risk brings back memories of Northern California’s 2017 wildfires.
“I don’t think anyone wants to go through what we went through in 2017 and some of the other Northern California fires where we had Campfire OG be a strain because it just smelled like smoke,” Kiloh said.
Another complication for cannabis operators is the need to move product and large amounts of cash while maintaining security.
“There’s a lot of security risk in trying to just move things out or leaving your dispensary unsupervised or unprotected because looters will take any advantage they can,” Kiloh said. “We know that cash isn’t insured and a lot of our products may not get full value.”
The California Cannabis Industry Association said in a email statement to GMR that the state’s Department of Cannabis Control is offering disaster relief to affected licensees, including permission for emergency product evacuation without prior authorization. The organization said it was “deeply concerned” about both immediate and long-term impacts on businesses and employees, and said it would advocate for policies and relief measures to support them.
Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.
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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis
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Crain Communications Inc © 2017 – . All rights reserved.